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 quarter ended June 30, 1996
[ ] 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 020979
INDUSTRIAL SERVICES OF AMERICA, INC.
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(Exact Name of Registrant as specified in its Charter)
Florida 59-0712746
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(State or other jurisdiction of (I.R.S. 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 12, 13 or 15(d) of the Securities 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
Securities 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 the latest practicable date:
1,750,433
<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>
JUNE 30 JANUARY 1
1996 1996
-------------------------
CURRENT ASSETS
- --------------
<S> <C> <C>
Cash $ 301,206 $ 507,889
Receivables:
Trade, net of allowance for
doubtful accounts of $16,000 3,756,508 3,241,290
Other 233,789 -0-
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3,990,297 3,241,290
Net investment in sales-type leases 15,506 29,273
Inventories 351,642 138,503
Deferred tax assets 6,400 6,400
Other 73,512 168,773
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Total current assets 4,738,563 4,092,128
Property and equipment, net 2,348,805 1,961,381
Other assets 110,840 155,852
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Total assets $7,198,208 $6,209,361
========== ==========
</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
JUNE 30 JANUARY 1
1996 1996
------------------------
<S> <C> <C>
Current liabilities
Accounts payable $4,101,912 $3,600,857
Income taxes payable 19,096 184,126
Current maturities of long-term debt 9,041 19,797
Other current liabilities 125,656 202,555
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Total current liabilities 4,255,705 4,007,335
Long-Term Debt 467,432 367,431
Deferred tax liability 66,600 66,600
Stockholders' equity
Common stock, $.01 par value,
10,000,000 shares authorized;
1,750,433 shares issued 18,825 17,575
Additional paid-in capital 275,750 27,000
Retained earnings 2,121,896 1,731,420
Treasury stock, at cost,
27,900 shares (8,000) (8,000)
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Total stockholders' equity 2,408,471 1,767,995
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Total liabilities and
stockholders' equity $7,198,208 $6,209,361
========== ==========
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
---------------------------
<S> <C> <C>
Revenue
Net sales $ 8,944,953 $ 7,882,521
Rental income 88,095 58,062
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Total revenue 9,033,048 7,940,583
Cost and expenses
Cost of sales 7,559,607 6,367,060
Direct expenses applicable to rental income 27,490 22,401
Selling general and administrative expenses 1,203,617 1,238,913
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Total cost and expenses 8,790,714 7,628,374
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Income (loss) from operations 242,334 312,209
Other income, net 13,106 20,579
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Income before provision for income taxes 255,440 332,788
Provision for income taxes 101,000 130,000
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Net income $ 154,440 $ 202,788
=========== ===========
Earnings per common share $ 0.09 $ 0.12
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
----------------------------
<S> <C> <C>
Revenue
Net sales $16,611,123 $14,278,442
Rental income 181,488 110,633
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Total revenue 16,792,611 14,389,075
Cost and expenses
Cost of sales 13,811,446 11,518,165
Direct expenses applicable to rental income 49,650 45,936
Selling general and administrative expenses 2,311,446 2,261,779
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Total cost and expenses 16,172,542 13,825,880
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Income (loss) from operations 620,069 563,195
Other income, net 28,377 39,776
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Income before provision for income taxes 648,446 602,971
Provision for income taxes 258,000 240,000
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Net income $ 390,446 $ 362,971
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Earnings per common share $ 0.22 $ 0.21
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30, 1996 AND 1995
(UNAUDITED)
<TABLE>
<CAPTION>
1996 1995
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Operating activities
<S> <C> <C>
Net Income $ 390,446 $ 362,971
Adjustments to reconcile net
income to net cash provided
by operating activities:
Depreciation and amortization 230,037 139,851
Increase (decrease) in cash
resulting from changes in:
Receivables (515,218) (187,625)
Inventories (213,139) (15,625)
Prepaid expenses (4,709) 61,466
Accounts payable 501,055 565,857
Deferred revenue 90,000
Income taxes payable (165,030) (96,195)
Other current liabilities (76,899) 9,670
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Net cash provided by operating activities 146,543 930,370
Investing activities
Proceeds from sale of investment 100,000
Advances to related parties (10,564)
Payments/Deposits for
property and equipment (572,449) (732,494)
Additions to notes receivables (233,789)
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Net cash used in investing activities (706,238) (743,058)
Financing activities
Payments on long-term debt (10,755)
Proceeds from issuance of
notes payable to bank 100,000 300,000
Proceeds from issuance of
long-term debt 21,260
Investment in sales-type leases (2,463) 18,840
Proceeds from sales-type leases 16,230
Proceeds from issuance of
stock options 250,000
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Net cash provided by financing activities 353,012 340,100
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Net (decrease) increase in cash (206,683) 527,412
Cash at beginning of period 507,889 354,884
Cash at end of period $ 301,206 $ 882,296
========== ==========
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
---------
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 June 30, 1996 and the
results of its operations and changes in cash flows for the
periods ended June 30, 1996 and 1995. Results of operations for
the period ended June 30, 1996 are not necessarily indicative of
the results that may be expected for the entire year.
2. Additional Information
----------------------
Additional information, including the audited 1995 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, 1995 on file with the Securities and
Exchange Commission.
<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 June 30, 1996, the Registrant held cash and cash
equivalents of $301,206.
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 approximately 30% and 60% of the
Registrant's income before provision for income taxes for the
years ended December 31, 1994 and 1995, 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. Effective January 1, 1996, the
Registrant is charging K&R Corporation a management fee of 80% of
income before provision for income taxes from the recycling
operations. The remaining 20% of income before provision for
income taxes is remitted to K&R Corporation and is reported in
the Registrant's financials as a Selling Expense. Prior to
January 1, 1996, the Registrant was charging K&R Corporation a
management fee of 60% of income before provision for income taxes
from the recycling operations.
Income before provisions for income taxes for the six months
ended June 30, 1996 was $648,446, as compared to $602,971 for the
comparable period of 1995.
Revenues for the six months ended June 30, 1996 was
$16,792,611, as compared to $14,278,442 for the comparable period
of 1995.
Costs and expenses for the six months ended June 30, 1996
were $16,172,542 as compared to $13,825,880 for the comparable
period of 1995.
Income (loss) from operations for the six months ended June
30, 1996 was $620,069, as compared to $563,195 for the comparable
period of 1995.
Increases in net income of 7%, revenues of 16% and income
from operations of 10% of the Registrant is attributable to
an increase in the volume of the recyclable processing
operations and an increase in the leasing of waste disposal
and recycling equipment. The increase in costs and expenses
proportionately increased as revenue increased.
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 $750,000. Indebtedness under this
credit facility earns interest at the Bank's prime rate as
promulgated from time to time. The maturity date under this
credit facility is June 30, 1997. As of June 30, 1996
approximately $450,000 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.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
- ----------------------------
None
Item 2. Changes in Securities
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None
Item 3. Defaults upon Senior Securities
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None
Item 4. Submission of Matters to a Vote of Security Holders
- -------------------------------------------------------------
None
Item 5. Other Information
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On July 8, 1996, the Registrant filed a Form 8-A with
the Securities and Exchange Commission (the "Commission")
registering the $.01 par value common stock of the Registrant
under Section 12(g) of the Securities Exchange Act of 1934,
as amended. The Commission declared the Form 8-A effective
on July 17, 1996.
The Registrant also issued 100,000 shares of its Common
Stock to each of two consultants for the Registrant during
June 1996, pursuant to the terms of consulting agreements
between the Registrant and each such consultant. These two
consultants, Neil C. Sullivan and Douglas I. Maxwell, III,
entered into separate consulting agreements with the Registrant
effective March 31, 1995, although executed on June 26, 1996.
Pursuant to the consulting agreements, each of Messrs. Maxwell
and Sullivan agreed to provide to the Registrant general business
analysis, management and marketing, business opportunity
evaluation and merger/acquisition finder services effective
through March 31, 1997. In accordance with the terms of the
consulting agreements, Mr. Maxwell received an option to purchase
100,000 shares of the $.01 par value common stock of the
Registrant for $.50 per share, which he exercised on
June 28, 1996. Mr. Sullivan received an option to
purchase 100,000 shares of the $.01 par value common stock
of the Registrant for $2.00 per share, which he exercised on
June 28, 1996. The shares authorized to be issued upon the
the exercise of options granted under these consulting
agreements were the subject of two registration statements
related to each separate consulting agreement, filed by
the Registrant with the Commission on June 26, 1996, on
Form S-8 Registration Statements under the Securities Act
of 1933, as amended. These registration statements
became effective upon filing with the Commission.
Item 6. Exhibits and Reports on Form 8-K
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(a) The following exhibits are filed as part of this report:
27 -- Financial Data Schedule
(b) No reports on Form 8-K were filed during the quarter
ended June 30, 1996.
<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, thereunto duly authorized.
INDUSTRIAL SERVICES OF AMERICA, INC.
DATE: August 14, 1996 /s/ Harry Kletter
---------------- ---------------------------------------
President and Principal Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000004187
<NAME> INDUSTRIAL SERVICES OF AMERICA, INC.
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 301,206
<SECURITIES> 0
<RECEIVABLES> 4,006,297
<ALLOWANCES> 16,000
<INVENTORY> 351,642
<CURRENT-ASSETS> 4,738,563
<PP&E> 3,418,959
<DEPRECIATION> 1,070,154
<TOTAL-ASSETS> 7,198,208
<CURRENT-LIABILITIES> 4,255,705
<BONDS> 467,432
0
0
<COMMON> 18,825
<OTHER-SE> 2,389,646
<TOTAL-LIABILITY-AND-EQUITY> 7,198,208
<SALES> 16,611,123
<TOTAL-REVENUES> 16,792,611
<CGS> 13,811,446
<TOTAL-COSTS> 13,861,096
<OTHER-EXPENSES> 2,311,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 648,446
<INCOME-TAX> 258,000
<INCOME-CONTINUING> 390,446
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 390,446
<EPS-PRIMARY> .22
<EPS-DILUTED> .22
</TABLE>
