FORM 10-KSB
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the fiscal year ended December 31, 1998.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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
---------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
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Common Stock, no par value None
Securities registered pursuant to Section 12(g) of the Act: None
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 __ No _X_
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]
On May 25, 1999, there were 10,618,224 shares of registrant's common stock were
outstanding, and the aggregate market value of the voting stock held by none
affiliates of the registrant was approximately $700,000. For purposes of the
forgoing statement, directors and officers of the registrant have been assumed
to be affiliates.
1
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PART 1
Item 1. Business.
The registrant, US 1 Industries, Inc. (hereinafter referred to, together
with its subsidiaries, as "US 1" or the "Company"), through its subsidiaries is
an interstate trucking company operating in 48 states and in Ontario and Quebec,
Canada. The Company's business consists of a truckload operation for which the
Company obtains substantially all of its business through independent sales
agents who then contract with independent truckers to haul the freight to the
desired destination.
US 1 was incorporated in California under the name Transcon Incorporated on
March 3, 1981. In March 1994, the Company changed its name to US 1 Industries,
Inc. In February 1995, the Company was merged with an Indiana corporation for
purposes of re-incorporation under the laws of Indiana. The Company's principal
subsidiaries consist of Blue and Grey Transport, Inc., an Indiana corporation
("BGT"), Blue and Grey Brokers, Inc., an Indiana corporation ("BGB"), Carolina
National Logistics, Inc., an Indiana corporation ("CNL"), Carolina National
Transportation, Inc., an Indiana corporation ("CNT"), Gulf Line Brokerage, Inc.,
an Indiana Corporation ("GLB"), Gulf Line Transportation, Inc., an Indiana
Corporation ("GLT"), Keystone Lines, a California corporation ("Keystone"), and
TC Services, Inc., a California corporation ("TCS"). BGT, BGB, CNL, CNT, GLB,
GLT, and Keystone operate under authority granted by the United States
Department of Transportation (the "DOT"), and various state agencies.
Operations
The Company carries virtually all forms of freight transported by truck,
except bulk goods and hazardous materials, including specialized trucking
services such as containerized, refrigerated, and flatbed transportation.
The Company contracts with independent truckers and sales agents and pays
them a percentage of the revenue received from customers for the delivery of
goods. The expenses related to the operation of the trucks are the
responsibility of the independent contractors. Consequently, short-term
fluctuations in operating activity have less of an impact on this component of
the Company's net income than they have on the net income of truck
transportation companies that bear substantially all of the cost of employing
drivers and maintaining equipment. Like other truck transportation companies,
however, US 1's revenues are affected by competition and the state of the
economy.
The Company's principal focus during 1998 was growing the Company through
expansion of Carolina National Transportation, which began operating in January
of 1997.
Marketing and Customers
The Company conducts its business through independent sales agents. The
sales agents have facilities and personnel to monitor and coordinate shipments
and to dispatch independent contractors who own and operate their own trucks for
freight transportation. The Company pays sales agents and contractors
commissions immediately upon delivery of shipments.
Approximately 85% of the Company's revenues from its trucking operations
are allocated to the payment of independent contractors and sales agents.
2
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During 1998, the Company utilized the services of approximately 25 sales
agents. The largest agent accounted for 12% of the Company's total revenues. No
other agent accounted for more than 10% of revenue. The Company shipped freight
for approximately 3,000 customers in 1998, no one of which accounted for more
than of 10% of the Company's total revenues.
During 1997, the Company utilized the services of approximately 100 sales
agents, one of which accounted for 14% of the Company's total revenue. No other
agent accounted for more than 10% of revenue.
The independent contractors used by the Company must enter into standard
equipment operating agreements. The agreements provide that independent
contractors must bear many of the costs of operations, including drivers'
compensation, maintenance costs, fuel costs, collision insurance, taxes related
to the ownership and operation of the vehicle, licenses, and permits. The
Company requires independent contractors to maintain their equipment to
standards established by the DOT, and the drivers are subject to qualification
and training procedures established by the DOT. The Company is also required to
have random drug testing, enforce hours of service requirements, and monitor
maintenance of vehicles.
Employees
At December 31, 1998, the Company had approximately thirty-five full-time
employees. The Company's employees are not covered by a collective bargaining
agreement.
Competition
The trucking industry is highly competitive. The Company competes for
customers primarily with other nationwide carriers, some of which have
company-owned equipment and company drivers, and many, if not most, of which
have greater volume and financial resources. The Company also competes with
private carriage conducted by existing and potential customers. In addition, the
Company competes with other modes of transportation including rail.
The Company also faces competition for the services of independent trucking
contractors and sales agents. Sales agents routinely do business with a number
of carriers on an ongoing basis. The Company has attempted to develop a strong
sales agent network by maintaining a policy of prompt payment upon delivery of
goods.
Competition is based on several factors; principally cost, timely
availability of equipment and quality of service.
Insurance
The Company insures the trucks with automobile liability insurance coverage
of up to $1 million per occurrence with a $5,000 deductible. The Company has
cargo insurance coverage of $200,000 per occurrence ($400,000 for catastrophes)
with a $10,000 deductible. The Company also maintains a commercial general
liability policy with a limit of $1,000,000 per occurrence and no deductible.
3
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Regulation
The Company is a common and contract motor carrier regulated by the DOT and
various state agencies. Prior to 1980, the government strictly regulated the
trucking industry as to entry of new operators, rates charged, routes driven and
types of freight hauled. The Motor Carrier Act of 1980 commenced a period of
deregulation that has continued to the present. The Act increased competition by
easing barriers to entry into the trucking industry, such as proof of public
convenience and necessity. The Act also made rates more competitive and reduced
regulation of the industry.
Like all interstate motor carriers, the Company is subject to the safety
requirements prescribed by the DOT, including regulations effective in 1992 that
instituted drug-testing procedures and a uniform commercial driver license. The
Company is in substantial compliance with these regulations.
In 1990, the Company was granted permission from Canadian authorities to
haul truckload freight between all points in the provinces of Ontario and Quebec
and the United States. The Company is therefore also subject to Canadian
regulation, which is not dissimilar to regulation in the United States.
Environmental Regulation
The Company owns property in Phoenix, Arizona that was formerly leased to
Transcon Lines ("Lines") as a terminal facility, where soil contamination
problems existed or are known to exist currently. State environmental
authorities notified the Company of potential soil contamination from
underground storage tanks, and management has been working with the regulatory
authorities to implement required remediation. The underground storage tanks
were removed from the Phoenix facility in February 1994. Currently the State
environmental authorities are not requiring any additional remediation of the
property. The Company believes it is in substantial compliance with state and
federal environmental regulations relative to the trucking business. However,
the Company is working with regulatory officials to eliminate new sources of
contamination and determine extent of existing problems. Estimates of the costs
to complete the future remediation of approximately $141,000 are considered in
the land valuation allowance at December 31, 1998 and 1997.
Safe Harbor Provisions of the Private Securities Litigation Reform Act of 1995
The statements contained in Item 1 (Description of Business) and Item 6
(Management Discussion and Analysis of Financial Condition and Results of
Operation), particularly the statements under "Future Prospects" contain
forward-looking statements that are subject to a variety of risks and
uncertainties. The Company cautions readers that these risks and uncertainties
could cause the Company's actual results in 1999 and beyond to differ materially
from those suggested by any forward-looking statements. These risks and
uncertainties include, without limitation, a lack of historic information for
new operations on which expectations regarding their future performance can be
based, general economic and business conditions affecting the trucking industry,
competition from, among others, national and regional trucking companies that
have greater financial and marketing resources than the Company, the
availability of sufficient capital, and the Company's ability to successfully
attract and retain qualified owner operators and agents.
4
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Item 2. Properties
The Company's administrative offices are at 1000 Colfax, Gary, Indiana. The
Company leases its headquarters on a month to month basis for $2,200 per month
from Mr. Michael E. Kibler, President, Chief Executive Officer and a director of
the Company, and Mr.
Harold Antonson, Chief Financial Officer of the Company.
Carolina National leases 2400 sq. ft of office space in Mt. Pleasant, SC
for $2700 per month. The current lease is due to expire July, 1999.
Item 3. Legal Proceedings
The Company is involved in litigation in the normal course of its business.
Management intends to vigorously defend these cases. In the opinion of
management, the litigation now pending will not have a material adverse effect
on the financial position of the company.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to a vote of the Company's shareholders during
the fourth quarter of 1998.
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters.
Shares of Common Stock of the Company are listed and traded on the
"bulletin board market" under the symbol USOO. During 1998
the Company was de-listed from the NYSE.
The following table sets forth for the period indicated the high and low
sales prices per share of the Common Stock as reported on the New York Stock
Exchange Composite Tape through June 1998. The prices since June 1998 are as
reported by Dreyfus Brokerage Services and reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not represent actual
transactions.
Calendar Year High Low
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1998
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First Quarter 13/32 7/32
Second Quarter 3/8 1/4
Third Quarter 3/8 3/32
Fourth Quarter 3/32 1/16
1997
First Quarter 9/16 9/32
Second Quarter 3/8 7/32
Third Quarter 1/2 9/32
Forth Quarter 13/32 3/16
As of May 25, 1999, there were 3,293 holders of record of Common Stock.
The Company has not paid any cash dividends on its Common Stock. Management
does not anticipate paying any dividends on the Common Stock in the foreseeable
future, and the Company's current credit agreement prohibits the payment of
dividends.
5
<PAGE>
Item 6. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
The financial statements and related notes contained elsewhere in this Form
10-KSB are essential to an understanding of the comparisons and are incorporated
by reference into the discussion that follows.
1998 Compared to 1997
The Company's operating revenues increased from $25.4 million in 1997 to
$30.2 million in 1998. The Company's operating revenues were generated
principally by independent sales agents who originate truckload shipments. These
shipments are then transported by independent trucking contractors using their
own equipment. The increase in operating revenues resulted primarily from the
startup and growth of Carolina National Transportation, offset by a decrease in
revenue of Keystone Lines caused by a loss of certain agent relationships.
Total operating expenses increased from $25.8 million in 1997 to $30.0
million in 1998. The largest component of operating expenses is purchased
transportation. Purchased transportation generally varies in proportion to
operating revenues at approximately 77% of revenues. Purchased transportation
increased from $19.7 million in 1997 to $23.4 million in 1998. Commissions
increased from $2.4 million in 1997 to $3.2 million in 1998, and similarly vary
in proportion to operating revenues. Insurance and claims, which were $0.9
million in 1997 remained constant at $0.9 million in 1998. The insurance rate
was reduced during 1998 due to favorable loss experience. The remaining
operating expenses decreased from $2.8 million in 1997 to $2.5 million in 1998
primarily as a result of better cost control.
As a result of the factors noted above, the company's operating income
improved from a loss of $0.4 million in 1997 to income of $0.2 million in 1998.
Interest expense, the largest ongoing component of non operating income and
expense, varies in proportion to the Company's outstanding interest-bearing
indebtedness. Interest expense increased from $0.4 million in 1997 to $0.7
million in 1998, primarily due to the increased debt used to finance additional
accounts receivable related to the company's expansion.
During 1998, the Company has written off $0.5 million in vendor accounts
payable which are no longer considered by management and the company's legal
counsel to be valid obligations of the Company. These payables relate to fiscal
years prior to 1994 and no claims have been made against these amounts since
September 1993.
Other income (expense), net, increased from $0.1 million to $0.2 million
due to a write off of net payables relating to revisions of estimates of amounts
due from or payable to drivers and agents.
Overall, the Company had net income of $0.2 million in 1998 as compared to
a net (loss) of ($0.2) million in 1997.
Future Prospects
The Company has not yet been able to sustain profitable operations and is
in technical noncompliance with its revolving line of credit agreement. These
factors raise substantial doubt about the ability of the Company to continue as
a going concern. The report of the Company's Independent Certified Public
Accountants contains an explanatory paragraph indicating that these factors
express substantial doubt about the Company's ability to continue as a going
concern.
6
<PAGE>
The Company's ability to continue as a going concern is ultimately
dependent on its ability to increase sales to a level that will allow it to
operate profitably and sustain positive operating cash flows. In addition, the
Company needs to reduce the level of outstanding indebtedness which will, in
turn, reduce the amount of interest expense. Although the reduction of expenses,
including interest, can contribute to future profitability, achieving
profitability without an increase in sales would require a greater level of
expense reductions and in all likelihood could only be accomplished through a
significant reduction and restructuring of the nature and scope of operations.
Shareholders and potential investors in the Company are cautioned that the
Company's financial condition remains precarious and that an increase in
operating performance is essential to its long term survival.
Liquidity and Capital Resources
As of December 31, 1998, the Company's financial position remained poor.
The Company had a net deficiency in shareholders' equity of $4.3 million.
Working capital at December 31, 1998 was ($0.8 million), compared to ($1.4)
million at the end of 1997.
Accounts receivable at the end of 1998 were $4 million, down $1.1 million,
or 20%, from the previous year-end balance of $5.1 million. The decrease was due
primarily to increased collection efforts at Carolina National Transportation.
Accounts payable at the end of 1998 were $1.4 million, compared to $2.7
million at the end of 1997. The decrease was due to the write-off of old
payables from 1993 and prior and changes in estimates associated with amounts
due to drivers and agents for services provided.
The bank overdraft and balance of the revolving line of credit has decrease
by $1.0 million from 1997 due to increased cash flows from operations during
1998.
The Company's principal source of liquidity is its $3.3 million line of
credit with FINOVA. The availability of the line of credit is based on 80% of
Keystone's, Gulf Line's and Carolina National's eligible accounts receivable. At
December 31, 1998, the outstanding borrowings were $2.5 million.
Related party loans from AIP and Messrs. Kibler and Antonson have increased
from $2,349,304 at December 31, 1997 to $2,701,042 at December 31, 1998.
The Company is not a party to any Super-fund litigation and otherwise does
not have any known environmental claims against it. However, the Company does
have one property where soil contamination problems existed or are known to
exist currently. The Company has preliminarily evaluated its potential liability
at this site and believes that it has reserved appropriately for its remediation
or that the fair market value of the property exceeds its net book value by an
amount in excess of any remediation cost. There can be no assurance, however,
that the cost of remediation would not exceed the expected amounts. The Company
has no current plans to remediate the property.
Inflation
Changes in freight rates charged by the Company to its customers are
generally reflected in the cost of purchased transportation and commissions paid
by the Company to independent contractors and agents, respectively. Therefore,
management believes that future operating results of the Company will be
affected primarily by changes in volume of business. However, due to the highly
competitive nature of the truckload motor carrier industry, it is possible that
future freight rates and cost of purchased transportation may fluctuate,
affecting the Company's profitability.
7
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Year 2000 Issue
Many existing computer systems and related software applications, and other
control devices, use only two digits to identify a year in a date field, without
considering the impact of the upcoming change in the century. Such systems,
applications and/or devices could fail or create erroneous results unless
corrected so that they can process data related to the Year 2000. The company
relies on such computer systems, applications and devices in operating and
monitoring all major aspects of its business, including, but not limited to, its
financial systems (such as general ledger, accounts payable, and payroll
modules), customer services, internal networks and telecommunications equipment,
and end products. The Company also relies, directly, and indirectly, on the
external systems of various independent business enterprises, such as its
customers, suppliers, creditors, financial organizations, and of governments,
both domestically and internationally, for the accurate exchange of data and
related information.
The Company is currently in the process of evaluating the potential impact
of the Year 2000 issue on its business and the related expenses that would
foreseeably be incurred in attempting to remedy such impact (including testing
and implementation of remedial action). As of December 31 1998 the company has
spent $10,000 re-writing its computer programs to comply with the year 2000
needs and expects to spend an additional $15,000 to $30,000 during 1999
re-writing and purchasing new software to bring itself into compliance.
Management's current estimate is that the costs associated with the Year 2000
issue should not have a material adverse affect on the results of operations or
financial position of the Company in any given year. However, despite the
Company's effort to address the Year 2000 impact on its internal systems, the
Company is not sure that it has fully identified such impact or that it can
resolve it without disruption of its business and without incurring significant
expenses. In addition, even if the internal systems of the Company are not
materially affected by the Year 2000 issue, the Company could be affected as a
result of any disruption in the operation of the various third-party enterprises
with which the Company interacts. The Company has not developed a formal
contingency plan to handle any potential year 2000 failures. The Company plans
to contact its significant vendors and customer to ascertain their level of year
2000 compliance.
Recently Issued Accounting Standards
In June 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 130, "Reporting Comprehensive Income" (SFAS
No. 130)and No. 131, "Disclosures About Segments of an Enterprise and Related
Information"(SFAS No. 131), and No. 132 "Employers' Disclosures About Pension
and Other Postretirement Plans" (SFAS 132). SFAS 130 establishes standards for
reporting and displaying comprehensive income, its components and accumulated
balances. SFAS 131 establishes standards for the way that public companies
report information about operating segments in annual financial statements and
requires reporting of selected information about operating segments in interim
financial statements issued to the public. SFAS 132 enhances the disclosures
related to pensions and other postretirement benefits. SFAS 130, SFAS 131 and
SFAS 132 are effective for periods beginning after December 15, 1997. The
Company adopted these new standards in 1998, and their adoption had no material
effect on the Company's financial statements and disclosures.
In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 effective for fiscal years beginning
after June 15, 1999. The Company, to date, has not engaged in derivative and
hedging activities.
8
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Item 7. Financial Statements and Supplementary Data.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Board of Directors of
US1 Industries, Inc.
Gary, Indiana
We have audited the accompanying consolidated balance sheet of US 1 Industries,
Inc. and Subsidiaries as of December 31, 1998 and the related consolidated
statements of operations, shareholders' equity (deficiency), and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion of these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimated made by
management, as well as evaluating the overall presentation of the financial
statements. We believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of US 1 Industries,
Inc. and Subsidiaries at December 31, 1998 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced operating losses and negative
cash flows in recent years and has a net capital deficiency. In addition, the
Company is also in default under its revolving line of credit agreement. These
factors raise substantial doubt about the Company's ability to continue as a
going concern. Management's plans in regard to these matters are also described
in Note 1. The financial statements do not include any adjustment that might
result from the outcome of this uncertainty.
BDO Seidman, LLP
Chicago, Illinois
March 15, 1999
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To the Shareholders and Board of Directors of US 1 Industries, Inc.
We have audited the accompanying consolidated balance sheet of US 1 Industries,
Inc. and subsidiaries (the "Company") as of December 31, 1997 and the related
consolidated statements of operations, shareholders' equity and cash flows for
the year then ended. These financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as the overall financial statement presentation. We believe
our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of US 1 Industries,
Inc. and subsidiaries at December 31, 1997 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1 to the
financial statements, the Company has experienced operating losses and negative
cash flows in recent years and has a net capital deficiency. These factors raise
substantial doubt about the Company's ability to continue as a going concern.
Management's plans in regard to these matters are also described in Note 1. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
PricewaterhouseCoopers LLP
March 27, 1998
10
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US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
ASSETS
1998 1997
---- ----
CURRENT ASSETS:
Cash $ $ 298,079
Accounts receivable-trade, less allowance for
doubtful accounts of $ 95,083 and $195,298 4,041,966 5,066,256
Other receivables 59,654 336,919
Deposits 132,429 154,068
Prepaid expenses 27,798 83,731
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Total current assets 4,261,847 5,939,053
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FIXED ASSETS:
Equipment 258,445 52,996
Less accumulated depreciation and amortization (75,316) (12,682)
---------- -----------
Net fixed assets 183,129 40,314
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ASSETS HELD FOR SALE:
Land 195,347 423,226
Valuation allowance (141,347) (141,347)
----------- -----------
Net assets held for sale 54,000 281,879
----------- -----------
TOTAL ASSETS $ 4,498,976 $ 6,261,246
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
11
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US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
1998 1997
---- ----
CURRENT LIABILITIES:
Accounts payable $ 1,445,889 $ 2,734,980
Bank overdraft 260,404 530,133
Accrued expenses 183,400 137,454
Short-term debt 2,565,006 3,292,945
Insurance and claims 181,524 241,607
Accrued compensation 17,591 38,302
Accrued interest 392,883 140,824
Fuel and other taxes payable 75,695 273,901
------------ ------------
Total current liabilities 5,122,392 7,390,146
------------ ------------
LONG-TERM DEBT TO RELATED PARTIES 2,849,262 2,516,415
REDEEMABLE PREFERRED STOCK:
authorized 5,000,000 shares; no par value,
Series A shares outstanding:
1998 - 1,094,224; 1997 - 1,094,224.
Liquidation preference $0.3125 per share 825,254 753,254
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock, authorized 20,000,000 shares;
no par value; shares outstanding:
1998 and 1997 - 10,618,224 40,844,296 40,844,296
Accumulated deficit (45,142,228) (45,242,865)
----------- ------------
Total shareholders' equity (deficiency) (4,297,932) (4,398,569)
----------- ------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
(DEFICIENCY) $ 4,498,976 $ 6,261,246
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
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US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
YEARS ENDED DECEMBER 31, 1998, AND 1997
1998 1997
OPERATING REVENUES $ 30,176,818 $25,421,806
OPERATING EXPENSES:
Purchased transportation 23,416,624 19,676,213
Insurance and claims 938,044 941,700
Salaries, wages, and other 1,223,113 1,285,778
Commissions 3,177,908 2,360,989
Other Operating expenses 1,247,334 1,578,486
---------------------------
Total operating expenses 30,003,023 25,843,166
OPERATING INCOME (LOSS) 173,795 (421,360)
NON OPERATING INCOME (EXPENSE):
Interest income 7,702 2,430
Interest expense (743,953) (435,042)
Write off of old payables 530,674
Other income (expense), net 204,419 51,462
-------------------------
Total non operating income (expense) ( 1,158) (381,150)
INCOME (LOSS)
BEFORE EXTRAORDINARY GAIN 172,637 (802,510)
EXTRAORDINARY GAIN:
Forgiveness of debt 0 610,318
---------------------------
NET INCOME (LOSS) 172,637 (192,192)
DIVIDENDS ON PREFERRED SHARES 72,000 61,712
--------------------------
NET INCOME(LOSS)AVAILABLE TO COMMON SHARES $100,637 ($253,904)
--------------------------
INCOME (LOSS) PER COMMON SHARE:
Income (Loss) from operations:
Basic $0.01 ($0.08)
Diluted $0.01 ($0.08)
Extraordinary gain:
Basic $0.00 $0.06
Diluted $0.00 $0.06
Net Income (Loss):
Basic $0.01 ($0.02)
Diluted $0.01 ($0.02)
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING -
BASIC AND DILUTED 10,618,224 10,616,397
The accompanying notes are an integral part of the consolidated financial
statements.
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US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (DEFICIENCY)
YEARS ENDED DECEMBER 31, 1998, and 1997
Common Stock Accumulated
Shares Amount Deficit Total
Balance at
December 31, 1996 10,573,780 $40,824,296 ($44,988,961) ($4,164,665)
Issuance of Common Stock 44,444 20,000 20,000
Dividends on Preferred Stock (61,712) (61,712)
Net(loss) (192,192) (192,192)
Balance at ________________________________________________
December 31, 1997 10,618,224 $40,844,296 ($45,242,865) ($4,398,569)
Dividends on Preferred Stock (72,000) (72,000)
Net income 172,637 172,637
Balance at __________ ___________ ___________ ___________
December 31, 1998 10,618,224 $40,844,296 ($45,142,228) ($4,297,932)
The accompanying notes are an integral part of the consolidated financial
statements.
14
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31, 1998, AND 1997
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ 172,637 ($192,192)
Adjustments to reconcile net income (loss) to net
cash provided by (used in)operating activities:
Depreciation and amortization 74,963 9,533
Provision on accounts receivable 0 145,298
Write off of old payables (530,674) 0
Loss on disposal of equipment 17,488 1,160
Extraordinary gain - forgiveness of debt (610,318)
Gain on Sale of Property (44,800) 0
Changes in operating assets and liabilities:
Accounts receivable-trade 1,024,290 (3,709,607)
Other receivables 277,265 (200,271)
Prepaid expenses 55,933 32,745
Deposits 21,639 (176)
Accounts payable (758,417) 720,143
Accrued expenses 207,570 (14,644)
Insurance and claims (60,083) (10,546)
Accrued interest 252,059 108,396
Accrued compensation (20,711) (8,578)
Fuel and other taxes payable (198,206) 99,524
-----------------------
Net cash provided by (used in) operating
activities 490,953 (3,629,533)
-----------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (2,566) (41,496)
Purchase of Land (227,879)
Proceeds from sale of Land 61,055 0
------------------------
Net cash provided by (used by) investing
activities 58,489 (269,375)
-----------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line of credit (741,720) 2,135,847
Proceeds from issuance of common stock 20,000
Proceeds from short term loan on property 50,000
Repayment of long-term loans (123,308) (10,000)
Net proceeds from related party loans 287,236 926,608
Increase (Decrease)in bank overdraft (269,729) 348,991
Proceeds from issuance of mortgages to
related parties 0 500,000
Net cash provided by (used in)financing ----------------------
activities (847,521) 3,971,446
----------------------
NET INCREASE (DECREASE)IN CASH (298,079) 72,538
CASH, BEGINNING OF YEAR 298,079 225,541
----------------------
CASH, END OF YEAR $ 0 $298,079
----------------------
- -------------------------------------------------------------------------------
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION--
Cash paid during year for interest $491,894 $326,646
SUPPLIMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES
Note payable incurred for purchase of equipment $232,700
The accompanying notes are an integral part of the consolidated financial
statements.
15
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, AND 1997
1. OPERATIONS
The Company is primarily an interstate truckload carrier of general
commodities, which uses independent agents and contractor equipment to contract
for and haul freight for its customers in all 48 states and Canada with a
concentration in the Southeastern United States. One agent accounted for 12% of
the Company's revenue for the year ended December 31, 1998. The same agent
represented 14% of sales for the year ended December 31, 1997.
Going Concern--The accompanying consolidated financial statements have been
prepared assuming that the Company will continue as a going concern. As shown in
the accompanying consolidated financial statements, the Company experienced
operating losses and negative cash flows in recent years. The Company has not
yet been able to sustain profitable operations and is in technical noncompliance
with its revolving line of credit agreement. These factors raise substantial
doubt about the ability of the Company to continue as a going concern. Without a
resolution of the technical noncompliance with its revolving line of credit
agreement, the Company would not have sufficient funds to pay its debts should
the lenders demand payment and would not be able to continue as a going concern.
The Company's ability to continue as a going concern is ultimately dependent on
its ability to increase sales to a level that will allow it to operate
profitably and sustain positive operating cash flows. In addition, the Company
needs to reduce the level of outstanding indebtedness which will, in turn,
reduce the amount of interest expense. Although the reduction of expenses,
including interest, can contribute to future profitability, achieving
profitability without an increase in sales would require a greater level of
expense reductions which in all likelihood could only be accomplished through a
significant reduction and restructuring of the nature and scope of operations.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation--The consolidated financial statements include
the accounts of US 1 Industries, Inc. and its subsidiaries. All significant
inter-company accounts and transactions have been eliminated.
Revenue Recognition--Revenue for freight in transit is recognized upon
delivery. Amounts payable for purchased transportation, commissions and
insurance expense are accrued when the related revenue is recognized.
Fixed Assets--Fixed assets are stated at cost and depreciated using the
straight-line method over the estimated useful lives of the related assets,
which range from three to eight years.
Assets Held for Sale--Such assets comprise real estate, not required for
the Company's operations, which is carried at the lower of historical cost or
estimated net realizable value. See Note 12.
Long-Lived Assets - The Company assesses the realizability of its lon-lived
assets in accordance with statement of Financial Accounting Standards No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to
be disposed of."
16
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Accounting Estimates--The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the dates of
financial statements and the reported amounts of revenues and expenses during
the reporting periods. Actual results could differ from those estimates.
Recently Issued Accounting Standards--In June 1997, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards No. 130
"Reporting Comprehensive income", No. 131, "Disclosures About Segments of an
Enterprise and Related Information" (SFAS No. 131), and No. 132 "Employers'
Disclosures About Pension and Other Postretirement Plans" (SFAS No. 132). SFAS
130 establishes standards for reporting and displaying comprehensive income, its
components and accumulated balances. SFAS 131 establishes standards for the way
that public companies report information about operating segments in annual
financial statements and requires reporting of selected information about
operating segments in interim financial statements issued to the public. SFAS
132 enhances the disclosures related to pensions and other postretirement
benefits. SFAS 130, SFAS 131 and SFAS 132 are effective for periods beginning
after December 15, 1997. The Company adopted these new standards in 1998, and
their adoption had no material effect on the Company's financial statements and
disclosures.
In June 1998, the FASB issued Statement of Financial Accounting Standards (SFAS)
No. 133, "Accounting for Derivative Instruments and Hedging Activities," which
establishes accounting and reporting standards for derivative instruments and
hedging activities. It requires that an entity recognize all derivatives as
either assets or liabilities in the statement of financial position and measure
those instruments at fair value. SFAS 133 is effective for fiscal years
beginning after June 15, 1999. The Company, to date, has not engaged in
derivative and hedging activities.
Income Taxes--Deferred income taxes are recognized for the tax consequences
of "temporary differences" by applying enacted statutory tax rates applicable to
future years to differences between the financial statement carrying amounts and
the tax bases of existing assets and liabilities. In addition, the amount of any
future tax benefits are reduced by a valuation allowance to the extent such
benefits are not expected to be fully utilized.
Earnings Per Common Share--In February 1997, the Financial Accounting
Standards Board issued Statement No. 128, "Earnings per Share," which became
effective for both interim and annual financial statement periods ending after
December 15, 1997. As required by this statement, the Company adopted the new
standards for computing and presenting earnings per share ("EPS") for 1997.
Following are the reconciliations of the numerators and denominators of the
basic and diluted EPS.
17
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Numerator 1998 1997
Income (Loss)Before Extraordinary Gain $172,637 ($802,510)
Extraordinary gain 0 610,318
---------- ----------
Net income (loss) $172,637 ($192,192)
Dividends on preferred shares ($ 72,000) ($ 61,712)
---------- ----------
Net income (loss) available to common
shareholders for basic and diluted EPS 100,637 ($253,904)
Denominator
Weighted average common shares
outstanding for basic and diluted EPS 10,618,224 10,616,397
Options to purchase 80,000 share of common stock at $25 per share were
outstanding during 1998 and 1997 but were not included in the computation of
diluted EPS because in 1997 the Company had a net loss and in 1998 the options
exercise price was greater than the average market price of the common shares.
Business Segments - Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information" requires
public enterprises to report certain information about reporting segments in
financial statements. The Company presents its operations in one busines
segment.
Reclassifications - Certain items in the prior year financial statements have
been reclassified to conform with the current year presentation.
3. EXTRAORDINARY GAIN
During the fourth quarter of 1997, the bankruptcy of Trailblazer
Transportation (a subsidiary of Keystone Lines, Inc.) was finalized and,
accordingly, the Company recorded a gain of $610,318 ($0.06 per share - basic
and diluted) on the forgiveness of debt.
4. REDEEMABLE PREFERRED STOCK
The Series A preferred shares are not convertible into common stock, are
non-voting, and earn dividends at the rate of $0.0375 per share per annum
(increasing by $0.0063 on each of January 1, 1995, 1996 and 1997, and by $0.0094
on January 1, 1998 and on each January 1 thereafter until redeemed) payable
quarterly on the first day of February, May, August, and November. The Series A
preferred stock is redeemable at the option of the Company or the holders at any
time.
As of December 31, 1998, series A cumulative preferred stock dividends are in
arrears by $278,141. The Company's current line of credit prohibits the payment
of dividends.
5. RELATED PARTY TRANSACTIONS
One of the Company's subsidiaries provides safety, management, and
accounting services to companies controlled by the President and Chief Financial
Officer of the Company. These services are priced to cover the cost of the
employees providing the services. Revenues related to those services totaled
$70,607 and $149,422 in 1998 and 1997, respectively.
One of the Company's insurance providers, American Inter-Fidelity Exchange
(AIFE) is managed by a Director of the Company and the Company has an investment
in the Provider. In addition, the Directors also manage an affiliated insurance
carrier , Indiana Truckers Exchange (ITE). For the years ended December 31, 1998
and 1997, cash paid for related party insurance premiums and deductibles
amounted to $751,123 and $770,704, respectively. The Company also has long term
notes payable to AIFE and ITE as described in Note 8.
18
<PAGE>
The Company has notes payable due to August Investment Partnership as
described in Note 8. In addition, Enterprise Truck Line, Inc. (a company
controlled by Messrs. Kibler and Antonson) has advanced the Company
approximately $115,000 as of December 31, 1998.
6. LEASES
The Company leases office space on a month-to-month basis for its
headquarters in Gary, Indiana for $ 2,200 per month from the Company's President
and Chief Financial Officer. No formal lease agreement with the Company existed
at December 31, 1998. The Company leases office space in Mt. Pleasant, South
Carolina for $ 2,700 per month. The lease agreement expires in July, 1999. Rent
expense for the years ended December 31, 1998 and 1997 was approximately $59,000
and $80,000, respectively.
7. SHORT-TERM DEBT
Short-term debt at December 31, 1998 and 1997 comprises:
December 31, December 31,
1998 1997
---------- ----------
Line of credit $2,446,861 $3,188,581
Current portion of long-term debt 118,145 54,364
Note on Kansas City Property 50,000
---------- ----------
Total $2,565,006 $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 (7.75% and 8.50% at December 31,
1998 and 1997, respectively) plus 2.75%. Advances under the line of credit
agreement are collateralized by the Company's accounts receivable, property and
other assets. At December 31, 1998, the outstanding borrowings were $2.5
million. The line of credit expires in May 2002.
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, 1998, the Company was in violation of the
covenants relating to capital expenditure limitations and total debt service
coverage ratio. On April 9, 1998, the lender issued a letter of default for
these covenant violations.
19
<PAGE>
US1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTER TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
8. LONG-TERM DEBT
Long-term debt at December 31, 1998 and 1997 comprises:
1998 1997
Note payable to August Investment
Partnership interest at prime + .75%,
interest only payments required, principal
balance due January 2000 $ 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 2003 500,000 500,000
Mortgage note payable to ITE, collateralized
by land, interest at 9%, monthly repayments
of $5,000, including interest, remaining
principal balance due March, 2002 56,428 120,930
Note payable collateralized by equipment
monthly payments of $ 5679 interest at 7.8%
through February, 2001 109,392
Mortgage note payable to ITE interest at 9%
Monthly repayment of $2850 are to begin
on August 15, 1999 57,289 57,289
Mortgage note payable to AIFE interest at 9%
Monthly installments of $2150 are to begin
on August 15, 1999 43,256 43,256
Mortgage note payable to August Investment
Partnership, interest at prime + .75%,
interest only payments required, principal
balance due January, 2001 100,000 100,000
Note payable to Antonson/Kibler interest at
prime + .75%, interest only payments required,
principal balance due January, 2001 1,851,042 1,499,304
---------- --------
Total debt 2,967,407 2,570,779
Less current portion 118,145 54,364
---------- --------
Total long-term debt $ 2,849,262 $2,516,415
========== ========
Interest expense on related party notes was approximately $325,000 and $273,000
for the years ended December 31, 1998 and 1997, respectively.
Scheduled maturities of the long-term debt at December 31, 1998 are due as
follows:
1999 $ 118,145
2000 47,675
2001 2,201,042
2002 100,545
2003 500,000
Beyond 0
---------
$2,967,407
==========
20
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
9. STOCK OPTIONS
The Company has a stock option plan which allows the Board of Directors to
grant options to officers and certain key employees to purchase common stock at
the fair market value on the date of the grant. At December 31, 1998 and 1997,
96,500 share were available for future option grants under the stock option
plan. There were no options outstanding under the stock option plan as of
December 31, 1998 and 1997.
During 1997, the Board of Directors granted options to purchase 80,000 shares of
the Company's common stock to an unaffiliated investor at an exercise price of
$.25 per share. These options were immediately exercisable and expire on
December 31, 1999. As of December 31, 1998, no options under this grant had been
exercised.
10. INCOME TAXES
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and income tax purposes. A valuation allowance for the net deferred tax
asset has been recognized due to the uncertainty of realizing the benefit of the
loss carry forwards and future deductible temporary differences.
The components of deferred tax assets as of December 31, 1998 and 1997 are as
follows:
1998 1997
------------- -------------
Deferred tax assets:
Accounts receivable and other $ 32,401 $ 66,401
Estimated fuel and other taxes 47,155 47,155
Insurance and claims 68,390 68,390
Litigation reserves 17,170 17,170
Land valuation allowance 48,058 48,058
Net operating loss carry forwards 19,937,987 19,962,684
------------ -------------
Total deferred tax assets 20,151,161 20,209,858
Less valuation allowance (20,151,161) (20,209,858)
------------ -------------
Total net deferred tax asset $ --- $ ---
============= =============
The Company has provided a valuation allowance to write-down deferred tax
assets due to uncertainty of its ability to utilize them in future periods.
During 1998, the valuation allowance was decreased by approximately $59,000 to
reflect the utilization of net operating loss carryforwards.
The Company had net operating loss carry forwards of approximately $59
million at December 31, 1998 and 1997. These carry-forwards are available to
offset taxable income in future years and will expire in the years 2003 through
2008.
11. COMMITMENTS AND CONTINGENCIES
The Company is involved in litigation in the normal course of its business.
Management intends to vigorously defend these cases. In the opinion of
management, the litigation now pending will not have a material adverse effect
on the financial position of the Company.
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.
21
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
12. ENVIRONMENTAL MATTERS
The Company owns a property in Phoenix where soil contamination problems
exist. The Company has been working with regulatory officials to eliminate new
contamination sources and determine the extent of existing problems. Estimates
of the cost to complete the future remediation of approximately $141,000 are
considered in the land valuation allowance at December 31, 1998 and 1997.
13. OTHER MATTERS
a) During 1998, the Company has written off approximately $531,000 in
vendor accounts payable which are no longer considered by management and the
Company's legal Counsel to be valid obligations of the Company. These payables
relate to fiscal years prior to 1994 and no claims have been made against these
amounts since September 1993.
b) Other income (expense), net, in the consolidated statement of operations
is comprised primarily of a write off net payables from fiscal years 1996 and
1997 relating to revisions of estimates of amounts due from or payable to
drivers and agents.
Item 8. Changes in and Disagreements with Independent Auditors' on Accounting
and Financial Disclosure.
On August 31, 1998, PricewaterhouseCoopers LLP (formerly Coopers & Lybrand
L.L.P, which became PricewaterhouseCoopers LLP ("PwC") on July 1, 1998 resigned
as the independent accountants for US 1 Industries, Inc.
The reports of PwC on the financial statements of the Registrant for the past
two fiscal years contained no adverse opinion or disclaimer of opinion and were
not qualified or modified as to uncertainty, audit scope or accounting
principle, except that the report of PwC on the financial statements for the
past two fiscal years included an explanatory paragraph expressing substantial
doubt about the Registrant's ability to continue as a going concern.
In connection with its audits of the two most recent fiscal years and through
August 31, 1998 there have been no disagreements with PwC on any matters of
accounting principles or practices, financial statement disclosure, or auditing
scope of procedure, which disagreements if not resolved to the satisfaction of
PwC would have caused them to make reference thereto in their report on the
financial statements for such years.
On October 29, 1998, the Company appointed BDO Seidman, LLP("BDO") as its
independent accountants. Prior to appointment, the Company did not consult with
BDO on any matters.
22
<PAGE>
PART III
Item 9. Directors and Executive Officers of the Registrant.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The executive officers of the company as of May 25, 1999 were as follows
NAME AGE POSITION
- ---- --- --------
Michael E. Kibler 58 President, Chief Executive
Officer,
Director
Richard Courtney 57 Vice President, Treasure, and
Assistant Secretary, and Director
Steven R. Green 40 Director
Lex Venditti 45 Director
Robert I. Scissors Director
Harold E. Antonson 59 Chief Financial Officer
Item 4A. Executive Officers of the Registrant.
Name and Age Office and Experience
Michael E. Kibler, 57 Mr. Kibler is President and Chief Executive
Officer of the Company and has held these
positions since September 13, 1993. He also has
been President of Enterprise Truck Lines, Inc.,
an interstate trucking company engaging in
operations similar to the Company's, since 1972.
Mr. Kibler is also a director of American
Inter-Fidelity Exchange, an insurance reciprocal
located in Indiana that is the subject of an
Order of Rehabilitation by the Indiana
department of Insurance. Mr. Kibler has served
as a Director of the Company since 1993.
Harold E. Antonson, 59 Mr. Antonson is Chief Financial Officer of the
Company, a position he has held since March
1998. Mr. Antonson is a certified public
accountant. Prior to joining the company,
he was Secretary Treasurer of American
Inter-fidelity Exchange. Mr Antonson is also a
partner in August Investment Partnership.
Richard Courtney, 56 Mr. Courtney has served as Vice-President,
Secretary, and Controller of the Company since
September, 1993. Since 1982, Mr. Courtney has
been the Controller of Eastern Refrigerated
Express, Inc. Mr. Courtney has served as a
director of the Company since 1994.
23
<PAGE>
Item 10. Executive Compensation
The following Summary Compensation Table sets forth compensation paid by the
Company during the years ended December 31,1998,1997 and 1996 to its Chief
Executive Officer. No other officer earned in excess of $ 100,000.
Summary Compensation Table
Annual Compensation
Name and Position Year Salary Bonus Other
- ----------------- ---- ------ ----- -----
Michael Kibler 1998 33,048 0 0
President 1997 33,048 0 0
1996 33,140 0 0
EMPLOYEE STOCK OPTIONS
The company's 1987 Stock Option Plan (Nonqualified) (the "Option Plan")
authorizes the Board of Directors or a committee thereof to grant to officers,
including officers who are also directors, and employees of the Company options
to purchase from the Company shares of Common Stock. The Option Plan originally
covered an aggregate of 570,000 shares of Common Stock. At December 31, 1998
there were no options outstanding under the Option Plan and 96,500 shares
remained available for future grants of options thereunder.
24
<PAGE>
Item 11. Security Ownership of Certain Beneficial Owners and Management.
Security Ownership of Management
The following table sets forth the number and percentage of shares of Common
Stock that as of May 12, 1999 are deemed to be beneficially owned by each
director of the company and director nominee, by each executive officer of the
Company and by all directors and executive officers of the company as a group
Number of Shares of
Common Stock
Name and position Beneficially Owned Percentage of Class
- ----------------- ------------------ -------------------
Michael E Kibler 3,489,507 (1,2,3) 33.0%
Director, President and
Chief Executive Officer
Richard Courtney 3,434,507 (1) 32.5%
Director, Vice President,
Secretary, and Controller
Steven R. Green 0 0
Director
Robert I. Scissors, 36,770 0
Director
Lex L. Venditti 20,000 0
Director
Harold E. Antonson 3,489,507 (1,2,4) 33.0%
Chief Financial Officer
All Directors and Executive Officers 3,735,919 35.3%
(1) As partners of AIP, Messrs. Kibler, Antonson, Courtney, and Lavery may be
deemed to be beneficial owners of 3,067,840 shares of common stock owned
by AIP
(2) This figure includes 55,000 shares of Common Stock held by Enterprise Truck
Lines Employment Plan of which Mr. Kibler is a trustee
(3) As Director of Eastern Refrigerated Express Inc Messrs. Kibler, Antonson,
and Courtney may be deemed to be beneficial owner of 366,667 Shares of
Common Stock owned by Eastern.
(4) Mr. Antonson disclaims beneficial ownership of 197,500 shares of Common
Stock owned by American Inter-Fidelity Exchange, of which Mr Antonson is
Secretary, and Treasurer
25
<PAGE>
Security Ownership of Certain Beneficial Owners
The following table sets forth the number and percentage of shares of Common
Stock beneficially owned as of May 12, 1999 by any person who is known to the
Company to be the beneficial owner of more than five percent of the outstanding
shares of Common Stock:
Number of Shares of
Name and Address of Common Stock Percentage
Beneficial Owner Beneficially Owned of Class
- ---------------- ------------------ --------
Harold E. Antonson 3,489,507 (1,2,3,4) 33%
8400 Louisiana Street
Merrillville, IN 46410
August Investment Partnership 3,067,840 29%
8400 Louisiana Street
Merrillville, IN 46410
Richard Courtney 3,434,507 (1,4) 32.5%
8400 Louisiana Street
Merrillville, IN 46410
Brad A. James 3,067,840 (1) 29.0%
8400 Louisiana Street
Merrillville, IN 46410
Michael Kibler 3,489,507 (1,3,4) 33.0%
8400 Louisiana Street
Merrillville, IN 46410
John K. Lavery 3,438,507 (1,4) 32.5%
8400 Louisiana Street
Merrillville, IN 46410
(1) As partners of AIP, Messrs. Kibler, Courtney, Antonson, and Lavery may be
deemed to be beneficial owners of the shares of Common Stock owned by AIP.
(2) Mr. Antonson disclaims beneficial ownership of 197,500 shares of Common
Stock owned by American Inter-Fidelity Exchange, of which Mr. Antonson is
Secretary and Treasurer.
(3) This figure includes 55,000 shares of Common Stock Held by Enterprise Truck
Line Employment Plan of which Mr. Kibler and Mr. Antonson are trustees.
(4) As directors of Eastern Refrigerated Express, Inc. Messrs. Antonson,
Courtney, Kibler and Lavery may be deemed to be beneficial owners of 366,667
shares of Common Stock owned by Eastern.
26
<PAGE>
Item 12. Certain Relationships and Related Transactions.
The company leases office space for its headquarters in Gary, Indiana, for
$2,200 per month from Michael E. Kibler, the president and Chief Executive
Officer and a director of the Company, and Harold E. Antonson, the Chief
Financial Officer of the company and beneficial owner of more than five percent
of the outstanding Common Stock. Messrs. Kibler and Antonson own the property as
joint tenants.
One of the Company's subsidiaries provides safety, management, and accounting
services to companies controlled by the President and Chief Financial Officer of
the Company. These services are priced to cover the cost of the employees
providing the services. Revenues related to those services totaled $70,607 and
$149,422 in 1998 and 1997, respectively.
One of the Company's insurance providers, American Inter-Fidelity Exchange
(AIFE) is managed by a Director of the Company and the Company has an investment
in the Provider. In addition, the Directors also manage an affiliated insurance
carrier , Indiana Truckers Exchange (ITE). For the years ended December 31, 1998
and 1997, cash paid for related party insurance premiums and deductibles
amounted to $751,123 and $770,704, respectively. The Company also has long term
notes payable to AIFE and ITE as described in Note 8.
The Company has notes payable due to August Investment Partnership as
described in Note 8. In addition, Enterprise Truck Line, Inc. (a company
controlled by Messrs. Kibler and Antonson) has advanced the Company
approximately $115,000 as of December 31, 1998.
27
<PAGE>
PART IV
Item 13. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
(a)(1) List of Financial Statements
The following is a list of financial statements filed herewith:
Page Number
Reports of Independent Certified Public Accountants 11 and 12
Consolidated Balance Sheets as of December 31, 1998 and 1997 13
Consolidated Statements of Operations for the years ended 15
December 31, 1998 and 1997
Consolidated Statements of Shareholders' Equity (Deficiency) 16
for the years ended December 31, 1998 and 1997
Consolidated Statements of Cash Flows 17
for the years ended December 31, 1998 and 1997
Notes to Consolidated Financial Statements 18
(a)(2) List of Financial Statement Schedules
Schedules are not included because of the absence of the conditions under
which they are required or because the required information is included in the
consolidated financial statements or notes thereto.
28
<PAGE>
(a)(3) List of Exhibits
The following exhibits, numbered in accordance with Item 601 of Regulation
S-K, are filed as part of this report:
Exhibit 3.1 Articles of Incorporation of the Company.
(incorporated herein by reference to the Company's Proxy Statement
of November 9, 1993).
Exhibit 3.2 By-Laws of the Company.
(incorporated herein by reference to the Company's Annual Report on
Form 10-K for the year ended December 31, 1994).
Exhibit 10.1 Loan and Security Agreement with FINOVA and Keystone Lines and
L.R.S. Transportation, Inc.
Exhibit 10.2 Loan agreements with August Investment Partnership and US 1
Industries.
Exhibit 10.3 Loan agreements with Michael Kibler/Harold Antonson and US 1
Industries.
Exhibit 10.4 Loan agreements with AIFE/ITE and US 1 Industries.
Exhibit 10.5 First Amendment of Loan and Security Agreement with FINOVA and
Keystone Lines and L.R.S. Transportation, Inc.
Exhibit 10.6 Second Amendment of Loan and Security Agreement with FINOVA and
Keystone Lines and L.R.S. Transportation, Inc.
Exhibit 10.7 Mortgage and Loan agreements with Michael Kibler/Harold
Antonson and US 1 Industries, Inc.
Exhibit 21.1 Subsidiaries of Registrant
Exhibit 27.1 Financial Data Schedule
(b) Reports on Form 8-K
NONE
29
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 and 15(d) 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.
Date:_________________ By: _________________________
Michael E. Kibler
President & Chief Executive Officer
(Principal Executive Officer)
Date:_________________ By: _________________________
Richard Courtney
Vice President & Secretary
Date:_________________ By: _________________________
Harold Antonson
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Date:_________________ _________________________
Richard Courtney, Director
Date:_________________ _________________________
Michael E. Kibler, Director
Date:_________________ _________________________
Robert I. Scissors, Director
Date:_________________ _________________________
Lex L. Vendetti, Director
Date:_________________ _________________________
Steve Green, Director
30
<PAGE>
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