UNITED STATES SECURITIES AND EXCHANGE COMMISSION


Washington, DC  20549




FORM 10-K




þ
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





For the fiscal year ended December 31, 2010.




 ̈
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934





Commission File No.  1-8129.




US 1 INDUSTRIES, INC.


(Exact name of registrant as specified in its charter)




Indiana

(State of Incorporation)
95-3585609

I.R.S. Employer Identification No.336 W. US Hwy 30, Valparaiso, Indiana

(Address of principal executive offices)
46385

(Zip Code)Registrant’s telephone number, including area code: (219) 476-1300Securities registered pursuant to Section 12(b) of the Act:Title of each class

Common Stock, no par value
Name of each exchange on which registered

None





Securities registered pursuant to Section 12(g) of the Act: None





Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  ̈ No þ





Indicate by check mark if the registrant is not required to file reports pursuant to section 13 or 15(d) of the Securities Act. Yes  ̈ No þ





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 þ No  ̈





Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or such shorter period that the registrant was required to submit and post such files.  Yes  ̈ No þ





Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ̈





Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See definitions of large accelerated filer, an accelerated filer, and smaller reporting company in Rule 12b-2 of the Exchange Act. (check one):  Large accelerated filer  ̈       Accelerated filer  ̈ Non-accelerated filer  ̈


Smaller reporting company þ
(Do not check if a smaller reporting company)





Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes  ̈ No þ




The aggregate market value of the voting stock held by non-affiliates of the registrant was $12,569,392 (based on the per share closing price on June 30, 2010, the last business day of the Company’s second fiscal quarter.)  For purposes of the forgoing statement, directors, officers and 10% shareholders of the registrant have been assumed to be affiliates.





On March 15, 2011, there were 14,243,409 shares of registrant's common stock outstanding.









TABLE OF CONTENTS





PART I
3Item 1.
Business

3Item 1A.
Risk Factors

6Item 1B.
Unresolved Staff Comments

8Item 2.
Properties

8Item 3.
Legal Proceedings

9Item 4.
Reserved

9PART II


9Item 5.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

9Item 6.
Selected Financial Data

11Item 7.
Management's Discussion and Analysis of Financial Condition and Results of Operations

13Item 7A.
Quantitative and Qualitative Diclosures about Market Risk

21Item 8.
Financial Statements and Supplementary Data

22Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

38Item 9A.
Controls and Procedures

38Item 9B.
Other Information

39PART III


40Item 10.
Directors, Executive Officers and Corporate Governance

40Item 11.
Executive Compensation

42Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

44Item 13.
Certain Relationships, Related Transactions, and Director Independence

45Item 14.
Principal Accountant Fees and Services

46PART IV


47Item 15.
Exhibits and Financial Statement Schedules

47SIGNATURES


50




2




PART I





Item 1.  Business




US 1 Industries, Inc., is a holding company that owns subsidiary operating companies, most of which are interstate trucking companies operating in 48 states.  For descriptive purposes herein, US 1 Industries, Inc. may hereinafter be referred to, together with its subsidiaries, as "US 1" or the "Company" and we refer to the subsidiaries that operate the trucking business as the “Operating Subsidiaries.”  The Company's business consists principally of truckload operations, for which the Company, through its subsidiaries, obtains a significant percentage of its business through independent agents, who then arrange with independent truckers to haul the freight to the desired destinations.





US 1 was incorporated in California under the name Transcon Incorporated on March 3, 1981.  In March 1994, the Company changed its name to US 1 Industries, Inc.  In February 1995, the Company was merged with an Indiana corporation for purposes of re-incorporation under the laws of the state of Indiana.  The Company's subsidiaries consist of Antler Transport, LLC, AFT Transport, LLC, ARL, LLC (60% owned subsidiary), Blue and Grey Brokerage, Inc., Blue and Grey Transport, Inc., Bruin Express Intermodal, LLC, Cam Transport, Inc., Carolina National Logistics, Inc., Carolina National Transportation, LLC (60% owned subsidiary), Fast freight Systems, Inc., Five Star Transport, LLC, Freedom 1 LLC (formerly known as Freedom Logistics, LLC), Freightmaster USA, LLC, Friendly Transport, LLC, Gulf Line Brokerage, Inc., Gulf Line Transportation, LLC, Harbor Bridge Intermodal Inc., Keystone Lines, Inc., Keystone Logistics, Inc., Liberty Transport, Inc., Patriot Logistics, LLC., Risk Insurance Services, LLC, TC Services, Inc., Thunderbird Logistics, LLC, Transport Leasing, Inc., Transport Leasing Systems, LLC, Unity Logistics Services Inc., US1 Corp., and US1 Logistics, LLC (60% owned subsidiary). Most of these subsidiaries operate under authority granted by the United States Department of Transportation (the "DOT") and various state agencies.  The Company’s operating subsidiaries generally maintain separate offices, have their own management teams, officers and directors, and are run independently of the parent and each other.





Operations




The Operating Subsidiaries carry virtually all forms of freight transported by truck, including specialized trucking services such as containerized, refrigerated, and flatbed transportation.





The Operating Subsidiaries conduct primarily a non-asset based business, contracting with independent truckers who generally own the trucks they drive and independent agents who own the terminals from which they operate.  The Operating Subsidiariespay the independent truckers and agents a percentage of the revenue received from customers for the transportation of goods.  The expenses related to the operation of the trucks are the responsibility of the independent contractors, and the expenses related to the operation of the terminals are the responsibility of the agents.  Certain Operating Subsidiaries also subcontract (“broker”) freight loads to other unaffiliated transportation companies.  Consequently, short-term fluctuations in operating activity have less of an impact on the Company's net income than they have on the net income of truck transportation companies that bear substantially all of the fixed cost associated with the ownership of the trucks.  Like other truck transportation companies, however, US 1’s revenues are affected by competition and the state of the economy.





Marketing and Customers




The Operating Subsidiaries conduct the majority of this business through a network of independent agents who are in regular contact with shippers at the local level.  The agents have facilities and personnel to monitor and coordinate shipments and respond to shippers’ needs in a timely manner.





These agents are typically paid a commission of 6% to 13% of the Company's revenues from the agents’ trucking operations.





During 2010, Operating Subsidiaries utilized the services of approximately 170 agents. No agent has accounted for more than 10% of revenue during 2010, 2009 or 2008.  The Company, through its subsidiaries, shipped freight for approximately 1,000 customers in 2010, none of which accounted for more than 10% of the Company's revenues.




3




Independent Contractors




The independent contractors (persons who own the trucks) used by the Company, through its subsidiaries, enter into standard equipment operating agreements.  The agreements provide that independent contractors must bear most of the costs of operations, including drivers' compensation, maintenance costs, fuel costs, collision insurance, taxes related to the ownership and operation of the vehicle, licenses, and permits.  These independent contractors are paid either a flat rate or a percentage between 62% to 78% of the charges billed to the customer.  The Company, through its subsidiaries, requires independent contractors to maintain their equipment to standards established by the DOT, and the drivers are subject to qualification and training procedures established by the DOT.  The Operating Subsidiaries are required to conduct random drug testing, enforce hours of service requirements, and monitor maintenance of vehicles.





Employees




At December 31, 2010, the Operating Subsidiaries had approximately 90 full-time employees. The Company's employees are not covered by a collective bargaining agreement.





Competition




The trucking industry is highly competitive.  The Operating Subsidiaries compete for customers primarily with other nationwide carriers, some of which have company-owned equipment and company drivers, and many of which have greater volume and financial resources.  The Operating Subsidiaries also compete with private carriage conducted by existing and potential customers.  In addition, the Operating Subsidiaries compete with other modes of transportation including rail.





The Company also faces competition for the services of independent trucking contractors and agents.  Agents routinely do business with a number of carriers on an ongoing basis.  The Company has attempted to develop a strong sales agent network by maintaining a policy of prompt payment for services rendered and providing advanced computer systems.





Competition is based on several factors such as cost, timely availability of equipment, and quality of service.





Insurance




The Operating Companies purchase auto liability insurance coverage of up to $1.0 million per occurrence with a $5,000 to $50,000 deductible for the operation of the trucks.  They also buy cargo insurance coverage of up to $250,000 per occurrence with up to a $50,000 deductible.  The companies also purchase commercial general liability insurance with a $2.0 million combined single limit and no deductible.  The current insurance market is volatile with significant rate changes that could adversely affect the cost and availability of coverage.  In addition, the insurance coverage that the companies purchase may, given the recent trend toward exorbitant jury verdicts, not be sufficient to cover losses experienced by the companies.





One of the insurance providers to the Operating Subsidiaries, American Inter-Fidelity Exchange (AIFE), is managed by Lex Venditti, a director of the Company.  AIFE provides liability and cargo insurance to several subsidiaries of the Company as well as other entities, some of which are related to the Company by common ownership. For the years ended December 31, 2010, 2009 and 2008, cash paid to AIFE for insurance premiums and deductibles on behalf of the Company’s independent own operators, excluding bobtail and physical damage insurance,  was approximately $2.8 million, $2.9 million, and $3.6 million, respectively.




4




None of the Operating Subsidiaries exercise control over the operations of AIFE. As a result, the Company recorded its investment in AIFE under the cost method of accounting for each of the three years ended December 31, 2010, 2009, and 2008. 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 AIFE. There were no dividends declared by AIFE for the years ended December 31, 2010, 2009 and 2008.  For the years ended December 31, 2010, 2009 and 2008, a subsidiary insurance agency of the Company, recorded commission income of $0.4 million, $0.7 million and $0.7 million, respectively,  related to premiums with AIFE.  This commission income is reflected as a reduction of insurance expense in the consolidated financial statements of the Company for the years ended December 31, 2010, 2009 and 2008, respectively.





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 was no such loss assessment for any of the three years ended December 31, 2010, 2009, and 2008.





In addition, the Chief Executive Officer and a director of the Company, the Chief Financial Officer and a director of the Company, as well as another director of the Company, are the sole 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.  AIFE incurred management fees of approximately $0.5 million for the year ended December 31, 2010 and $0.5 million for each of the years ended December 31, 2009, and 2008, respectively.  These management fees are available to be paid as dividends to these officers and directors of the Company.





Independent Contractor Status




From time to time, various legislative or regulatory proposals are introduced at the federal or state levels to change the status of independent contractors’ classification to employees for either employment tax purposes (withholding, social security, Medicare and unemployment taxes) or other benefit purposes.





Currently, most individuals are classified as employees or independent contractors for employment tax purposes based on 20 “common-law” factors rather than any definition in the Internal Revenue Code or the regulations promulgated there under.  In addition, under Section 530 of the Revenue Act of 1978, taxpayers that meet certain criteria may treat similarly situated workers as employees, if they have received a ruling from the Internal Revenue Service or a court decision affirming their treatment, or if they are following a long-standing recognized practice.





Although management is unaware of any proposals currently pending to change the employee/independent contractor classification, the costs associated with potential changes, if any, in the employee/independent contractor classification could adversely affect the Company’s results of operations if the Company were unable to reflect them in its fee arrangements with the independent contractors and agents or in the prices charged to its customers.





Regulation




The Operating Subsidiaries are common and contract motor carrier regulated by the DOT and various state agencies.  Among other things, this regulation imposes requirements on the Company, and its subsidiaries, with regard to the agreements that it has with owner-operators and the terms of payment to them.  The Company’s independent contractor drivers also must comply with the safety and fitness regulations promulgated by the DOT, including those relating to drug and alcohol testing and hours of service.





The Company and its subsidiaries are subject to various federal, state, and local environmental laws and regulations, implemented principally by the Environmental Protection Agency (EPA) and similar state regulatory agencies, governing the management of hazardous wastes, other discharge of pollutants into the air and surface and underground waters, and the disposal of certain substances.  Management believes that its operations are in compliance with current laws and regulations and does not know of any existing condition that would cause compliance with applicable environmental regulations to have a material effect on the Company’s earnings or competitive position.




5




Environmental Regulation




Neither the Company nor its subsidiaries have any known environmental violations against it.





Item 1A.  Risk Factors




The Company makes forward-looking statements in this document and in other materials it files with the SEC or otherwise makes public. In addition, senior management of the Company might make forward-looking statements orally to analysts, investors, the media and others.  Statements concerning the Company’s future operations, prospects, strategies, financial condition, future economic performance (including growth and earnings) and demand for our services, and other statements of the Company’s plans, beliefs, or expectations, are forward-looking statements.  In some cases these statements are identifiable through the use of words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “plan,” “project,” “target,” “can,” “could,” “may,” “should,” “will,” “would” and similar expressions.  You are cautioned not to place undue reliance on these forward-looking statements.  The forward-looking statements the Company makes are not guarantees of future performance and are subject to various assumptions, risks, and other factors that could cause actual results to differ materially from those suggested by these forward-looking statements.  These factors include, among others, those set forth in the following paragraphs and in the other documents that the Company files with the SEC.





The Company expressly disclaims any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.





Factors That May Affect Future Results and/or Forward-Looking Statements




Insurance Limits.  The Operating Subsidiaries currently purchases insurance coverage for commercial trucking claims with limits of up to $1.0 million per occurrence.  Liability associated with accidents in the trucking industry is severe (sometimes in excess of $1.0 million) and occurrences are unpredictable.  If a claim for an amount in excess of $1.0 million was successful, it could have a material adverse effect on US 1 and its subsidiaries, including its results of operations and financial condition.





Increased severity or frequency of accidents and other claims.  Potential liability associated with accidents in the trucking industry is severe and occurrences are unpredictable.  While the Company’s subsidiaries generally retain deductibles ranging from $5,000 to $50,000 per occurrence, a material increase in the frequency or severity of accidents or cargo claims, or the unfavorable development of existing claims, could have a material adverse effect through increased insurance costs on US 1 and its subsidiaries, which would adversely affect its results of operations and financial condition.





Dependence on third-party insurance companies. The cost of insurance coverage for commercial trucking varies dramatically, but is expensive.  Further, the ability of US 1 to purchase coverage for losses in excess of $1.0 million is very limited.  A number of the Company’s subsidiaries purchase insurance through AIFE.  AIFE reinsures some of its exposure with third party insurance companies. AIFE is managed by Lex Venditti, a director of the Company.





Dependence on independent commission agents.  As noted above in Item 1, "Business," the Operating Subsidiaries, excluding Patriot Logistics,  market their services primarily through independent commission agents.  Currently, they have a network of approximately 170 agents.  During 2010, 66 of these agents generated revenue for US 1 of at least $1.0 million, and no one agent generated more than $10.0 million of US 1's total revenue. The Operating Subsidiaries compete with motor carriers and other third parties for the services of these independent agents.  The Operating Subsidiaries’ contracts with these agents typically are terminable upon 30-days notice by either party and do not restrict the ability of a former agent to compete with US 1 following a termination.  The loss of some of the agents or a significant decrease in volume generated by these agents could have a materially adverse effect on US 1, including its results of operations and revenue.




6




Dependence on third-party owner operators. As noted above in Item 1, "Business," the Operating Subsidiaries do not generally own trucks and rely on owner/operators who operate as independent contractors and unrelated trucking companies to transport freight for its customers.  Operating Subsidiaries compete with other motor carriers and third parties for the services of owner/operators.  Almost all of the freight hauled by the Company, through its subsidiaries, is by these owner/operators.  A significant decrease in available capacity provided by either of these parties could have a material adverse effect on US 1, including its results of operations and revenue.





Dependence on key personnel.  The Company is dependent on the services of its officers, particularly the officers of its subsidiaries.  All of these officers are free to leave the Company and start competing operations.  None have agreed to any covenant not to compete.  Given the nature of the relationship with the agents and owner/operators, as described above, it would be relatively easy for the Company to lose a substantial amount of business if one or more of these key people left and set up a competing operation.  This in turn could have a material adverse effect on the Company, including its results of operations and revenue.





In October 2006, the Company and the President of Patriot Logistics, Inc., a wholly owned subsidiary of the Company, entered into an agreement under which the Company granted the individual the option to purchase 100% of the outstanding stock of Patriot for a purchase price equal to the book value of Patriot. This option terminates in October 2012 or upon a change in control of the Company. The option is immediately exercisable and may be exercised in whole (not in part) at any time prior to October 2011.  The fair value of this option was reevaluated at December 31, 2010, and was determined to be deminimis.  Patriot Logistics’ revenue was $25.5 million for the year ended December 31, 2010 and $26.4 million for the year ended December 31, 2009.  Patriot Logistics had pre-tax income of approximately $0.3 million and $0.03 million for the years ended December 31, 2010 and 2009, respectively.





Disruptions or failures in the Company's computer systems.  The Company's information technology systems used in connection with its operations are located in South Bend, IN and Valparaiso, IN.  US 1 and its subsidiaries rely, in the regular course of business, on the proper operation of its information technology systems to link its network of customers, agents and owner operators.  These systems in turn are dependent on operation of the Internet.  Any significant disruption or failure of these systems could significantly disrupt the Company and its subsidiaries’ operations and impose significant costs on the Company.





Status of Owner/Operators.  From time to time, various legislative or regulatory proposals are introduced at the federal or state levels to change the status of owner/operators’ classification to employees (from independent contractors) for either employment tax purposes (withholding, social security, Medicare and unemployment taxes) or other benefit purposes.  Currently, most individuals are classified as employees or independent contractors for employment tax purposes based on 20 “common-law” factors rather than any definition found in the Internal Revenue Code or the regulations there under.  In addition, under Section 530 of the Revenue Act of 1978, taxpayers that meet certain criteria may treat similarly situated workers as employees, if they have received a ruling from the Internal Revenue Service or a court decision affirming their treatment, or if they are following a long-standing recognized practice.  The Operating Subsidiaries treat their owner/operators as independent contractors.  The classification of owner/operators as independent contractors does require significant analysis of the facts relating to their service to the Operating Subsidiaries.





Although management is unaware of any proposals currently pending to change the employee/independent contractor classification, the costs associated with potential changes, if any, in the employee/independent contractor classification could adversely affect the Company’s results of operations if the Company were unable to reflect them in its fee arrangements with the owner/operators and agents or in the prices charged to its customers.





7





Credit Facility and Economic Financial Environment.Our credit facility with US Bank contains a number of financial covenants that require us to meet certain financial ratios and tests. If we fail to comply with the obligations in the credit agreement, we would be in default under the credit agreement. If an event of default is not cured or waived, it could result in acceleration of any outstanding indebtedness under our credit agreement, which could have a material adverse effect on our business.  Additionally, our credit facility expires in October 2011. If we are unable to extend the credit facility with US Bank or obtain a new credit facility with a new lender, this inability to obtain financing could have a material adverse effect on our business. The recent global financial crisis affecting the banking system and financial markets and the going concern threats to investment banks and other financial institutions have resulted in a tightening in the credit markets. There could be a number of follow-on effects from the global financial crisis and resulting economic slowdown on our business, including payment delays by customers and/or customer insolvencies, delays in accessing our current credit facilities or obtaining new credit facilities on terms we deem commercially reasonable, and an inability of US Bank to fulfill their funding obligations. Any further deterioration of economic conditions would likely exacerbate these adverse effects and could result in a wide-ranging and prolonged impact on general business conditions, thereby negatively impacting our operations, financial results and/or liquidity.





As of December 31, 2010, financial covenants included: maximum total debt service coverage ratio and prohibition of additional indebtedness without prior authorization.  At December 31, 2010, the Company, and its subsidiaries, was in compliance with these financial covenants.  At December 31, 2009, the Company, and its subsidiaries, was non-compliant with these covenants.  The Company’s lender issued a waiver of these violations.





Stock Price.The Company’s stock price is affected by a number of factors, including quarterly variations in revenue and operating income, low trading volume, general economic and market conditions.  As a result, the Company’s common stock may experience significant fluctuations in market price.





Item 1B.  Unresolved Staff Comments


None.





Item 2.  Properties




The Company leases its administrative offices of approximately 7,000 square feet from an independent owner at 336 W. US Hwy 30, Valparaiso, Indiana for $7,500 monthly.  This lease expries on March 31, 2012.  Patriot Logistics, Inc. leases a truck terminal in Fort Smith, AR of approximately 13,250 square feet on a month-to-month basis for $2,618 from Fort Smith Property, LLC which is owned by Michael E. Kibler, the President and Chief Executive Officer and a director of the Company, Harold E. Antonson, the Chief Financial Officer, Treasurer and a director of the Company, and Edwis Selph Sr., the President of Patriot Logistics, Inc.





In addition, the Company’s subsidiaries lease office space and land in several locations throughout the United States, as summarized below:




8




Approximate



LeaseSubsidiary

City

State

Sq. Ft.

Monthly

ExpirationARL

Hebron

OH

1,250

1,250

10/31/2011ARL

Moon Township

PA

33,920

18,826

10/14/2025ARL

Garland

TX

26,000

6,933

6/30/2011Cam Transport

Gulfport

MS

1,130

1,442

8/31/2012Carolina National

Mt. Pleasant

SC

6,280

10,865

6/30/2011Keystone Logistics

Southbend

IN

4,451

3,148

month to monthPatriot Logistics, Inc.

Atlanta

GA

49,250

1,936

8/31/2011Patriot Logistics, Inc.

Charlotte

NC

500

2,825

12/31/2011Patriot Logistics, Inc.

Dallas

TX

5.0 acres

3,800

month to monthPatriot Logistics, Inc.

French Camp

CA

1,000

1,200

month to monthPatriot Logistics, Inc.

Ft Smith

AR

13,250

2,618

month to monthPatriot Logistics, Inc.

Houston

TX

33,000

10,500

12/31/2011Patriot Logistics, Inc.

Irving

TX

1,440

1,659

month to monthPatriot Logistics, Inc.

Jacksonville

FL

1,000

1,605

7/31/2011Patriot Logistics, Inc.

Kansas City

MO

432

1,500

month to monthPatriot Logistics, Inc.

Laredo

TX

400

1,100

month to monthPatriot Logistics, Inc.

Memphis

TN

4,500

5,500

7/31/2011TC Services, Inc

Valparaiso

IN

7,000

7,500

3/31/2012Thunderbird

Houston

TX

1,017

1,475

month to monthThunderbird Logistics

Terrell

TX

1,700

1,400

2/9/2011Thunderbird Motor Express

Crown Point

IN

1,225

1,120

month to monthTransport Leasing, Inc

Ft. Smith

AR

850

507

month to monthUS1 Logistics, Inc.

St Augustine

FL

1,340

1,841

3/31/2012





Management believes that the Company’s leased properties are adequate for its current needs and can be retained or replaced at acceptable cost.





Item 3.  Legal Proceedings




The Company and its subsidiaries are involved in certain litigation matters in the normal course of its business. Management intends to vigorously defend these cases. In the opinion of management, any negative outcome from litigation now pending will not have a material adverse affect on the consolidated financial statements of the Company.





Item 4.  Reserved





Part II





Item 5.  Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities





Shares of Common Stock of the Company are listed and traded on the NASD Electronic “bulletin board market” under the symbol “USOO.”





As of March 15, 2011, there were approximately 3,000 holders of record of the Company’s Common Stock.





The Company has not paid and, for the foreseeable future, does not anticipate paying any cash dividends on its Common Stock.  The Company's current credit agreement prohibits the payment of dividends.




9




Equity Compensation Plan Informaiton





PLAN CATEGORY

NUMBER OF

SECURITIES TOBE

ISSUED UPON

EXERCISE OF

OUTSTANDING

OPTIONS,

WARRANTS AND

RIGHTS


WEIGHTED-

AVERAGE

EXERCISE PRICE

OFOUTSTANDING

OPTIONS,

WARRANTS AND

RIGHTS


NUMBER OF

SECURITIES

REMAINING

AVAILABLE FOR

FUTUREISSUANCE

UNDER EQUITY

COMPENSATION

PLANSEquity compensation plans approved by security holders:Stock Option Plans


-



-



-Equity compensation plans not approved by security holders:Stock options issued to employees (1)


206,070


$
0.80


Not applicable





(1)
On December 18, 2008, in conjunction with the acquisition of ARL, the Company granted stock options to the CEO and CFO of ARL.  The Company does not have any other equity compensation plans or arrangements.


(2)   The Company does not currently have any active equity compensation plans or arrangements.





During 2007, the Company purchased 595,248 shares of its common stock for $952,513.  These shares are reflected as treasury stock in the Company’s balance sheet and statement of shareholders’ equity as of and for the year ended December 31, 2009 and 2010.





The following table sets forth for the periods indicated the high and low bid prices per share of the Common Stock as reported from quotations provided by North American Quotations and reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not represent actual transactions.





2010

High


LowFirst Quarter

$
1.02


$
0.75Second Quarter


1.49



0.93Third Quarter


1.19



0.81Fourth Quarter


1.17



1.012009

High


LowFirst Quarter

$
0.90


$
0.66Second Quarter


1.03



0.64Third Quarter


0.90



0.71Fourth Quarter


0.98



0.52





On February 18, 2011, US 1 Industries, Inc., an Indiana corporation (the “Company”), entered into an Agreement and Plan of Merger with Trucking Investment Co. Inc., an Indiana corporation (“TIC”), US 1 Merger Corp., an Indiana corporation and direct, wholly-owned subsidiary of TIC (“Merger Sub”), Harold E. Antonson (“Antonson”) and Michael E. Kibler (“Kibler”). At the effective time of the Merger, TIC will be directly owned by Antonson (the Chief Financial Officer of the Company and member of the Board of Directors of the Company) and Kibler (the President and Chief Executive Officer of the Company and member of the Board of Directors of the Company) – the Company shareholders who have previously submitted proposals to the Company’s Board of Directors (the “Board”) to take the Company private.





The Merger Agreement provides that Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation as a direct, wholly-owned subsidiary of TIC (the “Merger”), and that each issued and outstanding share of Company Common Stock immediately prior to the effective time of the Merger (other than shares owned by the Company, TIC, Merger Sub and shares owned by shareholders who have perfected and not withdrawn a demand for appraisal rights under Indiana law) will automatically be canceled and converted into the right to receive $1.43 per share in cash, without interest (the “Merger Consideration”). In conjunction with the Merger, the Company obtained an independent fairness opinion to support the consideration being offered to the shareholders of the Company.  Options that are issued and outstanding immediately prior to the effective time of the Merger will be canceled and converted into the right to receive cash.




10




The Company expects that the closing of the Merger will occur in the second quarter of 2011, subject to regulatory approvals and other customary closing conditions, including TIC obtaining debt financing on the terms set forth in the debt financing commitment letter it has received and the adoption of the Merger Agreement and approval of the Merger by the holders of a majority of the issued and outstanding shares of Company Common Stock.  TIC has been advised by US Bancorp that it believes that it will be able to fund the purchase price for the shares that are acquired. The Merger Agreement contains a “no-shop” provision, which restricts the Company’s ability to solicit, discuss or negotiate competing proposals.





Item 6.  Selected Financial Data





The selected consolidated financial data presented below have been derived from the Company’s consolidated financial statements.  The consolidated financial statements for the years ended December 31, 2010, 2009, and 2008 have been audited by the Company’s registered independent certified public accountants, whose report on such consolidated financial statements are included herein under Item 8. The information set forth below should be read in conjunction with the consolidated financial statements and notes thereto under Item 8 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”




11




(in thousands, except shares and per share data)Fiscal Year Ended December 31,2010(C)


2009


2008


2007


2006STATEMENT OF INCOME DATA:OPERATING REVENUE

$
210,751


$
179,732


$
172,675


$
184,677


$
190,976OPERATING EXPENSES:Purchased transportation


145,154



123,254



121,928



132,444



139,149Commissions


31,908



26,336



21,955



22,406



21,866Other operating costs and expenses (A)


28,296



31,442



24,614



24,826



24,999OPERATING INCOME (LOSS)


5,394



(1,299
)


4,178



5,001



4,962Interest expense


551



732



159



780



790NET INCOME (LOSS) BEFORE INCOME TAXES


4,999



(1,738
)


4,264



4,397



4,351INCOME TAX (EXPENSE) BENEFIT


(994
)


(590
)


107



(368
)


(260
)NET INCOME (LOSS)


4,005



(2,329
)


4,371



4,029



4,091Income attributable to non controlling interest


2,233



257



1,313



1,176



989NET INCOME (LOSS) ATTRIBUTABLE TO US1 INDUSTRIES, INC.


1,772



(2,586
)


3,058



2,853



3,102Basic and Diluted Net income (loss) per common share

$
0.12


$
(0.18
)

$
0.21


$
0.23


$
0.25Weighted average shares outstanding:Basic


14,243,409



14,243,409



14,243,409



12,679,087



12,169,739Diluted


14,303,922



14,243,409



14,243,409



12,679,087



12,169,739BALANCE SHEET DATA (at end of year):Total assets

$
43,985


$
41,892


$
51,004


$
32,157


$
32,563Long-term debt, including current portion


9,461



12,097



16,744



2,371



7,271Working capital


13,463



9,363



8,811



15,272



10,272Total US1 Industries, Inc. shareholders' equity (B)


19,073



17,190



19,718



16,660



11,385Noncontrolling interests equity


1,178



221



846



569



1,160Total equity


20,250



17,411



20,564



17,229



12,545OTHER DATA:Cash provided by (used in) operating activities


3,678



5,945



1,218



7,188



4,071Cash (used in) provided by investing activities


(224
)


(361
)


(2,167
)


(345
)


(281
)Cash (used in) provided by financing activities


(3,453
)


(5,584
)


948



(6,843
)


(3,790
)





(A)- In the fourth quarter of 2009 the Company recorded a non-cash charge of $3.0 million for the impairment of goodwill related to ARL.  The test as of December 31, 2009 indicated that the book value of ARL exceeded the fair value of the business.




(B)- On January 1, 2009, we adopted ASC 810 - “Consolidation”.  As required by ASC 810 -“Consolidation”, prior period results have been recast to conform with the new pronouncement.




(C)-On January 1, 2010, we adopted the provisions of ASU No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities.  As a result, the net assets, including goodwill, and retained earnings of Stoops Ferry, LLC were removed from the Company’s financial statements.




12




Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations




Overview




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.  Because the Operating Subsidiaries generally do not own their own trucks, purchased transportation is the largest component of the Company’s operating expenses and increases or decreases in proportion to the revenue generated through independent contractors.  Commissions to agents and brokers are similarly based on contractually agreed-upon percentages of revenue.





A majority of the Company’s insurance expense, through its subsidiaries, is based on a percentage of revenue and, as a result, will increase or decrease 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.





Historically salaries, wages, fringe benefits, and other operating expenses had been principally non-variable expenses and remained relatively fixed with slight changes in relationship to revenue.  However, since the Company, through its subsidiaries, has added certain operations, which utilize employees rather than independent agents, these non-variable expenses may not be directly comparable.





The following table set forth the percentage relationships of expense items to operating revenue for the periods indicated:





Fiscal Years2010


2009


2008Revenue


100.0
%


100.0
%


100.0
%Operating expenses:Purchased transportation


68.9



68.6



70.6Agent commissions


15.1



14.7



12.7Insurance and claims


2.8



2.7



2.9Salaries, wages and fringe benefits


5.9



7.1



6.5Impairment of Goodwill


-



2.0



-Other operating expenses


4.7



6.0



4.9Total operating expenses


97.4



100.8



97.6Operating income (loss)


2.6
%


(0.8
)%


2.4
%





2010 Compared to 2009




The Company’s operating revenues for the 2010 fiscal year were $211 million, an increase of $31.0 million, or 17.3%, from operating revenue for the 2009 fiscal year. The increase is primarily attributable to the increase of load activity.  The Company’s non-wholly owned operations saw revenues increase by $33.0 million to $137.0 million in fiscal 2010 from $104.0 million in fiscal 2009.  This is an increase of 31.7%.  This increase is primarily attributable to an increase in load activity as a result of the recovery in the economy at several of the non-wholly owned operations, locations, as well as several new offices.




13




Purchased transportation and agent commission expense generally increase or decrease in proportion to the revenue generated through independent contractors.  Many agents negotiate a combined percentage payable for purchased transportation and commission.  Purchased transportation and commissions in total increased to 84.0% of operating revenue for fiscal 2010 compared to 83.3% for fiscal 2009.  Purchased transportation increased 0.3% as a percentage of operating revenue in fiscal 2010 to 68.9% compared to 68.6% of operating revenue for the same period of time in 2009.  Commissions increased by 0.4% of operating revenues for fiscal 2010 to 15.1% of operating revenue compared to 14.7% for fiscal 2009.  The mix between the amounts of purchased transportation paid versus commissions paid may vary slightly based on agent negotiations with independent owner operators.  In addition, pay on certain types of revenue may be higher than for other types of revenue.  Thus a change in the mix of revenue can cause some variation in the percentage paid out for purchased transportation and commission.  However, in total, commissions and purchased transportation would typically be expected to remain relatively consistent as a percentage of revenue.  The increase in purchased transportation and commissions is the result of increased brokerage activity at several of the Company’s operations.  Brokered loads pay a higher percentage of purchased transportation and commission as carriers are responsible for paying their own liability insurance. Purchased transportation and commissions at the Company’s non-wholly owned subsidiaries increased by $28.0 million which accounts for 95.7% of the total increase. The increase is related to the increased revenues at these non-wholly owned subsidiaries. Purchased transportation and commission expense at the Company’s non-wholly owned operations decreased from 86.6% of operating revenue to 86.2% for the twelve months ended December 31, 2009 and 2010, respectively.





One of the Company’s subsidiaries uses employees to staff the terminals rather than independent sales agents.  As a result, this operation has higher operating expenses relative to revenue than the Company’s other operations.  This operation accounted for approximately 12% and 15% of the Company’s consolidated operating revenues in 2010 and 2009, respectively.





Salaries expense is not directly variable with revenue.  However, salaries expense decreased in dollar amount from $12.8 million for the fiscal year 2009 to $12.4 million for fiscal year 2010.  This decrease in salaries expense is primarily attributable to the Company’s non-wholly owned subsidiaries that have restructured the workloads in order to cut costs.  Salaries expense decreased 1.2% as a percentage of operating revenue from 7.1% for the fiscal year 2009 to 5.9% for the fiscal year 2010.




Insurance and claims increased slightly from 2.7% of operating revenue for fiscal year 2009 to 2.8% of operating revenue for fiscal 2010.  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 Company obtains some of its auto liability and cargo insurance from AIFE, an affiliated entity (see Note 6 to consolidated financial statements).





Other operating expenses decreased to 4.7% as a percentage of operating revenue for the fiscal year 2010 compared to 6.0% as a percentage of operating revenue for fiscal year 2009.  While not all operating expenses are directly variable with revenues, the increased revenue can directly impact several components of operating expenses.  In the fourth quarter of 2009, the Company recorded a non-cash charge of $3.0 million for the impairment of goodwill related to ARL.  The test as of December 31, 2009 indicated that the book value of ARL exceeded the fair value of the business.  The impairment increased operating expenses by 1.7% of operating revenue.  In addition, The Company experienced a decrease in depreciation and amortization expense for fiscal year 2010 related to the deconsolidation of Stoops Ferry, an office that was formerly consolidated as part of one of the Company’s non-wholly owned subsidiaries.  The Company experienced a decrease in rent expense related to the expiration of certain leases. The decrease in depreciation and amortization, and a portion of the decrease in rent expense noted above were reflected in the performance of the Companies non-wholly owned subsidiaries which is a partial reflection of the improved operating performance of those subsidiaries.





Based on the changes in revenue and expenses discussed above, operating income increased $6.7 million from 2009 to 2010.  For the year ended December 31, 2010, the Company had operating income of 2.6% of operating revenues compared to an operating loss of (0.7%) of operating revenues for the same period of time in 2009.




14




Interest expense decreased $0.2 million from $0.7 million for the year ended December 31, 2009 to $0.5 million for the year ended December 31, 2010.  This decrease is primarily attributable to decreased notes payable and borrowings against the Company’s line of credit and decreased interest rates on the line of credit.  The Company’s interest rate being charged on the line of credit decreased from 4.600% as of December 31, 2009 to 3.663% as of December 31, 2010.  Under the amended line of credit agreement, the Company’s interest rate is “One Month LIBOR” plus 3.35%.





Other income includes income from rental property, storage and equipment usage fees.  Other income decreased 0.1% of operating revenues for the year ended December 31, 2010 compared to the year ended 2009.  This decrease in other income is the result of the Company experiencing a decrease in administrative fee income.




Federal and state income tax expense increased $0.4 million from $0.6 million for the year ended December 31, 2009 to $1.0 million for the year ended December 31, 2010.    The Company will be required to commence paying Federal income tax in 2010 and any future profitable years.  The increase in income tax expense is due to 2009 income taxes relating solely to state tax and 2010 taxes attributable to an increase in federal taxable income.





The Company also allocated 2.2 million and $0.3 million of income to the noncontrolling interest holders relating to their portion of its subsidiaries’, ARL Transport, LLC, Carolina National Transportation, LLC and US 1 Logistics, LLC, net income for the years ended December 31, 2010 and 2009, respectively.  ARL Transport, LLC, Carolina National Transportation, LLC and US 1 Logistics LLC are each 60% owned subsidiaries of the Company.





As a result of the factors outlined above, net income attributed to US 1 Industries, Inc. in 2010 was $1.8 million compared to a net loss attributed to US1 Industries, Inc. of ($2.6 million) in 2009.





2009 Compared to 2008




The Company’s operating revenues for the 2009 fiscal year were $180 million, an increase of $7.0 million, or 4.1%, from operating revenue for the 2008 fiscal year. The increase is largely attributable to the acquisition of ARL in December 2008.  The Operating Subsidiaries experienced a decrease in load volume from various larger customers, which we believe is attributable to the general slowing economy.  This was offset by an increase in volume from the ARL acquisition.  Without the volume of ARL, the Company incurred approximately a 25% decline in revenue on a year over year basis.  However, in December 2008, the Company acquired 60% of ARL Transport, which generated revenues of $50.0 million in 2009.  This, in turn, offset the decline in sales.





Purchased transportation and agent commission expense generally increase or decrease in proportion to the revenue generated through independent contractors.  Many agents negotiate a combined percentage payable for purchased transportation and commission.  Purchased transportation and commissions in total remained consistent at 83.3% of operating revenue in both fiscal 2009 and 2008.  Purchased transportation decreased by 2.0% of operating revenue in fiscal 2009 compared to the same period of time in 2008.  This decrease was offset by in increase in commissions of 2.0% of operating revenues for fiscal 2009 compared to fiscal 2008.  The mix between the amounts of purchased transportation paid versus commissions paid may vary slightly based on agent negotiations with independent owner operators.  In addition, pay on certain types of revenue may be higher than for other types of revenue.  Thus a change in the mix of revenue can cause some variation in the percentage paid out for purchased transportation and commission.  However, in total, commissions and purchased transportation would typically be expected to remain relatively consistent as a percentage of revenue.





One of the Company’s subsidiaries uses employees to staff the terminals rather than independent sales agents.  As a result, this operation has higher operating expenses relative to revenue than the Company’s other operations.  This operation accounted for approximately 15% and 19% of the Company’s consolidated operating revenues in 2009 and 2008, respectively.





Salaries expense is not directly variable with revenue.  However, salaries expense increased in dollar amount from $11.2 million for the fiscal year 2008 to $12.8 million for fiscal year 2009.  The increase in salaries expense is attributable to a $2.1 million increase due to the acquisition of ARL in December 2008 offset by subsidiaries of the Company that have closed offices and restructured the workloads in order to cut costs. Salaries expense is partially fixed and, therefore, as a percentage of revenue, will increase as revenue decreases.




15




Insurance and claims decreased in 2009 to 2.7% of operating revenue compared to 2.9% of operating revenue for 2008.  A majority of the Company’s insurance expense is based on a percentage of revenue and, as a result, will tend to 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 0.2% decrease in the percentage of operating revenue represented by insurance and claims between 2009 and 2008 can be attributed to favorable claims experienced for the fiscal year 2009.  The Company obtains some of its auto liability and cargo insurance from AIFE, an affiliated entity (see Note 6 to consolidated financial statements).





Other operating expenses increased to 6.0% as a percentage of operating revenue for the fiscal year 2009 compared to 4.9% as a percentage of operating revenue for fiscal year 2008.  While not all operating expenses are directly variable with revenues, the increased revenue can directly impact several components of operating expenses.  In the fourth quarter of 2009, the Company recorded a non-cash charge of $3.0 million for the impairment of goodwill related to ARL.  The test as of December 31, 2009 indicated that the book value of ARL exceeded the fair value of the business.  The impairment increased operating expenses by 1.7% of operating revenue.  The Company incurred additional rent expense in 2009 due to the ARL acquisition of approximately $0.6 million and the start up of a new operation under its Patriot division of $0.4 million.





Based on the changes in revenue and expenses discussed above, operating income decreased $5.5 million from 2008 to 2009.  For the year ended December 31, 2009, the Company had an operating loss of (0.7%) of operating revenues compared to income of 2.4% of operating revenues for 2008.





Interest expense increased $0.5 million from $0.2 million for the year ended December 31, 2008 to $0.7 million for the year ended December 31, 2009.  This increase in interest expense is primarily attributable to an increase in outstanding borrowings related to the ARL acquisition in December 2008. Under the amended line of credit agreement, the interest rate is based upon certain financial covenants and may range from “One Month LIBOR” plus 3.35% to “One Month LIBOR” plus 4.35%.  As of December 31, 2009 the interest rate on this line of credit was 4.60%.





Other income includes income from rental property, storage and equipment usage fees.  Other income remained consistent at 0.1% of operating revenues for the years ended December 31, 2009 and 2008.





Federal and state income tax expense increased $0.7 million from ($0.1 million) for the year ended December 31, 2008 to $0.6 million for the year ended December 31, 2009.  The Company had  carry-forwards of approximately $1.2 million as of December 31, 2009.  The Company’s effective tax rate differed from the statutory rate primarily due to the impact of state income taxes and the non-deductible goodwill impairment in 2009 and a reduction in the valuation reserve related to net operating loss carryforwards in 2008.  Assuming that the Company’s business returns to historical levels of performance in 2010, the Company will be required to commence paying Federal income tax





The Company also allocated $0.3 million and $1.3 million of income to the noncontrolling interest holders relating to their portion of its subsidiaries’, ARL Transport, LLC, Carolina National Transportation, LLC and US 1 Logistics, LLC, net income for the years ended December 31, 2009 and 2008, respectively.  ARL Transport, LLC, Carolina National Transportation, LLC and US 1 Logistics LLC are each 60% owned subsidiaries of the Company.





As a result of the factors outlined above, net loss attributed to US 1 Industries, Inc. in 2009 was ($2.6 million) compared to net income attributed to US 1 Industries, Inc. of $3.1 million in 2008.




16




Critical Accounting Policies and Estimates




US 1’s financial statements reflect the selection and application of accounting policies, which require management to make significant estimates and assumptions. The Company believes that the evaluation of allowance for doubtful accounts, the estimates related to contingencies and litigation are the more critical accounting policies as they involve more significant estimates and assumptions.





Preparation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions affecting the reported amounts of assets, liabilities, revenues, and expenses and related contingent liabilities. On an on-going basis, the Company evaluates its estimates, including those related to revenues, bad debts, income taxes, valuation of goodwill and intangible assets, contingencies and litigation. The Company bases its estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions.





The Company records an allowance for doubtful accounts based on (1) specifically identified amounts that it believes to be un-collectable and (2) an additional allowance based on certain percentages of its aged receivables, which are determined based on historical collection experience and (3) our assessment of the general financial conditions affecting our customer base.  At December 31, 2010, the allowance for doubtful accounts was $1.4 million or approximately 4.4% of total trade accounts receivable.  If actual collections experience changes, revisions to the Company’s allowance may be required. After reasonable attempts to collect a receivable have failed, the receivable is written off against the allowance. In addition, US 1 reviews the components of other receivables, consisting primarily of advances to drivers and agents, and writes off specifically identified amounts that it believes to be un-collectable.





Revenue for freight is recognized upon delivery.  The Company accounts for its revenue on a gross basis in accordance with Accounting Standard Codification (“ASC”) 605-45, “Revenue Recognition- Principal Agent Consideration.”  Amounts payable for purchased transportation, commissions and insurance are accrued when incurred.  The Company, and its subsidiaries, follow guidance of this standard and record revenues at the gross amount billed to customers because the Company (1) determined it operates as the primary obligor, (2) typically is responsible for damages to goods and (3) bears the credit risk.





The Company and its subsidiaries are involved in litigation in the normal course of its business. Management intends to vigorously defend these cases. In the opinion of management, any negative outcome from litigation now pending will not have a material adverse affect on the consolidated financial statements of the Company.  Management evaluates the likelihood of a potential loss from the various litigation matters on a quarterly basis.  When it is probable that a loss will occur from litigation and the amount of the loss can be reasonably estimated, the loss is recognized in the Company's financial statements. If a potential loss is not determined to be both probable and reasonably estimated, but there is at least a reasonable possibility that a loss may be incurred, the litigation is not recorded in the Company's financial statements but this litigation is disclosed in the footnotes of the financial statements.





Deferred income taxes are recognized for the tax consequences of “temporary differences” by applying enacted statutory rates applicable to future years to differences between the financial statements carrying amounts and the tax basis of existing assets and liabilities.  The Company establishes a valuation allowance when it determines it is more likely than not that future tax benefits related to the deferred tax assets will not be realized. The Company has no valuation allowance as of December 31, 2010 as it is considered more likely than not that the deferred tax assets will be fully utilized based on our current expectations of future taxable income. At December 31, 2010 and 2009, the Company has a net deferred tax asset of approximately $1.8 million and $2.1 million, respectively.





In December 2008, the Company completed the acquisition of a 60% membership interest in ARL, LLC. As a result of this acquisition, the Company recorded intangible assets of approximately $3.7 million and goodwill of approximately $4.8 million. The identifiable intangible asset relates primarily to relationships with established independent agents and is being amortized over its expected life of 7 years.




17




Goodwill represents the purchase price in excess of the fair value of net assets acquired in business combinations. ASC 350-20, “Goodwill and Other Intangible Assets”, requires the Company to assess goodwill for impairment at least annually in the absence of an indicator of possible impairment and immediately upon an indicator of possible impairment.   Currently, all goodwill is related to our 60% owned subsidiary ARL and this subsidiary is determined to be the reporting unit at which the goodwill is evaluated for impairment.  The Company’s annual impairment assessment date is December 31st. As part of the annual impairment, the Company estimates the fair value of the reporting unit. The determination of fair value is subject to various judgmental assumptions including assumptions about future cash flows and growth rates. We use our internal forecasts, customer and industry projections of demand and other market information, as well as the current cost of delivery to estimate future cash flows. If the ARL reporting unit does not meet our performance expectations, we may be required to record goodwill impairment charges in the future.





As of December 31, 2010, our net book value (i.e., shareholders’ equity) was approximately $20.3 million, and our market capitalization was approximately $16.4 million.  We believe that, when assessing whether an asset impairment may exist, the difference between the net book value and market capitalization as of December 31, 2010 is reasonable when market-based control premiums are applied and in light of the volatility in the economy and equity markets throughout 2010.  As of the date of the Merger, the market capitalization and the consideration paid to the shareholders approximated our net book value.  We believe this situation supports our conclusion that there are no additional 2010 impairments.





Liquidity and Capital Resources





During fiscal 2010, the Company’s financial position improved as shareholders’ equity increased by approximately $2.9 million from $17.4 million at December 31, 2009 to $20.3 million at December 31, 2010.





Net cash provided by operating activity decreased $2.2 million from $5.9 million for the year ended December 31, 2010 to $3.7 million for the year ended December 31, 2010.  Non-working capital provided $6.4 million for the year ended December 31, 2010 compared to $3.5 million for the year ended December 31, 2009.  The Company experienced an increase in net income of $4.4 million from ($2.6) million for the twelve months ended December 31, 2009 to $1.8 million for the twelve months ended December 31 2010.





Working capital items used cash of ($2.7) million during fiscal 2010 compared to providing cash of $2.4 million during fiscal 2009. The increase in cash used is attributable to the increase in accounts receivable associated with the Company’s increase in revenue at the Company’s non-wholly owned operations, locations, and new offices.  During fiscal 2009 the Company used its line of credit to fund the payment of certain liabilities of ARL.





The Company, through its subsidiaries, makes advances under other receivables to owner operators and agents in the normal course of business.  Generally the largest contributor to change in other receivables is owner operator advances associated with the daily operations of the Company.  These advances are typically collected each week during the settlement process.  Owner operator settlements are the weekly process of paying for the loads which have been completed. The advances do not earn interest.  The balance of these advances remained consistent at $4.4 million for the year ended December 31, 2010 and December 31, 2009, respectively.





Activity from Other Receivables provided cash of $0.2 million during fiscal 2010 compared to using cash of $0.2 million during fiscal 2009.  Generally other receivables primarily consist of owner operator advances associated with the daily operations of the Company.  Advances are generally issued to provide the owner operators with the fuel and other resources needed to complete the movement of a load or multiple loads.  These advances are issued and collected on a weekly cycle and the balances are affected by the timing of the advance as well as the settlement of the owner operator where the advance is collected back.  Owner operator settlements are the weekly process of paying for the loads which have been completed.




18




Activity from Notes Receivable provided cash of $0.1 million during fiscal 2010 compared to $0.5 million during fiscal 2009.  The Company, through its subsidiaries, periodically makes advances under notes receivable to certain agents and owner operators in the normal course of business.  Notes may be issued for a number of reasons but typically to provide capital for business expansion, this is main reason for material changes in the balance of notes receivable.  For the period ending December 31, 2010 gross disbursements for notes receivable were $0.7 million and $1.3 million for the same period of time in 2009, respectively.  For the period ending December 31, 2010 the gross receipts for notes receivable were $0.9 million and $1.0 million for the period ending December 31, 2009, respectively.





The Company, and its subsidiaries, experienced an increase in accounts receivable of $5.4 million for the year ended December 31, 2010.  This increase is largely due to an increase in revenue attributable to increases in load volume.





Accounts payable provided cash of $1.2 million for the year ended December 31, 2010 compared to the same period of time in 2009 where accounts payable used ($0.4) million in cash.  For the year ended December 31, 2008 the Company’s accounts payable used $6.9 million associated with the pay down of ARL trade payables after its acquisition.





Net cash used in investing activities was $0.2 million for the year ended December 31, 2010 compared to $0.4 million for the year ended December 31, 2009. Net cash used in investing activities increased for the year ended December 31, 2009 primarily due to the acquisition of ARL, a 60% membership interest (the "Membership Interest") in ARL Transport, LLC ("ARL"). The activity for the year ended December 31, 2010 was primarily due to the ARL Earnout agreement.





On December 18, 2008, the Company completed its acquisition of ARL.  Prior to the completion of the transaction, ARL, acquired substantially all of the assets of, and assumed certain liabilities of, ARL, Inc. and Aficionado Transport, Inc. Pursuant to the terms of the Membership Purchase Agreement by and among the Company, ARL, Inc., Aficionado Transport, Inc. and Ronald K. Faherty (the "Agreement"), the Company paid approximately $1.59 million at closing for the Membership Interest.   ARL also consolidated a variable interest entity in which ARL was the primary beneficiary and guarantor of certain debt of the related entity. ARL has evaluated its contractual and economic relationships with Stoops Ferry, LLC (“Stoops”) and has concluded that Stoops is a variable interest entity.  ARL had also concluded that it is the primary beneficiary of Stoops, in that ARL absorbed a majority of Stoops’ expected losses and/or, received a majority of Stoops’ expected residual returns, as a result of contractual or other financial interests in Stoops.  Accordingly, ARL was consolidating the assets, liabilities, equity and financial results of Stoops in the Company’s combined financial statements.  Stoops had total assets of approximately $0.4 million at December 31, 2009. Total liabilities for Stoops were approximately $1.2 million at December 31, 2009.  During 2010, the debt that ARL guaranteed significantly decreased.  As a result, Stoops was deconsolidated. The net assets, including goodwill of $0.2 million, and retain earnings were removed from the Company’s financial statements accordingly.  The impact of this deconsolidation was not material to the Company’s financial statements.





Net cash used in financing activities was $3.5 million for the year ended December 31, 2010 compared to $5.6 million used in financing activities for the year ended December 31, 2009.  The bank overdraft used net cash of $0.7 million for the year ended December 31, 2010 compared to using cash of $1.5 million for the year ended December 31, 2009.  For the year ended December 31, 2010, net repayments under the lines of credit were $1.3 million, compared to $1.7 million for 2009.  For the year ended December 31, 2010, the Company distributed $1.3 million to the minority shareholders of the Company’s non-wholy owned subsidiaries, Carolina National Transportation, LLC. and US1 Logistics, LLC compared to $0.9 million for the same period in 2009 to minority shareholders.





The Company and its subsidiaries have a $17.5 million line of credit that was amended on September 28, 2010.  The amendment included (1) an extension of the maturity date from October 1, 2010 to October 1, 2011, (2) a modification of the interest rate to LIBOR plus 3.35%, (3) a modification of the provision for the minimum debt service ratio to deduct nonrecurring and non-cash gains from the numerator, and, (4) the deletion of Unity Logistics Services Inc. (“Unity”) and ERX, Inc. (“ERX”) as part of the borrowing entity.  This line of credit matures on October 1, 2011.  Historically the revolving line of credit has been extended prior to maturity and management anticipates that this will occur in 2011.  Advances under this revolving line of credit are limited to 75% of eligible accounts receivable.  Unused availability under the amended line of credit was $9.3 million at December 31, 2010.     The Company’s accounts receivable, property, and other assets are collateral under the agreement.  Borrowings up to $3.0 million are guaranteed by the Chief Executive Officer and Chief Financial Officer of the Company. At December 31, 2010, the outstanding borrowings on this line of credit were $8.2 million.




19




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.  As of December 31, 2010, financial covenants include: minimum debt service ratio, maximum total debt service coverage ratio, limits on capital expenditures, prohibition of dividends and distributions that would put the Company out of compliance, and prohibition of additional indebtedness without prior authorization.  At December 31, 2010, the Company, and its subsidiaries were in compliance with these financial covenants.





The balance outstanding under this line of credit agreement is classified as a current liability at December 31, 2010 and 2009.  Historically the revolving line of credit has been extended prior to maturity.





On January 15, 2009, the Company and its subsidiaries entered into a no cost Interest Rate Swap Agreement with U.S. Bank effective February 2, 2009 through February 1, 2012.  This agreement is in the notional amount of $10.0 million from February 2, 2009 through January 31, 2010, then $7.0 million from February 1, 2010 through January 31, 2011, then $4.0 million from February 1, 2011 to February 1, 2012.  The agreement provides for the Company to pay interest at an annual rate of 1.64% times the notional amount of the swap agreement, and U.S. Bank pay interest at the LIBOR rate times the notional amount of the swap.  The Company did not enter into this agreement for speculative purposes.  The Company recorded the fair value of the interest rate swap resulting in interest expense of approximately $0.20 million for the fiscal year 2010.  The fair value of the interest rate swap was minimal at December 31, 2010.




The Company’s primary sources of liquidity consist of cash on hand generated through operations and availability under the line of credit agreement.  The Company believes these sources are sufficient to operate its business and meet its obligations.




Environmental Liabilities





Neither the Company nor its subsidiaries is a party to any Super-fund litigation and does not have any known environmental claims against it.





Inflation





Changes in freight rates charged by the Company, and its subsidiaries, to their 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, and its subsidiaries, will be affected primarily by changes in the 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.





Recently Issued Accounting Standards




ASC 605-25—In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-13 for updated revenue recognition guidance under the provisions of ASC 605-25, “Multiple-Element Arrangements”. The previous guidance has been retained for criteria to determine when delivered items in a multiple-deliverable arrangements should be considered separate units of accounting, however the updated guidance removes the previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting. This guidance is effective for fiscal years beginning on or after June 15, 2010. The Company does not expect that the adoption of this guidance will have a material effect on the Company’s consolidated results of operations, financial position or cash flows.




20




ASC 815—In March 2010, the FASB issued ASU 2010-11, “Scope Exception Related to Embedded Credit Derivatives” to address questions that have been raised in practice about the intended breadth of the embedded credit derivative scope exception in paragraphs 815-15-15-8 through 815-15-15-9 of ASC 815, “Derivatives and Hedging”.  The amended guidance clarifies that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of subordination of one financial instrument to another. This guidance is effective on July 1, 2010 for the Company.  The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.





Off-Balance Sheet Arrangements




Some of the Company's subsidiaries obtained their auto liability and cargo insurance from AIFE. For the years ended December 31, 2010, 2009, and 2008, cash paid to AIFE for insurance premiums and deductibles, excluding bobtail and physical damage premiums, was approximately $2.8 million, $2.9 million, and $3.6 million, respectively. 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 each of the years ended December 31, 2010, 2009, and 2008, respectively.  The Company currently accounts for a significant percentage of the premium revenue of AIFE.





The Company has no other off-balance sheet arrangements that potentially could be material.





Contractual Obligations and Commitments





We had the following contractual obligations and commitments for debt and non-cancelable lease payments:


Total


Less than one year


1-3 years


3-5 years


More than 5 yearsRevolving line of credit

$
8,247,745


$
8,247,745


$
-


$
-


$
-Debt (1)


224,157



188,076



28,440



7,641



-Interest on long term debt (2)


3,420



1,780



1,561



79Operating leases


3,837,738



684,088



490,983



451,824



2,210,843Total (3)

$
12,313,060


$
9,121,689


$
520,984


$
459,544


$
2,210,843





(1)
Balances include obligations under capital leases


(2)
Interest epense assumes the balances of long term debt at the end of the period and current effective interest rates


(3)
We have not committed to any significant current or long term purchase obligations for our operations and have no other long term liabilities reflected on our balance sheet under GAAP.





Item 7A.  Quantitative and Qualitative Disclosures about Market Risk




Interest Rate Risk





The Company and its subsidiaries have a revolving line of credit with U.S. Bank which currently bears interest at the “One Month LIBOR” rate plus 3.35%  (at December 31, 2010 the interest rate was 3.66%).  The interest rate was based on certain financial covenants.  A one percentage point change in the LIBOR rate would result in approximately $0.1 million in additional expense annually.




On January 15, 2009, the Company and its subsidiaries entered into a no cost Interest Rate Swap Agreement with U.S. Bank effective February 2, 2009 through February 1, 2012.  This agreement is in the notional amount of $10.0 million from February 2, 2009 through January 31, 2010, then $7.0 million from February 1, 2010 through January 31, 2011, then $4.0 million from February 1, 2011 to February 1, 2012.  The agreement provides for the Company to pay interest at an annual rate of 1.64% times the notional amount of the swap agreement, and U.S. Bank pay interest at the LIBOR rate times the notional amount of the swap.  The Company did not enter into this agreement for speculative purposes.  The Company recorded the fair value of the interest rate swap resulting in interest expense of approximately $0.20 million for the fiscal year 2010.  The fair value of the interest rate swap was minimal at December 31, 2010.




21




Item 8.  Financial Statements and Supplementary Data





Report of Independent Registered Public Accounting Firm





Board of Directors and Shareholders


US 1 Industries, Inc.


Valparaiso, Indiana




We have audited the accompanying consolidated balance sheets of US 1 Industries, Inc. and Subsidiaries as of December 31, 2010 and 2009 and the related consolidated statements of operations, shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2010.  In connection with our audits of the financial statements, we have also audited the financial statement schedule listed in the accompanying index under Item 15(a) (2). These financial statements and schedule are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements and schedule based on our audits.




We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements and schedule.  We believe that our audits provide a reasonable basis for our opinion.




In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of US 1 Industries, Inc. at December 31, 2010 and 2009, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2010, in conformity with accounting principles generally accepted in the United States of America.




Also, in our opinion, the financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly, in all material respect, the information set forth therein.




/s/ BDO USA, LLP


Chicago, Illinois


March 31, 2011




22




US 1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


DECEMBER 31, 2010 AND 2009





ASSETS





December 31, 2010


December 31, 2009Accounts receivable-trade, less allowances for doubtful accounts of $1,436,000 and $1,147,000, respectively

$
30,885,654


$
26,614,970Other receivables, including receivables due from affiliated entities of $277,000 and $861,000, respectively


4,404,394



4,427,027Prepaid expenses and other current assets


1,486,692



1,623,808Current deferred income tax asset


384,244



975,178Total current assets


37,160,984



33,640,983FIXED ASSETS:Land


195,347



195,347Equipment


1,733,513



2,748,270Less accumulated depreciation and amortization


(974,133
)


(1,353,102
)Net property and equipment


954,727



1,590,515Non-current deferred income tax asset


1,392,038



1,107,575Notes receivable - long term


695,214



833,651Intangible assets, net


2,046,030



2,812,672Goodwill


1,609,047



1,780,639Other assets


126,461



126,461Total Assets

$
43,984,501


$
41,892,496





The accompanying notes are an integral part of the consolidated financial statements.




23




US 1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED BALANCE SHEETS


DECEMBER 31, 2010 AND 2009





LIABILITIES AND SHAREHOLDERS' EQUITY





December 31, 2010


December 31, 2009CURRENT LIABILITIES:Revolving line of credit

$
8,247,745


$
9,592,474Bank overdraft


989,121



1,628,383Current portion of capital lease obligation


-



30,246Current portion of long-term debt


188,076



642,413Accounts payable


10,347,854



9,538,918Insurance and claims


1,813,142



1,435,924Other accrued expenses


2,112,026



1,410,098Total current liabilities


23,697,964



24,278,456LONG-TERM DEBT, less current portion


36,081



146,878CAPITAL LEASE, less current portion


-



56,241SHAREHOLDERS'  EQUITY:Common stock, authorized 20,000,000 shares: no par value; 14,838,657 shares issued at December 31, 2010, and December 31, 2009, respectively


46,988,026



46,978,349Treasury stock, 595,248 shares at both December 31, 2010 and December 31, 2009, respectively


(952,513
)


(952,513
)Accumulated deficit


(26,962,573
)


(28,835,952
)Total US 1 Industries, Inc. shareholders' equity


19,072,940



17,189,884Noncontrolling Interests


1,177,516



221,037Total equity


20,250,456



17,410,921Total liabilities and shareholders' equity

$
43,984,501


$
41,892,496





The accompanying notes are an integral part of the consolidated financial statements.




24




US 1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF OPERATIONS


YEARS ENDED DECEMBER 31, 2010, 2009, AND 2008





2010


2009


2008OPERATING REVENUES

$
210,751,131


$
179,732,469


$
172,674,648OPERATING EXPENSES:Purchased transportation


145,153,870



123,253,896



121,927,791Commissions


31,907,540



26,335,793



21,955,155Insurance and claims


5,905,342



4,906,089



5,027,980Salaries, wages and other


12,435,144



12,839,752



11,188,362Other operating expenses


9,955,506



10,695,691



8,397,332Impairment of Goodwill


-



3,000,000



-Total operating expenses


205,357,402



181,031,221



168,496,620OPERATING INCOME (LOSS)


5,393,729



(1,298,752
)


4,178,028NON-OPERATING (EXPENSE) INCOMEInterest income


153,956



79,263



28,827Interest expense


(551,474
)


(732,345
)


(159,141
)Other income (expense)


3,253



213,437



215,842Total non operating (expense) income


(394,265
)


(439,645
)


85,528NET INCOME (LOSS) BEFORE INCOME TAXES


4,999,464



(1,738,397
)


4,263,556Income tax (expense) benefit


(994,062
)


(590,429
)


107,238NET INCOME (LOSS)


4,005,402



(2,328,826
)


4,370,794Income attributable to noncontrolling interest


2,232,951



257,486



1,312,954NET INCOME (LOSS) ATTRIBUTABLE TO US 1 INDUSTRIES, INC.

$
1,772,451


$
(2,586,312
)

$
3,057,840Basic and Diluted Net Income (Loss) per Common Share Attributable to US 1 Industries, Inc.

$
0.12


$
(0.18
)

$
0.21Weighted Average Shares OutstandingBasic


14,243,409



14,243,409



14,243,409Diluted


14,303,922



14,243,409



14,243,409





The accompanying notes are an integral part of the consolidated financial statements.




25




US 1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY


YEARS ENDED DECEMBER 31, 2010, 2009, and 2008





TotalUS1 Industries, Inc.Common Stock


Treasury


Accumulated


Shareholders'


NoncontrollingShares


Amount


Shares


Amount


Deficit


Equity


InterestsBalance at December 31, 2007


14,838,657



46,920,288



(595,248
)


(952,513
)


(29,307,480
)


16,660,295



569,047Distribution to noncontrolling interests


























(1,035,558
)Net Income


















3,057,840



3,057,840



1,312,954Balance at December 31, 2008


14,838,657



46,920,288



(595,248
)


(952,513
)


(26,249,640
)


19,718,135



846,443Stock compensation expense






58,061















58,061



-Distribution to noncontrolling interests


























(882,892
)Net (Loss) Income


















(2,586,312
)


(2,586,312
)


257,486Balance at December 31, 2009


14,838,657


$
46,978,349



(595,248
)

$
(952,513
)

$
(28,835,952
)

$
17,189,884


$
221,037Stock compensation expense






9,677















9,677



-Deconsolidation of VIE


















100,928



100,928



55,527Distribution to noncontrolling interests






















-



(1,331,999
)Net Income


















1,772,451



1,772,451



2,232,951Balance at December 31, 2010


14,838,657


$
46,988,026



(595,248
)

$
(952,513
)

$
(26,962,573
)

$
19,072,940


$
1,177,516





The accompanying notes are an integral part of the consolidated financial statements.




26




US 1 INDUSTRIES, INC. AND SUBSIDIARIES


CONSOLIDATED STATEMENTS OF CASH FLOWS


YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008





2010


2009


2008CASH FLOWS FROM OPERATING ACTIVITIES:Net Income (Loss)

$
4,005,402


$
(2,328,826
)

$
4,370,794Adjustments to reconcile net income (loss) to net cash provided by operating activitiesDepreciation and amortization


947,742



1,549,878



258,758Impairment of goodwill


-



3,000,000



-Loss (Gain) on disposal of fixed assets


(3,412
)


54,174



(16,586
)Stock compensation expense


9,677



58,061



--



-



485,119Provision for bad debts


1,141,873



1,090,240



1,820,202Deferred income tax expense (benefit)


306,471



83,160



(731,113
)Changes in operating assets and liabilities excluding business acquisition:Accounts receivable - trade


(5,438,520
)


2,349,447



2,805,640Other receivables


191,788



242,806



(274,004
)Notes receivable


138,437



480,744



(407,199
)Prepaid expenses and other current assets


101,561



605,665



(33,704
)Accounts payable


1,197,496



(378,373
)


(6,938,067
)Insurance and claims payable


377,218



(400,467
)


142,433Other accrued expenses


701,929



(461,701
)


(263,900
)Net cash provided by (used in) operating activities


3,677,662



5,944,808



1,218,373CASH FLOWS FROM INVESTING ACTIVITIES:Additions to equipment


(45,185
)


(335,075
)


(219,040
)Proceeds from sales of fixed assets


38,000



14,650



34,750Other


-



(40,192
)


(100,000
)Acquisition of ARL


(217,306
)


-



(1,882,348
)Net cash used in investing activities


(224,491
)


(360,617
)


(2,166,638
)CASH FLOWS FROM FINANCING ACTIVITIES:Net repayments under the line of credit


(1,344,729
)


(1,720,216
)


(321,352
)Change in bank overdraft


(663,953
)


(1,462,230
)


2,335,570Capital lease payments


-



(77,584
)


(5,396
)Principal payments of long term debts


(112,490
)


(1,441,268
)


(25,000
)Distributions to noncontrolling interests


(1,331,999
)


(882,892
)


(1,035,557
)Net cash (used in) provided by financing activities


(3,453,171
)


(5,584,190
)


948,265NET CHANGE IN CASH


-



-



-CASH, BEGINNING OF YEAR


-



-



-CASH, END OF YEAR

$
-


$
-


$
-SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATIONCash paid for interest

$
558,396


$
743,805


$
207,580Cash paid for income taxes

$
171,143


$
698,606


$
584,912





In December 2008, ARL, LLC, a 60% owned subsidiary of the Company acquired a business from an officer in exchange for the assumption of approximately $ 0.5 million of debt. As the value of the net assets acquired was determined to be nominal, the Company recorded compensation expense of approximately $0.5 million for the debt assumed in this transaction.  As previously disclosed, effective January 1, 2010, the Company deconsolidated Stoops Ferry.  As a result, the net assets, including goodwill of $0.2 million, and retained earnings were removed from the financial statements accordingly.





The accompanying notes are an integral part of the consolidated financial statements.




27





US 1 INDUSTRIES, INC. AND SUBSIDIARIES


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


YEARS ENDED DECEMBER 31, 2010, 2009 AND 2008





1.           OPERATIONS





US1 Industries, Inc. (the Company), through its subsidiaries, is primarily an interstate truckload carrier of general commodities, which uses independent agents and owner-operators to contract for and haul freight for its customers in 48 states.  No one agent accounted for more than 10% of the Company’s operating revenue for the years ended December 31, 2010, 2009 and 2008.  The Company, through its subsidiaries, shipped freight for approximately 1,000 customers in 2010, none of which accounted for more than 10% of the Company's revenues.





On December 18, 2008, the Company completed its acquisition of a 60% membership interest (the "Membership Interest") in ARL Transport, LLC ("ARL"). Prior to the completion of the transaction, ARL, acquired substantially all of the assets of, and assumed certain liabilities of, ARL, Inc. and Aficionado Transport, Inc. Pursuant to the terms of the Membership Purchase Agreement by and among the Company, ARL, Inc., Aficionado Transport, Inc. and Ronald K. Faherty (the "Agreement"), the Company paid approximately $1.59 million at closing for the Membership Interest.   ARL also consolidated a variable interest entity in which ARL was the primary beneficiary and guarantor of certain debt of the related entity. ARL has evaluated its contractual and economic relationships with Stoops Ferry, LLC (“Stoops”) and has concluded that Stoops is a variable interest entity.  ARL had also concluded that it was the primary beneficiary of Stoops, in that ARL absorbed a majority of Stoops’ expected losses and/or, received a majority of Stoops’ expected residual returns, as a result of contractual or other financial interests in Stoops.  Accordingly, ARL was consolidating the assets, liabilities, equity and financial results of Stoops in the Company’s combined financial statements.  Stoops had total assets of approximately $0.8 million at December 31, 2008 and $0.4 million at December 31, 2009. Total liabilities for Stoops were approximately $1.2 million at December 31, 2008 and $0.9 million at December 31, 2009.





In January 1, 2010 the Company adopted the provisions of ASU No. 2009-17, Consolidations: Improvements to Financial Reporting by Enterprises Involved with Variable Interest Entities, which requires reporting entities to evaluate former qualifying special purpose entities for consolidation, changes the approach to determining a VIE’s primary beneficiary from a quantitative assessment to a qualitative assessment designed to identify a controlling financial interest, and increases the frequency of required reassessments to determine whether a company is the primary beneficiary of a VIE. It also clarifies, but does not significantly change, the characteristics that identify a VIE. However, as a result, the Company concluded that Stoops Ferry, LLC no longer qualifies for consolidation into ARL; the net assets, including goodwill, and retained earnings were removed from the Company’s financial statements accordingly.  The impact of this deconsolidation was not material to the Company’s financial statements.





2.           RECLASSIFICATIONS





Certain reclassifications have been made to the previously reported 2009 and 2008 financial statements to conform to the 2010 presentation.





3.           SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES





Principles of Consolidation—The consolidated financial statements include the accounts of US 1 Industries, Inc. and its majority owned subsidiaries.  All intercompany accounts and transactions have been eliminated.





Fair Value of Financial Instruments—The carrying amount of cash and cash equivalents, accounts receivable and accounts payable approximate fair value due to the short-term nature of these instruments. The carrying amount of outstanding borrowings approximates fair value as a variable interest rate is charged on the outstanding balance.




28




Allowance for Doubtful Accounts—The subsidiaries record an allowance for doubtful accounts based on specifically identified amounts that they believe to be uncollectible.  The Company also records an additional allowance based on percentages of aged receivables, which are determined based on historical collections experience and an assessment of the general financial conditions affecting its customer base.  If actual collections experience changes, revisions to the allowance may be required.  After all attempts to collect a receivable have failed, the receivable is written off against the allowance.





Revenue Recognition— Revenue for freight is recognized upon delivery. The Company accounts for its revenue in accordance with Emerging Issues Task Force (“EITF”) 99-19, “Reporting Revenue Gross as a Principal Versus Net as an Agent,” which was primarily codified into ASC topic 605, “Revenue Recognition”. Amounts payable for purchased transportation, commissions and insurance are accrued when incurred.  The Company follows guidance of this standard and records revenues at the gross amount billed to customers because the Company (1) determined it operates as the primary obligor, (2) typically is responsible for damages to goods and (3) bears the credit risk.





Fixed Assets—Fixed assets are stated at cost and depreciated using the straight-line method over the estimated useful lives of the related assets, which range from three to eight years.





Long-Lived Assets—The Company assesses the realizability of its long-lived assets including finite lived intangible assets in accordance with ASC 810-10 -  “Accounting for the Impairment or Disposal of Long-Lived Assets The Company reviews long-lived assets for impairment when circumstances indicate that the carrying amount of an asset may not be recoverable based on the undiscounted future cash flows of the asset.  No impairment was necessary as of December 31, 2010, 2009 and 2008.





Goodwill— Goodwill represents the purchase price in excess of the fair value of net assets acquired in business combinations. ASC 350-20, “Goodwill and Other Intangible Assets”, requires the Company to assess goodwill for impairment at least annually in the absence of an indicator of possible impairment and immediately upon an indicator of possible impairment.   All goodwill is related to our 60% owned subsidiary ARL and this subsidiary is determined to be the reporting unit at which the goodwill is evaluated for impairment.  The Company’s annual impairment assessment date is December 31st. As part of the annual impairment assessment, the Company estimates the fair value of the reporting unit. The determination of fair value is subject to various judgmental assumptions including assumptions about future cash flows and growth rates. We use our internal forecasts, customer and industry projections of demand and other market information, as well as the current cost of delivery to estimate future cash flows. If the ARL reporting unit does not meet our performance expectations, we may be required to record goodwill impairment charges in the future, in addition to the charges recorded in 2009.





Accounting Estimates—The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the dates of financial statements and the reported amounts of revenues and expenses during the reporting periods.  Actual results could differ from those estimates.





Income Taxes—Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date.  Beginning with the adoption of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes,included in FASB ASC Subtopic 740-10 - Income Taxes - Overall, the Company recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.




29




Earnings Per Common Share—The Company computes earnings per share under ASC 260-10,  “Earnings Per Share”,  The statement requires presentation of two amounts, basic and diluted earnings per share.  Basic earnings per share are computed by dividing income attributable to US 1 Industries, Inc.’s common stockholders by the weighted average common shares outstanding.  Dilutive earnings per share would include all dilutive common stock equivalents.  The diluted earnings per share exclude the effect of 0.2 million, 0.3 million, and 0.3 million outstanding stock options as of December 31, 2010, 2009, and 2008, respectively.  The inclusion of these options would be antidilutive.





Business Segments—ASC 280-10, “Disclosures about Segments of an Enterprise and Related Information”, requires public enterprises to report certain information about reporting segments in financial statements.  As the Company’s operating segments exhibit similar economic characteristics and meet the aggregation criteria of ASC 280-10, they are reported in one segment.





Recent Accounting Pronouncements




ASC 605-25—In October 2009, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2009-13 for updated revenue recognition guidance under the provisions of ASC 605-25, “Multiple-Element Arrangements”. The previous guidance has been retained for criteria to determine when delivered items in a multiple-deliverable arrangements should be considered separate units of accounting, however the updated guidance removes the previous separation criterion that objective and reliable evidence of fair value of any undelivered items must exist for the delivered items to be considered a separate unit or separate units of accounting. This guidance is effective for fiscal years beginning on or after June 15, 2010. The Company does not expect that the adoption of this guidance will have a material effect on the Company’s consolidated results of operations, financial position or cash flows.




ASC 815—In March 2010, the FASB issued ASU 2010-11, “Scope Exception Related to Embedded Credit Derivatives” to address questions that have been raised in practice about the intended breadth of the embedded credit derivative scope exception in paragraphs 815-15-15-8 through 815-15-15-9 of ASC 815, “Derivatives and Hedging”.  The amended guidance clarifies that the scope exception applies to contracts that contain an embedded credit derivative that is only in the form of subordination of one financial instrument to another. This guidance is effective on July 1, 2010 for the Company.  The adoption of this guidance is not expected to have a material impact on the Company’s consolidated financial position, results of operations or cash flows.





4.  ACQUISITIONS





On December 18, 2008, the Company completed the acquisition of a 60% membership interest in ARL for $1.59 million.  In addition, the prior shareholder of ARL can receive up to an additional $2.9 million in cash consideration if ARL achieves certain revenue and earnings goals through 2012. During 2010 additional consideration of $0.2 million was earned and only $1.5 million remains available to be earned. Should the revenue and earnings goals be achieved for the period through 2012 the cash consideration payments would be recorded as additional purchase consideration in the year earned in accordance with ASC 805-30.  The acquisition was recorded using the purchase method of accounting, and on the date of the acquisition, the Company assessed the fair value of the acquired assets and assumed liabilities and allocated purchase price accordingly.





30





The assets acquired and liabilities assumed are as follows:





Accounts receivable

$
9,688,022Other accounts receivable


1,542,041Other current assets


1,116,978Property and equipment


1,245,669Intangible asset – agent relationships


3,636,000Goodwill


4,756,943Total assets acquired


21,985,653Lines of credit


(10,017,885
)Accounts payable and accrued expenses


(8,199,016
)Capital lease obligations


(156,700
)Long-term debt


(1,729,704
)Total liabilities assumed


(20,103,305
)Net assets acquired


1,882,348Less acquisition costs


(292,348
)Cash paid for purchase price

$
1,590,000





The Company has allocated $3.6 million of the ARL purchase price to agent relationships which is an identifiable intangible asset with a finite life, currently estimated at 7 years. At the date of the acquisition of ARL, the book value attributable to the noncontrolling interest shareholder was a deficit, which the shareholder was not required to fund.  As a result, the noncontrolling interest at the date of the acquisition was recorded at zero and the amount allocated to goodwill was increased by the deficit attributable to the noncontrolling interest.  The resulting goodwill recorded on the date of the acquisition was approximately $4.8 million.




The Company’s fourth quarter 2009 annual evaluation for goodwill impairment indicated an impairment of the goodwill for four of the Company’s reporting units. As a result, the Company estimated the implied fair value of the goodwill of these reporting units compared to carrying amounts and recorded total impairment charges of $3.0 million at December 31, 2009 to impair a portion of the goodwill recorded on these reporting units. The decrease in the fair value of the reporting units was due to deteriorating market conditions resulting from the global economic downturn. No impairment of goodwill was identified related to the Company’s other reporting units. No additional impairment was recorded in the year ended December 31, 2010 or prior to 2009. As of December 31, 2010, the Company has an aggregate amount of Goodwill acquired of $1.6 million after the deconsolidation of $0.2 million of goodwill from Stoops Ferry.  The aggregate amount of impairment losses recognized was $3.0 million.





Unaudited pro forma results of operations for the years ended December 31, 2008 for the Company assuming the acquisition of ARL had taken place on January 1, 2007 are as follows:




31




4. ACQUISITIONS - proforma table




Year Ended December 31,

2008RevenueAs Reported

$
172,674,648Pro-forma


238,305,310Net Income attributable to US 1 Industries, Inc.As Reported


3,057,840Pro-forma


1,136,961Basic and Diluted Earning Per Share attributable to US 1 Industries, Inc.As Reported


0.21Pro-forma


0.08





The carrying value of the ARL agent relationships were as follows:





December 31, 2010


December 31, 2009Agent relationships

$
3,736,000


$
3,736,000Accumulated amortization


(1,689,970
)


(923,328
)Intangible assets, net

$
2,046,030


$
2,812,672





Intangible assets amortization expense for 2010, 2009 and 2008 was $766,642, $923,328 and $0, respectively.





Estimated annual amortization expense for these intangibles is as follows:





Year ending December 31,2011


631,5352012


551,5472013


436,3662014


280,1872015


146,395Thereafter


-Total

$
2,046,030





5.  NOTES RECEIVABLE





The Company, through its subsidiaries, makes advances under notes receivable to certain agents and owner operators in the normal course of its business.  These notes bear interest at rates ranging from 0% to 13.0% with weekly payments ranging from approximately $125 - $8,333. Maturity on these notes receivable ranges from June 2011 through September 2015.  The balance of these notes was approximately $1.4 million and $1.5 million at December 31, 2010 and December 31, 2009, respectively.  The current portion of these notes receivable was approximately $0.7 million and $0.7 million at December 31, 2010 and December 31, 2009, respectively, and is classified in other receivables.  There are 24 notes outstanding as of December 31, 2010.




32




6.  RELATED PARTY TRANSACTIONS




One of the Company’s subsidiaries provides safety, management, and accounting services to companies controlled by the Chief Executive Officer and Chief Financial Officer of the Company.  These services are priced to cover the cost of the employees providing the services.  Charges related to those services were approximately $0.05 million, $0.04 million and $0.06 million in 2010, 2009, and 2008, respectively. Other receivables due from entities affiliated through common ownership were $0.3 million and $0.9 million as of December 31, 2010 and 2009.





One of the insurance providers to the Operating Subsidiaries, American Inter-Fidelity Exchange (AIFE), is managed by Lex Venditti, a director of the Company. AIFE provides liability and cargo insurance to several subsidiaries of the Company as well as other entities, some of which are related to the Company by common ownership. For the years ended December 31, 2010, 2009 and 2008, cash paid to AIFE for insurance premiums and deductibles, excluding bobtail and physical damage insurance to the independent owner operators, was approximately $2.8 million, $2.9 million, and $3.6 million, respectively.





The subsidiaries exercised no control over the operations of AIFE. As a result, the Company recorded its investment in AIFE under the cost method of accounting for each of the three years in the period ended December 31, 2010. 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 years ended December 31, 2010, 2009 and 2008.





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 any of the three years in the period ended December 31, 2010. The Company’s subsidiaries currently account for a significant percentage of the premiums of AIFE.





For the years ended December 31, 2010, 2009 and 2008, a subsidiary insurance agency of the Company, recorded commission income of $0.4 million, $0.7 million and $0.7 million, respectively,  related to premiums with AIFE.  This commission income is reflected as a reduction of insurance expense in the consolidated financial statements of the Company for the years ended December 31, 2010, 2009 and 2008, respectively.





In addition, the Chief Executive Officer and a director of the Company, the Chief Financial Officer and a director of the Company, as well as another director of the Company, are the sole 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.  AIFE incurred management fees of approximately $0.5 million for the year ended December 31, 2010 and $0.5 million for each of the years ended December 31, 2009, and 2008, respectively.  These management fees are available to be paid as dividends to these officers and directors of the Company.





In 2010, 2009 and 2008, the Company paid consulting fees of $0.06 million, $0.05 million and $0.03 million, respectively, to two of its directors, relating to insurance and other services.





7.  LEASES




Operating Leases




The Company leases its administrative offices in Indiana from an independent owner under an operating lease expiring on March 31, 2012.





In addition, the Company’s subsidiaries lease office space and land in Arkansas, California, Florida, Georgia, Indiana, Missouri, Mississippi, North Carolina, Ohio, Pennsylvania, South Carolina, Tennessee, and Texas, under operating leases ranging from one to fourteen years.





Rent expense under these operating leases was $1.4 million, $2.0 million, and $1.0 million for the years ended December 31, 2010, 2009, and 2008, respectively.


33




Future commitments under these operating leases are as follows:





2011


684,0882012


265,0712013


225,9122014


225,9122015


225,9122016-2025


2,210,8433,837,738





8.  BANK LINE OF CREDIT




The Company and its subsidiaries have a $17.5 million line of credit that was amended on September 28, 2010.  The amendment included (1) an extension of the maturity date from October 1, 2010 to October 1, 2011, (2) a modification of the interest rate to LIBOR plus 3.35%, (3) a modification of the provision for the minimum debt service ratio to deduct nonrecurring and non-cash gains from the numerator, and, (4) the deletion of Unity Logistics Services Inc. (“Unity”) and ERX, Inc. (“ERX”) as part of the borrowing entity.  This line of credit matures on October 1, 2011.  Historically the revolving line of credit has been extended prior to maturity and management anticipates that this will occur in 2011.  Advances under this revolving line of credit are limited to 75% of eligible accounts receivable.  Unused availability under the amended line of credit was $9.3 million at December 31, 2010.   The Company’s accounts receivable, property, and other assets are collateral under the agreement.  Borrowings up to $3.0 million are guaranteed by the Chief Executive Officer and Chief Financial Officer of the Company. At December 31, 2010, the outstanding borrowings on this line of credit were $8.2 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.  As of December 31, 2010, financial covenants include: minimum debt service ratio, maximum total debt service coverage ratio, limits on capital expenditures, prohibition of dividends and distributions that would put the Company out of compliance, and prohibition of additional indebtedness without prior authorization.  At December 31, 2010, the Company, and its subsidiaries were in compliance with these financial covenants.





The balance outstanding under this line of credit agreement is classified as a current liability at December 31, 2010 and 2009.  Historically the revolving line of credit has been extended prior to maturity.





On January 15, 2009, the Company and its subsidiaries entered into a no cost Interest Rate Swap Agreement with U.S. Bank effective February 2, 2009 through February 1, 2012.  This agreement is in the notional amount of $10.0 million from February 2, 2009 through January 31, 2010, then $7.0 million from February 1, 2010 through January 31, 2011, then $4.0 million from February 1, 2011 to February 1, 2012.  The agreement provides for the Company to pay interest at an annual rate of 1.64% times the notional amount of the swap agreement, and U.S. Bank pay interest at the LIBOR rate times the notional amount of the swap.  The Company did not enter into this agreement for speculative purposes.  The Company recorded the fair value of the interest rate swap resulting in interest expense of approximately $0.20 million for the fiscal year 2010.  The fair value of the interest rate swap was minimal at December 31, 2010.




9.   LONG TERM DEBT





As a part of the ARL acquisition, certain equipment notes payable were assumed with monthly payments at varying rates and interest at rates ranging from 3.5%-14.3%.  All of the long-term debt is collateralized by the property and equipment associated with the debt.  In fiscal year 2009, of this total debt, $0.5 million relates to a Variable Interest Entity, “Stoops Ferry”, of which $0.4 million was current.


As of January 1, 2010, Stoops is no longer consolidated with the Company’s financial statements.




34




Long-term debt consists of the following at December 31, 2010:





2011

$
188,0762012


14,2202013


14,2202014


7,641$
224,157





10.  EQUITY TRANSACTIONS




During 2008 and 2009, the Company had 300,000 outstanding options to purchase common stock, which have been excluded from the calculation of diluted earnings per share because the effect would be anti-dilutive.




(a) In December 2008, as part of the acquisition of ARL, the Company granted two employees a total of 300,000 options to purchase shares of common stock at an exercise price of $0.80 per share. For the year ended December 31, 2010 further calculations were performed to determine share options earned based on certain criteria. For fiscal year 2010 and 2009, approximately 75,000 and 18,930 options were forfeited due to ARL not meeting certain criteria in the purchase agreement.  As of December 31, 2010, the options available to purchase common stock totaled 206,070.   These options have an exercise price of $.80 per share.  These options vest over 4 years: however 150,000 options vested early in 2009 due to one employee’s termination.  All options expire by December 18, 2018.  The fair value of these options of $0.1 million was calculated using a Black Scholes model with the following assumptions:





Dividend yield


0.0
%Risk-free rate


2.7
%Volatility


44
%Expected life (years)


7





The fair value is being expensed over the vesting period with $10,000 recorded in 2010, $60,000 recorded in 2009 and the remainder to be recorded through 2012. The Company has no other options or warrants to purchase common stock outstanding as of December 31, 2010, 2009 or 2008.





11. INCOME TAXES





The composition of income tax expense (benefit) is as follows:





December 31,

2010


2009


2008Current

$
687,591


$
507,269


$
1,806,240Deferred


306,471



83,160



(722,366
)Benefit from operating loss carry-forward


-



-



(1,182,365
)Adjustment of valuation allowance


-



-



(8,747
)$
994,062


$
590,429


$
(107,238
)





The following summary reconciles income taxes at the maximum federal statutory rate, based upon (loss) income before income taxes after deducting income attributable to noncontrolling interests, with the effective rates for 2010, 2009, and 2008:




35




December 31,

2010


2009


2008Income tax expense at statutory rate

$
930,426


$
(678,600
)

$
1,033,000State income tax expense, net of federal tax benefit


109,171



331,226



323,879Adjustment of valuation allowance


-



-



(1,191,112
)Non-deductible goodwill impairment


-



803,760Permanent differences


44,200



134,043



(273,005
)Other


(89,735
)


-



-$
994,062


$
590,429


$
(107,238
)





December 31,

2010


2009Deferred tax assetsCumulative basis difference in 60% owned LLCs

$
711,938


$
580,311AMT credit carryforward


-



349,274Accounts receivable reserves


322,044



239,687Insurance accruals


62,200



64,717Net operating losses


-



313,676Fixed assets


12,146



23,339Intangible assets


667,954



503,926Other


-



7,823Total deferred tax assets


1,776,282



2,082,753Less long-term portion


(1,392,038
)


(1,107,575
)Current Deferred Tax Asset

$
384,244


$
975,178





At December 31, 2010 and 2009, the Company has realized a net deferred tax asset of $1.8 million and $2.1 million respectively.  In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. Taxable income/(losses) for the years ended December 31, 2010,  2009, and 2008 was $4.9 million, ($7.million), and $4.3 million, respectively. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more likely than not that the Company will realize the benefits of these deductible differences. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced.





The Company had net operating loss carry-forwards of approximately $0.8 million at December 31, 2009.  These carry-forwards were available to offset taxable income in future years.   The Company also had an AMT credit carryforward of $0.3 million available to reduce federal income tax. The NOL’s and AMT credits were fully utilized in 2010.





The Company accounts for uncertain tax positions pursuant to ASC 740, “Accounting for Income Taxes” on January 1, 2007, and recorded the cumulative effect of a change in accounting principle by recording an increase in the liability for uncertain tax positions of $0.7 million that was accounted for as a credit to opening retained earnings. The liability for uncertain tax positions and related interest and penalties at December 31, 2010, 2009, and 2008 totaled $0.7 million, of which $0.3 million relates to interest and penalties.  This liability is recorded in the Company’s balance sheet in accrued expenses. No uncertain tax position reserves were reversed or settled during 2010 or 2009.  The entire amount of this consolidated liability for uncertain tax positions would affect the Company’s effective tax rate upon favorable resolution of the uncertain tax positions.  Absent new experience in defending these uncertain tax positions in the various jurisdictions to which they relate, the Company cannot currently estimate a range of possible change of the December 31, 2010 liability over the next twelve months.




36




The Company files a consolidated U.S. income tax return and tax returns in various state and local jurisdictions.  In the U.S., all tax years from 2007 through the present are subject to tax authority audits.  In various states and local jurisdictions all tax years from 2007 through the present are subject to tax authority audits.





Interest and penalties related to tax positions taken in the Company’s tax returns are recorded in income tax expense in the consolidated statements of operations.





12.  COMMITMENTS AND CONTINGENCIES




Litigation




The Company and its subsidiaries are involved in certain litigation in the normal course of its business. Management intends to vigorously defend these cases. In the opinion of management, the other litigation now pending will not have a material adverse affect on the consolidated financial statements of the Company.





Merger





On February 18, 2011, US 1 Industries, Inc., an Indiana corporation (the “Company”), entered into an Agreement and Plan of Merger with Trucking Investment Co. Inc., an Indiana corporation (“TIC”), US 1 Merger Corp., an Indiana corporation and direct, wholly-owned subsidiary of TIC (“Merger Sub”), Harold E. Antonson (“Antonson”) and Michael E. Kibler (“Kibler”). At the effective time of the Merger, TIC will be directly owned by Antonson (the Chief Financial Officer of the Company and member of the Board of Directors of the Company) and Kibler (the President and Chief Executive Officer of the Company and member of the Board of Directors of the Company – the Company shareholders who have previously submitted proposals to the Company’s Board of Directors (the “Board”) to take the Company private.





The Merger Agreement provides that Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation as a direct, wholly-owned subsidiary of TIC (the “Merger”), and that each issued and outstanding share of Company Common Stock immediately prior to the effective time of the Merger (other than shares owned by the Company, TIC, Merger Sub and shares owned by shareholders who have perfected and not withdrawn a demand for appraisal rights under Indiana law) will automatically be canceled and converted into the right to receive $1.43 per share in cash, without interest (the “Merger Consideration”). Options that are issued and outstanding immediately prior to the effective time of the Merger will be canceled and converted into the right to receive cash.





The Company expects that the closing of the Merger will occur in the second quarter of 2011, subject to regulatory approvals and other customary closing conditions, including TIC obtaining debt financing on the terms set forth in the debt financing commitment letter it has received and the adoption of the Merger Agreement and approval of the Merger by the holders of a majority of the issued and outstanding shares of Company Common Stock.  TIC has been advised by US Bancorp that it believes that it will be able to fund the purchase price for the shares that are acquired. The Merger Agreement contains a “no-shop” provision, which restricts the Company’s ability to solicit, discuss or negotiate competing proposals.





Other





In October 2006, the Company and the President of Patriot entered into an agreement under which the Company granted the individual the option to purchase 100% of the outstanding stock of Patriot for a purchase price equal to the book value of Patriot. This option to purchase Patriot currently terminates in October 2011 or upon a change in control of the Company. The option is immediately exercisable and may be exercised in whole (not in part) at any time prior to October 2011.  The fair value of this option was reevaluated at December 31, 2010, and was determined to be deminimis.  Patriot’s revenue for the years ended December 31, 2010, 2009 and 2008 were $25.5 million, $26.4 million, and $33.1 million, respectively. Patriot had pre-tax income of $0.26 million, $0.28 million and $0.59 million for the years ended December 31, 2010, 2009 and 2008, respectively.





37





US1 INDUSTRIES, INC.


VALUATION AND QUALIFYING ACCOUNTS


YEARS ENDED DECEMBER 31, 2008, 2009, AND 2010





Schedule II


Balance at


Charged to


Write-Offs,Beginning of


Costs and


Retirements &


Balance atDescription

Year


Expenses


Recoveries


End of YearYear Ended December 31, 2008Allowance for Doubtful Accounts Receivable

$
1,237,000


$
1,529,678


$
1,406,678
(2)

$
1,360,000Allowance for Doubtful Other Receivables

$
212,453


$
290,322


$
(6,634
)

$
509,409Valuation Reserve for Deferred Taxes

$
1,191,112


$
(1,191,112
)(1)

$
-


$
-Year Ended December 31, 2009Allowance for Doubtful Accounts Receivable

$
1,360,000


$
881,055


$
1,094,055


$
1,147,000Allowance for Doubtful Other Receivables


509,409



208,945



718,354


$
-Year Ended December 31, 2010Allowance for Doubtful Accounts Receivable

$
1,147,000


$
685,300


$
396,300


$
1,436,000Allowance for Doubtful Other Receivables


-



456,700



456,700


$
-





(1)
Includes benefit from utilization of net operating losses and change in deferred taxes.


(2)
Amount is net of a $169,000 allowance for doubtful accounts related to accounts receivable acquired in a December 2008 business combination.





Item 9.  Changes in and Disagreements with Accountants on Accounting and Financial Disclosure




None.





Item 9A.  Controls and Procedures




The Company and its subsidiaries maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company's Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating the disclosure controls and procedures, management recognized that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating the cost-benefit relationship of possible controls and procedures.




38




As required by SEC Rule 13a-15(b), the Company carried out an evaluation, under the supervision and with the participation of the Company's management, including the Company's Chief Executive Officer and the Company's Chief Financial Officer, of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this report. Based on the foregoing, the Company's Chief Executive Officer and Chief Financial Officer concluded that the Company's disclosure controls and procedures were effective.





Management’s Annual Report on Internal Control Over Financial Reporting





Our management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company. Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America. Internal control over financial reporting includes policies and procedures for maintaining records that in reasonable detail accurately and fairly reflect our transactions; providing reasonable assurance that transactions are recorded as necessary for the preparation of our financial statements; providing reasonable assurance that receipts and expenditures of the Company are made in accordance with management authorization; and providing reasonable assurance that unauthorized acquisition, use or disposition of Company assets that could have a material effect on our financial statements would be prevented or detected on a timely basis. Because of inherent limitations, internal control over financial reporting is not intended to provide absolute assurance that a misstatement of our financial statements would be prevented or detected.





Management, including the Company’s Chief Executive Officer and the Company’s Financial Officer, conducted an evaluation of the effectiveness of the internal controls over financial reporting based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.





Management assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2010.  Based on management’s assessment and those criteria, management believes that the internal control over financial reporting was effective.





Changes in Internal Control Over Financial Reporting





There were no changes in our internal control over financial reporting during the quarter ended December 31, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.





Item 9B.  Other Information





Submission of Matters to a Vote of Security Holders




On November 26, 2008, the Company held an Annual Meeting of Shareholders to elect five (5) directors to constitute the Board of Directors and to approve the reverse/forward/stock split.  The nominees for director included Mr. Harold Antonson, Mr. Brad James, Mr. Michael Kibler, Mr. Robert Scissors, and Mr. Lex Venditti.  All of the nominees were elected as directors for US1 Industries, Inc. and will hold their position until the next Annual Meeting and until their successors are elected and qualified.





On February 18, 2011, US 1 Industries, Inc., an Indiana corporation (the “Company”), entered into an Agreement and Plan of Merger with Trucking Investment Co. Inc., an Indiana corporation (“TIC”), US 1 Merger Corp., an Indiana corporation and direct, wholly-owned subsidiary of TIC (“Merger Sub”), Harold E. Antonson (“Antonson”) and Michael E. Kibler (“Kibler”). At the effective time of the Merger, TIC will be directly owned by Antonson (the Chief Financial Officer of the Company and member of the Board of Directors of the Company) and Kibler (the President and Chief Executive Officer of the Company and member of the Board of Directors of the Company – the Company shareholders who have previously submitted proposals to the Company’s Board of Directors (the “Board”) to take the Company private.




39




The Merger Agreement provides that Merger Sub will be merged with and into the Company, with the Company continuing as the surviving corporation as a direct, wholly-owned subsidiary of TIC (the “Merger”), and that each issued and outstanding share of Company Common Stock immediately prior to the effective time of the Merger (other than shares owned by the Company, TIC, Merger Sub and shares owned by shareholders who have perfected and not withdrawn a demand for appraisal rights under Indiana law) will automatically be canceled and converted into the right to receive $1.43 per share in cash, without interest (the “Merger Consideration”). Options that are issued and outstanding immediately prior to the effective time of the Merger will be canceled and converted into the right to receive cash.





The Company expects that the closing of the Merger will occur in the second quarter of 2011, subject to regulatory approvals and other customary closing conditions, including TIC obtaining debt financing on the terms set forth in the debt financing commitment letter it has received and the adoption of the Merger Agreement and approval of the Merger by the holders of a majority of the issued and outstanding shares of Company Common Stock.  TIC has been advised by US Bancorp that it believes that it will be able to fund the purchase price for the shares that are acquired. The Merger Agreement contains a “no-shop” provision, which restricts the Company’s ability to solicit, discuss or negotiate competing proposals.





Part III





Item 10.  Directors, Executive Officers and Corporate Governance





DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT




40




The directors and executive officers of the Company as of March 18, 2011 were as follows:





NAME

AGE

POSITIONMichael E. Kibler

70

President, Chief Executive Officer, and DirectorHarold E. Antonson

71

Chief Financial Officer, Treasurer, and DirectorLex Venditti

58

DirectorRobert I. Scissors

77

DirectorBrad James

55

DirectorWalter Williamson

76

Director





Name

Office and ExperienceMichael E. Kibler

Mr. Kibler is President and Chief Executive Officer of the Company and has held these positions since September 13, 1993 and has been a director since 1993. He also has been President of Enterprise Truck Lines, Inc., an interstate trucking company engaging in operations similar to the company's, since 1972. Mr. Kibler is a partner of August Investment Partnership and is also a shareholder of American Inter-Fidelity Corporation, the attorney-in-fact of AIFE, an entity that provides auto liability and cargo insurance to the Company.Harold E. Antonson

Mr. Antonson is Chief Financial Officer of the Company, a position he has held since March 1998. Mr. Antonson is a certified public accountant.  Prior to joining the Company, he was Secretary/Treasurer of AIFE.  Mr. Antonson is also a partner in August Investment Partnership.  Mr. Antonson was elected a director and Treasurer of the Company in November 1999.  Mr. Antonson is also a shareholder of American Interfidelity Corporation, the attorney-in-fact of AIFE, an affiliated entity that provides auto liability and cargo insurance to the Company.Lex Venditti

Mr. Venditti has served as a director of the Company since 1993. Mr. Venditti is the General Manager of AIFE, an insurance reciprocal located in Indiana.  Mr. Venditti is also a shareholder of AIFC, the attorny-in-fact of AIFE, an entity that provides auto liability and cargo insurance to the Company.Robert I. Scissors

Mr. Scissors has been a director of the Company since 1993.  Mr Scissors began his career in the Insurance Industry in 1957.  In 1982, Mr. Scissors joined a brokerage firm called Alexander/Alexander where he worked untill retiring in 1992.  Mr. Scissors currently works as an insurance consultant and broker.Brad James

Mr. James is the President of Seagate Transportation Services, Inc. since 1982.  Mr. James graduated from Bowling Green University with a Bachelors Degree in Business Administration.  He has been in the trucking industry since 1977.  Mr. James was elected a director of the Company in 1999.Walter Williamson

Mr. Williamson became a director of the Company in 2009. Mr. Williamson has been in the trucking industry since 1955. He was President of Land Container, a trucking company engaging in operations similar to the Company's, from 1990 to 2008.





There are no family relationships between any director or executive officer of the Company.




41




Code of Ethics




The Company has adopted a Code of Ethics that applies to Mr. Kibler, the Chief Executive Officer and Mr. Antonson, the Chief Financial Officer, a copy of which was filed as Exhibit 14.1 to the Company’s 2003 Form 10-K.





Audit Committee and Audit Committee Financial Expert




The Company has an audit committee consisting of Lex Venditti, Robert Scissors and Walter Williamson. The Company’s Board of Directors has determined that Mr. Venditti is an “audit committee financial expert” as defined under SEC rules. However, because of his position as general manager of AIFE and as a shareholder of American Inter-Fidelity Corporation, Mr. Venditti is not considered an independent director as defined under Rule 10A-3(b) of the Exchange Act. In addition, Mr. Scissors receives fees for consulting services provided to the Company and is also not considered an independent director.





The audit committee is responsible for selecting the Company’s independent auditors and approving the scope, fees and terms of all audit engagements and permissible non-audit services provided by the independent auditor, as well as assessing the independence of the Company’s independent auditor from management. The audit committee also assists the Board in oversight of the Company’s financial reporting process and integrity of its financial statements, and also reviews other matters with respect to the Company’s accounting, auditing and financial reporting practices as it may find appropriate or may be brought to its attention.





Compliance with Section 16(a) of the Exchange Act




Section 16(a) of the Securities Exchange Act of 1934 requires the Company’s directors, executive officers and persons who own more than 10% of the outstanding common stock of the Company to file with the Securities and Exchange Commission reports of changes in ownership of the common stock of the Company held by such persons.  Officers, directors and greater than 10% shareholders are also required to furnish the Company with copies of all forms they file under this regulation.  There were no late filings during 2010.  To the Company’s knowledge based solely on a review of the copies of such reports furnished to the Company, and representations that no other reports were required, during the year ended December 31, 2010, all Section 16(a) filing requirements applicable to its officers, directors and greater than 10% shareholders were complied with.





Director Nomination Procedures




The Company will consider nominations for directors submitted by shareholders of the Company.  Shareholders who wish to make a nomination for director should send the name and biographical information with respect to such nominee to the Secretary of the Company along with a certification by such nominee that he or she will serve as a director of the Company if elected.  There have not been any changes to this process in the past year.





Item 11.  Executive Compensation





Overview of Executive Compensation Program





The Company does not have a formalized program for determining executive compensation.  Any executive compensation changes are taken before the Board of Directors for approval.  In general, our executive officers receive compensation consisting of a salary and on occasion, there have been stock bonuses issued.  Executive officers participate in the same group health insurance program as the Company’s full-time employees.  The Company has not used, nor intend to use, an outside consultant in connection with making compensation decisions.




42




Objectives of Compensation Program




The Company’s compensation of executive officers is intended to provide requisite compensation to the Chief Executive Officer (“CEO”) and the Chief Financial Officer (“CFO”).  Because the CEO and CFO are large shareholders of the Company, the CEO and CFO should be motivated to act in the best interest of the Company.





Current Executive Officers




The Company currently has two executive officers, Michael Kibler, our CEO, and Harold Antonson, our CFO.





The following Summary Compensation Table sets forth compensation paid by the Company during the years ended December 31, 2010, 2009 and 2008 to Mr. Michael E. Kibler, Chief Executive Officer and Mr. Harold Antonson, Chief Financial Officer, where applicable.  No other executive officer of the Company earned in excess of $0.1 million.





Summary Compensation TableName and Position

Year

Salary


Stock

Awards


All Other

Compensation


TotalMichael Kibler

Chief Executive officer

2010

$
100,100








$
100,1002009

$
104,000



-



-


$
104,0002008

$
97,315



-



-


$
97,315Harold Antonson

Chief Financial Officer

2010

$
100,100










$
100,1002009

$
96,000



-



-


$
96,0002008

$
97,419



-



-


$
97,419





Option exercises and option values




No stock options have been issued to Mr. Michael E. Kibler, Chief Executive Officer or Mr. Harold Antonson, Chief Financial Officer for the years ended December 31, 2010, 2009 or 2008 and they hold no such options as of December 31, 2010.





Compensation of Directors




Directors who are also employees of the Company receive no additional compensation for their services as directors.  In 2010 and 2009, the Company paid consulting fees of $0.06 million and $0.05 million to Walter Williamson and Robert Scissors, two directors of the Company.  No other compensation was paid to our non-executive board members during 2010, 2009 or 2008.  The Company will reimburse its directors for travel expenses and other out-of-pocket costs incurred in connection with the Company’s board of directors’ meetings.





Compensation Committee




The Company does not have a compensation committee.





The current members of the Board of Directors (Harold Antonson, Brad James, Michael Kibler, Robert Scissors, Lex Venditti and Walter Williamson) participated in deliberation concerning the Company’s executive officer compensation, although the Chief Financial Officer, Harold Antonson and Chief Executive Officer, Michael Kibler abstain from all votes.  There are no compensation committee interlocks.




43




Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters




Security Ownership of Management




The following table sets forth the number and percentage of shares of Common Stock that as of March 18, 2011 are deemed to be beneficially owned by each director of the Company and director nominee, by each executive officer of the Company and by all directors and executive officers of the Company as a group.





Name of Beneficial Owner

Number of Shares of

Common Stock

Beneficially Owned


Perentage of Class (1)Harold E. AntonsonChief Financial Officer, Treasurerand Director


5,268,592
(1)


35.5
%Michael E. KiblerDirector, President andChief Executive Officer


5,053,923
(1)(5)


34.1
%Brad A. James Director


166,981
(2)


1.1
%Robert I. Scissors


64,770
(3)


*Lex L. Venditti, Director


217,500
(4)


1.5
%All Directors and Executive Officers


8,105,410



56.2
%





* Indicates less than 1% ownership.





(1)
Includes shares held by August Investment Partnership, August Investment  Corporation, Eastern Refrigerated Transport, LLC., Enterprise Truck  Lines, LLC., Seagate Transportation Services, Inc., and American  Inter-Fidelity Exchange, of which Messrs. Kibler and Antonson are either  directors, partners, or significant shareholders or otherwise share the  voting and dispositive authority with respect to these shares.


(2)
Includes shares held by Seagate Transportation Services, Inc., of which Mr. James is a director, partner and significant shareholder. or significant shareholder.


(3)
Includes 11,770 shares held in the Saundra L. Scissors Trust of which Mr. and Mrs. Scissors are joint trustees.


(4)
Includes shares held by American Inter-Fidelity Exchange, of which Mr. Venditti is a director and significant shareholder of the attorney-in-fact.


(5)
Includes shares of 2,676,883 held by the Kibler Family Living Trust of which Mr. Kibler and Linda Kibler are trustees.




44




Security Ownership of Certain Beneficial Owners




The following table sets forth the number and percentage of shares of Common Stock beneficially owned as of March 8, 2011 by any person who is known to the Company to be the beneficial owner of more than five percent of the outstanding shares of Common Stock:





Name and Address

Number of Shares of Commonof Beneficial Owner

Stock Beneficially Owned


Percentage of ClassHarold E. Antonson8400 Louisiana StreetMerrillville, IN 46410


5,268,592
(1)


35.5
%August Investments Partnership8400 Louisiana StreetMerrillville, IN 46410


1,163,606



7.8
%Michael Kibler8400 Louisiana StreetMerrillville, IN 46410


5,053,923
(1)(3)


34.1
%FMR LLC82 Devonshire StreetBoston, MA 02109


1,362,800
(2)


9.6
%





(1)
Includes shares held by August Investment Partnership, August Investment  Corporation, Eastern Refrigerated Transport, Inc., Enterprise Truck Lines, Inc., Seagate Transportation Services, Inc., and American  Inter-Fidelity Exchange, of which Messrs. Kibler and Antonson are either directors, partners, or significant shareholders or otherwise share the voting and dispositive authority with respect to these shares.


(2)
Includes shares held by Fidelity Low-Priced Stock Fund and Fidelity Select Portfolios-Transportation.


(3)
Includes shares of 2,676,883 held by the Kibler Family Living Trust of which Mr. Kibler and Linda Kibler are trustees.





Item 13.  Certain Relationships, Related Transactions, and Director Independence





One of the Company’s subsidiaries provides safety, management, and accounting services to companies controlled by the Chief Executive Officer and Chief Financial Officer of the Company.  These services are priced to cover the cost of the employees providing the services.  Charges related to those services were approximately $0.05 million, $0.04 million and $0.06 million in 2010, 2009, and 2008, respectively. Other receivables due from entities affiliated through common ownership were $0.2 million and $0.9 million as of December 31, 2010 and 2009.





One of the Operating Subsidiaries insurance providers, American Inter-Fidelity Exchange (“AIFE”), is managed by Mr. Venditti, a director of the Company and the Company has an investment of $0.1 million in the provider. AIFE provides auto liability and cargo insurance to several subsidiaries of the Company as well as other entities related to the Company by common ownership. For the years ended December 31, 2010, 2009 and 2008, cash paid to AIFE for insurance premiums and deductibles, excluding bobtail and physical damage premiums for independent owner operators, was approximately $2.8 million, $2.9 million, and $3.6 million, respectively.





The Operating Subsidiaries exercised no control over the operations of AIFE. As a result, the Company recorded its investment in AIFE under the cost method of accounting for each of the three years in the period ended December 31, 2010. 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 years ended December 31, 2010, 2009 and 2008.




45




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 any of the three years in the period ended December 31, 2010. The subsidiaries currently account for majority significant percentage of the premiums of AIFE.





For the years ended December 31, 2010, 2009 and 2008, a subsidiary insurance agency of the Company, recorded commission income of $0.4 million, $0.7 million and $0.7 million, respectively,  related to premiums with AIFE.  This commission income is reflected as a reduction of insurance expense in the consolidated financial statements of the Company for the years ended December 31, 2010, 2009 and 2008, respectively.





In addition, the Chief Executive Officer and a director of the Company, the Chief Financial Officer and a director of the Company, as well as another director of the Company, are the sole 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.  AIFE incurred management fees of approximately $0.5 million for the year ended December 31, 2010 and $0.5 million for each of the years ended December 31, 2009, and 2008, respectively.  These management fees are available to be paid as dividends to these officers and directors of the Company.





In each of 2010, 2009 and 2008, the Company paid consulting fees of $0.06 million, $0.05 million and $0.03 million, respectively, to two of its directors, Robert Scissors and Walter Williamson, relating to insurance and other services.





The Company’s Board of Directors are advised of all related party transactions and reviews these transactions as deemed appropriate.





The Company’s directors are identified in response to Item 10 above. The Company considers Messrs. James and Scissors to be independent.  In making this determination, the Company has applied the NASDAQ definition of independence.





Item 14.  Principal Accountant Fees and Services




The following table shows the fees paid or accrued by the Company for the audit and other services provided by BDO USA, LLP


2010


2009Audit Fees         (1)

$
217,000


$
245,000Tax Fees            (2)

$
-


$
-All Other Fees   (3)

$
-


$
-Total

$
217,000


$
245,000





(1)
Audit fees include fees associated with the annual audit of our consolidated financial statements, audit of internal control over financial reporting for 2009, and  reviews of our quarterly reports on Form 10-Q.


(2)           There were no tax fees.


(3)           There were no other fees.





The Audit Committee must pre-approve audit-related and non-audit services not prohibited by law to be performed by the Company’s independent registered public accounting firm.




46





PART IV





Item 15.  Exhibits and Financial Statement Schedules





(a) (1)  Financial Statements:Report of Independent Registered Public Accounting Firm
22Consolidated Balance Sheets as of December 31, 2010 and 2009
23Consolidated Statements of Operations for the years ended December 31, 2010, 2009, and 2008
25Consolidated Statements of Shareholders' Equity for the years ended December 31, 2010, 2009, and 2008
26Consolidated Statements of Cash Flows  for the years ended December 31, 2010, 2009, and 2008
27Notes to Consolidated Financial Statements
28(a)(2)  Financial Statement Schedules:Schedule of Valuation and Qualifying Accounts
38





Other schedules are not included because of the absence of the conditions under which they are required or because the required information is included in the consolidated financial statements or notes thereto.





(a)(3) List of Exhibits





The following exhibits, numbered in accordance with Item 601 of Regulation S-K, are filed as part of this report:





Exhibit 3.1
Articles of Incorporation of the Company

(incorporated herein by reference to the Company's Proxy  Statement of November 9, 1993)





Exhibit 3.2
By-Laws of the Company

(incorporated herein by reference to the Company's Annual Report on Form 10-K for the year ended December 31, 1994)





Exhibit 10.1
Amended and Restated Loan Agreement with US BANK and Carolina National Transportation Inc., Gulfline Transport Inc., Five Star Transport, Inc., Cam Transport, Inc., Unity Logistic Services, Inc., ERX, Inc., Friendly Transport, Inc., Transport Leasing, Inc., Harbor Bridge Intermodal, Inc., Patriot Logistics, Inc., Liberty Transport, Inc., Keystone Lines Corporation, and US 1 Industries, Inc. (incorporated by reference to the Company’s Form 10-Q for the nine months ended September 30, 2005 filed on November 11, 2005)





Exhibit 10.2
Amendment to Amended and Restated Loan Agreement with US BANK and Carolina National Transportation Inc., Gulfline Transport Inc., Five Star Transport, Inc., Cam Transport, Inc., Unity Logistic Services, Inc., ERX, Inc., Friendly, Transport, Inc., Transport Leasing, Inc., Harbor Bridge Intermodal, Inc., Patriot Logistics, Inc., Liberty Transport, Inc., Keystone Lines Corporation, and US 1 Industries, Inc. (incorporated by reference to the Company’s Form 10-Q for the nine Months ended September 30, 2005 filed on November 11, 2005)




47




Exhibit 10.3
Second Amendment to Amended and Restated Loan Agreement with US BANK and Carolina National Transportation Inc., Gulfline Transport Inc., Five Star Transport, Inc., Cam Transport, Inc., Unity Logistic Services, Inc., ERX, Inc., Friendly, Transport, Inc., Transport Leasing, Inc., Harbor Bridge Intermodal, Inc., Patriot Logistics, Inc., Liberty Transport, Inc., Keystone Lines Corporation, and US 1 Industries, Inc. (incorporated by reference to the  Company’s Form 10-Q for the nine months ended September 30, 2005 filed on November 11, 2005)





Exhibit 10.4
Amendment to Amended and Restated Loan Agreement with US BANK and Carolina National Transportation LLC, Gulfline Transport Inc., Five Star Transport, Inc., Cam Transport, Inc., Unity Logistic Services, Inc., ERX, Inc., Friendly, Transport, Inc., Transport Leasing, Inc., Harbor Bridge Intermodal, Inc., Patriot Logistics, Inc., Liberty Transport, Inc., Keystone Lines Corporation, TC Services, Inc., Freedom Logistics, LLC, Thunderbird Logistics, LLC, Thunderbird Motor Express, LLC, US1 Logistics, LLC, and US 1 Industries, Inc. .(incorporated by reference to the Company’s Form 10-Q for the six months ended June 30, 2007 filed on August 14, 2007)





Exhibit 10.5
Amendment to Amended and Restated Loan Agreement with US BANK and Blue and Grey Brokerage, Inc., Cam Transport, Inc., Carolina National Logistics, Inc., Carolina National Transportation, LLC, Five Star Transport, LLC, Friendly Transport, LLC, Gulf Line Transportation, LLC, Harbor Bridge Intermodal Inc., Keystone Lines, Corp., Keystone Logistics, Inc., Liberty Transport, Inc., Patriot Logistics, Inc., Risk Insurance Services, LLC, TC Services, Inc., Transport Leasing, Inc., Unity Logistics Services Inc., and US1 Logistics, LLC. (incorporated by reference to the  Company’s Form 10-Q for the six months ended June 30, 2007 filed on August 14, 2007)





Exhibit 10.6
Amendment to Amended and Restated Loan Agreement with US BANK and Blue and Grey Brokerage, Inc., Cam Transport, Inc., Carolina National Logistics, Inc., Carolina National Transportation, LLC, Five Star Transport, LLC, Friendly Transport, LLC, Gulf Line Transportation, LLC, Harbor Bridge Intermodal Inc., Keystone Lines, Corp., Keystone Logistics, Inc., Liberty Transport, Inc., Patriot Logistics, Inc., Risk Insurance Services, LLC, TC Services, Inc., Thunderbird Logistics, LLC, Thunderbird Motor Express, LLC, Transport Leasing, Inc., Unity Logistics Services Inc., and US1 Logistics, LLC. (incorporated by reference to the  Company’s Form 8-K announcing the completion of the Acquisition or Disposition of Assets filed on December 24, 2008)





Exhibit 10.7
Amendment to Amended and Restated Loan Agreement with US BANK and Blue and Grey Brokerage, Inc., Cam Transport, Inc., Carolina National Logistics, Inc., Carolina National Transportation, LLC, Five Star Transport, LLC, Friendly Transport, LLC, Gulf Line Transportation, LLC, Harbor Bridge Intermodal Inc., Keystone Lines, Corp., Keystone Logistics, Inc., Liberty Transport, Inc., Patriot Logistics, Inc., Risk Insurance Services, LLC, TC Services, Inc., Thunderbird Logistics, LLC, Thunderbird Motor Express, LLC, Transport Leasing, Inc., Unity Logistics Services Inc., and US1 Logistics, LLC. (incorporated by reference to the  Company’s Form 8-K announcing the Sixth Amendment to Amended and Restated Loan Agreement and Eleventh Amendment to Revolving Loan Note with US Bank, US1 Industries, Inc. as filed on July 29, 2009)




48




Exhibit 10.8
Amendment to Amended and Restated Loan Agreement with US BANK and AFT Transport, LLC, ARL Transport, LLC, Cam Transport, Inc., Carolina National Logistics, Inc., Carolina National Transportation, LLC, Five Star Transport, LLC, Friendly Transport, LLC, Gulf Line Transportation, LLC, Harbor Bridge Intermodal Inc., Keystone Lines, Corp., Keystone Logistics, Inc., Liberty Transport, Inc., Patriot Logistics, Inc., Risk Insurance Services, LLC, TC Services, Inc., Thunderbird Logistics, LLC, Thunderbird Motor Express, LLC, Transport Leasing, Inc., Unity Logistics Services Inc., and US1 Logistics, LLC. as filed with the Company’s Form 10-K, this item announces the Seventh  Amendment to Amended and Restated Loan Agreement and Twelfth Amendment to Revolving Loan Note with US Bank, US1 Industries, Inc. as included in the Company’s Form 10-K for the fiscal year ended December 31, 2009.





Exhibit 10.9
Amendment to Amendedand Restated Loan Agreement (“Amendment”), dated as of September 28, 2010 with US BANK and GULF LINE TRANSPORT LLC., an Indiana limited liability company, formerly known as Gulf Line Transport, Inc. (“Gulf Line”); FIVE STAR TRANSPORT, LLC., an Indiana limited liability company, formerly known as Five Star Transport, Inc. (“Five Star”); CAM TRANSPORT, INC., an Indiana corporation (“CAM”); FRIENDLY TRANSPORT, LLC, an Indiana limited liability company, formerly known as Friendly Transport, Inc. (“Friendly”); TRANSPORT LEASING, INC., an Arkansas corporation (“Transport Leasing”); KEYSTONE LINES, a California corporation (“Keystone Lines”); HARBOR BRIDGE INTERMODAL, INC., an Indiana corporation (“Harbor”); PATRIOT LOGISTICS, INC., an Indiana corporation (“Patriot”); LIBERTY TRANSPORT, INC., an Indiana corporation (“Liberty”); KEYSTONE LINES CORP., an Indiana corporation, formerly known as Keystone Lines Corporation (“Keystone”), TC SERVICES, INC., an Indiana corporation (“TC Services”); KEYSTONE LOGISTICS, INC., an Indiana corporation ("Keystone Logistics"); CAROLINA NATIONAL TRANSPORTATION LLC, an Indiana limited liability company ("Carolina National"); CAROLINA NATIONAL LOGISTICS, INC., an Indiana corporation (“Carolina Logistics”); FREEDOM 1 LLC, an Indiana limited liability company, formerly known as Freedom Logistics, LLC ("Freedom"); THUNDERBIRD LOGISTICS, LLC, an Indiana limited liability company ("Thunderbird Logistics"); THUNDERBIRD MOTOR EXPRESS, LLC, an Indiana limited liability company ("Thunderbird Motor"); BLUE & GREY TRANSPORT COMPANY, INC., an Indiana corporation, ("Blue & Grey"); FREIGHTMASTER USA, LLC, an Indiana limited liability company ("Freightmaster"); US 1 CORP., an Indiana corporation ("US 1"); ANTLER TRANSPORT, LLC, an Indiana limited liability company ("Antler"); RISK INSURANCE SERVICES OF INDIANA LLC, an Indiana limited liability company ("Risk"); BRUIN EXPRESS INTERMODAL LLC, an Indiana limited liability company ("Bruin"); US 1 LOGISTICS, LLC, an Indiana limited liability company ("US 1 Logistics") US 1 INDUSTRIES, INC., an Indiana corporation (“Industries”), TC ADMINISTRATIVE SERVICES, INC., a California corporation ("TC"); ARL TRANSPORT LLC, a Delaware limited liability company (“ARL”) and AFT TRANSPORT LLC, a Delaware limited liability company (“AFT”).  (Gulf Line, Five Star, CAM, Risk, Bruin, Friendly, Transport Leasing, Keystone Lines, Harbor, Patriot, Liberty, Keystone, TC Services, Keystone Logistics, Carolina National, Carolina Logistics, Freedom, Thunderbird Logistics, Thunderbird Motor, Blue & Grey, Freightmaster, US 1, Antler, Risk, Bruin, US 1 Logistics, Industries, TC, ARL and AFT are hereinafter each referred to each as a “Borrower Entity”, and collectively as the “Borrower”); and U.S. BANK, a national banking association (“Lender”). This item announces the Eighth Amendment to Amended and  Restated Loan Agreement as filed with the Company’s Form


10-Q for the nine months ended September 30, 2010.




49




Exhibit 10.10
Agreement and Plan of Merger, dated as of February 18, 2011, by and among US1 Industries, Inc., Trucking Investment Co., Inc., US1 Merger Corp., Harold E. Antonson and Michael E. Kibler.





Exhibit 14.1
US 1 Industries, Inc. Code of Ethics (incorporated by reference to the Company’s Form 10-K for the year ended December 31, 2003 filed on March 26, 2005





Exhibit 21.1
Subsidiaries of the Registrant





Exhibit 31.1
Rule 13a-14(a)\15d-14a(a) Certifications





Exhibit 32.1
Section 1350 Certifications





SIGNATURES





Pursuant to the requirements of Sections 13 and 15(d) 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.





Date:  March 31, 2011 US 1 INDUSTRIES, INC.
By:
/s/ Michael E. KiblerMichael E. KiblerPresident & Chief Executive Officer(Principal Executive Officer)Date:  March 31, 2011
By:
/s/ Harold AntonsonHarold AntonsonChief Financial Officer & Treasurer(Principal Financial & Accounting Officer





Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.





Date:  March 31, 2011
/s/ Michael E. KiblerMichael E. Kibler, DirectorDate:  March 31, 2011
/s/ Robert I. ScissorRobert I. Scissors, DirectorDate:  March 31, 2011
/s/ Lex L. VendittiLex L. Venditti, DirectorDate:  March 31, 2011
/s/ Brad JamesBrad James, DirectorDate:  March 31, 2011
/s/ Walter WilliamsonWalter Williamson, DirectorDate:  March 31, 2011
/s/ Harold AntonsonHarold Antonson, Director





50