SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------
FORM 10-Q
Quarterly Report Under Section 13 or 15(d)
of the Securities Exchange Act of 1934
----------
For Quarter Ended March 31, 1999 Commission File Number 0-23360
COUNTRY WIDE TRANSPORT SERVICES, INC.
(Exact name of registrant as specified in charter)
DELAWARE 95-4105996
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification No.)
119 Despatch Drive, East Rochester, NY 14445
(Address of principal executive offices) (Zip Code)
(716) 381-5470
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes _X_ No ___
The number of shares of common stock outstanding as of April 30, 1999 was
4,248,100
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
INDEX
Part I - Financial Information Page
Item 1. Financial Statements:
Condensed Consolidated Balance Sheets--March 31, 1999
and June 30, 1998 3
Condensed Consolidated Statements of Operations--
Three Months Ended March 31, 1999 and 1998, and
Nine Months Ended March 31, 1999 and 1998 4
Condensed Consolidated Statements of Cash Flows--Nine
Months Ended March 31, 1999 and 1998 5
Notes to Condensed Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 8
Part II - Other Information
Item 5. Other Information 10
Item 6. Exhibits and reports on form 8K 10
Signatures 11
2
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Balance Sheets
(In Thousands)
<TABLE>
<CAPTION>
March 31, June 30,
1999 1998*
-------- -------
(Unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash $ 8 $ 6
Accounts receivable, net 4,709 5,548
Accounts receivable, miscellaneous 148 112
Driver advances 16 13
Prepaid expenses 56 38
------- -------
Total current assets 4,937 5,717
Property and equipment, net 246 263
Other assets:
Deposits 36 34
Excess of purchase price over fair market value of net assets acquired, net 2,429 2,518
------- -------
Total Assets $ 7,648 $ 8,532
======= =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 4,275 $ 5,088
Liabilities in excess of assets of discontinued subsidiary 127 150
------- -------
Total current liabilities 4,402 5,238
Long-term debt, less current portion 1,944 2,514
Total liabilities 6,346 7,752
------- -------
Stockholders' equity
Preferred stock, $.01 par value, 5,000,000 shares authorized,
issuable in series, none issued -- --
Common stock, $.10 par value, 6,000,000 shares authorized, 4,248,100 shares
issued and outstanding at March 31, 1999 and June 30, 1998, respectively 425 425
Additional paid-in capital 8,110 8,110
Retained earnings (7,233) (7,755)
------- -------
Total stockholders' equity 1,302 780
------- -------
Total liabilities and stockholders' equity $ 7,648 $ 8,532
======= =======
</TABLE>
* Condensed from audited financial statements.
The accompanying notes are an integral part of these
condensed consolidated financial statements.
3
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Operations
(Unaudited)
(In Thousands, except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
March 31, March 31,
-------------------- --------------------
1999 1998 1999 1998
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Transportation revenue $ 8,290 $ 8,291 $ 27,055 $ 25,444
-------- -------- -------- --------
Operating costs and expenses:
Purchased transportation 7,119 7,280 23,485 22,346
Salaries and related expenses 566 515 1,722 1,416
Operating expenses 56 46 127 135
General supplies and expenses 264 195 926 645
Depreciation and amortization 50 42 149 125
-------- -------- -------- --------
Total operating costs and expenses 8,055 8,078 26,409 24,667
-------- -------- -------- --------
Operating income 235 213 646 777
Other income (expense):
Interest expense (45) (48) (148) (149)
Other, net 21 74 23 73
-------- -------- -------- --------
Income before provision for income taxes 211 239 521 701
Income tax expense -- 15 -- 73
-------- -------- -------- --------
Net income $ 211 $ 224 $ 521 $ 628
======== ======== ======== ========
Earnings per common share:
Basic $ 0.05 $ 0.05 $ 0.12 $ 0.15
======== ======== ======== ========
Diluted $ 0.04 $ 0.04 $ 0.10 $ 0.13
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
4
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Condensed Consolidated Statements of Cash Flows
(Unaudited)
(In Thousands)
<TABLE>
<CAPTION>
Nine Months Ended
March 31,
--------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 521 $ 628
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization 149 125
(Increase) decrease in:
Accounts receivable 839 (473)
Accounts receivable, miscellaneous (36) (1)
Drivers advances (3) (10)
Prepaid expenses (18) (20)
Deposits (2) --
Increase (decrease) in:
Notes Payable - current portion -- (160)
Accounts payable and accrued liabilities (813) (52)
Liabilities in excess of assets of discontinued subsidiaries (23) (78)
Liabilities in excess of assets of discontinued operations -- (81)
-------- --------
Net cash provided by (used in) operating activities 614 (122)
-------- --------
Cash flows from investing activities:
Additions to property and equipment (42) (102)
-------- --------
Net cash (used in) investing activities (42) (102)
-------- --------
Cash flows from financing activities:
Principal payments on borrowings $(28,143) $(25,102)
Proceeds from borrowings 27,573 25,324
-------- --------
Net cash provided by (used in) financing activities (570) 222
-------- --------
Increase (decrease) in cash 2 (2)
Cash, beginning of period 6 10
-------- --------
Cash, end of period $ 8 $ 8
======== ========
Supplemental disclosure of cash flow information:
Cash paid for:
Interest $ 159 $ 123
======== ========
Income taxes $ -- $ 73
======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed financial statements.
5
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Notes to Condensed Consolidated Financial Statements
(Unaudited)
1. Summary of Significant Accounting Policies
The accounting policies followed by the Company are set forth in Note 1 to
the Company's consolidated financial statements included in the Company's
Annual Report to Stockholders for the year ended June 30, 1998
2. Statement of Information Furnished
The accompanying unaudited consolidated financial statements have been
prepared in accordance with Form 10-Q instructions and in the opinion of
management contain all adjustments (consisting of only normal recurring
accruals) necessary to present fairly the financial position as of March
31, 1999, the results of operations for the three months and nine months
ended March 31, 1999 and 1998 and the cash flows for the nine months ended
March 31, 1999 and 1998. The results of operations for the three and nine
month periods ended March 31, 1999 and 1998 are not necessarily indicative
of the results to be expected for the full year. These results have been
determined on the basis of generally accepted accounting principles and
practices applied consistently with those used in the preparation of the
Company's 1998 Annual Report.
Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to the rules and
regulations of the Securities and Exchange Commission.
3. Property and Equipment
Property and equipment consisted of the following (000 omitted):
<TABLE>
<CAPTION>
March 31, June 30, Estimated
1999 1998 Useful Lives
------------------ ----------------- ------------------
<S> <C> <C> <C>
Furniture and office equipment $ 305 $ 268 4 to 5 years
Leasehold improvements 158 154 life of lease
------------------ -----------------
463 422
Less accumulated depreciation
and amortization (217) (159)
------------------- ------------------
$ 246 $ 263
================== =================
</TABLE>
4. Accounts Payable and Accrued Liabilities
Accounts payable and accrued liabilities consisted of the following (000
omitted):
March 31, June 30,
1999 1998
------ ------
Accounts payable $2,507 $2,913
Accrued purchased transportation 1,535 1,948
Other accrued expenses 233 227
------ ------
$4,275 $5,088
====== ======
6
<PAGE>
5. Earnings Per Share (In Thousands, Except Per Share Data)
<TABLE>
<CAPTION>
For the Three For the Three
Months Ended Months Ended
March 31, March 31
----------------------- -----------------------
1999 1998 1999 1998
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Basic Earnings Per Share
Net income $ 211 $ 224 $ 521 $ 628
Less - preferred stock dividends -- -- -- --
---------- ---------- ---------- ----------
Net income applicable to
common shareholders $ 211 $ 224 $ 521 $ 628
========== ========== ========== ==========
Weighted average number of common shares 4,248,100 4,248,100 4,248,100 4,248,100
========== ========== ========== ==========
Basic Earnings per Share $ 0.05 $ 0.05 $ 0.12 $ .15
========== ========== ========== ==========
Diluted Earnings per Share
Net income from basic income per
common share $ 211 $ 224 $ 521 $ 628
Add:
preferred stock dividend -- -- -- --
---------- ---------- ---------- ----------
Net income for diluted earnings per share $ 211 $ 224 $ 521 $ 628
========== ========== ========== ==========
Weighted average number of shares used in
calculating basic earnings per common share 4,248,100 4,248,100 4,248,100 4,248,100
Add - common equivalent shares (determined
using the "treasury stock" method) representing
shares issuable upon exercise of options 720,126 755,007 746,088 736,059
---------- ---------- ---------- ----------
Weighted average number of shares used in
calculation of diluted earnings per share 4,968,276 5,003,107 4,994,188 4,984,159
========== ========== ========== ==========
Diluted Earnings per Share $ 0.04 $ 0.04 $ 0.10 $ .13
========== ========== ========== ==========
</TABLE>
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Net income for the three and nine months ended March 31, 1999, amounted to
$210,568 and $521,172 respectively compared to $223,229 and $628,008 for the
prior year periods.
Revenue for the three month period ended March 31, 1999, was $8,289,743 as
compared to $8,291,391 for the prior year period. For the nine month period
ended March 31, 1999, the revenue increased 6.3% to $27,055,444 from $25,443,909
for the prior year period. The increase was due to increased account
penetration.
Operating costs for the three month period ended March 31, 1999, decreased
$23,967 and increased $1,743,399 for the nine months ended March 31, 1999. As a
percentage of sales, operating costs for the three and nine month period
decreased 0.3% and increased 0.7% for the respective prior year period.
Depreciation and amortization expense for the three month and nine month period
ended March 1999, was $49,982 and $148,643 as compared with $42,338 and $124,615
for the respective prior year periods. Interest expense was $45,375 for the
three month period and $147,727 for the nine month period as compared to $48,108
and $149,388 for the prior year periods.
During the period the Company was able to introduce new business and reduce
expenses which enabled the results to equal the prior year three month period.
LIQUIDITY AND CAPITAL RESOURCES
On April 29, 1997, the Company, through its Vertex Transportation, Inc.
subsidiary, secured financing with a commercial bank. The facility is a three
year contract which allows for borrowings of up to $4,000,000 which are limited
to 80% of eligible accounts receivable. The agreement bears an interest rate of
the bank's prime rate plus 2 1/2%. At March 31, 1999 the Company had borrowings
of $1,944,015 and unused borrowing capacity of $1,301,539.
At March 31, 1999, the Company's ratio of current assets to current liabilities
and its debt to equity were 1.1:1 and 4.9:1 respectively, as compared to 1.1:1
and 9.9:1 respectively at June 30, 1998.
The Company ended the March 31, 1999 period with $8,000 of cash and working
capital of $535,000. Based upon the Company's expected cash flow from operations
and funds available from it's April 29, 1997 credit facility, management
believes that the Company's capital resources are sufficient to meet its present
and anticipated operating needs.
Year 2000 Issues
The Company believes that the general nature of its business operations limits
its risks with respect to Year 2000 issues, with the state of readiness of its
own computer system being the key consideration. Most of the Company's business
is conducted by telephone, fax, e-mail, and mail communications with customers
and transportation providers. The Company's computer system is independent of
external computers, except for e-mail Internet communications. Generally orders
are taken by phone, and shipping arrangements are made by phone, with subsequent
written confirmations. The Company uses its internal computer system to keep
8
<PAGE>
track of orders and related expenses and billing information and eventually to
provide accounting for the business transactions and the Company's financial
statements. All data used by the computer is entered at the Company's offices by
employees.
The independent developer of the Company's customized software system has
advised the Company that the system, including computer firmware, is Year 2000
compliant. In spring 1999 the Company will be administering testing scenarios.
If the computer system needed even major overhaul in order to become Year 2000
compliant, the Company believes that necessary expense and time will be
allocated to do it.
The Company believes that Year 2000 problems that its customers might experience
are as likely to increase the Company's business and results of operations as
they are to decrease them. If any customers whose shipping needs are
significantly managed by computers do in fact experience Year 2000 problems,
they probably would need to use freight forwarders more, in order to find
available carriers who can make timely deliveries. Even with that increase in
business, of course, problems with finding, negotiating, and managing the
shipments and then billing and collecting for them could result in the Company
experiencing higher costs and delayed receipts on billings, thereby negatively
affecting margins on Company business.
The Company believes that Year 2000 problems that the transportation providers
might experience could generally impair the availability of transportation and
the efficiency with which rolling stock is used. This problem, too, appears as
likely to increase Company business and results of operations as to decrease
them, with the carriers becoming more dependent on freight forwarders for
finding and arranging ways to fill the rolling stock for various trips. With
such a less efficient system, of course, the Company's overhead probably would
increase, thereby negatively affecting margins on Company business.
Lastly, the Company also believes that it does not have significant exposure to
embedded technology problems, except for possible problems that could have
widespread effects. The Company's offices are in a stand-alone, single story
building with basic utilities and HVAC and security systems, each which could be
replaced without material expense to the Company. Thus, the Company's primary
exposure to embedded technology problems appears to focus on communications and
utilities. If electricity became unavailable or erratic, or if telephone, fax,
e-mail, and/ or mail systems became unusable or erratic, the Company might have
severe difficulties in maintaining its business operations. The Company does not
have a contingency plan with respect to a possible loss of electricity,
telephone, or mail systems.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
9
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
Part II.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(A) Reports on Form 8-K:
1. None.
(B) Exhibits:
1. None
10
<PAGE>
COUNTRY WIDE TRANSPORT SERVICES, INC.
and Consolidated Subsidiary Companies
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
COUNTRY WIDE TRANSPORT SERVICES, INC.
Registrant
DATED: May 6, 1999 S/Timothy Lepper
--------------------------------------------
Timothy Lepper, President,
Chief Executive Officer,
Chief Financial Officer,
and Principal Accounting Officer
11
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-START> JUL-01-1998
<PERIOD-END> MAR-31-1999
<CASH> 8
<SECURITIES> 0
<RECEIVABLES> 4,932
<ALLOWANCES> 75
<INVENTORY> 0
<CURRENT-ASSETS> 4,937
<PP&E> 463
<DEPRECIATION> 217
<TOTAL-ASSETS> 7,648
<CURRENT-LIABILITIES> 4,942
<BONDS> 0
0
0
<COMMON> 425
<OTHER-SE> 8,848
<TOTAL-LIABILITY-AND-EQUITY> 7,648
<SALES> 27,055
<TOTAL-REVENUES> 27,055
<CGS> 25,335
<TOTAL-COSTS> 26,410
<OTHER-EXPENSES> (23)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 148
<INCOME-PRETAX> 521
<INCOME-TAX> 0
<INCOME-CONTINUING> 521
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 521
<EPS-PRIMARY> .122
<EPS-DILUTED> .104
</TABLE>
