FORM 10-QSB
________________________________________________
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1997.
Commission File No. 1-8129.
US 1 INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
Indiana 95-3585609
(State of Incorporation) (I.R.S. Employer Identification No.)
1000 Colfax, Gary, Indiana 46406
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 944-6116
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 ___
As of August 4, 1997, there were 10,618,224 shares of common stock were
outstanding.
TOTAL OF SEQUENTIALLY
NUMBERED PAGES: 14
<PAGE>
Part I
Item 1. FINANCIAL STATEMENTS.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
ASSETS
June 30, December 31,
1997 1996
(Unaudited)
CURRENT ASSETS:
Cash $ 53,768 $ 225,541
Accounts receivable--trade less allowance for
doubtful accounts of $67,341 and $50,000 3,025,992 1,501,947
Other receivables 635,957 136,648
Deposits 154,191 153,892
Prepaid expenses 142,715 116,476
------------ ------------
Total current assets 4,012,623 2,134,504
------------ ------------
FIXED ASSETS:
Equipment 59,535 17,193
Less accumulated depreciation and amortization (8,362) (7,682)
------------ ------------
Net fixed assets 51,173 9,511
------------ ------------
ASSETS HELD FOR SALE:
Land 195,347 195,347
Valuation allowance (141,347) (141,347)
------------ ------------
Net assets held for sale 54,000 54,000
------------ ------------
TOTAL ASSETS $ 4,117,796 $ 2,198,015
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 1997 (UNAUDITED) AND DECEMBER 31, 1996
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
June 30, December 31,
1997 1996
(Unaudited)
CURRENT LIABILITIES:
Accounts payable $ 3,344,521 $ 2,722,897
Accrued expenses 176,877 152,098
Short-term debt 1,853,634 1,769,146
Insurance and claims 289,542 252,153
Accrued interest 90,551 46,880
Accrued compensation 22,051 32,428
Estimated fuel and other taxes 135,513 174,377
----------- -----------
Total current liabilities 5,912,689 5,149,979
----------- -----------
LONG-TERM DEBT 1,882,542 521,160
REDEEMABLE PREFERRED STOCK,
authorized 5,000,000 shares; no par value,
Series A shares outstanding: 1,094,224
Liquidation preference $0.3125 per share. 722,144 691,541
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock authorized 20,000,000 shares;
no par value; shares outstanding:
June 30, 1997 and December 31, 1996 were
10,618,224 and 10,573,780, respectively. 40,844,296 40,824,296
Accumulated deficit (45,243,875) (44,988,961)
------------ ----------
Total shareholders' equity (deficiency) (4,399,579) (4,164,665)
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 4,117,796 $ 2,198,015
============ ===========
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND 1996 (UNAUDITED)
<TABLE>
<S> <C> <C> <C> <C>
Three Months Ended Six Months Ended
1997 1996 1997 1996
OPERATING REVENUES $ 6,171,327 $ 4,096,404 $10,655,666 $ 7,743,395
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Purchased transportation 4,721,505 3,078,289 8,113,784 5,814,274
Insurance and claims 200,707 137,536 379,554 262,584
Salaries, wages, and other 331,476 186,472 611,758 307,933
Commissions 620,155 398,773 1,046,255 727,685
Operating supplies and expense 237,516 75,795 430,526 260,995
Operating taxes and licenses 35,416 33,297 66,656 68,564
Communications and utilities 40,950 15,542 69,887 32,385
Rents 24,470 4,767 47,641 17,767
Depreciation and amortization 2,697 470 4,046 941
------------ ------------ ------------ -----------
Total operating expenses 6,214,892 3,930,941 10,770,107 7,493,128
------------ ------------ ------------ -----------
OPERATING INCOME (43,565) 165,463 (114,441) 250,267
------------ ------------ ------------ -----------
NON-OPERATING INCOME (EXPENSE):
Interest income 1,336 16,543 1,336 16,988
Interest expense (98,962) (84,643) (159,517) (152,123)
Other income 20,866 24,364 48,311 54,814
------------ ------------ ------------ -----------
Total non-operating (expense) (76,760) (43,736) (109,870) (80,321)
------------ ------------ ------------ -----------
NET INCOME (LOSS) $ (120,325) $ 121,727 $ (224,311) $ 169,946
============ ============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE $ (0.01) $ 0.01 $ (0.02) $ 0.02
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 10,614,768 9,829,336 10,614,768 9,829,336
============ ============ ============ ============
The accompanying notes are an integral part of the consolidated financial statements.
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
(UNAUDITED)
Six Months Ended June 30,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $(224,311) $ 169,946
Adjustments to reconcile net income (loss) to net
cash provided from (used for) operations:
Depreciation and amortization 2,697 942
Changes in operating assets and liabilities:
Accounts receivable - trade (1,524,045) (182,956)
Other receivables (499,309) (356,457)
Prepaid assets (26,239) (27,581)
Deposits (299) 550
Accounts payable 621,624 67,866
Accrued expenses 24,779 (5,660)
Accrued interest 58,123 (3,555)
Insurance and claims 37,389 52,548
Other accrued compensation (24,829) (5,583)
Fuel and other taxes (38,864) 19,592
Other (528)
---------- ----------
Net Cash used for operating activities (1,593,284) (270,876)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (44,359)
---------- ----------
Net cash used for investing activities (44,359)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings under line of credit 739,288 158,306
Proceeds from other related party short term loans 117,463
Proceeds from other related party long term loans 1,374,802
Repayment of other related party short term loans (654,800)
Repayment of other loans (13,420)
Proceeds from issuance of common stock 20,000
---------- ----------
Net cash provided from financing activities 1,465,870 275,769
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (171,773) 4,897
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 225,541 53,602
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 53,768 $ 58,499
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION-
Cash paid during period for interest $ 155,846 $ 75,803
========== ==========
See accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 1997 AND 1996
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of June 30, 1997 and the
consolidated statements of operations and cash flows for the six month periods
ended June 30, 1997 and 1996 are unaudited, but, in the opinion of management,
include all adjustments necessary for a fair presentation of the financial
position and the results of operations for such periods. The December 31, 1997
balance sheet data was derived from audited financial statements. These
statements should be read in conjunction with the Company's audited
consolidated financial statements for the year ended December 31, 1996 and the
notes thereto included in the Company's Annual Report on Form 10-KSB. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
omitted, as permitted by the requirements of the Securities and Exchange
Commission, although the Company believes that the disclosures included in
these financial statements are adequate to make the information not misleading.
The results of operations for the six months ended June 30, 1997 and 1996 are
not necessarily indicative of the results for a full year.
2. GOING CONCERN
The accompanying consolidated financial statements have been prepared assuming
that the Company will continue as a going concern. The Company has experienced
operating losses and negative cash flows in recent years. At June 30, 1997 and
December 31, 1996, the Company's current liabilities exceeded its current
assets by $1.9 million and $3.0 million, respectively. The Company's future
depends heavily on raising the capital to fund operations until its revenue
grows and generates sufficient cash flows to satisfy its indebtedness. Revenue
growth and the resulting improved cash flows would enable the Company to reduce
its third party debt and improve its working relationships with potential
agents and independent contractors. The Company is exploring options to raise
capital and various other potential transactions. Recent poor results,
negative cash flows from operations, and inability to remain in compliance with
financial covenants with its lenders, continue to raise substantial doubts
about the Company's ability to continue as a going concern. The financial
statements do not include any adjustments that might result from the outcome of
this uncertainty.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. SHORT-TERM DEBT
Short-term debt at June 30, 1997 and December 31, 1996 comprises:
June 30, December 31,
1997 1996
---------- ----------
Line of credit $1,792,022 $1,052,734
Current portion of long-term debt 61,612 61,612
Due to August Investment Partnership 100,000
Due to Antonson/Kibler 554,800
---------- ----------
Total $1,853,634 $1,769,146
========== ==========
Under its revolving line of credit agreement the Company may borrow up to a
maximum of $3,000,000. Borrowings are limited to 80% of eligible accounts
receivable and bear interest at the prime rate (8.25% at June 30, 1997 and
December 31, 1996, respectively) plus 3.25%. Advances under the line of credit
agreement are collateralized by the Company's accounts receivable, property and
other assets. The agreement contains a clause providing for extension of the
agreement for one year unless either party notifies the other of their intent
to terminate the agreement. At May 31, 1997, the agreement automatically
extended for one year. The Company and the lender are currently in the process
of extending the line of credit for multiple years although no final agreement
has been approved.
The line of credit is subject to termination upon various events of default,
including failure to remit timely payments of interest, fees and principal, any
adverse change in the business of the Company or the insecurity of the lender
concerning the ability of the Company to repay its obligations as and when due
or failure to meet certain financial covenants. Financial covenants include:
minimum net worth requirements, total debt service coverage ratio, capital
expenditure limitations, restrictions on compensation levels of key officers,
and prohibition of additional indebtedness without prior authorization. As of
December 31, 1996, the Company was in violation of the debt service coverage
ratio covenant. At June 30, 1997, it is in violation of the debt service
coverage ratio, additional indebtedness, and the net worth covenants. As a
result, the lender may at any time declare the commitment terminated and demand
payment. Management does not expect the lender to terminate the agreement
before it expires.
Other-- Outstanding loans from the President of the Company and another General
Partner of August Investment Partnership ("AIP") (the Company's largest
shareholders, Kibler and Antonson) was $554,800 at December 31, 1996. The
interest rate on these loans approximated the prime rate (8.25%) at December
31, 1996.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
4. LONG-TERM DEBT
Long-term debt at June 30, 1997 and December 31, 1996 comprises:
June 30, December 31,
1997 1996
--------- ------------
Mortgage note payable to August Investment
Partnership collateralized by land,
interest at prime + .75%, interest only
payments required, principal balance due
July 31, 1999 $ 250,000 $250,000
Mortgage note payable to AIFE,
collateralized by land, interest at 9%,
monthly repayments of $5,000, including
interest, remaining principal balance
due July 31, 1999 231,952 239,372
TIP trailer settlement payments of principal
only of $1,000 per month, principal due
February, 2003 87,400 93,400
Due to August Investment Partnership
interest at prime + .75%, interest only
payments required, principal balance due
January, 1999 100,000
Due to Antonson/Kibler interest at prime + .75%,
interest only payments required, principal
balance due January, 1999 1,274,802
---------- --------
Total debt 1,944,154 582,772
Less current portion 61,612 61,612
---------- --------
Total long-term debt $1,882,542 $521,160
========== ========
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. COMMITMENTS AND CONTINGENCIES
Over the past few years, the Company has had a significant number of lawsuits
instituted or threatened against it as a result of its poor financial condition
and its inability to meet certain financial obligations. For the most part,
these resulting suits have been settled through cash payments of a reduced
amount or through the institution of payment plans. The undisputed claims that
have not been settled are reflected as liabilities in the Company's financial
statements and are included in accrued expenses in the accompanying
consolidated balance sheets. The Company's significant litigation activity
that is currently pending includes the following:
McCormick v. Trailblazer. Mr. McCormick, the owner of C.A. White Trucking
Company ("White"), filed an action on October 1, 1993, alleging that
Trailblazer failed to make required payments under an employment contract.
Trailblazer did not make the payments as a result of a dispute related to
undisclosed liens on assets purchased from White. The Company has lost this
suit, however, Trailblazer was closed in 1994 and has no funds to pay the
judgment. The judgement was for approximately $59,000. The suit has since
been brought against US 1. The suit has been dismissed during the second
quarter of 1997.
Simpson V. Keystone Lines--Mr. Simpson, an independent owner-operator leased to
Keystone Lines, is claiming approximately $54,000 for injuries he sustained to
his back while working for the Company. The Company is vigorously defending
against this claim on the basis that Mr. Simpson was not an employee and is not
entitled to a workers compensation claim.
Cam Regional Transport, Inc., Miller, Pry v. Trailblazer, Transcon
Incorporated. Mr. Miller and Mr. Pry owners of Cam Regional Transport, Inc.,
filed an action in 1994, alleging that Trailblazer failed to make required
payments under an employment contract and purchase agreement alleging damages
of $293,000. Trailblazer ceased to make the payments as a result of a dispute
related to their employment and inability to obtain title to the assets
purchased. The Company is vigorously defending the action.
In December 1996, Trailblazer Transportation, a subsidiary of Keystone Lines,
filed for protection from its creditors under the bankruptcy laws. At June 30,
1997, Trailblazer's liabilities exceeded its assets.
The Company believes it has adequately reserved for the above claims, however,
additional liability is possible and the ultimate disposition of these claims
may have a material adverse effect to the Company's results of operations, cash
flows and financial position.
The Company carries insurance for public liability and property damage, and
cargo loss and damage through various programs. The Company's insurance
liabilities are based upon the best information currently available and are
subject to revision in future periods as additional information becomes
available. Management believes it has adequately provided for insurance
claims.
<PAGE>
6. SUBSEQUENT EVENTS
As a result of a lawsuit concerning the ownership of property, US 1 Industries,
Inc. was awarded title to a property in Kansas City less a mortgage of $50,000
and real estate taxes of approximately $123,000. The Company believes the
property to be worth in excess of $450,000. The Company expects to obtain
title to the property during the third quarter of 1997.
As of August 4, 1997, AIP and Antonson/Kibler restructured part of their long
term debt with the company by using the Phoenix property to secure $600,000 of
debt through mortgages which are due July 3, 2003.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
Results of Operations
The financial statements and related notes contained elsewhere in this Form 10-
QSB and in the Company's Form 10-KSB for its fiscal year ended December 31,
1996 are essential to an understanding of the comparisons and are incorporated
by reference into the discussion that follows.
Three Month Period 1997 Compared to 1996
The Company's operating revenues increased from $4.1 million for the quarter
ended June 30, 1996 to $6.2 million for the same period in 1997. The Company's
operating revenues are generated principally from its truckload carriers, who
generate sales through independent agents who originate shipments that then are
transported by independent contractors who own their own equipment. The
increase in operating revenues resulted from the addition of Carolina National
Transportation in January 1997 and Gulf Line Transportation in December 1996.
Total operating expenses increased from $3.9 million in 1996 to $6.2 in 1997.
The largest component of operating expenses is purchased transportation, which
generally varies in proportion to operating revenues at approximately 77%.
Commissions generally vary in proportion to operating revenues. The Company
has added salaried agents with the addition of Carolina National Transportation
and Gulf Line Transportation. These additions have increased commission
expense beyond the normal proportions. Insurance and claims also generally
vary in proportion to operating revenues, although they also depend on claims
experience. Wages, Communications, and Rent increased from $0.2 million to
$0.4 million from 1996 to 1997 with the addition of Carolina National
Transportation and Gulf Line Transportation.
Non-operating income and (expenses) increased from an expense of $0.04 million
in 1996 to $0.08 million in 1997. Interest expense increased from $.08 million
for the three months ended June 30, 1996 to $.1 million for the same period in
1997. Interest expense varies in proportion to the Company's outstanding
interest-bearing indebtedness which increased during 1997 as the result of the
additional financing of accounts receivable for Carolina National
Transportation.
Overall results for the three month period ended June 30, 1997 decreased to a
loss of $0.1 million from a gain of $0.1 million for the same period in 1996.
The difference in additional costs of operations of approximately $0.2 million
was caused by the operating losses sustained by Carolina National
Transportation during 1997 and by recovery of a bad debt, which reduced
expenses in 1996.
<PAGE>
Six Month Period 1997 Compared to 1996
The Company's operating revenues increased from $7.7 million for the first six
months of 1996 to $10.7 million for the same period in 1997. The Company's
operating revenues are generated principally from its truckload carriers, who
generate sales through independent agents who originate shipments that then are
transported by independent contractors who own their own equipment. The
increase in operating revenues resulted from the addition of Carolina National
Transportation in January 1997 and Gulf Line Transportation in December 1996.
These additions also resulted in the increase in the account receivable balance
from December 31, 1996 to June 30, 1997.
Total operating expenses increased from $7.5 million for the period ended June
30, 1996 to $10.8 million for the same period in 1997. The largest component
of operating expenses is purchased transportation, which generally varies in
proportion to operating revenues at approximately 77%. Purchased
transportation increased from $5.8 million in 1996 to $8.1 million in 1997.
Commissions also increased from $0.7 million in 1996 to $1.0 million in 1997.
Commissions vary in proportion to operating revenues. Insurance and claims,
which increased from $0.3 million in 1996 to $0.4 million for 1997, similarly
vary in proportion to operating revenues, although they also depend on claims
experience. The remaining operating expenses increased from $0.7 in 1996 to
$1.2 million for 1997.
Other expense increased from approximately $80,000 for the first six months of
1996 to $110,000 for the first six months of 1997 and consists primarily of
interest expense. Interest expense varies in proportion to the Company's
outstanding interest-bearing indebtedness which decreased during 1997 as the
result of lower FINOVA borrowing on Keystone receivables and the settlement of
the Landair note of $200,000 at December 31, 1996.
The Company started two new operations, Carolina National Transportation in
January 1997 and Gulf Line Transportation in December 1996. The costs of these
startups resulted in a loss of approximately $0.25 million, which affected the
overall operating results for the first six months of 1997. Overall results
for the first six months of 1997 decreased to a $0.25 million loss from income
of $0.17 million in 1996.
Future Prospects
The Company's management remains optimistic about its future prospects.
Revenue for each month in 1997 has increased over revenue in the prior month.
In addition, the Company started two new operations at the beginning of 1997,
Carolina National Transportation and Gulf Line Transportation. However, the
Company's future depends on continuing to increase its revenues, its ability to
resolve its cash flow problems, and bringing its new operations to
profitability.
<PAGE>
Liquidity and Capital Resources
As of June 30, 1997, the Company's financial position remains precarious. The
Company had a deficit in shareholders' equity of $4.4 million and its current
liabilities of $5.9 million exceeded its current assets by $1.9 million. The
Company has experienced significant operating losses in the current and prior
years and losses from discontinued operations in prior years leaving the
Company in its current position. The Company's borrowing from the partners of
AIP and the Company's president to alleviate the current cash shortages has
enabled the Company to continue in operation. While the Company's current
situation is not good, current plans are designed to grow the Company while
remaining profitable which should enable it to improve its liquidity position.
The Company continues to suffer from negative cash flows from operations, as
the negative cash flow increased from a negative of $.3 million during the
first six months of 1996 to a negative $1.6 million during the same period of
1997. Cash flow was provided by borrowing $0.7 million from the Company's
president and a partner of AIP and by borrowing $0.7 million from FINOVA. This
borrowing reduced the net negative cash flow to $0.2 million for the six months
ended June 30, 1997
The Company's principal source of outside liquidity is its $3 million line of
credit with FINOVA. The availability of the line of credit is based on 80% of
Keystone's eligible accounts receivable and 75% of the Carolina National
eligible accounts receivable. At June 30, 1997, the outstanding borrowings
were $1.7 million, which essentially was the entire amount that the Company was
eligible to borrow. The agreement contains a clause providing for extension of
the agreement for one year unless either party notifies the other of their
intent to terminate the agreement. At May 31, 1997, the agreement
automatically extended for one year. The Company and the lender are currently
in the process of extending the line of credit for multiple years although no
final agreement has been approved. The Company is currently in violation of
several covenants of the lender. As a result, the lender may at any time
declare the commitment terminated and demand payment. The Company expects
these covenants to be modified as part of the new agreement.
Shareholders and potential investors in the Company are cautioned that the
Company's financial condition remains precarious and that an increase in
operating performance remain essential to its long-term survival.
Unfortunately, there can be no assurance that these goals will be achieved.
<PAGE>
PART II. OTHER INFORMATION
Item 6(b). Reports on Form 8-K
No Reports on Form 8-K have been filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
US 1 Industries, Inc.
Michael E. Kibler
President
James C. Day
Chief Financial Officer
August 14, 1997
<PAGE>
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