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 March 31, 2004.
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) 977-5225
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 ___
Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).
Yes ___ No _X_
As of May 14, 2004, there were 11,618,224 shares of registrant's common stock
outstanding.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003
Part I FINANCIAL INFORMATION
Item 1. FINANCIAL STATEMENTS.
ASSETS
March 31, December 31,
2004 2003
(Unaudited)
CURRENT ASSETS:
Cash $ 0 $ 0
Accounts receivable-trade, less allowances for
doubtful accounts of $895,000 and $882,000
respectively 17,847,675 17,910,027
Other receivables, including receivables due
from affiliated entities of $52,500 and
$51,000, respectively 1,598,285 1,254,243
Prepaid expenses and other current assets 256,433 289,776
Current deferred tax asset 600,000 600,000
----------- ----------
Total current assets 20,302,393 20,054,046
FIXED ASSETS:
Equipment 1,903,736 1,765,979
Less accumulated depreciation and amortization (873,475) (794,676)
----------- ----------
Net fixed assets 1,030,261 971,303
----------- -----------
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 deferred tax asset 600,000 600,000
Other Assets 397,745 397,745
----------- -----------
TOTAL ASSETS $22,384,399 $22,077,094
=========== ===========
The accompanying notes are an integral part of the consolidated financial
statements.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
MARCH 31, 2004 (UNAUDITED) AND DECEMBER 31, 2003
LIABILITIES AND SHAREHOLDERS' EQUITY
March 31, December 31,
2004 2003
(Unaudited)
CURRENT LIABILITIES:
Revolving line of credit $ 4,365,937 $ 4,884,758
Current portion of long-term debt 185,093 194,911
Accounts payable 7,223,243 7,009,625
Accrued expenses 303,110 377,475
Insurance and claims 941,077 788,954
Accrued compensation 241,762 47,863
Accrued interest 1,161,898 1,134,787
Fuel and other taxes payable 79,030 28,138
Accrued legal settlement 700,000 700,000
----------- ------------
Total current liabilities 15,201,150 15,166,511
----------- ------------
LONG-TERM DEBT (primarily to related parties) 3,130,399 3,176,156
MINORITY INTEREST 381,951 324,927
COMMITMENTS AND CONTINGENCIES
SHAREHOLDERS' EQUITY:
Common stock, authorized 20,000,000 shares;
no par value; 11,618,224 shares outstanding 42,257,185 42,227,725
as of March 31, 2004 and December 31, 2003.
Accumulated deficit (38,586,286) (38,818,225)
----------- -----------
Total shareholders' equity 3,670,899 3,409,500
----------- -----------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 22,384,399 $ 22,077,094
=========== ============
The accompanying notes are an integral part of the consolidated financial
statements.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
MARCH 31, 2004 AND MARCH 31, 2003 (UNAUDITED)
MARCH 31, MARCH 31,
2004 2003
______________ ______________
OPERATING REVENUES $30,730,053 $ 28,552,527
------------ ------------
OPERATING EXPENSES:
Purchased transportation 22,621,721 21,230,405
Commissions 3,120,077 2,810,606
Insurance and claims 1,316,963 1,115,963
Salaries, wages, and other 1,926,887 1,533,174
Other operating expenses 1,444,460 1,335,020
------------ ------------
Total operating expenses 30,430,108 28,025,168
------------ ------------
OPERATING INCOME 299,945 527,359
------------ ------------
NON-OPERATING INCOME (EXPENSE):
Interest income 5,464 3,667
Interest expense (97,689) (129,717)
Other income 54,273 116,086
------------ ------------
Total non-operating expense (37,952) (9,964)
------------ ------------
NET INCOME BEFORE MINORITY INTEREST $ 261,993 $ 517,395
Minority Interest Expense 30,054 30,316
------------ ------------
NET INCOME $ 231,939 $ 487,079
------------ -------------
Basic Net Income
Per Common Share $ 0.02 $ 0.04
==== ====
Diluted Net Income
Per Common Share $ 0.02 $ 0.04
==== ====
WEIGHTED AVERAGE SHARES OUTSTANDING -
BASIC 11,618,224 11,618,224
============ =============
WEIGHTED AVERAGE SHARES OUTSTANDING -
DILUTED 11,922,014 11,618,224
============ =============
The accompanying notes are an integral part of the consolidated financial
statements.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY (UNAUDITED)
FOR THE THREE MONTHS ENDED MARCH 31, 2004
Total
Common Common Accumulated Shareholders'
Shares Stock Deficit Equity
____________________________________________________
Balance, December 31, 2003 11,618,224 $42,227,725 $(38,818,225) $3,409,500
Minority interest in subsidiary 0 (1,970) 0 (1,970)
Grant of restricted common stock 0 31,430 0 31,430
Net income for the three months ended
March 31, 2004 0 0 231,939 231,939
---------- ----------- ------------ ----------
Balance, March 31, 2004 11,618,224 $42,257,185 $(38,586,286) $3,670,899
========== =========== ============= ==========
The accompanying notes are in integral part of the consolidated financial
statements.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
MARCH 31, 2004 AND MARCH 31, 2003 (UNAUDITED)
Three Months Ended March 31,
2004 2003
(Unaudited) (Unaudited)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net Income 231,939 487,079
Adjustments to reconcile net income to net
cash provided by (used in) operating activities
Depreciation and amortization 78,799 72,839
Compensation Expense resulting from
Issuance of restricted stock 31,430 0
Compensation Expense resulting from
issuance of equity in subsidiary 25,000 37,500
Provision for bad debts 136,116 128,612
Minority interest expense 30,054 30,316
Changes in operating assets and liabilities:
Accounts receivable - trade (73,764) (1,840,543)
Other receivables (344,042) (29,193)
Prepaid expenses and other current assets 33,343 (93,729)
Accounts payable 209,883 647,647
Accrued expenses (74,365) (68,593)
Accrued interest 27,111 52,265
Insurance and claims 152,123 (458,984)
Accrued compensation 193,899 (16,507)
Fuel and other taxes payable 50,892 ( 1,463)
--------- --------
Net cash provided by(used in)operating activities 708,418 (1,052,754)
--------- ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to fixed assets (137,757) (70,122)
-------- ---------
Net cash used in investing activities (137,757) (70,122)
-------- ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) under line of credit (518,821) 1,574,218
Principal payments on long-term debt (51,840) (181,342)
Repayments of shareholder loans 0 (270,000)
--------- ---------
Net cash (used in) provided by financing activities (570,661) 1,122,876
--------- ---------
NET DECREASE IN CASH 0 0
CASH, BEGINNING OF PERIOD 0 0
--------- ---------
CASH, END OF PERIOD 0 0
========= =========
Cash paid for interest $70,578 $77,451
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
US 1 INDUSTRIES, INC. AND SUBSIDIARIES
CONDENSED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
THREE MONTHS ENDED MARCH 31, 2004 AND 2003
1. BASIS OF PRESENTATION
The accompanying consolidated balance sheet as of March 31, 2004 and the
consolidated statements of income, shareholders' equity and cash flows for the
three months ended March 31, 2004 and 2003 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 at such date and for such periods. The year-end balance sheet data
was derived from audited financial statements. These statements should be read
in conjunction with US 1 Industries, Inc. and Subsidiaries' ("the Company")
audited consolidated financial statements for the year ended December 31, 2003,
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 three months ended March 31, 2004
and 2003 are not necessarily indicative of the results for a full year.
2. EARNINGS PER SHARE
The Company calculates earnings per share ("EPS") in accordance with SFAS
No. 128. Following is the reconciliation of the numerators and denominators of
basic and diluted EPS.
Three Months Ended March 31,
Numerator 2004 2003
Net income $ 231,939 $ 487,079
Dividends on preferred shares 0 0
--------- ----------
Net income available to common
shareholders for basic EPS 231,939 487,079
Net income attributable to unvested minority
interest shares in subsidiary (6,947) (34,358)
--------- ----------
Net income available to common
shareholders for diluted EPS 224,992 452,721
Denominator
Weighted average common shares
outstanding for basic EPS 11,618,224 11,618,224
Effect of diluted securities
Unvested restricted stock granted
to employees 303,790 0
_____________________________
Weighted average shares outstanding
for diluted EPS 11,922,014 11,618,224
3. BANK LINE OF CREDIT
The Company has a $10.0 million line of credit that matures on October 1,
2005. Advances under this revolving line of credit are limited to 75% of
eligible accounts receivable. Unused availability under this line of credit was
$5.6 million at March 31, 2004. The interest rate is based upon certain
financial covenants and may range from prime to prime less .50%. At March 31,
2004, the interest rate on this line of credit was at prime less .25% (3.75%).
The Company's accounts receivable, property, and other assets collateralize
advances under the agreement. Borrowings up to $1.0 million are guaranteed by
the Chief Executive Officer and Chief Financial Officer of the Company. At March
31, 2004 the outstanding borrowings on this line of credit were $4.4 million.
This line of credit is 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 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.
In October 2003, the Company's lender granted it a $500,000 new equipment
line of credit. Although the Company has not utilized this new equipment line of
credit, the interest rate will range from prime to prime less 0.50% per annum
based on certain financial covenants. This new equipment line of credit matures
October 1, 2005.
4. MINORITY INTEREST
The Company entered into an agreement with certain key employees of Carolina
National Transportation, ("Carolina") a subsidiary of the Company, in which
these employees will earn up to a 40% ownership interest in Carolina over a
three year period, beginning in the year following the year in which Carolina
achieves positive retained earnings, contingent upon certain restrictions,
including continued employment at Carolina. In 2001, Carolina achieved positive
retained earnings. As a result, the Company will incur total compensation
expense of $400,000 over the three-year vesting period. These employees
received 15% ownership in Carolina at December 31, 2002 and received an
additional 15% at December 31, 2003. These employees will receive an additional
10% ownership interest at December 31, 2004. As a result of this agreement, the
Company incurred compensation expense of $25,000 and $37,500 for the three
months ended March 31, 2004 and 2003, respectively. The Company also recognized
minority interest expense (relating to the employees' portion of Carolina's net
income) of $30,054 and $30,316 for the three months ended March 31, 2004 and
2003, respectively.
5. LEGAL PROCEEDINGS
The Company is involved in various other litigation in the normal course of
its business. Management intends to vigorously defend these cases. In the
opinion of management, the litigation now pending will not have a material
adverse effect on the consolidated financial position of the Company.
6. STOCK COMPENSATION
In March 2003, the Company granted 400,000 shares (200,000 each) of common
stock to the Company's Chief Executive Officer and Chief Financial Officer,
subject to the continued employment of these employees through December 2004. As
a result, the Company will incur approximately $220,000 of compensation expense
(based on the quoted market price of the Company's stock on the date of grant)
over the vesting period of this grant. These shares of common stock vest on
December 31, 2004. The Company recognized $31,400 of compensation expense
related to these stock grants for the three months ended March 31, 2004.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATION.
Results of Operations
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 2004 and beyond may
differ materially from those expressed in, or implied by, these forward-looking
statements.
The financial statements and related notes contained elsewhere in this Form
10-Q as of and for the three months ended March 31, 2004 and 2003 and in the
Company's Form 10-K for its fiscal year ended December 31, 2003, are essential
to an understanding of the comparisons and are incorporated by reference into
the discussion that follows.
Three months ended March 31, 2004 compared to the three months ended March 31,
2003.
The following table sets forth the percentage relationships of expense items to
revenue for the three months ended March 31, 2004 and March 31, 2003:
2004 2003
------ ------
Revenue 100.0% 100.0%
Operating expenses:
Purchased transportation 73.6 74.3
Commissions 10.1 9.8
Insurance and claims 4.3 3.9
Salaries, wages and fringe benefits 6.3 5.4
Other operating expenses 4.7 4.7
------- ------
Total operating expenses 99.0 98.1
------ ------
Operating income 1.0 1.9
The Company's operating revenues increased to $30.7 million for the three
months ended March 31, 2004 from $28.6 million for the same period in 2003.
This is an increase of 7.6%. This increase is attributable to the continued
growth of Patriot Logistics, Inc. (f/k/a Keystone Intermodal, Inc.) and Keystone
Logistics, Inc. The growth of these subsidiaries is attributable to the addition
of new terminals and growth of existing terminals.
Purchased transportation represents the amount an independent contractor is
paid to haul freight and is primarily based on a contractually agreed-upon
percentage of revenue generated by the haul for truck capacity provided by
independent contractors. Purchased transportation is the largest component of
operating expenses. Purchased transportation and commission expense increase or
decrease in proportion to the revenue generated through independent contractors.
Purchased transportation decreased slightly to 73.6% of revenue for the three
months ended March 31, 2004 from 74.3% for the three months ended March 31,
2003. The slight decrease was partially offset by the slight increase in
commissions. Many agents negotiate a combined percentage payable for purchased
transportation and commission. The mix between the amounts of purchased
transportation paid versus commissions paid may vary slightly based on agent
negotiations with independent owner operators. However, in total, commissions
and purchased transportation would typically be expected to remain relatively
consistent as a percentage of revenues.
Commissions to agents and brokers are primarily based on contractually
agreed-upon percentages of revenue. Commissions increased to 10.1% of revenue
for the three months ended March 31, 2004 from 9.8% of revenue for the three
months ended March 31, 2003. As previously described, the slight increase of
0.3% of revenue was partially offset by the decrease in purchased
transportation.
Insurance and claims increased to 4.3% of revenue for the three months ended
March 31, 2004 from 3.9% of revenue for the three months ended March 31, 2003.
A majority of the insurance and claims expense is based on a percentage of
revenue and, as a result, will increase or decrease on a consolidated basis with
the Company's revenue. Potential liability associated with accidents in the
trucking industry is severe and occurrences are unpredictable. A material
increase in the frequency or severity of accidents or the unfavorable
development of existing claims could adversely affect the Company's operating
income. The increase of 0.4% of revenue can be attributed to the increase in
claims incurred by certain operations of the Company.
Salaries, wages, and fringe benefits were 6.3% of revenue for the three
months ended March 31, 2004 compared to 5.4% of revenue for the three months
ended March 31, 2003. This increase of 0.9% can primarily be attributed to the
additional personnel hired to accommodate the growth of expanding terminals.
Other operating expenses as a percentage of revenue remained consistent at
4.7% for the three months ended March 31, 2004 and for the same period in 2003.
While not all operating expenses are directly variable with revenues, the
increased revenue directly impacts several components of operating expenses due
to the Company adding new locations.
Based on the changes in revenue and expenses described above, operating
income decreased by $227,414. Operating income for the three months ended March
31, 2003 was $527,359 compared to $299,945 for the three months ended March 31,
2003.
Interest expense decreased by $32,028 for the three months ended March 31,
2004 to $97,689 compared to interest expense of $129,717 for the three months
ended March 31, 2003. This decrease in interest expense is attributable to a
continued decrease in the prime rate. The rate on the Company's loan with US
Bank is currently based on certain financial covenants and may range from prime
to prime less .5%. At March 31, 2004, the interest rate charged on the loan
with US Bank was 3.75%. At March 31, 2003 the interest rate on this loan was
4.25%.
Non-operating (income) expense, exclusive of interest expense, includes
income from rental property, storage, equipment usage, fees, discounts and legal
settlement costs. Non-operating (income) expense, exclusive of interest
expense, was ($59,737) for the three months ended March 31, 2004 versus
($119,753) for the three months ended March 31, 2003. The decrease is partially
attributed to a decrease in gain on sale of assets along with a decrease in
storage income associated with one of the Company's divisions located in Laredo,
Texas.
Minority interest expense of $30,054 and $30,316 for the three months ended
March 31, 2004 and 2003, respectively, is the result of an agreement with
certain key employees of Carolina National, a wholly owned subsidiary of the
Company. Under the terms of this agreement, these employees will earn up to a
40% ownership interest in Carolina over a three-year period (see note 4 to
condensed consolidated financial statements).
As a result of the factors described above, net income for the three months
ended March 31, 2004 was $231,939 compared with $487,079 for the same period in
2003.
Liquidity and Capital Resources
Net cash from operating activities increased $1.8 million from ($1,052,754)
for the three months ended March 31, 2003 to $708,418 for the three months ended
March 31, 2004. Cash provided by operating activities for the first three
months of 2004 can be attributed to net income of $231,939, an increase in
accounts payable of $209,833, an increase in insurance and claims payable of
$152,123 and an increase in accrued compensation of $193,899. This is offset by
an increase in other receivables of $344,042 for the three months ended March
31, 2004.
Net cash used in investing activities was $137,757 for the three months
ended March 31, 2004 compared to net cash used in investing activities of
$70,122 for the three months ended March 31, 2003. Net cash used in investing
activities increased due to the purchase of additional equipment.
Net cash from financing activities decreased $1,693,537 from $1,122,876
provided by financing activities for the three months ended March 31, 2003 to
($570,661) used in financing activities for the three months ended March 31,
2004. The cash used in financing activities for 2004 is primarily due to
repayments of borrowings under the line of credit.
Effective October 1, 2003, the Company's Lender agreed to amend the existing
bank agreement to increase the Company's revolving line of credit from $8.5
million to $10.0 million. The maturity date of the Company's revolving line of
credit was also extended from October 1, 2003 to October 1, 2005. Advances
under this revolving line of credit are limited to 75% of eligible accounts
receivable. The interest rate is based upon certain financial covenants and may
range from prime to prime less 0.50%. At March 31, 2004, the interest rate on
this line of credit was at prime less .25%
(3.75%). The Company's accounts receivable, property, and other assets
collateralize advances under the agreement. Unused availability under this line
of credit was approximately $5.6 million at March 31, 2004. The Chief Executive
Officer and Chief Financial Officer of the Company guarantee borrowings of up to
$1 million. At March 31, 2004, the outstanding borrowings on this line of
credit were $4.4 million.
The Company is dependent upon the funds available under its line of credit
agreement for liquidity. As long as the Company can fund 25% of its accounts
receivable from funds generated internally from operations or otherwise, this
facility has historically provided the Company sufficient liquidity to meet its
needs on an ongoing basis.
The Company also has two additional equipment loans with its primary lender
used to fund equipment purchases. The outstanding balances on these loans bear
interest at the prime rate in effect less 0.25% per annum (3.75% at March 31,
2004) based on certain financial covenants. The principal balance of these
equipment loans is payable based on a five-year amortization of the outstanding
balances. The outstanding balances under these equipment loans totaled $423,724
at March 31, 2004. These loans mature in October 2005.
In October 2003, the Company's lender granted them a new equipment line of
credit in the amount of $500,000. Although the Company has not utilized this new
equipment line of credit, the interest rate will range from prime to prime less
0.50% per annum based on certain financial covenants. This new equipment line
of credit carries a maturity date of October 1, 2005.
The line of credit and equipment loans 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 failure to meet certain financial covenants. The required financial
covenants include: minimum net worth requirements, total debt service coverage
ratio, capital expenditure limitations, and prohibition of additional
indebtedness without prior authorization.
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. Rising fuel prices are
generally offset by a fuel surcharge the Company passes onto its customers.
However, due to the highly competitive nature of the truckload motor carrier
industry, it is possible that future freight rates, cost of purchased
transportation, as well as fuel prices may fluctuate, affecting the Company's
profitability.
Interest Rate Risk
The Company has a revolving line of credit with a bank, which currently
bears interest in an amount equal to the prime rate in affect (3.75%) at March
31, 2004). The interest rate is based on certain financial covenants and may
range from prime to prime less .5%. In addition, the company has certain
equipment lines-of-credit which bear interest at the prime rate less .25% annum
(at March 31, 2004 the rate was 3.75%). The Company also has subordinated debt
with related parties which bears interest at rates ranging from prime + .75% to
prime plus 1%.
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.
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 and the overhead.
The Company has approximately $52,500 of other accounts receivable due from
entities that could be deemed to be under common control as of March 31, 2004.
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 of $126,461 with the provider. AIFE provides auto liability
insurance to several subsidiaries of the Company as well as other entities
related to the Company by common ownership.
The Company exercised no control over the operations of AIFE. As a result,
the Company recorded its investment in AIFE under the cost method of accounting
as of March 31, 2004 and for the three months ended March 31, 2004 and 2003.
Under the cost method, the investment in AIFE is reflected at its original
amount and income is recognized only to the extent of dividends paid by the
investee. There were no dividends declared by AIFE for the three months ended
March 31, 2004 and 2003.
If AIFE incurs a net loss, the loss may be allocated to the various
policyholders based on each policyholder's premium as a percentage of the total
premiums of AIFE for the related period. There has been no such loss assessment
for three months ended March 31, 2004 or 2003. The Company currently accounts
for the majority of the premiums of AIFE. For fiscal 2002, the Company accounted
for approximately 90% of the total premium revenue of AIFE. At December 31,
2002, AIFE had net worth of approximately $4.3 million, a portion of which is
attributable to other policyholders of AIFE.
In addition, the Chief Executive Officer and Chief Financial Officer, as
well as a director of the Company, are shareholders of American Inter-Fidelity
Corporation ("AIFC"), which serves as the attorney in fact of AIFE. AIFC is
entitled to receive a management fee from AIFE. During 2003, AIFE paid
management fees of $282,000 to AIFC which AIFC then paid as dividends totaling
$282,000 to these officers and directors of the Company.
The Company also pays a consulting fee of $2,000 per month, to a director of
the Company, relating to insurance services.
The Company has a 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 $2.9 million at
March 31, 2004. In addition, the Company had approximately $1.0 million of
accrued interest due under these notes payable.
The Company conducts business with freight companies under the control of a
director of the Company. Accounts receivable at March 31, 2004 includes
$430,849 due from or guaranteed by these companies.
PART II. OTHER INFORMATION
Item 5. Controls and Procedures
(a) Evaluation of disclosure controls and procedures. Based on their
evaluations as of the end of the period covered by the report, our
principal executive officer and principal financial officer, with the
participation of our full management team, have concluded that our
disclosure controls and procedures (as defined in Rules 13(a)-14(c)
and 15(d)-14(c) under the Securities Exchange Act) are effective to
ensure that information required to be disclosed by us in reports that
we file or submit under the Securities Exchange Act is recorded,
processed, summarized and reported within the time periods specified
in the rules and forms of the SEC.
b) Changes in controls. There were no changes in our internal controls
over financial reporting identified in connection with the evaluations
reported above that occurred during our last fiscal quarter that has
materially affected, or is reasonably likely to materially affect, our
internal controls over financial reporting.
(c) Disclosure controls and procedures. Disclosure controls and
procedures are our controls and other procedures that are designed to
ensure that information required to be disclosed by us in the reports
that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure
controls and procedures include, without limitation, controls and
procedures designed to ensure that information required to be
disclosed by us in the reports that we file under the Exchange Act is
accumulated and communicated to our management, including our
principal executive officer and principal financial officer, as
appropriate to allow timely decisions regarding required disclosure.
Item 6 Exhibits and Reports on Form 8-K
(a) (1) List of Exhibits
The following exhibits, numbered in accordance with Item 601 of
Regulation S-K, are filed as part of this report:
Exhibit 31.1 Certification 302 of Chief Executive Officer
Exhibit 31.2 Certification 302 of Chief Financial Officer
Exhibit 32.1 Certification 906 of Chief Executive Officer
Exhibit 32.2 Certification 906 of Chief Financial Officer
(b)(1) 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 thereunto duly authorized.
US 1 Industries, Inc.
Michael E. Kibler
Chief Executive Officer
Harold E. Antonson
Chief Financial Officer
May 17, 2004