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, 2000.
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 7, 2000, there were 10,618,224 shares of registrant's common
stock were outstanding.
<PAGE>
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
<CAPTION>
ASSETS
September30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash $ 1,524 $ 0
Accounts receivable-trade, less allowance for
doubtful accounts of $109,827 and $66,648
respectively $7,270,885 $4,972,846
Other receivables 490,383 105,770
Deposits 187,661 162,173
Prepaid expenses 54,096 9,245
----------- ----------
Total current assets 8,004,549 5,250,034
FIXED ASSETS:
Equipment 182,847 100,738
Less accumulated depreciation and amortization (59,198) (52,756)
---------- ----------
Net fixed assets 123,649 47,982
---------- -----------
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 $ 8,182,198 $ 5,352,016
========== ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
SEPTEMBER 30, 2000 (UNAUDITED) AND DECEMBER 31, 1999
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
<CAPTION>
September 30, December 31,
2000 1999
(Unaudited)
<S> <C> <C>
CURRENT LIABILITIES:
Accounts payable $ 1,889,196 $ 1,341,134
Bank overdraft 0 345,719
Accrued expenses 234,168 215,505
Short-term debt 3,408,485 3,173,990
Insurance and claims 340,679 204,592
Accrued compensation 29,389 17,314
Accrued interest 769,922 613,567
Fuel and other taxes payable 71,602 49,948
----------- ------------
Total current liabilities 6,743,441 5,961,769
----------- ------------
LONG-TERM DEBT TO RELATED PARTIES 4,058,196 2,451,028
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Authorized 5,000,000 shares; no par value,
Series A shares outstanding:
2000 and 1999 - 1,094,224
Liquidation preference $0.3125 per share 976,969 907,540
SHAREHOLDERS' DEFICIENCY:
Common stock, authorized 20,000,000 shares;
no par value; shares outstanding 10,618,224 40,844,296 40,844,296
Accumulated deficit (44,440,704) (44,812,617)
----------- -----------
Total shareholders' deficiency (3,596,408) (3,968,321)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIENCY $ 8,182,198 $
5,352,016
=========== ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
</TABLE>
<PAGE>
<TABLE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2000 AND 1999 (UNAUDITED)
<CAPTION>
Three Months Ended Nine Months Ended
2000 1999 2000 1999
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 12,761,124 $ 8,077,835 $ 33,385,179 $23,667,900
------------ ------------ ------------ -----------
OPERATING EXPENSES:
Purchased transportation 9,988,982 6,286,668 26,052,430 18,150,132
Insurance and claims 417,669 251,718 1,050,541 721,474
Salaries, wages, and other 408,737 321,134 1,263,578 953,055
Commissions 1,158,209 757,688 2,985,978 2,244,605
Operating supplies and expense 420,050 181,894 1,001,466 675,021
Other expenses 43,148 46,083 262,811 230,567
------------ ------------ ------------ ----------
Total operating expenses 12,436,795 7,845,185 32,616,804 22,974,854
------------ ------------ ------------ ----------
OPERATING INCOME 324,329 232,650 768,375 693,046
------------ ------------ ------------ ----------
NON-OPERATING INCOME (EXPENSE):
Interest income 42,451 2,795 67,525 6,142
Interest expense (222,640) (160,841) (474,271) (476,011)
Other income (expense) 44,950 3,760 79,713 5,149
------------ ------------ ------------ ----------
Total non-operating (expense) (135,239) (154,286) (327,033) (464,720)
------------ ------------ ------------ ----------
NET INCOME $ 189,090 $ 78,364 $ 441,342 $ 228,326
DIVIDENDS ON PREFERRED SHARES 23,143 18,000 69,429 54,000
----------- ------------ ------------ -----------NET INCOME AVAILABLE TO COMMON
SHARES 165,947 60,364 371,913 174,326
=========== ============ ============
===========
EARNINGS PER COMMON SHARE -
BASIC AND DILUTED $ 0.02 $ 0.01 $ 0.04 $ 0.02
=========== ============ ============ ============
WEIGHTED AVERAGE NUMBER OF COMMON SHARES-
BASIC AND DILUTED 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 STATEMENTS OF CASH FLOWS
NINE MONTHS ENDED SEPTEMBER 30, 1999 AND 1998
(UNAUDITED)
Nine Months Ended September 30,
2000 1999
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income $ 441,342 $228,326
Adjustments to reconcile net income to net
cash provided from (used for) operations:
Depreciation and amortization 17,218 25,351
Loss from disposal of equipment 3,609 27,284
Changes in operating assets and liabilities:
Accounts receivable - trade (2,298,039) (213,249)
Other receivables (384,613) ( 58,735)
Prepaid assets (44,851) 15,350
Deposits (25,488) 3,802
Accounts payable 548,062 (78,255)
Accrued expenses 18,663 (11,408)
Accrued interest 156,355 150,603
Insurance and claims 136,087 1,515
Accrued compensation 12,075 (2,369)
Fuel and other taxes payable 21,654 (10,019)
--------- ----------
Net Cash used for operating activities (1,397,926) 23,628
--------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (22,804) (5,183)
Proceeds from disposal of equipment 8,885 82,251
Sale of assets held for sale
--------- ----------
Net cash (used in) provided by investing activities (13,919) 77,068
--------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds(repayments)under line of credit 246,495 (103,485)
Principal payments on long term debt (41,291) (76,380)
Net proceeds from related party loans 1,553,884 (13,773)
(Decrease)Increase in bank overdraft (345,719) 38,374
--------- ----------
Net cash provided from (used for)financing activities 1,413,369 (65,264)
--------- ----------
NET INCREASE IN CASH AND CASH EQUIVALENTS 1,524 0
CASH AT BEGINNING OF PERIOD 0 0
--------- ----------
CASH AT END OF PERIOD 1,524 0
========= ==========
Non Cash Financing and Investing Activities:
In April 2000, the Company purchased additional equipment through the issuance
of debt in the amount of $82,575.
Redeemable preferred stock has been increased by $69,429 and $36,000 in 2000
and 1999 respectively for cumulative unpaid dividends on preferred stock.
<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, 2000 AND 1999
The accompanying notes are an integral part of the consolidated financial
statements.
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of September 30, 2000, and the
consolidated statements of operations and cash flows for the three month and
nine month periods ended September 30, 2000 and 1999 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, 1999, and the notes thereto included in the
Company's annual report on Form 10-K. 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, 2000 and 1999 are not necessarily
indicative of the results for a full year.
2. EARNINGS PER COMMON SHARE
The Company calculates earnings per share in accordance with the Statement of
Financial Accounting Standards No. 128. Following is the reconciliation of the
numerators and denominators of the basic and diluted earnings per share (EPS).
There were no outstanding common stock equivalents in these periods.
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
<S> <C> <C> <C> <C>
Numerator 2000 1999 2000 1999
Income from continuing operations $ 189,090 $ 78,364 $ 441,342 $ 228,326
Dividends on preferred shares (23,143) (18,000) (69,429) (54,000)
---------- --------- -------- --------
Net income available to common
shareholders for basic and
diluted EPS $ 165,947 $ 60,364 $ 371,913 $ 174,326
---------- --------- -------- --------
Denominator
Weighted average common shares
outstanding for basic and
diluted EPS 10,618,224 10,618,224 10,618,224 10,618,224
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
3. SHORT-TERM DEBT
Short-term debt at September 30, 2000, and December 31, 1999, comprises:
<TABLE>
<CAPTION>
September 30, December 31,
2000 1999
---------- ----------
<S> <C> <C>
Line of credit 3,324,101 $3,077,606
Current portion of long-term debt 84,384 96,384
---------- ----------
Total 3,408,485 $3,173,990
========== ==========
</TABLE>
The Company has a $3,500,000 line of credit. Advances under this line-of-credit
are limited to 70% of eligible accounts receivable. Advances bear interest at
the lender's prime rate (9.5% AT September 30, 2000) plus .5%. This line of
credit is secured by substantially all of the Company's assets and required
personal guarantees from the Company's Chief Executive Officer and Chief
Financial Officer.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
<TABLE>
4. LONG-TERM DEBT
Long-term debt at September 30, 2000, and December 31, 1999, comprises:
September 30, December 31,
2000 1999
<S> <C> <C>
Note payable to August Investment
Partnership, interest at prime + .75%,
interest only payments required, principal
balance due October 2001 $ 250,000 $ 250,000
Mortgage note payable to the Chief Executive
Officer and Chief Financial Officer
collateralized by land, interest at
prime + .75%, interest only payments
required, principal balance due
July 2003 500,000 500,000
Note payable, collateralized by equipment,
monthly payments of $3,985 including
interest at 7.8% through February, 2001 11,032 45,115
Note payable, collateralized by equipment,
monthly payments of $2,077 including
interest at 9.55% through April 2004 75,364
Mortgage note payable to ITE,
monthly payments of $2,850 including
Interest at 9% through March 2002 46,771 68,443
Mortgage note payable to AIFE,
monthly payments of $2,150 including
interest at 9% through March 2002 35,343 51,689
Mortgage note payable to August Investment
Partnership, interest at prime + .75%, interest
only payments required, principal balance due
October, 2001 100,000 100,000
Note payable to the Chief Executive Officer
And Chief Financial Officer, interest at
prime + 1%, interest only payments required,
principal balance due October, 2001 3,124,070 1,532,165
--------- ----------
Total debt 4,142,580 2,547,412
Less current portion 84,384 96,384
--------- ----------
Total long-term debt $ 4,058,196 $ 2,451,028
========== ==========
<FN>
This long term debt is subordinated to the line of credit agreement.
</FN>
</TABLE>
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
5. COMMITMENTS AND CONTINGENCIES
Cam Regional Transport has filed a complaint against the Company which alleges
breach of contract, claiming that Trailblazer Transportation, Inc., a
subsidiary of the Company which filed bankruptcy, failed to abide by a purchase
agreement entered into with Cam Regional Transport, Inc. and Laurel Mountain
Leasing, Inc. The complaint seeks damages of $284,000 plus interest from
November 1992. At this time, the Company and its legal counsel are unable to
assess the outcome of this complaint. The Company intends to vigorously defend
itself in this matter.
The Company is involved in other litigation in the normal course of its
business. Management intends to vigorously defend these cases. In the opinion
of management, the other litigation now pending will not have a material
adverse effect on the consolidated financial position of the Company.
The Company has entered into an agreement with certain key employees of
Carolina National Transportation, Inc.("Carolina"), a wholly owned subsidiary
of the Company, in which these employees will receive up to 40% ownership in
Carolina. These key employees will earn the 40% ownership interest in Carolina
over a three-year period beginning in the year in which Carolina achieves
positive net worth. Carolina has a negative net worth of $75,600 at September
30, 2000, and the negative net worth of $482,000 at December 31, 1999.
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>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION.
You should read the following discussion regarding the Company along with the
Company's financial statement and related notes included in this quarterly
report. The following discussion contains forward-looking statements that are
subject to risks, uncertainties and assumptions. The Company's actual results,
performance and achievements in 2000 and beyond may differ materially
from those expressed in, or implied by these forward-looking statements. See
cautionary note regarding forward-looking statements.
Results of Operations
The financial statements and related notes contained elsewhere in this Form
10-Q as of and for the nine months ended September 30, 2000 and in the
Company's Form 10-K for its fiscal year ended December 31, 1999, are essential
to an understanding of the comparisons and are incorporated by reference into
the discussion that follows.
Nine months ended September 30, 2000 Compared to the nine months ended
September 30, 1999
The Company's operating revenues increased from $23.7 million for nine months
ended September 30, 1999 to $33.4 million for the same period in 2000. This is
an increase of 41.5%. This increase is attributable to the growth of existing
agents and the addition of new agents. The Company continues to experience
success following its business plan of working, almost exclusively, with agents
and independent owner operators.
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:
These expenses, as a result, remain relatively consistent (as a percent of
sales). Actual expenses as a percentage of revenues for the three major items
for the nine months ended September 30 of each year are as follows:
<TABLE>
<CAPTION>
Item:
2000 1999
<S> <C> <C>
Purchased Transportation and Commissions 87.0% 86.2%
Insurance (Liability & Cargo) 3.1% 3.0%
Total 90.1% 89.2%
</TABLE>
Purchased transportation and Commissions to agents in total has increased 0.9%
as a percentage of revenue for the nine months ended September 30, 2000,
compared to the nine months ended September 30, 1999. Due to the increase in
diesel fuel prices, the Company has begun to bill their customers a fuel
surcharge that is reimbursable to the owner operator at 100%. Because this
portion of the revenue is reimbursed at 100% to the owner operator, the
purchased transportation and commissions in total as a percentage of revenue
will increase.
Insurance has increased .1% as a percentage of revenues for the nine months
ended September 30, 2000, compared to the nine months ended September 30, 1999,
due to a small increase in the rate for cargo insurance.
The remaining operating expenses have increased by approximately $669,212 for
the nine months ended September 30, 2000, compared to the nine months ended
September 30, 1999. The majority of this increase is the result of additional
personnel hired due to Company growth and the cost of a start up operation
where these expenses are not yet in proportion to the revenues generated.
Interest expense decreased $1,740 from $476,011 for the nine months ended
September 30, 1999, to $474,271 for the nine months ended September 30, 2000.
This reduction in spite of an increase in debt is due to the much better terms
that resulted from the refinancing that took place in April 2000.
The Company's net income from operations increased from $228,326 for the nine
months ended September 30, 1999, to $441,342 for the
nine months ended September 30, 2000.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
The three months ended September 30, 2000, compared to the three months ended
September 30, 1999
The Company's operating revenue for the three months ended September 30, 2000,
increased by $4.7 million in comparison to the three months ended September 30,
1999. This is an increase of 58.2%. Purchased transportation, Commissions,
and Insurance expenses increased by $4,268,787 or 58.5% all consistent with and
resulting from the increase in revenue for the same period.
Wages and salaries increased by $87,633 or 27.3% reflecting increased
productivity associated with scale and the absorption of the startup costs of
the new operation which began in November 1999. Operating and other expenses
increased 235,221 or 103%. Most of the increase here that exceeded the growth
rate in revenue was attributable to one time charges. There were fees and
legal expenses in connection with the new line of credit of close to $50,000.
In addition the computer network at Carolina National was upgraded at a cost of
$15,000 when they expanded their office during the third quarter.
Interest expense as a percent of sales decreased by 0.25% between the two
periods due to the improved terms on the new line of credit.
The Company's net income from operations increased from $78,364 for the three
months ended September 30, 1999, to $189,090 for the three months ended
September 30, 2000.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Liquidity and Capital Resources
As of September 30, 2000, the Company's financial position continues to improve
in comparison to prior fiscal periods. The Company had a net deficiency in
shareholders' equity of $3.6 million at September 30, 2000 an improvement of
$372,000 over year-end December 31, 1999. Working capital continued to improve
with a deficiency at December 31,1999, of ($0.7) million, compared to a
positive working capital at September 30, 2000, of $1.3 million. The increase
in working capital is due to refinancing a portion of the former line of credit
and continuing profitably.
Net cash used for operating activities was $1.4 million and resulted from the
increased sales. Net cash used in investing activities was $13,919 due to the
investment in additional equipment. Cash provided for the above activities was
$1.4 million and was provided by an increase in long term debt of $1.6 million,
an increase in the line of credit of $0.25 million and a reduction in the bank
overdraft of $0.35 million.
Accounts receivable at September 30, 2000, were $7.2 million, up from the $5.0
million at year-end December 31, 1999. The increase was due to increased
revenues in the first nine months of 2000.
The Short Term Debt increased by $0.23 million from December 31, 1999, to
September 30, 2000, due to the increased sales and resulting increase in
accounts receivable balances.
In April 2000, the Company refinanced its short term debt with a new lender.
The Company received a $2,000,000 line of credit which was subsequently
increased to $3,500,000 in June 2000. Advances under this new line-of-credit a
re limited to 70% of eligible accounts receivable. Advances bear interest at
the lender's prime rate plus .5%. This new line of credit is secured by
substantially all of the Company's assets and required personal guarantees
from the Company's Chief Executive Officer and Chief Financial Officer.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Quantitative and Qualitative Disclosures About Market Risk
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.
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.
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.
The Company has notes payable due to its Chief Executive Officer, Chief
Financial Officer, and August Investment Partnership, an affiliated entity
through common ownership as described in Note 4.
<PAGE>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
PART II. OTHER INFORMATION
Item 6(b). Reports on Form 8-K
No Reports on Form 8-K have been filed during the quarter.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned there unto duly authorized.
US 1 Industries, Inc.
Michael E. Kibler
President
Harold E. Antonson
Chief Financial Officer
November 13, 2000
