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 March 31, 1998.
Commission File No. 1-8129.
US 1 INDUSTRIES, INC.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Indiana 95-3585609
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(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 May 18, 1998, there were 10,618,224 shares of common stock were
outstanding.
<PAGE> 2
PART I
ITEM 1. FINANCIAL STATEMENTS.
----------------------------
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
ASSETS March 31, December 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 125,032 $ 298,079
Account receivable--trade less allowance for
doubtful accounts of $237,056 and $195,298 4,416,750 5,066,256
Other receivables 673,785 336,919
Deposits 154,048 154,068
Prepaid expenses 111,458 83,731
------------ ------------
Total current assets 5,481,073 5,939,053
------------ ------------
FIXED ASSETS:
Equipment 58,010 52,996
Less accumulated depreciation and amortization (15,275) (12,682)
------------ ------------
Net fixed assets 42,735 40,314
------------ ------------
ASSETS HELD FOR SALE:
Land 423,226 423,226
Valuation allowance (141,347) (141,347)
------------ ------------
Net assets held for sale 281,879 281,879
------------ ------------
TOTAL ASSETS $ 5,805,687 $ 6,261,246
============ ============
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 3
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 1998 (UNAUDITED) AND DECEMBER 31, 1997
<TABLE>
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
March 31, December 31,
1998 1997
---- ----
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 2,888,086 $ 2,651,580
Bank overdraft 183,521 530,133
Accrued expenses 125,261 137,454
Short-term debt 2,915,872 3,292,945
Insurance and claims 259,663 241,607
Accrued interest 55,464 140,824
Accrued compensation 41,153 38,302
Estimated fuel and other taxes 216,654 273,901
----------- -----------
Total current liabilities 6,685,674 7,306,746
----------- -----------
LONG-TERM DEBT 2,762,939 2,599,815
REDEEMABLE PREFERRED STOCK,
authorized 5,000,000 shares; no par value,
Series A shares outstanding: 1,094,224
Liquidation preference $0.3125 per share. 771,254 753,254
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock authorized 20,000,000 shares;
no par value; shares outstanding 10,618224 40,844,296 40,844,296
Accumulated deficit (45,034,335) (45,036,724)
Accumulated other comprehensive loss (224,141) (206,141)
------------ ----------
Total shareholders' equity (deficiency) (4,414,180) (4,398,569)
------------ ----------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 5,805,687 $ 6,261,246
============ ===========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 4
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997 (UNAUDITED)
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
OPERATING REVENUES $ 7,125,645 $ 4,484,339
------------ -----------
OPERATING EXPENSES:
Purchased transportation 5,494,135 3,392,279
Insurance and claims 252,032 178,847
Salaries, wages, and other 246,564 280,282
Commissions 681,966 426,100
Operating supplies and expense 213,144 193,010
Operating taxes and licenses 19,181 31,240
Communications and utilities 31,957 28,937
Rents 21,150 23,171
Depreciation and amortization 2,592 1,349
------------ ------------
Total operating expenses 6,962,719 4,555,215
------------ ------------
OPERATING INCOME 162,926 (70,876)
------------ ------------
NON-OPERATING INCOME (EXPENSE):
Interest income 476
Interest expense (161,496) (60,555)
Other income 485 27,445
------------ ------------
Total non-operating (expense) (160,535) (33,110)
------------ ------------
NET INCOME (LOSS) $ 2,389 $ (103,986)
DIVIDENDS ON PREFERRED SHARES 18,000 15,429
------------ ------------
NET INCOME (LOSS) AVAILABLE TO COMMON SHARES (15,611) $ (119,415)
============ ============
INCOME (LOSS) PER COMMON SHARE:
Net Income:
Basic $0.00 ($0.01)
Diluted $0.00 ($0.01)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 10,616,397 10,573,780
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 5
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
(UNAUDITED)
<TABLE>
<CAPTION>
Three Months Ended March 31,
----------------------------
1998 1997
---- ----
CASH FLOWS FROM OPERATING ACTIVITIES:
<S> <C> <C>
Net Income (loss) $ 2,389 $ (103,986)
Adjustments to reconcile net income (loss) to net
cash provided from (used for) operations:
Depreciation and amortization 2,593 1,349
Changes in operating assets and liabilities:
Accounts receivable - trade 649,506 (1,047,993)
Other receivables (336,866) (314,309)
Prepaid assets (27,727) 14,047
Deposits 20 (375)
Accounts payable 236,506 498,559
Accrued expenses (12,193) 13,363
Accrued interest (85,360) 38,454
Insurance and claims 18,056 42,643
Other accrued compensation 2,851 (24,709)
Fuel and other taxes (57,247) (68,728)
--------- ----------
Net Cash provided by (used for) operating activities 392,527 (951,685)
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,014) (18,071)
--------- ----------
Net cash used in investing activities (5,014) (18,071)
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line of credit (377,073) 693,930
Proceeds from other related party loans 163,124 246,849
Decrease in bank overdraft (346,612) 0
--------- ----------
Net cash provided from (used for)financing activities (560,561) 940,779
--------- ----------
NET DECREASE IN CASH AND CASH EQUIVALENTS (173,047) (28,977)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 298,079 225,541
--------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $125,032 196,564
========= ==========
</TABLE>
The accompanying notes are an integral part of the consolidated
financial statements.
<PAGE> 6
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 1998 AND 1997
1. BASIS OF PRESENTATION
---------------------
The accompanying consolidated balance sheet as of March 31, 1998 and
the consolidated statements of operations and cash flows for the three
month periods ended March 31, 1998 and 1997 are unaudited, but, in the
opinion of management, include all adjustments (consisting of normal,
recurring accruals) necessary for a fair presentation of the financial
position and the results of operations for such periods. The year-end
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, 1997 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 three months ended March 31, 1998 and
1997 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 March 31, 1998 and December 31, 1997, the Company's
current liabilities exceeded its current assets by $1.2 million and
$1.4 million, respectively. While this is an improvement, the
Company's future still depends heavily on raising the capital to fund
operations until its revenue growth 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
and the 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> 7
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENT
----------------------------------------
Reporting Comprehensive Income. Statement of Financial Accounting
Standards No. 130, "Reporting Comprehensive Income," establishes
standards for reporting and display of comprehensive income and its
components in a full set of general-purpose financial statements. The
term comprehensive income is defined as the change in the equity of a
business. Comprehensive income includes net income as well as other
components (revenues, expenses, gains, and losses) that under
generally accepted accounting principles are excluded from net income
but effect equity. The statement was effective for fiscal years
beginning after December 15, 1997. Comprehensive income (loss) for
the periods ended March 31, 1998 and 1997 were ($15,611) and
($119,415) respectively.
Disclosure about Segments. Statement of Financial Accounting Standards
No.131, "Disclosure about Segments of an Enterprise and Related
Information," changes Statement of Financial Accounting Standards No.
14 by requiring a new framework for segment reporting and includes the
disclosure of financial information related to each segment. The
statement was effective for fiscal years beginning after December 15,
1997; however, adoption of this statement is not required in interim
statements in the initial year of application. The Company is
currently evaluating the effects of this pronouncement.
Employers' Disclosures About Pensions and Other Postretirement
Benefits. Statement of Financial Accounting Standards NO. 132,
"Employers' Disclosures About Pensions and Other Postretirement
Benefits", standardized the disclosure requirements for pensions and
other post retirement benefits, requires additional information on
changes in the benefit obligation and fair values of plan assets and
eliminates certain disclosures that are no longer useful. This
statement is effective for fiscal years beginning after December 15,
1997. The Company believes that the adoption of this statement will
not have a significant impact on its financial statements.
4. EARNINGS PER COMMON SHARE
The Company calculates earnings per share in accordance with the
Financial Accounting Standards No. 128 effective for both interim and
annual financial statement periods. As required by this statement,
the company adopted the standards for computing and presenting
earnings per share (EPS) and for all prior period earnings per share
data presented. Following are the reconciliation of the numerators
and denominators of the basic and diluted EPS. There were no
outstanding options during the first quarter of 1997. The average
market price of the common stock was greater than the exercise price
<PAGE> 8
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
of the outstanding options, however, as the Company had a net loss
available to shareholders in 1998, the potentially dilutive securities
(options) were antidilutive.
<TABLE>
<CAPTION>
Numerator 1998 1997
<S> <C> <C> <C>
Income (Loss) from continuing operations $ 2,389 ($103,986)
Dividends on preferred shares ($18,000) ($15,429)
---------- ------------
Loss available to common shareholders
for basic and diluted EPS ($15,611) ($119,415)
---------- ------------
Net income (loss) available to common
Shareholders for basic and diluted EPS ($15,611) ($119,415)
Denominator
Weighted average common shares 10,618,224 10,573,780
Outstanding for basic and diluted EPS
</TABLE>
5. SHORT-TERM DEBT
Short-term debt at March 31, 1998 and December 31, 1997 comprises:
March 31, December 31,
1998 1997
---------- ----------
Line of credit $2,854,260 $3,188,581
Current portion of long-term debt 61,612 54,364
Note on Kansas City Property 50,000
---------- ----------
Total $2,915,872 $3,292,945
========== ==========
Under its revolving line of credit agreement the Company may borrow up
to a maximum of $3,300,000. Borrowings are limited to 80% of eligible
accounts receivable and bear interest at the prime rate (8.50% and
8.25% at March 31, 1998 and December 31, 1997, respectively) plus
2.75% and 3.25% respectively. The Company's accounts receivable;
property and other assets collateralize advances under the line of
credit agreement.
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, 1997, the Company was in violation of the debt
service coverage ratio covenant. At March 31, 1998, it is in
violation of the debt service coverage ratio and the net worth
covenants. As a result, the lender may declare the commitment
terminated and demand payment. Management does not expect the lender
to terminate the agreement before it expires.
<PAGE> 9
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. LONG-TERM DEBT
Long-term debt at March 31, 1998 and December 31, 1997 comprises:
<TABLE>
<CAPTION>
March 31, December 31,
1998 1997
--------- ------------
<S> <C> <C>
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 Antonson/Kibler
collateralized by land, interest at
prime + .75% interest only payments
required, principal balance due
July 2, 2003 500,000 500,000
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 232,293 221,475
TIP trailer settlement payments on principal
only of $1,000 per month, principal due
February, 2003 80,899 83,400
Mortgage note payable to August Investment
Partnership, interest at prime + .75%, interest
Only payments required, principal balance due
January, 1999 100,000 100,000
Due to Antonson/Kibler interest at prime + .75%,
Interest only payments required, principal
Balance due January, 1999 1,661,359 1,499,304
--------- ---------
Total debt 2,824,551 2,654,179
Less current portion 61,612 54,364
--------- ---------
Total long-term debt 2,762,939 2,599,815
========= =========
</TABLE>
<PAGE> 10
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
7. 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 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 litigation that currently is pending include:
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 from Federal Court during
the second quarter of 1997. McCormick has refiled the case in Texas
State Court during the third quarter of 1997. Recently that Court
stayed the action. The Company continues to vigorously defend this
action.
SIMPSON V. KEYSTONE LINES--Mr. Simpson, an independent owner-operator
leased to Keystone Lines, is claiming an amount in excess of $25,000
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.
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> 11
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, 1997 are essential to an understanding of the comparisons
and are incorporated by reference into the discussion that follows.
PERIOD 1998 COMPARED TO 1997
The Company's operating revenues increased from $4.5 million for the
first quarter of 1997 to $7.1 million for the same period in 1998, an
increase of 58%. The Company's operating revenues are generated
principally from two truckload carriers Keystone, and Carolina
National Transportation. Sales are generated 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 it's subsequent growth.
The company contracts with third parties for most services and as a
matter of contract agrees to pay certain percentages of revenue for
services rendered. The three major items so managed are:
Item: Average Percent
Purchased Transportation (PURTRANS) 76.3%
Commissions to agents 9.0%
Insurance (Liability & Cargo) 4.2%
Total 89.5%
These expenses, as a result, remain relatively consistent (as a
percent of sales)
(Dollar amounts stated in
thousands)
First Quarter results 1998 1997
Sales $ 7,125 $4,484
PURTRANS+ Commissions + Insurance 6,428 3,997
Percentage 90.2% 89.1%
The rest the of operations expenses have remained relatively fixed:
First Quarter results 1998
1997
Remaining operation expenses
(Fixed Expenses) $ 535 $ 558
<PAGE> 12
During the first quarter 1998 the increased sales less variable
expenses reached a point where after subtracting the fixed expenses,
an operating income of $162,926 was reached.
Additional funds were borrowed to finance last year's growth and fund
the start up expenses of Carolina National. As a result, interest
expense increased from $60,555 to $ 161,496. Management is exploring
the possibility of raising additional equity funds in order to retire
debt and fund growth. The continued listing of the company's shares
on the NYSE is essential to those plans.
FUTURE PROSPECTS
The Company's management remains hopeful about its future prospects.
Revenue for each month in the first quarter of 1998 has increased over
revenue in the prior month and operations are beginning to show a
small profit. However, the Company's future depends on continued
increases in revenue, and bringing its operations up to greater
profitability. Management has been recently informed by the New York
Stock Exchange that the company no longer meets their listing
requirements. The NYSE has asked management to present a business
plan whereby the company can meet the listing requirements within a
set time. Management is currently drafting that plan. Shareholders
and Investors are cautioned that delisting from the NYSE is a strong
possibility.
LIQUIDITY AND CAPITAL RESOURCES
As of March 31, 1998, the Company's financial position remains
precarious. The Company had a deficit in shareholders' equity of $4.4
million and its current liabilities of $6.6 million exceeded its
current assets by $1.1 million. As described above, the Company has
experienced significant revenue declines, and operating losses 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 cash shortage has enabled the Company to
continue in operation. While the Company's situation is not good,
management plans to continue to grow the Company and increase profits.
The Company reversed its negative cash flows from operations during
the first quarter of 1998 from a negative $.95 million in 1997 to a
positive $.4 million during the same period of 1998. Cash flow was
provided by borrowing $0.16 million from the Company's president and a
partner of AIP while net borrowings from FINOVA were reduced by $.4
million. This borrowing resulted in the net negative cash flow being
$0.2 million for the quarter ended March 31, 1998
The Company's principal source of outside liquidity is its $3.3
million line of credit with FINOVA. The availability of the line of
credit is based on 80% of eligible accounts receivable. At March 31,
<PAGE> 13
1998, the outstanding borrowings were $2.9 million. The Company is
currently in violation of several covenants of the lender, although as
part of the extension these covenants are expected to be modified.
Shareholders and potential investors in the Company are cautioned that
the Company's financial condition remains precarious and that the
continued listing of the stock on the NYSE, and an increase in
operating performance, are essential to its long-term survival.
Unfortunately, there can be no assurance that these goals will be
achieved.
PART II. OTHER INFORMATION
--------------------------
ITEM 6(B). REPORTS ON FORM 8-K
No Reports on Form 8-K have been filed during the quarter.
<PAGE> 14
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
Harold E. Antonson
Chief Financial Officer
May 18, 1998
