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U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
[X] QUARTERLY REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2001.
[ ] TRANSACTION REPORT PURSUANT SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from..............to..............
Commission file number: 1-15597
LANDSTAR, INC.
(Exact name of registrant as specified in its charter)
Nevada 86-0914051
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification No.)
15825 N. 71st Street, Suite 205
Scottsdale, Arizona 85254
(480) 596-8400
(Address and telephone number of registrant's principal executive offices and
principal place of business)
Check whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Exchange Act 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 [ ]
State the number of shares outstanding of each of the Issuer's classes
of common equity, as of the latest practicable date. 46,681,424 shares of common
stock, $.001 par value as of April 30, 2001.
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LANDSTAR, INC.
FORM 10-QSB QUARTERLY REPORT
TABLE OF CONTENTS
PAGE NO.
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PART I. FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets at 3
March 31, 2001 and December 31, 2000
Condensed Consolidated Statements of 4
Operations for the Three Months Ended
March 31, 2001 and 2000
Condensed Consolidated Statements of 5
Cash Flows for the Three Months Ended
March 31, 2001 and 2000
Notes to Condensed Consolidated Financial 6
Statements
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings. 16
Item 2. Changes in Securities. 16
Item 3. Defaults Upon Senior Securities. 16
Item 4. Submission of Matters to a Vote of Security Holders. 16
Item 5. Other Information. 16
Item 6(a). Exhibits. 16
Item 6(b). Reports on Form 8-K. 16
Signatures. 17
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LANDSTAR, INC.
PART I. FINANCIAL INFORMATION
ITEM 1. CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
MARCH 31, 2001 DECEMBER 31, 2000
------------- -----------------
ASSETS
Current Assets:
Cash and cash equivalents $ 973,818 $ 29,542
Accounts receivable, net of allowances of $111,979 at March 31, 2001 1,965,485 10,371
Receivable from related party 59,100 --
Inventory 2,419,680 --
Prepaid and other assets 714,953 5,942
------------ -----------
Total current assets 6,133,036 45,855
Property and equipment, net of accumulated depreciation 19,506,755 730,539
Other Assets:
Technology rights, net of accumulated amortization of $257,505
and $169,660 at March 31, 2001 and 2000, respectively 627,499 649,624
Excess of cost over fair market value of assets acquired, net
of accumulated amortization of $415,809 6,889,936 --
------------ -----------
Total other assets 7,517,435 649,624
------------ -----------
Total assets $ 33,157,226 $ 1,426,018
============ ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued expenses $ 5,529,420 $ 842,416
Short-term line of credit 370,875 --
Current maturities of long-term debt 2,572,605 --
Due to shareholder 1,450,000 --
Short term note payable 237,500 --
Advances from related parties -- 250,950
Deferred revenue 2,000,000 --
------------ -----------
Total current liabilities 12,160,400 1,093,366
Long-term debt, less current maturities 11,422,342 --
------------ -----------
Total liabilities 23,582,742 1,093,366
Commitments and contingencies
Stockholders' Equity:
Common stock, $.001 par value; authorized, 100,000,000
shares; issued and outstanding 56,214,524 and 44,547,524
at March 31, 2001 and December 31, 2000, respectively 56,214 44,547
Preferred stock; to be authorized and issued (15,000,000 shares) 30,000 --
Additional paid-in capital (including $7,470,000 and $0, respectively
relating to the preferred shares to be issued) 17,402,433 6,029,499
Common stock subscriptions (636,000 shares) 171,725 117,000
Accumulated deficit (8,085,888) (5,858,394)
------------ -----------
Total stockholders' equity 9,574,484 332,652
------------ -----------
Total liabilities and stockholders' equity $ 33,157,226 $ 1,426,018
============ ===========
See notes to condensed consolidated financial statement
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LANDSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
For the three months ended March 31,
2001 2000
----------- -----------
Net sales $ 3,646,253 $
Cost of goods sold 3,665,984 --
----------- -----------
Gross loss (19,731) --
Operating expenses:
Research and development -- 76,985
Selling 170,594 --
General and administrative 1,772,587 339,468
----------- -----------
Total operating expenses 1,943,181 416,453
----------- -----------
Operating loss (1,962,912) (416,453)
Other income (expense):
Interest income 2,640 --
Interest expense (208,295) (12,178)
Other expense (60,139) --
----------- -----------
Total other income (expense) (265,794) (12,178)
----------- -----------
Net loss $(2,228,706) $ (428,631)
=========== ===========
Net loss per share, basic and diluted $ (0.05) $ (0.01)
=========== ===========
Weighted-average number of common
shares outstanding, basic and diluted 47,510,024 37,789,457
=========== ===========
See notes to condensed consolidated financial statements.
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LANDSTAR, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
For the three months ended March 31,
2001 2000
----------- ---------
Cash flows from operating activities
Net loss $(2,228,706) $(428,631)
Adjustments to reconcile net income to net cash
used in operating activities:
Depreciation and amortization 528,740 63,000
Loss on sale of property and equipment 62,366 --
(Increase) decrease in operating assets:
Trade receivables (31,093) --
Inventories (666,186) --
Prepaid expenses and other current assets (194,529) --
Increase (decrease) in operating liabilities:
Accounts payable (777,110) 146,433
Accrued expenses 58,777 --
----------- ---------
Net cash used in operating activities (3,247,741) (219,198)
Cash flows from investing activities:
Capital expenditures (563,573) (123,584)
Cash from acquisition 132,390 --
Proceeds from sale of property and equipment 5,000 --
----------- ---------
Net cash used in investing activities (426,183) (123,584)
Cash flows from financing activities:
Proceeds from revolving line of credit 2,951,143 --
Payments on revolving line of credit (3,029,936) --
Net proceeds from loan payable to stockholder and director 1,415,000 --
Payments on long-term debt (105,568) --
Issuance of common stock 2,417,000 193,047
Net advances from parent company 1,280,611 --
Net advances (payments) to/from related parties (310,050) 144,080
----------- ---------
Net cash provided by financing activities 4,618,200 337,127
----------- ---------
Net increase (decrease) in cash and cash equivalents 944,276 (5,655)
Cash and cash equivalents, beginning of period 29,542 10,042
----------- ---------
Cash and cash equivalents, end of period $ 973,818 $ 4,387
=========== =========
See notes to condensed consolidated financial statements.
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LANDSTAR, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
The condensed consolidated financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC"). Certain
information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations. However, the Company believes that the disclosures are
adequate to make the information presented not misleading. These condensed
consolidated financial statements should be read in conjunction with the
financial statements and notes thereto included in the Company's Annual
Report on Form 10-KSB for the year ended December 31, 2000.
The unaudited condensed consolidated financial statements included herein
reflect all adjustments (which include only normal recurring adjustments)
which are, in the opinion of management, necessary to state fairly the
results for the interim periods presented. The results of operations for
the interim periods presented are not necessarily indicative of the
operating results to be expected for any subsequent interim period or for
the year ending December 31, 2001.
The external auditors have not completed their review at the time of the
filing of this report.
2. CERTAIN SIGNIFICANT ACCOUNTING POLICIES
The Company had no revenues from operations and was considered to be in the
development stage through December 31, 2000. Effective January 8, 2001 the
Company acquired all outstanding shares of stock of PolyTek Rubber &
Recycling, Inc. (PolyTek) This acquisition is discussed in detail in Note
3. PolyTek is also included in "the Company", effective at the time of its
acquisition. The following accounting policies are additional policies that
have been adopted along with the acquisition of PolyTek. Other accounting
policies of the Company are described in the Company's Annual Report
referred to in Note 1 above.
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Property and Equipment
Property and equipment is recorded at cost, less accumulated depreciation.
Depreciation is calculated using the straight-line method over the
estimated useful lives of the assets.
The depreciation periods for the PolyTek assets are as follows:
Land Improvements 15 years
Buildings and Improvements 40 years
Machinery and Equipment 10 years
Transportation Equipment 5 years
Office Furniture and Equipment 5 to 10 years
Inventories and recognition of tire collection fees
Finished goods inventories are stated at the lower of cost (first-in,
first-out method) or market. Work in process and finished goods inventories
include materials, labor and allocated overhead.
The primary raw material used in the production of crumb rubber is used
tires. PolyTek does not generally purchase this raw material, but instead
collects tires under contracts with various counties in its area of
operation. The Company receives tire collection fees under third party
contracts, which are recorded as revenue upon the processing of tires into
the plant. Deferred revenues of $2,000,000 represents tire collection fees
relating to the 3,000,000 tires awaiting processing on March 31, 2001.
Intangible Assets
Intangible assets of PolyTek primarily include goodwill, which is the
excess of the acquisition price over the value assigned to identifiable
assets. It is being amortized using the straight-line method over the
expected economic life of 15 years.
Liquidity and Capital Resources
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the regular course of business. At March 31, 2001, the
Company has a working capital deficit of approximately $6 million. In
January, 2001, the Company acquired PolyTek (see Note 3); however, in the
more recent fiscal year ended September 30, 2000, PolyTek incurred a net
loss of approximately $6.5 million and used approximately $4.9 million in
cash flows from operations. In addition, PolyTek was in violation of two
debt covenants at March 31, 2001. One of the lenders did not waive the
covenants, of which the Company is now in default on those loans totalling
approximately $371,000. Under the event of default, the institution has
several rights, including making the debt immediately due and payable (see
Note 8). These factors, among others, raise substantial doubt about the
Company's ability to continue as a going concern.
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3. ACQUISITION OF POLYTEK RUBBER & RECYCLING, INC.
Effective January 8, 2001, the Company entered into an agreement to
purchase all of the issued and outstanding shares of common and preferred
stock of this company. The Company used the purchase method of accounting
for this transaction. Operations of PolyTek Rubber & Recycling, Inc.
("PRR") have been consolidated with the Company as of January 1, 2001. The
Company exchanged 10,000,000 shares of its common stock for the outstanding
common stock of PRR. The Company will also exchange 15,000,000 shares of
its preferred stock (yet to be authorized and issued) in exchange for the
issued and outstanding preferred shares of PRR, $3.7 million of debt to the
sole shareholder as of January 8, 2001 and for $2,000,000 advanced to the
Company in the first quarter of 2001. Each share of preferred stock will be
convertible into two shares of the Company's common stock. The
consideration of stock given in the merger is valued at $9,000,000 based on
the current stock sales value of the Company's common stock at the time of
the acquisition.
The assets purchased included cash of $132,390, accounts receivable of
$1,915,500, inventory of $1,753,500, other assets of $395,000, net fixed
assets of $18,542,000 and other non-current assets of $1,256,000. In
conjunction with the agreement, the Company assumed accounts payable and
accrued liabilities of $3,944,000, deferred revenue of $2,000,000 and
long-term debt of $18,459,000. Approximately $6,000,000 of goodwill was
recorded as a result of this transaction.
PolyTek Rubber & Recycling, Inc., an Arizona corporation, was established
in July 1996. The Company and its subsidiaries operate in the rubber
recycling industry and derive their revenue principally from the sale of
crumb rubber produced at their manufacturing facilities in Arizona,
Michigan, Pennsylvania and Oklahoma to customers on 30 day terms.
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4. PROFORMA INFORMATION
The financial statements included in this report reflect only the activity
of Landstar, Inc. (prior to the PRR acquisition) for three months ended
March 31, 2000. The following would have been the consolidated net revenue,
net loss and per share information if PRR had been owned during that time:
Net revenues $ 1,610,600
Net loss $(1,303,730)
Net loss per share, basic and diluted $ (.03)
5. INVENTORIES
Inventories at March 31, 2001 were composed of $127,900 of raw materials,
$291,700 of work-in-process and $2,000,100 of finished goods.
6. PROPERTY AND EQUIPMENT
The cost of property and equipment and the related accumulated depreciation
at March 31, 2001 are as follows:
Land $ 698,000
Land Improvements 834,605
Building Improvements 4,039,775
Office and Building Improvements 848,036
Tire Collection Equipment 401,254
Factory Equipment 13,972,491
Office Furniture and Fixtures 192,963
Vehicles and Trailers 46,978
Construction in Progress 1,558,026
-----------
22,592,128
Less: accumulated depreciation (3,085,373)
-----------
$19,506,755
===========
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7. LONG-TERM DEBT
The Company's long-term debt consists of the following at March 31, 2001:
The Michigan Strategic Fund Bonds (a) $ 5,000,000
The Pennsylvania Acquisition Note (f) 2,072,000
The Arizona Acquisition Note (f) 3,942,986
The Oklahoma Acquisition Note (b) 1,138,348
The Oklahoma Acquisition Capital Lease (c) 538,693
The Tennessee Note (d) 492,262
The Oklahoma Installment Lease (e) 636,326
Note payable to financial institution from the Oklahoma Subsidiary;
guaranteed by the Company, interest at 9.89%, due in monthly
installments of $1,788, including interest, through December 2006,
collateralized by substantially all assets except land and building. 98,769
Capital lease payable from the Company, interest at approximately 13%,
due in quarterly installments of $2,613, including interest, through
September 2003, collateralized by the associated equipment. 19,885
Capital lease payable from the Company, interest at 10.67%, due in
quarterly installments of $7,499, including interest, through 2003,
collateralized by the associated equipment. 55,678
----------
13,994,947
Less current maturities (2,572,605)
----------
$11,422,342
==========
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The future maturities of the Company's long-term debt are as follows:
Years Ending December 31,
-------------------------
2001 $ 2,422,625
2002 2,464,751
2003 2,454,639
2004 408,636
2005 408,636
Thereafter 5,861,218
-----------
$13,994,947
===========
(a) The Issue matures on September 1, 2011. Interest is calculated weekly
on a rate determined by the Remarketing Agent (the "Agent), which shall
be the lowest rate of interest which will, in the sole judgement of the
Agent, permit the bonds to be remarked to a price of par, plus accrued
interest, on the first day of the applicable weekly interest period.
Interest accrued is payable on a monthly basis.
(b) The Oklahoma Acquisition Note was assumed in connection with the
purchase of the Oklahoma manufacturing facility. The note is
collateralized by substantially all of the assets of PRR's Oklahoma
Subsidiary. The note bears interest at prime plus 1.5% and is due in
monthly installments of $17,936, including interest, with the balance
due in December 2006.
(c) The Oklahoma Acquisition Capital Lease was also assumed in connection
with the purchase of the Oklahoma manufacturing facility. The lease
bears interest at 6.7% and is due in monthly installments of $4,513,
including interest, with the balance due in December 2017. The lease is
collateralized by the land and building associated with the
manufacturing facility.
(d) The Tennessee Note bears interest at prime less 1.0% and is due in
monthly installments of $4,513, including interest, commencing in July
2000. The note matures June 2009. The note is collateralized by certain
land, buildings, receivables, and equipment.
The Tennessee Note contains restrictive covenants, including
requirements for the Company to meet certain financial ratios. The
Company was in violation of certain of these covenants as of September
30, 2000. The violations were subsequently waived by the financial
institution in a letter dated November 3, 2000. Management can provide
no assurance that the Company will not violate these covenants in the
future. Future violation of these covenants could result in the
obligation becoming due and payable on demand.
(e) On May 23, 2000, PRR's Oklahoma Subsidiary entered into an installment
lease with the holders of the Oklahoma Acquisition Note, consisting of
a series of non-revolving draws under a collateralized credit
agreement, for the purpose of financing the purchase and installation
of operating machinery. The draws bear interest at prime plus 2% and
are due in monthly payments of principal and interest through September
2005. The draws are unconditionally guaranteed by the Company and are
collateralized by the associated
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machinery acquired. Additionally, the obligation is
cross-collateralized with the Oklahoma Acquisition Note.
(f) In connection with the acquisition of the Arizona operations in 1997,
the PolyTek Rubber & Recycling, Inc. issued a note payable and a
security agreement for fixtures and equipment (the "Arizona Note"). The
Arizona Note is collateralized by a Deed of Trust on certain property
in Maricopa County, Arizona. The Arizona Note is due in annual
principal installments $1,325,000 through February 28, 2003. Interest
is payable in quarterly installments with a base rate at LIBOR plus one
percent per annum. Because the agreement includes the waiving of
certain interest payments, the original stated principal of $6,300,000
was discounted to $5,823,890 using 6.68%.
In connection with the acquisition of PRR's Pennsylvania Subsidiary,
the Company issued a note payable to NRI Pennsylvania representing
$2,500,000 deferred consideration (the "NRI Note"). The NRI Note is
collateralized by a mortgage on certain real property as defined in the
purchase agreement. The NRI Note is due in annual principal and
interest installments of $833,333 through May 1, 2003. Because the NRI
Note contains no stated interest rate, the original stated principal of
$2,500,000 was discounted to approximately $2,072,000 using, 10%.
As of March 31, 2001, aggregate principal maturities on the Arizona
Note and the NRI Note in each of the next three years are as follows:
Discounted
principal Imputed
Years Ending December 31, payments interest Total
------------------------ -------- -------- -----
2001 $2,390,916 $217,418 $2,608,334
2002 2,003,576 154,757 2,158,333
2003 2,072,504 85,829 2,158,333
---------- -------- ----------
$6,466,996 $458,004 $6,925,000
========== ======== ==========
8. LINES OF CREDIT
On January 10, 2000, PRR entered into a revolving line of credit agreement
with a financial institution whereby the Company could borrow up to a
maximum of $1,500,000 subject to a borrowing base calculation. The
borrowing base was originally calculated as the sum of 50% of eligible
inventory, provided that amount does not exceed $500,000, and 80% of
eligible receivables. Interest is payable monthly at prime plus 3.0%. The
line of credit is collateralized by substantially all assets of the Company
and expires in January 2002. Thereafter the agreement is automatically
renewed from year to year unless terminated by either party. Outstanding
borrowings under this line of credit at March 31, 2001 were $142,308 and
have been classified as short-term obligations.
On July 26, 2000, the Pennsylvania Subsidiary entered into a revolving line
of credit agreement with the same financial institution whereby the
Pennsylvania Subsidiary could borrow up to a maximum of $1,000,000 subject
to a borrowing base calculation, The borrowing base was calculated as the
sum of 50% of eligible inventory, provided that amount does not exceed
$200,000, and 80% of eligible receivables. Availability under this line of
credit extends through July 2001 and is collateralized by substantially all
of the assets of the Pennsylvania Subsidiary. Interest is payable monthly
at prime plus 3.0%. Outstanding borrowings under this line of credit at
March 31, 2001 were $228,567 and have been classified as short-term
obligations.
The Company unconditionally guarantees both of these lines of credit. The
Company is required to comply with certain financial and nonfinancial
covenants as a result of these lines of credit. At March 31, 2001 the
Company was in default of certain covenants under both of the agreements.
As a result of the defaults, the financial institution has reduced the
Company's original borrowing base. The institution has additional rights to
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act under the event of default including declaring the notes immediately
due and payable, termination of the agreement, cease making advances to the
Company, proceed to collect the collateral of the Company, and exercise any
and all of the rights accruing to a secured party. Management can provide
no assurance that the Company will remedy these defaults in the future.
9. COMMITMENTS
The Company leases production equipment, office equipment and vehicles
under various noncancelable agreements that expire between June 2001 and
March 2005 which require various minimum annual rentals. The Company leases
office space with payments of $8,940 per month which expires in November
2005, and plant space with payments of $11,958 per month which expires in
May 2005. In addition, the Company leases production equipment on a month
to month basis.
The total approximate minimum rental commitments under noncancelable leases
at March 31, 2001 are as follows:
Years Ending December 31,
-------------------------
2001 $286,923
2002 310,209
2003 285,336
2004 205,788
2005 192,648
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
In addition to historical information, this Quarterly Report contains
forward-looking statements. These forward-looking statements are subject to
a number of risks and uncertainties that could cause actual results to
differ materially from those reflected in such forward-looking statements.
Factors that might cause such a difference include, but are not limited to,
those discussed in the section entitled "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Factors That May
Affect Future Results and Market Price of Stock". Readers are cautioned not
to place undue reliance on these forward-looking statements, which reflect
management's opinions only as of the date hereof. The Company undertakes no
obligation to revise or publicly release the results of any revision to
those forward-looking statements. Readers should carefully review the risk
factors described in other documents the Company files from time to time
with the SEC, including its Annual Report on Form 10-KSB for the fiscal
year ended December 31, 2000 and the Quarterly Reports on Form 10-QSB filed
by the Company in fiscal year 2001.
RESULTS OF OPERATIONS
Comparison of results of operations is made difficult because in the
quarter ended March 31, 2000, the Company was a development stage company
with no revenues, five to six employees and no operating facilities. A
pilot facility was in process of being built in Dayton, Ohio. The Company
continued as a development company through the end of December 2000.
However, significant staff was hired in that interval to prepare the
Company for its launch into operations in 2001.
Effective January 8, 2001, the Company took its first step into operations
with the acquisition of PolyTek Rubber & Recycling, Inc. (See Note 3.) With
this action, they acquired four plants that manufacture crumb rubber.
Revenues for the first quarter of 2001 were $3.6 million compared to zero
for LandStar, Inc. for the same period in the prior year. PolyTek however
produced $1.6 million in revenues in the first quarter of 2000. In that
period in 2000, only two of the four plants were in full operation and a
third plant was coming up. In 2001 all four plants were producing, although
Michigan was closed for repairs for most of February and March 2001.
In 2001, the Company lost $19,731 at the gross margin line due to a
combination of low sale prices of the crumb rubber and high costs produced
by inefficient operations. The Company is attempting to right this
situation by addressing both sides of the formula. First, current
negotiations are in process to increase our prices to our customers. There
has not been a price increase for a number of years while costs to
manufacture continue to rise. Gone unchecked, a downward spiral is
inevitable. However, there are no guarantees that management will be
successful in obtaining the increases. Management is also reviewing and
analyzing each plant on its own merits. The plants must be expanded since
this is a volume business. They must have the correct equipment, properly
configured with capable operations and preventative maintenance programs in
place to operate in a safe, efficient and profitable manner. Management has
the manufacturing and engineering personnel in place to accomplish this
review and analysis. At completion, a program is to be outlined for each
facility that will bring their operations to the proper production and
efficiency levels. Management will not rule out the option of ceasing
operations at a facility if the analysis indicates the costs to reconfigure
a facility is cost prohibitive and the return is not acceptable.
Selling and general and administrative expenses for the quarter ended March
31, 2001 were $1.95 million compared to $416,000 for LandStar, Inc. in
2000. Include PolyTek for the first quarter 2000 and the selling, general
and administrative expenses would have been $925,000. Quarter to quarter
comparison reflects a $1,000,000 increase in selling general and
administrative expenses. PolyTek's expenses increased from $510,000 in the
first quarter of 2000 to $907,000 in 2001. This was partially due to them
adding two additional plants in the mid to latter part of 2000. Landstar's
corporate expenses for 2001 grew 2.5 times the level of the first quarter
2000. Again this is due to putting in place the corporate staff in the last
half of 2000 to prepare for the planned acquisitions in 2001. PolyTek and
Landstar both have staffs that are sized to handle much larger operations.
As previously stated, volume is very critical in this company and this
industry. Without
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substantive increases in production and sales, either through additional
acquisitions or internal generation, the Company will have to look at the
ongoing staffing needs of the company. The first quarter of 2001 expenses
were also somewhat overstated due to the severance payments made to
dismissed employees at the time of acquisition. This amounted to
approximately $200,000 in the first quarter of 2001. Additional costs have
also been incurred for the Landstar personnel to travel to the various
facilities to complete their operations and engineering analysis and to
relocated Landstar's corporate offices from Victoria, British Columbia,
Canada to Scottsdale, Arizona. LandStar also hired three employees that
will manage the asphalt rubber division of the Company: there were no
revenues from this division in the quarter.
Interest expenses were in excess of $200,000 for the combined Landstar,
Inc. in 2001 compared to $12,000 for only Landstar in 2000. However,
Polytek incurred $264,000 in interest charges in the first quarter of 2000.
Therefore there was a $76,000 overall improvement from first quarter 2000
to 2001.
Other expenses in 2001 relate to losses incurred in the transfer of plant
equipment from Tennessee to the other manufacturing facilities.
LIQUIDITY AND FINANCIAL RESOURCES
The primary sources of liquidity during the first quarter of 2001 was
through financing activities: primarily, proceeds from the revolving line
of credit and the issuance of common stock. $2,000,000 of the common stock
relates to the conversion of advances made by the former shareholder of
PolyTek in the first quarter to common stock. Funds were mainly utilized
for working capital with $563,000 used for the acquisition of plant and
equipment.
The Company is attempting to replace the revolving line of credit with
another financial institution that will allow more normal advance
percentages against the receivables and inventory. At the same time, it
would appear that we will also refinance two of our facilities and
equipment. That would allow us to pay off existing loan commitments against
them, make needed capital improvements at the plant, finalize another
acquisition and also generate needed working capital. Management is finding
difficulty on some financing fronts based on PolyTek's past performance and
the lack of any prior operations for Landstar. Management continues to seek
replacement and additional financing in the form of revolving lines of
credit, asset based financing and equity investors.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
The Company is from time to time involved in litigation incidental to
the conduct of its business. At this time the Company is not involved in any
material legal proceedings either instituted by or against the Company.
ITEM 2. CHANGES IN SECURITIES.
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not applicable.
ITEM 5. OTHER INFORMATION.
Not applicable.
ITEM 6(a). EXHIBITS.
Not applicable.
ITEM 6(b). REPORTS ON FORM 8-K.
The Company filed one Form 8-K on January 23, 2001 which announced the
acquisition of PolyTek Rubber & Recycling, Inc. and the appointment of two
senior executives.
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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 thereunder duly authorized.
Date: May 18, 2001 s/n/s D. Elroy Fimrite
-----------------------------------------
D. Elroy Fimrite - Chairman of the Board,
President and Chief Executive Officer
s/n/s Michael F. Jones
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Michael F. Jones - Vice President and
Chief Financial Officer
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