FORM 10-QSB
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period From to
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Commission File Number 2-31610
INDUSTRIAL SERVICES OF AMERICA, INC.
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(Exact name of small business issuer as specified in its charter)
Florida 59-0712746
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
7100 Grade Lane, P.O. Box 32428
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Louisville, Kentucky 40232
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(Address of principal executive offices)
(502) 368-1661
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(Issuer's telephone number)
Not Applicable
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(Former name, former address, and former fiscal year,
if changed since last report)
Check whether the Issuer (1) filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act during the past
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
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APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS
Check whether the registrant has filed all documents and reports
required to be filed by Sections 12, 13, or 15(d) of the Exchange
Act after the distribution of securities under a plan confirmed
by court. YES X No
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APPLICABLE ONLY TO CORPORATE ISSUERS:
State the number of shares outstanding of each of the issuer's
classes of common equity, as of November 10, 1995: 1,757,500
<PAGE>
Part I - FINANCIAL INFORMATION
Item 1. Financial Statements
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INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
ASSETS
------
<TABLE>
<CAPTION>
SEPTEMBER 30 JANUARY 1
1995 1995
---------------------------
CURRENT ASSETS
- --------------
<S> <C> <C>
Cash $ 611,616 $ 354,884
Investments 100,000 -0-
Receivables:
Trade, net of allowance for
doubtful accounts of
$10,000 3,271,679 2,380,446
Other 17,127 3,057
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3,288,806 2,383,503
Net investment in sales-
type leases 4,747 36,797
Inventories 214,164 161,211
Prepaid expenses 46,114 140,868
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Total current assets 4,265,447 3,077,263
Property and equipment, net 1,841,741 941,302
Other assets 122,346 74,884
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Total assets $6,229,534 $4,093,449
========== ==========
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
SEPTEMBER 30 JANUARY 1
1995 1995
---------------------------
Current liabilities
<S> <C> <C>
Note payable to bank $ 350,000 $ 50,000
Accounts payable 3,632,646 2,504,028
Income taxes payable 215,726 288,385
Current maturities of
long-term debt 8,315 14,141
Other current liabilities 306,801 137,307
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Total current liabilities 4,513,488 2,993,861
Long-Term Debt 35,128 13,152
Deferred revenue 45,000 -0-
Deferred tax liability 22,600 22,600
Stockholders' equity
Common stock, $.01 par value,
10,000,000 shares authorized;
1,757,500 shares issued 17,575 17,575
Additional paid-in capital 27,000 27,000
Retained earnings 1,576,743 1,027,261
Treasury stock, at cost,
27,900 shares (8,000) (8,000)
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Total stockholders' equity 1,613,318 1,063,836
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Total liabilities and
stockholders' equity $6,229,534 $4,093,449
========== ==========
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
Revenue
<S> <C> <C>
Net sales $8,213,186 $6,241,464
Rental income 65,713 50,142
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Total revenue 8,278,899 6,291,606
Cost and expenses
Cost of sales 6,380,229 5,394,404
Direct expenses applicable
to rental income 20,901 56,291
Selling, general and
administrative expenses 1,517,675 729,997
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Total cost and expenses 7,918,805 6,180,692
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Income from operations 360,094 110,914
Other income, net 21,416 15,627
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Income before provision for
income taxes 381,510 126,541
Provision for income taxes 195,000 63,000
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Net income $ 186,510 $ 63,541
========== ==========
Earnings per common share $ 0.11 $ 0.04
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
Revenue
<S> <C> <C>
Net sales $22,491,628 $16,596,244
Rental income 176,346 148,444
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Total revenue 22,667,974 16,744,688
Cost and expenses
Cost of sales 17,898,394 14,292,328
Direct expenses applicable
to rental income 66,837 56,291
Selling, general and
administrative expenses 3,779,454 2,167,750
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Total cost and expenses 21,744,685 16,516,369
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Income from operations 923,289 228,319
Other income, net 61,192 40,941
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Income before provisions for
income taxes 984,481 269,260
Provision for income taxes 435,000 113,000
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Net income $ 549,481 $ 156,260
=========== ===========
Earnings per common share $ 0.31 $ 0.09
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994
(UNAUDITED)
<TABLE>
<CAPTION>
1995 1994
--------------------------
Operating activities
<S> <C> <C>
Net Income $ 549,481 $ 156,260
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 231,108 131,720
Increase (decrease) in cash
resulting from changes in:
Receivables (905,303) (314,800)
Inventories (52,953) (107,629)
Prepaid expenses 94,753 (28,277)
Accounts payable 1,128,618 305,126
Deferred revenue 45,000
Income taxes payable (72,659) (28,800)
Other current liabilities 169,496 11,431
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Net cash provided by
operating activities 1,187,541 125,031
Investing Activities
Purchase of investment (100,000) 3,340
Advances to related parties (37,502)
Payment for property and
equipment (1,131,547) (273,267)
Additions to notes receivable -0- (72,705)
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Net cash used in investing
activities (1,231,547) (380,134)
Financing activities
Payments on long-term debt (5,826) (17,278)
Proceeds from issuance of
notes payable to bank 300,000 -0-
Proceeds from issuance of
long-term debt 21,976 -0-
Investment in sales-type leases (15,412) (12,963)
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Net cash provided by
financing activities 300,738 (30,241)
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Net (decrease) increase in cash 256,732 (285,344)
Cash at beginning of period 354,884 747,747
Cash at end of period $ 611,616 $ 462,403
=========== ===========
</TABLE>
<PAGE>
Item 2. Management's Discussion and Analysis or Plan of
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Operation
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1. Liquidity and Capital Resources
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As of September 30, 1995, the Registrant held cash and cash
equivalents of $611,616.
The Registrant derives its revenues from a variety of
sources, including customer services, equipment sales, consulting
fees, and from its recycling operations. The recycling
operations comprised 56% and 48% of the Registrant's net income
for the years ended December 31, 1993 and 1994, respectively. In
the event the Registrant were to operate without revenue derived
from its recycling operations, the Registrant's liquidity would
be significantly decreased but would not materially impair the
Registrant's ability to continue its operations and business.
2. Results of Operations
---------------------
The Registrant currently manages the recycling operations of
K&R Corporation. The Registrant reports gross sales derived from
its recycling operations within its computation of total revenue.
The cost of purchasing recyclable materials is reported as a Cost
of Sales of the Registrant. The Registrant charges K&R
Corporation a management fee of 60% of net sales from the
recycling operations. The remaining 40% of net sales is remitted
to K&R Corporation and is reported in the Registrant's financials
as a Selling Expense.
Net income before provisions for income taxes for the nine
months ended September 30, 1995 was $984,481, as compared to
$269,260 for the comparable period of 1994.
Revenues for the nine months ended September 30, 1995 was
$22,667,974, as compared to $16,744,688 for the comparable period
of 1994.
Costs and expenses for the nine months ended September 30,
1995 were $21,744,685, as compared to $16,516,369 for the
comparable period of 1994.
Income from Operations for the nine months ended September
30, 1995 was $923,289, as compared to $228,319 for the comparable
period of 1994.
The increase in net income, revenue and income from
operations of the Registrant was attributable to the following
factors: an increase in the market value of recyclable
materials; an increase in equipment sales and leasing of the
Registrant; and an increase in the volume of recyclable
processing operations. The increase in costs and expenses
proportionately increased as revenue increased.
During the third quarter of 1995, the price paid to the
Registrant for corrugated paper dropped from earlier levels this
year, thus adversely affecting the revenue received by the
Registrant, but only to the extent that the increased volume of
sales of such paper did not offset the drop in price.
<PAGE>
The Registrant is currently expanding its operations. The
Registrant has recently undertaken certain capital improvements
and is in the process of further developing its sales and
marketing department.
The Registrant does not believe that the impact of inflation
on operations has been material. The Registrant believes that
any cost increase resulting from periods of high inflation can be
passed through to its customers without negative reactions.
The Registrant currently maintains a working capital line of
credit with The Mid-America Bank of Louisville and Trust Company
(the "Bank") in the amount of $500,000. Indebtedness under this
credit facility earns interest at the Bank's prime rate as
promulgated from time to time. As of September 30, 1995,
approximately $350,000 was outstanding under this credit
facility.
The Registrant provides waste management consulting services
to its customers. Prior to 1994, the Registrant's service and
consulting revenue was derived principally from management fees
paid by its customers. The Registrant collected funds from its
customers for services rendered, retained its management fee, and
remitted the remaining funds to third party vendors who performed
the waste removal and maintenance services. In 1994, because of
certain market dynamics, changes in the industry and changes
related to the Registrant's operations, management re-evaluated
the Registrant's manner of conducting business. Based on this
re-evaluation, the Registrant's pricing process was modified. As
a result, the majority of the Registrant's current customers pay
a negotiated fee for their waste service needs, and in turn the
Registrant subcontracts the necessary work to third party vendors
and pays those vendors for their services. Accordingly, the 1994
and 1993 consolidated financial statements reflect accounting
treatment consistent with the Registrant's current operations.
These reclassifications and certain other reclassifications
necessary to conform the consolidated financial statements with
the 1994 presentation had no effect on net income.
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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1. Basis of Presentation
---------------------
The accompanying unaudited financial statements have been
prepared in accordance with generally accepted accounting
principles for interim financial reporting. They do not include
all information and footnotes required by generally accepted
accounting principles for complete financial statements. The
information furnished includes all adjustments which are, in the
opinion of management, necessary to present fairly the
Registrant's financial position as of September 30, 1995 and the
results of its operations and changes in cash flows for the
periods ended September 30, 1995 and 1994. Results of operations
for the period ended September 30, 1995 are not necessarily
indicative of the results that may be expected for the entire
year.
2. Additional Information
----------------------
Additional information, including the audited 1994 Financial
Statements and the Summary of Significant Accounting Policies, is
included in the Registrant's Annual Report on Form 10-KSB for the
year ended December 31, 1994 on file with the Securities and
Exchange Commission.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
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None
Item 2. Changes in Securities
- -------------------------------
None
Item 3. Defaults upon Senior Securities
- -----------------------------------------
None
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
None
Item 5. Other Information
- ---------------------------
The Registrant received notification during the fourth
quarter of 1995 that the National Association of Securities
Dealers, Inc. had approved Heidtke & Company, Inc., Nashville,
Tennessee, to initiate quotations of the $.01 par value common
stock of the Registrant.
Item 6. Exhibits and Reports on Form 8-K
- ------------------------------------------
None
<PAGE>
SIGNATURES
In accordance with the requirements of the Securities Exchange
Act of 1934, the Registrant caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
INDUSTRIAL SERVICES OF AMERICA, INC.
DATE: November 13, 1995 /s/ Harry Kletter
- ----------------------- -----------------------------------------
President and Principal Financial Officer
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<EXCHANGE-RATE> 1
<CASH> 611,616
<SECURITIES> 100,000
<RECEIVABLES> 3,298,806
<ALLOWANCES> 10,000
<INVENTORY> 214,164
<CURRENT-ASSETS> 4,265,447
<PP&E> 2,627,695
<DEPRECIATION> 785,954
<TOTAL-ASSETS> 6,229,534
<CURRENT-LIABILITIES> 4,513,488
<BONDS> 35,128
<COMMON> 17,575
0
0
<OTHER-SE> 1,595,743
<TOTAL-LIABILITY-AND-EQUITY> 6,229,534
<SALES> 22,491,628
<TOTAL-REVENUES> 22,667,974
<CGS> 17,898,394
<TOTAL-COSTS> 17,965,231
<OTHER-EXPENSES> 3,779,454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 984,481
<INCOME-TAX> 435,000
<INCOME-CONTINUING> 549,481
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 549,481
<EPS-PRIMARY> .31
<EPS-DILUTED> .31
</TABLE>
