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 June 30, 2001.
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 August 10, 2001, there were 10,618,224 shares of registrant's common
stock were outstanding.
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000
ASSETS
June 30, December 31,
2001 2000
---- ----
(Unaudited)
CURRENT ASSETS:
Accounts receivable-trade, less allowance for
doubtful accounts of $372,000 and $209,000
respectively $9,934,210 $9,911,436
Other receivables 828,677 382,057
Deposits 82,950 40,450
Prepaid expenses 267,857 309,897
Current deferred tax asset 400,000 400,000
----------- ----------
Total current assets 11,513,694 11,043,840
FIXED ASSETS:
Equipment 1,290,566 335,402
Less accumulated depreciation and amortization (139,828) (68,797)
---------- ----------
Net fixed assets 1,150,738 266,605
---------- -----------
ASSETS HELD FOR SALE:
Land 195,347 195,347
Valuation allowance (141,347) (141,347)
---------- -----------
Net assets held for sale 54,000 54,000
Non-current deposits 126,461 126,461
Non-current deferred tax asset 400,000 400,000
---------- -----------
TOTAL ASSETS $13,244,893 $11,890,906
========== ===========
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
JUNE 30, 2001 (UNAUDITED) AND DECEMBER 31, 2000
LIABILITIES AND SHAREHOLDERS' DEFICIENCY
June 30, December 31,
2001 2000
---- ----
(Unaudited)
CURRENT LIABILITIES:
Short-term debt $ 5,633,560 $ 4,503,896
Accounts payable 3,118,936 2,621,107
Bank overdraft 382,661 522,201
Accrued expenses 209,944 244,446
Insurance and claims 265,936 418,450
Accrued compensation 39,313 33,891
Accrued interest 908,684 836,019
Fuel and other taxes payable 40,235 143,796
----------- ------------
Total current liabilities 10,599,269 9,323,806
----------- ------------
LONG-TERM DEBT (primarily to related parties) 3,701,520 4,026,210
COMMITMENTS AND CONTINGENCIES
REDEEMABLE PREFERRED STOCK:
Authorized 5,000,000 shares; no par value,
Series A shares outstanding:
2001 and 2000 - 1,094,224
Liquidation preference $0.3125 per share 1,051,540 1,000,112
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 (42,951,732) (43,303,518)
----------- -----------
Total shareholders' deficiency (2,107,436) (2,459,222)
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS'
DEFICIENCY $ 13,244,893 $11,890,906
=========== ============
<FN>
The accompanying notes are an integral part of the consolidated financial
statements.
</FN>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
THREE AND SIX MONTHS ENDED JUNE 30, 2001 AND 2000 (UNAUDITED)
Three Months Ended Six Months Ended
2001 2000 2001 2000
---- ---- ---- ----
OPERATING REVENUES $ 17,536,616 $11,593,128 $ 32,987,624 $20,624,055
------------ ------------ ------------ -----------
OPERATING EXPENSES:
Purchased transportation/commissions 15,498,732 10,068,434 29,045,930 17,891,217
Insurance and claims 458,451 308,244 868,734 632,872
Salaries, wages, and other 529,738 465,530 1,069,764 854,841
Operating supplies and expense 575,820 343,015 1,056,606 506,416
Other expenses 169,491 125,912 309,866 219,663
------------ ------------ ------------ ----------
Total operating expenses 17,232,232 11,311,135 32,350,900 20,105,009
------------ ------------ ------------ ----------
OPERATING INCOME 304,384 281,993 636,724 519,046
------------ ------------ ------------ ----------
NON-OPERATING INCOME (EXPENSE):
Interest income 459 23,067 2,894 25,074
Interest expense (166,040) (160,956) (372,956) (326,631)
Other income (expense) 72,782 25,808 136,552 34,763
------------ ------------ ------------ ----------
Total non-operating (expense) ( 92,799) (112,081) (233,510) (266,794)
------------ ------------ ------------ ----------
NET INCOME $ 211,585 $ 169,912 $ 403,214 $ 252,252
DIVIDENDS ON PREFFERRED SHARES (25,714) (23,143) (51,428) (46,286)
----------- ------------ ------------ -----------
NET INCOME AVAILABLE TO COMMON
SHARES 185,871 146,769 351,786 205,966
=========== ============ ============ ===========
EARNINGS PER COMMON SHARE -
BASIC AND DILUTED $ 0.02 $ 0.01 $ 0.03 $ 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>
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
JUNE 30, 2001 (UNAUDITED) AND JUNE 30, 2000 (UNAUDITED)
Six Months Ended June 30,
2001 2000
__________ _________
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 403,214 252,254
Adjustments to reconcile net income to net
Cash used for operations:
Depreciation and amortization 71,031 10,859
Provision for doubtful accounts 162,297 23,328
Changes in operating assets and liabilities:
Accounts receivable - trade (185,071)(1,229,908)
Other receivables (446,620) (321,607)
Prepaid assets 42,040 (12,918)
Deposits (42,500) (288)
Accounts payable 497,829 371,768
Accrued expenses (34,502) 21,269
Accrued interest 72,665 98,069
Insurance and claims (152,514) 99,322
Accrued compensation 5,422 1,699
Fuel and other taxes payable (103,561) 13,406
--------- --------
Net Cash provided by(used in) operating activities 289,730 (672,747)
--------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property and equipment (955,164) (16,307)
-------- --------
Net cash used in investing activities (955,164) (16,307)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings(repayments)under line of credit 524,171 (877,606)
Proceeds from equipment line of credit 669,394 0
Principal payments on long term debt (156,280) (26,792)
Net(repayment of) proceeds from shareholder loans (232,311) 1,614,248
Decrease in bank overdraft (139,540) (20,796)
--------- --------
Net cash provided by financing activities 665,434 689,054
--------- --------
NET INCREASE IN CASH 0 0
CASH, BEGINNING OF PERIOD 0 0
--------- --------
CASH, END OF PERIOD 0 0
========= ========
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
SIX MONTHS ENDED JUNE 30, 2001 AND 2000
The accompanying notes are an integral part of the consolidated financial
statements.
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of June 30, 2001, and the
consolidated statements of operations and cash flows for the six month and
three month periods ended June 31, 2001 and 2000 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, 2000, 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 six months and three months
ended June 30, 2001 and 2000 are not necessarily indicative of the results for
a full year.
2. RECLASSIFICATIONS
Certain reclassifications have been made to the previously reported 2000
financial statement to conform with the 2001 presentation.
3. EARNINGS PER COMMON SHARE
The Company calculates earnings per share ("EPS") in accordance with
Statement of Financial Accounting Standards No. 128. Following is the
reconciliation of the numerators and denominators of the basic and diluted
EPS. There were no outstanding common stock equivalents in these periods.
Six Months Ended
Numerator 2001 2000
---- ----
Net income $ 403,214 $ 252,252
Dividends on preferred shares (51,428) (46,286)
---------- ------------
Net income available to common
shareholders for basic and diluted EPS 351,786 205,966
Denominator
Weighted average common shares 10,618,224 10,618,224
outstanding for basic and diluted EPS
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS--(Continued)
4. SHORT-TERM DEBT
Short-term debt at June 30, 2001, and December 31, 2000, comprises:
June 30, December 31,
2001 2000
---------- ----------
Line of credit 4,795,275 $4,271,104
Current portion of long-term debt 838,285 232,792
---------- ----------
Total 5,633,560 $4,503,896
========== ==========
The Company has a $5.5 million line of credit. Advances under the
revolving line of credit are limited to 70% of eligible accounts receivable
and bear interest at the prime rate (6.75% at June 30, 2001). The interest
rate is currently based on certain financial covenants and may range from
prime to prime plus .5%. This line of credit agreement expires in September
2001. Advances under the agreement are collateralized by the Company's
accounts receivable, property, and other assets. Borrowings of up to $1
million are guaranteed by the Chief Executive Officer and Chief Financial
Officer of the Company. At June 30, 2001, the outstanding borrowings on this
line of credit were $4.80 million.
In addition to the $5.5 million line of credit, the Company has also
established a separate line for equipment financing which was increased from
$500,000 to $1,000,000 in the first quarter of 2001. The principal balance of
the Equipment Loan shall bear interest payable monthly, in an amount equal to
the Prime Rate in effect plus 1% per annum. The principal balance on the
equipment line is payable monthly based on a five-year amortization of the
outstanding balance. The equipment line expires on May 15, 2002. At June 30,
2001, the outstanding borrowings on the equipment line, which is included
above in the current portion of long-term debt, totaled $740,695.
The lines of credit are 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, and prohibition of additional
indebtedness without prior authorization.
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 consolidated financial statements 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 2001 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 six months ended June 30, 2001 and in the Company's
Form 10-K for its fiscal year ended December 31, 2000, are essential to an
understanding of the comparisons and are incorporated by reference into the
discussion that follows.
Six months ended June 30, 2001 Compared to the six months ended June 30, 2000
The Company's operating revenues increased from $20.6 million for the six
months ended June 30, 2000 to $33.0 million for the same period in 2001. This
is an increase of 60.0%. This increase is attributable to the continued growth
at Carolina National Transportation and Keystone Lines, the expansion of
Keystone Logistics, Inc. and the start up of two new companies, CAM Transport,
Inc. and Unity Logistics, Inc.
The following table set forth the percentage relationships of expense items to
revenue for the six months ended June 30, 2001 and June 30, 2000:
2001 2000
------ ------
Revenue 100.0% 100.0%
Operating expenses:
Purchased transportation and commissions 88.0 86.7
Insurance and claims 2.6 3.1
Salaries, wages and other 3.2 4.1
Other operating expenses 4.1 3.5
------- ------
Total operating expenses 97.9 97.4
------ ------
Operating income 2.1 2.6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
The Company has three direct variable costs, which are purchased
transportation, commissions, and insurance. At June 30, 2000 the sum of these
direct variable costs was 89.8% of revenue in comparison to 90.6% at June 30,
2001. As reflected in the table above, the overall cost of the direct variable
items has increased .8% while insurance and claims decreased .5% as a
percentage of revenues. This decrease in insurance and corresponding increase
in purchased transportation and commissions is due to the Company brokering a
higher percentage of its freight in 2001 as compared to 2000. When the Company
brokers freight, the Company does not pay insurance on this freight. However,
the purchased transportation expense is greater for brokered freight.
Salaries, wages and other expenses were 3.2% of revenue at June 30, 2001
and 4.1% for the same period in 2000. This is a decrease of 0.9% as related to
revenue. Salaries and wages do not increase at the same rate as revenue due to
economies of scale, improved productivity, and the implementation of
technological solutions. Other operating expenses were 4.1% of revenue at June
30, 2001 and 3.5% at June 30, 2000. The increase in other operating expenses
as a percentage of revenue is primarily the result of the Company increasing
the allowance for doubtful accounts. The addition to the allowance for
doubtful accounts during the six months ended June 30, 2001 was $162,297 and
$23,328 for the same period of 2000. The Company has two large customers whose
credit has declined. Management believes the current allowance adequately
provides for the possibility that not all accounts receivable for these two
larger customers will be collected.
Based on the changes in revenue and expenses discussed above, operating
income increased by $117,678 from $519,046 for the six months ended June 30,
2000 to $636,724 for the six months ended June 30, 2001.
Interest expense increased by $46,325 in 2001. Interest at June 30, 2000
was $326,631 and at June 30, 2001 interest was $372,956. This increase in
interest expense is attributable to the additional borrowing against the
Company's lines of credit, partially offset by a reduction in interest rates.
Non-operating income, exclusive of interest expense, increased from
$59,837 for the six months ended June 30, 2000 to $139,446 for the six months
ended June 30, 2001. The increase was primarily attributable to income
generated through the financing of receivables by T.C. Services.
Net income for the six months ended June 30, 2001 was $403,214 compared
with $252,252 for the same period in 2000.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Three months ended June 30, 2001 Compared to the three months ended June 30,
2000
The Company's operating revenues increased from $11.6 million for the three
months ended June 30, 2000 to $17.5 million for the same period in 2001. This
is an increase of 51.3%. This increase is attributable to the continued growth
at Carolina National Transportation and Keystone Lines, the expansion of
Keystone Logistics, Inc. and the start up of two new Companies, CAM Transport,
Inc. and Unity Logistics, Inc.
The following table set forth the percentage relationships of expense items to
revenue for the three months ended June 30, 2001 and June 30, 2000:
2001 2000
------ ------
Revenue 100.0% 100.0%
Operating expenses:
Purchased transportation and commissions 88.4 86.8
Insurance and claims 2.6 2.7
Salaries, wages and other 3.0 4.0
Other operating expenses 4.3 4.0
------- ------
Total operating expenses 98.3 97.5
------ ------
Operating income 1.7 2.5
The Company has three direct variable costs, which are purchased
transportation, commissions, and insurance. For the three months ended June
30, 2000 the sum of these direct variable costs was 89.5% of revenue in
comparison to 91.0% for the three months ended June 30, 2001. As reflected in
the table above, the overall cost of the direct variable items has increased
1.5% while insurance and claims decreased .1% as a percentage of revenues.
This decrease in insurance and corresponding increase in purchased
transportation and commissions is due to the Company brokering a higher
percentage of its freight for the three months ended June 30, 2001 as compared
to the same period of time in 2000. When the Company brokers freight, the
Company does not pay insurance on this freight. However, the purchased
transportation expense is greater for brokered freight. Partially offsetting
the decrease in insurance expense resulting from a higher amount of brokered
freight, is an increase in accident claims expense.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
Salaries, wages and other expenses were 3.0% of revenue for the three
months ended June 30, 2001 and 4.0% for the same period in 2000. This is a
decrease of 1.0% as related to revenue. Salaries and wages do not increase at
the same rate as revenue due to economies of scale, improved productivity, and
the implementation of technological solutions. Other operating expenses were
4.3% of revenue for the three months ended June 30, 2001 and 4.0% for the
three months ended June 30, 2000. The increase in other operating expenses as
a percentage of revenue is primarily the result of the Company increasing the
allowance for doubtful accounts. The addition to the allowance for doubtful
accounts during the three months ended June 30, 2001 was $63,138 and $12,498
for the same period of 2000. The Company has two large customers whose credit
declined in 2001. Management believes the current allowance adequately
provides for the possibility that not all accounts receivable for these two
larger customers will be collected.
Based on the changes in revenue and expenses discussed above, operating
income increased by $22,391 from $281,993 for the three months ended June 30,
2000 to $304,384 for the three months ended June 30, 2001.
Interest expense remained relatively constant with a slight increase of
$5,084 for the three months ended June 30, 2001 in comparison to the same
period of time in 2000. Increased borrowings against the Company's line of
credit were partially offset by a decrease in interest rates. Interest for the
three months ended June 30, 2000 was $160,956 and $166,040 for the three
months ended June 30, 2001.
Non-operating income, exclusive of interest expense, increased from
$48,875 for the three months ended June 30, 2000 to $73,241 for the three
months ended June 30, 2001. The increase was primarily attributable to income
generated through the financing of receivables by T.C. Services.
Net income for the three months ended June 30, 2001 was $211,585 compared
with $169,912 for the same period in 2000.
Liquidity and Capital Resources
As of June 30, 2001, the Company's financial position continues to
improve in comparison to the prior fiscal period. The Company had a net
deficiency in shareholder equity of $2.1 million at June 30, 2001, an
improvement of $351,786 over year-end December 31, 2000.
Net cash provided by (used in) operating activities increased $1.0
million from $(0.7) million for the six months ended June 30, 2000 to $0.3
million for the six months ended June 30, 2001. The cash provided by
operations is due primarily to an increase in net income with a corresponding
decrease in accounts receivable as a percentage of revenue growth.
Net cash used in investing activities increased $938,857 from $16,307 for
the six months ended June 30, 2000 to $955,164 for the six months ended June
30, 2001. Net cash used in investing activities during the first six months of
2001 related to the investment in additional equipment.
Net cash provided by financing activities, primarily generated from
additional borrowings, decreased $23,620 from $689,054 for the six months
ended June 30, 2000 to $665,434 for the six months ended June 30, 2001.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION (continued)
In March 2001, the Company's line of credit agreement with Firstar Bank
was amended in order to increase the equipment line of credit from $500,000 to
$1,000,000. The principal balance on this equipment line is payable monthly
based on a five-year amortization of the outstanding balance. The equipment
line expires on May 15, 2002. $740,695 was outstanding on this equipment loan
at June 30, 2001. In conjunction with the March 2001 amendment of the Firstar
agreements, the personal guarantees of this debt by the Chief Executive
Officer and Chief Financial Officer of the Company were reduced from a total
of $3 million to a total of $1 million.
In addition to the $1,000,000 equipment line of credit, the Company also
has a $5.5 million line of credit with Firstar Bank. $4.80 million was
outstanding under this line at June 30, 2001.
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 $3,000 monthly, from Michael E. Kibler, the president and Chief Executive
Officer and a director of the Company, and Harold E. Antonson, the Chief
Financial Officer, treasurer and a director of the Company. Messrs. Kibler and
Antonson own the property as joint tenants. The Company's monthly rent cost
increased from $2,200 to $3,000 in April 2001.
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 a
deposit with the Provider.
The Company has long-term notes payable due to its Chief Executive
Officer, Chief Financial Officer, and August Investment Partnership, an entity
affiliated through common ownership, totaling approximately $4.3 million.
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
August 10, 2001