Industrial Services of America Inc. (IDSA, Financial) filed Quarterly Report for the period ended 2009-03-31.
INDUSTRIAL SVCS is a management services company specializing in solid waste management as well as ferrous non-ferrous and fiber recycling. The management division is engaged in the business of commercial retail and industrial waste management and waste handling. They also have an operating division engaged inequipment sales and leasing activities. The ferrous division's products include recycling of steel and iron products whereas the non-ferrous division recycles copper aluminum and brass. Industrial Services of America Inc. has a market cap of $18.4 million; its shares were traded at around $5.148 with a P/E ratio of 6.5 and P/S ratio of 0.2. The dividend yield of Industrial Services of America Inc. stocks is 1.9%. Industrial Services of America Inc. had an annual average earning growth of 22.6% over the past 5 years.
On August 2, 2007, we entered into an asset purchase agreement for $1,300,000 funded primarily by a note payable to Industrial Logistic Services, LLC, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20,000 per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7%) interest payment on the outstanding balance plus principal amortization. We also paid ILS $100,000 cash as a portion of the purchase price at the time of execution of the asset purchase agreement. We recorded a note payable of $1,010,040 with an outstanding balance at December 31, 2008, of $774,161.
During the first quarter of 2009, we purchased $1,719,843 of property and equipment. We spent $324,845 on building improvements. In the recycling segment we spent $1,129,838 for cranes, forklifts, a loader, a scale and other operating equipment. In the equipment sales, leasing and service segment, we purchased $102,584 in rental equipment that we located at customer sites. This rental fleet equipment consists of solid waste handling and recycling equipment such as compactors, pre-crushers, containers and balers. It is our intention to continue to pursue this market. We purchased office equipment of $116,633 and vehicles of $45,943. Additionally, we made purchases for the shredder system of $1,210,493.
Total revenue decreased $1,833,472 or 7.0% to $24,249,923 in 2009 compared to $26,083,395 in 2008. ISA Alloys increased from zero in 2008 to $15,097,830 in 2009 since it is a newly acquired business. Recycling revenue decreased $14,719,912 or 71.2% to $5,953,805 in 2009 compared to $20,673,717 in 2008. This is primarily due to a decrease of 41% in pricing and 42% in the volume of ferrous shipments, and a decrease of 52% in pricing and 45% in the volume of nonferrous shipments. Management services revenue decreased $2,226,974 or 45.7% to $2,645,568 in 2009 compared to $4,872,542 in 2008. This is primarily due to a decrease in the number of customer locations managed, including the loss of customers Circuit City and Mervyn's. Equipment, service and leasing revenue increased $15,584 or 2.9% to $552,720 in 2009 compared to $537,136 in 2008. This increase is due to an increase in rental revenue.
Total cost of goods sold decreased $1,630,357 or 7.4% to $20,265,118 in 2009 compared to $21,895,475 in 2008. Recycling cost of goods sold decreased $11,920,694 or 67.3% to $5,790,179 in 2009 compared to $17,710,873 in 2008. This is due to a decrease of 36.5% in the volume and a decrease of 43% in the pricing of purchases. Management services cost of goods sold decreased $1,719,998 or 43.2% to $2,262,929 in 2009 compared to $3,982,927 in 2008 primarily due to a decrease in the number of customer locations managed, including the loss of customers Circuit City and Mervyn's. Equipment, service and leasing cost of goods sold decreased $3,416 or 1.7% to $198,259 in 2009 compared to $201,675 in 2008. We have reclassified certain expenses in our income statement to more accurately reflect segment performance and we have restated cost of goods sold and selling, general and administrative expenses for the quarter ended March 31, 2008 to be consistent with current presentation. These reclassifications had no effect on previously reported net income.
Working capital increased $3,064,024 to $6,052,896 as of March 31, 2009 compared to $2,988,872 as of December 31, 2008. The increase was primarily driven by the $8.1 million increase in accounts receivable, the $2.8 million increase in inventory and the $0.7 million decrease in accounts payable, offset by the $9.1 million increase in current maturities of long term debt.
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INDUSTRIAL SVCS is a management services company specializing in solid waste management as well as ferrous non-ferrous and fiber recycling. The management division is engaged in the business of commercial retail and industrial waste management and waste handling. They also have an operating division engaged inequipment sales and leasing activities. The ferrous division's products include recycling of steel and iron products whereas the non-ferrous division recycles copper aluminum and brass. Industrial Services of America Inc. has a market cap of $18.4 million; its shares were traded at around $5.148 with a P/E ratio of 6.5 and P/S ratio of 0.2. The dividend yield of Industrial Services of America Inc. stocks is 1.9%. Industrial Services of America Inc. had an annual average earning growth of 22.6% over the past 5 years.
Highlight of Business Operations:
On May 14, 2008, we executed a loan agreement with BB&T in the amount of $6.0 million to finance the purchase of our shredder system and complementary facility improvements. The security for this facility is the shredder and assets being purchased. Our Board approved the acquisition and installation of the shredder system and complementary facility improvements on June 21, 2007. The note has a term beginning May 2008 and originally expiring November 2013. Until October 15, 2008, the facility bore interest at the one month Libor rate, as published in the Wall Street Journal, plus 1.625% per annum. The facility originally provided for interest only monthly payments which commenced June 7, 2008 and continued through November 7, 2008. Effective October 15, 2008, we converted this revolving credit facility into a fixed interest rate of 5.89% by executing a floating to fixed interest rate swap with BB&T as the counterparty to the ISDA Master Agreement, Schedule and confirmation. The maturity date under this revised agreement is April 2014. The repayment terms are interest only paid in 6 monthly payments starting on November 7, 2008 and continuing through April 7, 2009, principal paid in twelve (12) monthly payments of $37,636.11 plus interest commencing on May 7, 2009 and continuing through April 7, 2010, principal paid in 12 monthly payments of $39,957.42 plus interest commencing on May 7, 2010 and continuing through April 7, 2011, principal paid in 12 monthly payments of $42,421.91 plus interest commencing on May 7, 2011 and continuing through April 7, 2012, principal paid in 12 monthly payments of $45,038.40 plus interest commencing on May 7, 2012 and continuing through April 7, 2013, principal paid in eleven (11) monthly payments of $47,816.27 plus interest commencing on May 7, 2013 and continuing through March 7, 2014, with one final payment of all remaining principal and accrued interest due at maturity on April 7, 2014. The principal and interest payments of the facility are calculated on the basis of a ten (10) year amortization, resulting in a principal balance of approximately $3.5 million being due on or before April 7, 2014, at which time we anticipate that we will refinance. The terms of the loan agreement place certain restrictive covenants on us, including maintenance of a specified tangible net worth, debt to net worth and EBITDA ratio. Consequently, these covenants restrict our ability to incur as much additional debt as we may desire for future growth. At March 31, 2009, we were in compliance with all restrictive covenants.On August 2, 2007, we entered into an asset purchase agreement for $1,300,000 funded primarily by a note payable to Industrial Logistic Services, LLC, the sole member of which is Brian Donaghy, our president and chief operating officer, whereby we pay $20,000 per month for 60 months for various assets including tractor trailers, trucks and containers. The note payable reflects a seven percent (7%) interest payment on the outstanding balance plus principal amortization. We also paid ILS $100,000 cash as a portion of the purchase price at the time of execution of the asset purchase agreement. We recorded a note payable of $1,010,040 with an outstanding balance at December 31, 2008, of $774,161.
During the first quarter of 2009, we purchased $1,719,843 of property and equipment. We spent $324,845 on building improvements. In the recycling segment we spent $1,129,838 for cranes, forklifts, a loader, a scale and other operating equipment. In the equipment sales, leasing and service segment, we purchased $102,584 in rental equipment that we located at customer sites. This rental fleet equipment consists of solid waste handling and recycling equipment such as compactors, pre-crushers, containers and balers. It is our intention to continue to pursue this market. We purchased office equipment of $116,633 and vehicles of $45,943. Additionally, we made purchases for the shredder system of $1,210,493.
Total revenue decreased $1,833,472 or 7.0% to $24,249,923 in 2009 compared to $26,083,395 in 2008. ISA Alloys increased from zero in 2008 to $15,097,830 in 2009 since it is a newly acquired business. Recycling revenue decreased $14,719,912 or 71.2% to $5,953,805 in 2009 compared to $20,673,717 in 2008. This is primarily due to a decrease of 41% in pricing and 42% in the volume of ferrous shipments, and a decrease of 52% in pricing and 45% in the volume of nonferrous shipments. Management services revenue decreased $2,226,974 or 45.7% to $2,645,568 in 2009 compared to $4,872,542 in 2008. This is primarily due to a decrease in the number of customer locations managed, including the loss of customers Circuit City and Mervyn's. Equipment, service and leasing revenue increased $15,584 or 2.9% to $552,720 in 2009 compared to $537,136 in 2008. This increase is due to an increase in rental revenue.
Total cost of goods sold decreased $1,630,357 or 7.4% to $20,265,118 in 2009 compared to $21,895,475 in 2008. Recycling cost of goods sold decreased $11,920,694 or 67.3% to $5,790,179 in 2009 compared to $17,710,873 in 2008. This is due to a decrease of 36.5% in the volume and a decrease of 43% in the pricing of purchases. Management services cost of goods sold decreased $1,719,998 or 43.2% to $2,262,929 in 2009 compared to $3,982,927 in 2008 primarily due to a decrease in the number of customer locations managed, including the loss of customers Circuit City and Mervyn's. Equipment, service and leasing cost of goods sold decreased $3,416 or 1.7% to $198,259 in 2009 compared to $201,675 in 2008. We have reclassified certain expenses in our income statement to more accurately reflect segment performance and we have restated cost of goods sold and selling, general and administrative expenses for the quarter ended March 31, 2008 to be consistent with current presentation. These reclassifications had no effect on previously reported net income.
Working capital increased $3,064,024 to $6,052,896 as of March 31, 2009 compared to $2,988,872 as of December 31, 2008. The increase was primarily driven by the $8.1 million increase in accounts receivable, the $2.8 million increase in inventory and the $0.7 million decrease in accounts payable, offset by the $9.1 million increase in current maturities of long term debt.
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