FORM 10-Q
------------------------------------------------
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
September 30, 1999.
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 November 3, 1999, there were 10,618,224 shares of common stock were
outstanding.
TOTAL OF SEQUENTIALLY
NUMBERED PAGES: 14
<PAGE>
Part I
Item 1. FINANCIAL STATEMENTS.
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
<CAPTION>
ASSETS
September 30, December 31,
1999 1998
<S> <C> <C>
(Unaudited)
CURRENT ASSETS:
Cash $ 0 $ 0
Accounts receivable--trade less allowance for
doubtful accounts of $98,985 and $95,083 4,255,215 4,041,966
Other receivables 118,389 59,654
Deposits 128,627 132,429
Prepaid expenses 12,448 27,798
------------ ------------
Total current assets 4,514,679 4,261,847
------------ ------------
FIXED ASSETS:
Equipment 100,738 258,445
Less accumulated depreciation and amortization (47,312) (75,316)
------------ ------------
Net fixed assets 53,426 183,129
------------ ------------
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 $ 4,622,105 $ 4,498,976
============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEBER 30, 1999 (UNAUDITED) AND DECEMBER 31, 1998
LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1999 1998
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,367,634 $ 1,445,889
Bank Overdraft 298,778 260,404
Accrued expenses 171,991 183,400
Short-term debt 2,438,214 2,565,006
Insurance and claims 183,039 181,524
Accrued interest 543,486 392,883
Accrued compensation 15,222 17,591
Estimated fuel and other taxes 65,676 75,695
----------- -----------
Total current liabilities 5,084,040 5,122,392
----------- -----------
LONG-TERM DEBT 2,782,416 2,849,262
REDEEMABLE PREFERRED STOCK,
authorized 5,000,000 shares; no par value,
Series A shares outstanding: 1,094,224
Liquidation preference $0.3125 per share. 879,254 825,254
SHAREHOLDERS' EQUITY (DEFICIENCY):
Common stock authorized 20,000,000 shares;
no par value; shares outstanding 10,618,224 40,844,297 40,844,296
Accumulated deficit (44,967,902) (45,142,228)
------------ ----------
Total shareholders' equity (deficiency) (4,123,605) (4,297,932)
------------ ----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIENCY)
$ 4,622,105 $ 4,498,976
============ ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998 (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 31,
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 8,077,835 $ 7,681,683 $ 23,667,900 $22,889,671
------------ ------------ ------------ ------------
OPERATING EXPENSES:
Purchased transportation 6,286,668 5,758,520 18,150,132 17,437,007
Insurance and claims 251,718 242,788 721,474 744,513
Salaries, wages, and other 321,134 297,152 953,055 820,846
Commissions 757,688 808,536 2,244,605 2,352,806
Operating supplies and expense 181,894 350,944 675,021 775,718
Other expenses 46,083 115,417 230,567 257,559
------------ ------------ ------------ -----------
Total operating expenses 7,845,185 7,573,357 22,974,854 22,388,449
------------ ------------ ------------ -----------
OPERATING INCOME 232,650 108,326 693,046 501,222
------------ ------------ ------------ -----------
NON-OPERATING INCOME (EXPENSE):
Interest income 2,795 4,748 6,142 5,527
Interest expense (160,841) (189,448) (476,011) (518,787)
Other income 3,760 14,516 5,149 29,835
------------ ------------ ------------ -----------
Total non-operating (expense) (154,286) (170,184) (464,720) (483,425)
------------ ------------ ------------ -----------
INCOME (LOSS) BEFORE
EXTRAORDINARY ITEM 78,364 (61,858) 228,326 17,797
EXTRAORDINARY ITEM
GAIN ON SALE OF REAL ESTATE 0 61,055 0 61,055
------------ ---------- ------------ ----------
NET INCOME (LOSS) 78,364 (803) 228,326 78,852
DIVIDENDS ON PREFERRED SHARES 18,000 18,000 54,000
54,000
------------ ----------- ------------ -----------
NET INCOME (LOSS) TO COMMON SHARES 60,364 (18,803) 174,326 24,852
============ ============ ============ ============
EARNINGS (LOSS) PER COMMON SHARE
Income (Loss) before extraordinary item 0.006 (0.008) 0.016 (0.004)
Extraordinary item 0.000 0.006 0.000 0.006
------------ ------------ ------------ ------------
Net Income (Loss) per common share
0.006 (0.002) 0.016 0.002
============ ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES 10,618,224 10,618,224 10,618,224 10,618,224
============ ============ ============ ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
<CAPTION>
Nine Months Ended September 30,
1999 1998
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income (loss) $ 228,326 $ 17,797
Adjustments to reconcile net income (loss) to net
cash provided from (used for) operations:
Depreciation and amortization 25,351 64,069
Loss from disposal of equipment 27,284 61,055
Changes in operating assets and liabilities:
Accounts receivable - trade (213,249) 799,702
Other receivables (58,735) (82,216)
Prepaid assets 15,350 14,366
Deposits 3,802 7,425
Accounts payable (78,255) (648,710)
Accrued expenses (11,408) 22,783
Accrued interest 150,603 125,934
Insurance and claims 1,515 (20,074)
Other accrued compensation ( 2,369) (21,568)
Fuel and other taxes (10,019) (193,699)
---------- ----------
Net Cash used for operating activities 23,628 58,023
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (5,183) (245,800)
Proceeds from the sale of Real Estate 82,251 229,879
---------- ----------
Net cash used for investing activities 77,068 17,921
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net repayments under line of credit (103,485) (393,262)
Principal payments on long term debt (76,380) (33,787)
Net proceeds from related party loans (13,773) 0
Increase (Decrease) in bank overdraft 38,374 0
---------- ----------
Net cash provided from(used for)financing activities (65,264) (427,049)
---------- ----------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 0 (298,079)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD 0 298,079
---------- ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 0 $ 0
========== ==========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of September 30, 1999 and the
consolidated statements of operations and cash flows for the nine month periods
ended September 30, 1999 and 1998 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, 1998 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 nine months ended
September 30, 1999 and 1998 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 September 30, 1999
and December 31, 1998, the Company's current liabilities exceeded its current
assets by $497,000 and $860,000, respectively. While this is an improvement, the
Company's future still depends heavily on raising capital necessary to fund
operations until its revenue growth generates sufficient cash flows to satisfy
its obligations. 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 to
improve this situation. Recent poor results and the inability to remain in
compliance with financial covenants with its lenders continue to raise
substantial doubt about the Company's ability to continue as a going concern. As
of December 31, 1998, the Company was in violation of the debt service coverage
ratio and covenants relating to capital expenditure limitation. On April 9, 1999
the lender issued a letter of default for these covenant violations. At
September 30, 1999, the company is in violation of the net worth covenant. 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. EARNINGS PER COMMON SHARE
The Company calculates earnings per share in accordance with the Financial
Accounting Standards No. 128. Following is the reconciliation of the numerators
and denominators of the basic and diluted earnings per share (EPS).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Numerator 1999 1998 1999 1998
<S> <C> <C> <C> <C>
Income (Loss) before
extraordinary item $ 78,364 $(61,858) $ 228,326 $ 17,797
Dividends on preferred shares (18,000) (18,000) (54,000) (54,000)
---------- ----------- ------- --------
Income(Loss)available to common
shareholders for basic and
diluted EPS $ 60,364 $ (79,858) $ 174,326 $ 36,203
---------- ------------ ------- --------
Denominator
Weighted average common shares
outstanding for basic and
diluted EPS 10,618,224 10,618,224 10,618,224 10,618,224
<FN>
The Company has options outstanding that are not included in the computation of
diluted EPS because the options are considered antidilutive for the periods
presented.
</FN>
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
4. Short Term Debt
Short-term debt at September 30, 1999 and December 31, 1998 comprises:
<CAPTION>
September 30, December 31,
1999 1998
---------- ----------
<S> <C> <C>
Line of credit $2,343,376 $2,446,861
Current portion of long-term debt 94,838 118,145
---------- ----------
Total $2,438,214 $2,565,006
========== ==========
</TABLE>
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 (8.25% and 8.50% at September 30,
1999 and December 31, 1998, respectively) plus 2.75% respectively. The Company's
accounts receivable, property and other assets are pledged as collateral for
advances under the line of credit agreement. The line of credit expires in May
2002. The lender has placed the company in default of it's loan agreement as
previously stated and is currently charging a default interest rate of 13%.
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 debt service coverage
ratio and covenants relating to capital expenditure limitation. On April 9, 1999
the lender issued a letter of default to these covenant violations. At September
30, 1999, it is not in violation of the debt service coverage ratio, but is
still in violation of the net worth covenant. As a result, at September 30, 1999
the company remains in default.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
5. LONG-TERM DEBT
Long-term debt at September 30, 1999 and December 31, 1998 comprises:
<CAPTION>
September 30, December 31,
1999 1998
--------- ------------
<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, 2001 $ 250,000 $ 250,000
Mortgage note payable to Antonson/Kilber collateralized by land, interest at
prime + .75%, interest only payments required, principal balance due
July 02, 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 0 56,428
Note payable collateralized by equipment
monthly payments of $3985.39 interest at 7.8%
through February, 2001 56,028 109,392
Mortgage note payable to ITE interest at 9%
monthly repayment of $2850 are to begin on
August 15, 1999 through March 15, 2002 75,349 57,289
Mortgage note payable to AIFE interest at 9%
monthly installments of $2150 are to begin on
August 15, 1999 through March 15, 2002 58,608 43,256
Mortgage note payable 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 1,837,269 1,851,042
---------- --------
Total debt 2,877,254 2,967,407
Less current portion 94,838 118,145
---------- --------
Total long-term debt $ 2,782,416 $ 2,849,262
========== ========
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
6. 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.
7. 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 September 30, 1999 and December
31, 1998 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
September 30, 1999 and December 31, 1998.
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 June 30, 1999, no options under this grant had been
exercised.
<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 Form10-Q
and in the Company's Form 10-KSB for its fiscal year ended December 31, 1998 are
essential to an understanding of the comparisons and are incorporated by
reference into the discussion that follows.
Period 1999 Compared to 1998
The Company's operating revenues increased from $22.8 million for the first nine
months of 1998 to $23.6 million for the same period in 1999. 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 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:
<TABLE>
<CAPTION>
Average Percent
<S> <C>
Purchased Transportation (PURTRANS) 76.0%
Commissions to agents 9.5%
Insurance 3.0%
Total 89.2%
</TABLE>
These expenses, as a result, remain relatively consistent (as a percent of
operating revenues).
The following table summarizes the actual results for the nine months ended
September 30, 1999 .and. 1998:
<TABLE>
<CAPTION>
(Dollar amounts stated in thousands)
1999 1998
<S> <C> <C>
Operating revenues $23,668 $22,890
Purtrans, Commissions, and Insurance 21,116 20,534
Actual Percentage 89.2% 89.7%
</TABLE>
Other operating expenses for the nine months ended September 30, 1999 remained
consistent at $1.9 million compared with the same period in 1998. The increase
in operating revenues together with holding operating expenses constant resulted
in an increase in operating income of $192,000.
Continuing good collection and credit practices resulted in lower outstanding
balances of debt and as a result interest expense has decreased from $ 518,787
for the first nine months of 1998 to $ 476,011 for the first nine months of
1999.
<PAGE>
Future Prospects
The Company's management remains hopeful about its future prospects. However,
the Company's future depends on continued increases in revenue, and bringing its
operations up to greater profitability.
Liquidity and Capital Resources
As of September 30, 1999, the Company's financial position remains precarious.
The Company had a deficit in shareholders' equity of $4.1 million.
Accounts receivable at September 30, 1999 were 4.2 million, up from the balance
of 4.0 million at December 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.
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 September 30, 1999
and December 31, 1998, the Company's current liabilities exceeded its current
assets by $497,000 and $860,000, respectively. While this is an improvement, the
Company's future still depends heavily on raising capital necessary to fund
operations until its revenue growth generates sufficient cash flows to satisfy
its obligations. 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 to
improve this situation. Recent poor results and the inability to remain in
compliance with financial covenants with its lenders continue to raise
substantial doubt about the Company's ability to continue as a going concern. As
of December 31, 1998, the Company was in violation of the debt service coverage
ratio and covenants relating to capital expenditure limitation. On April 9, 1999
the lender issued a letter of default for these covenant violations. At
September 30, 1999, the company is in violation of the net worth covenant. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty.
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.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
The Company's management believes that fluctuations in interest rates in the
near term would not materially affect the Company's consolidated operating
results, financial position, or cash flows as the Company has limited risks
related to interest rate fluctuations. The Company is currently still paying a
default rate of 13% interest. At the point in time when the Company is able to
cure the events of default with its lender the interest rate will return to the
rate provided by the credit agreement (currently 11.25%).
<PAGE>
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 Antonson
Chief Financial Officer
November 15, 1998
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0000351498
<NAME> US1 INDUSTRIES, INC.
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JUL-31-1999
<PERIOD-END> SEP-30-1999
<EXCHANGE-RATE> 1
<CASH> 0
<SECURITIES> 0
<RECEIVABLES> 4354200
<ALLOWANCES> 98985
<INVENTORY> 0
<CURRENT-ASSETS> 4514679
<PP&E> 12448
<DEPRECIATION> (47312)
<TOTAL-ASSETS> 4622105
<CURRENT-LIABILITIES> 5084040
<BONDS> 0
0
879254
<COMMON> 40844297
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4622105
<SALES> 23667900
<TOTAL-REVENUES> 23667900
<CGS> 22974854
<TOTAL-COSTS> 22974854
<OTHER-EXPENSES> (11291)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (476011)
<INCOME-PRETAX> 228326
<INCOME-TAX> 0
<INCOME-CONTINUING> 228326
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 228326
<EPS-BASIC> .016
<EPS-DILUTED> 0
</TABLE>
