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 March 31, 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 2-31610
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:
1,729,600
Transitional Small Business Disclosure Format: YES NO X
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<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
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<TABLE>
<CAPTION>
MARCH 31 JANUARY 1
1996 1996
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CURRENT ASSETS
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<S> <C> <C>
Cash $ 259,697 $ 507,889
Receivables:
Trade, net of allowance for doubtful
accounts of $16,000 3,397,344 3,241,290
Net investment in sales-type leases 21,955 29,273
Inventories 157,970 138,503
Deferred tax assets 6,400 6,400
Other 174,672 168,773
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Total current assets 4,018,038 4,092,128
Property and equipment, net 1,969,952 1,961,381
Other assets 214,884 155,852
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Total assets $6,202,874 $6,209,361
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</TABLE>
<PAGE>
LIABILITIES AND STOCKHOLDERS' EQUITY
<TABLE>
<CAPTION>
MARCH 31 JANUARY 1
1996 1996
---------------------------
<S> <C> <C>
Current liabilities
Accounts payable $3,409,359 $3,600,857
Income taxes payable 201,096 184,126
Current maturities of long-term debt 20,153 19,797
Other current liabilities 139,882 202,555
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Total current liabilities 3,770,490 4,007,335
Long-Term Debt 361,753 367,431
Deferred tax liability 66,600 66,600
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 1,967,456 1,731,420
Treasury stock, at cost, 27,900 shares (8,000) (8,000)
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Total stockholders' equity 2,004,031 1,767,995
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Total liabilities and stockholders' equity $6,202,874 $6,209,361
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</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
1996 1995
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<S> <C> <C>
Revenue
Net sales $ 7,666,170 $ 6,395,921
Rental income 93,393 52,571
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Total revenue 7,759,563 6,448,492
Cost and expenses
Cost of sales 6,251,839 5,151,105
Direct expenses applicable to rental income 22,160 23,535
Selling general and administrative expenses 1,107,829 1,022,866
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Total cost and expenses 7,381,828 6,197,506
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Income (loss) from operations 377,735 250,986
Other income, net 15,271 19,197
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Income before provision for income taxes 393,006 270,183
Provision for income taxes 157,000 110,000
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Net income $ 236,006 $ 160,183
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Earnings per common share $ 0.13 $ 0.09
</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED MARCH 31, 1996 AND 1995
(UNAUDITED)
<TABLE>
1996 1995
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<S> <C> <C>
Operating activities
Net Income $ 236,006 $ 160,183
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 109,582 29,765
Increase (decrease) in cash
resulting from changes in:
Receivables (156,054) 74,759
Inventories (19,467) (21,873)
Prepaid expenses (64,901) 58,972
Accounts payable (191,498) (624)
Income taxes payable 16,970 (111,195)
Other current liabilities (62,673) (43,523)
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Net cash provided by operating activities (132,035) 146,464
Investing activities
Payment for property and equipment (118,153) (471,298)
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Net cash used in investing activities (118,153) (471,298)
Financing activities
Payments on long-term debt (5,322) (5,283)
Proceeds from issuance of
notes payable to bank -0- 388,060
Proceeds from issuance of long-term debt -0- 31,525
Proceeds from sales-type leases 7,318 10,787
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Net cash provided by financing activities 1,996 425,089
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Net (decrease) increase in cash (248,192) 100,255
Cash at beginning of year 507,889 354,884
Cash at end of year $ 259,697 $ 455,139
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</TABLE>
<PAGE>
INDUSTRIAL SERVICES OF AMERICA, INC.
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
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1. Basis of Presentation
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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 March 31, 1996 and the
results of its operations and changes in cash flows for the
periods ended March 31, 1996 and 1995. Results of operations for
the period ended March 31, 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 March 31, 1996, the Registrant held cash and cash
equivalents of $259,697.
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. The Registrant charges 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.
Income before provisions for income taxes for the three
months ended March 31, 1996 was $393,005, as compared to $270,183
for the comparable period of 1995.
Revenues for the three months ended March 31, 1996 was
$7,759,563, as compared to $6,448,492 for the comparable period
of 1995.
Costs and expenses for the three months ended March 31, 1996
were $7,381,828, as compared to $6,197,506 for the comparable
period of 1995.
Income (loss) from operations for the three months ended
March 31, 1996 was $377,735, as compared to $250,986 for the
comparable period of 1995.
The increase of net income, revenue and income from
operations 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 March 31, 1996
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.
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
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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
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None
Item 5. Other Information
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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
- ------------------------------------------
(a) None
(b) Reports on Form 8-K.
-------------------
The Registrant filed a report on Form 8-K with respect to
Item 5. Other Events on February 23, 1996, reporting an event on
February 8, 1996, relating to the filing by the Registrant of an
application with the NASDAQ Stock Market for inclusion of the
Registrant's Common Stock on the NASDAQ SmallCap Market.
<PAGE>
SIGNATURES
In accordance with 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: /s/ Harry Kletter
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President and Principal Financial
Officer
<TABLE> <S> <C>
<ARTICLE> 5
<CIK> 0000004187
<NAME> INDUSTRIAL SERVICES OF AMERICA
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 259,697
<SECURITIES> 0
<RECEIVABLES> 3,413,344
<ALLOWANCES> 16,000
<INVENTORY> 157,970
<CURRENT-ASSETS> 4,018,038
<PP&E> 2,919,651
<DEPRECIATION> 949,699
<TOTAL-ASSETS> 6,202,874
<CURRENT-LIABILITIES> 3,770,490
<BONDS> 361,753
0
0
<COMMON> 17,575
<OTHER-SE> 1,996,456
<TOTAL-LIABILITY-AND-EQUITY> 6,202,874
<SALES> 7,666,170
<TOTAL-REVENUES> 7,759,563
<CGS> 6,251,839
<TOTAL-COSTS> 6,273,999
<OTHER-EXPENSES> 1,107,829
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 393,006
<INCOME-TAX> 157,000
<INCOME-CONTINUING> 236,006
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 236,006
<EPS-PRIMARY> .13
<EPS-DILUTED> .13
</TABLE>
