UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) Form 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the quarterly period ended December 31, 1998
[ ]TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE EXCHANGE ACT
For the transition period from to .
Commission file number 0-1937
OAKRIDGE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
MINNESOTA 41-0843268
(State or other jurisdiction of (I.R.S. Employer
Incorporation or organization) Identification Number)
4810 120TH STREET WEST, APPLE VALLEY, MINNESOTA 55124
(Address of principal executive offices) (Zip Code)
(Issuer's telephone number) (651) 686-5495
_________________________________________________________________
(Former name, former address and former fiscal year,
if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 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. {X}Yes { }No
APPLICABLE ONLY TO CORPORATE ISSUERS
State the number of shares outstanding of each of the issuer's classes of common
equity, as of the latest practicable date:
1,349,670
Transitional Small Business Disclosure Format (Check One):
{ )Yes {X}No
OAKRIDGE HOLDINGS, INC.
FORM 10-QSB
For the quarter ended December 31, 1998
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements:
(a) Condensed Consolidated Balance Sheets as of December 31, 1998
(unaudited) and June 30, 1998
(b) Condensed Consolidated Statements of Operations for the three
months ended December 31, 1998 and 1997 (unaudited) and six months
ended December 31, 1998 and 1997 (unaudited)
(c) Condensed Consolidated Statements of Cash Flows for the six
months ended December 31, 1998 (unaudited) and June 30, 1998
(d) Notes to Condensed Consolidated Financial Statements
ITEM 2. Management s Discussion and Analysis of Financial Condition and
Results of Operations
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
ITEM 2. Changes in Securities and Use of Proceeds
ITEM 3-5. Not Applicable
ITEM 6. Exhibits and Reports on Form 8
SIGNATURES
PART I - FINANCIAL INFORMATION FORM 10-QSB
ITEM 1 - FINANCIAL STATEMENTS
<TABLE>
OAKRIDGE HOLDINGS, INC.
CONSOLIDATED BALANCE SHEET
(UNAUDITED)
<CAPTION>
ASSETS December 31,1998 June 30,1998
________________ ____________
<S> <C> <C>
Cash and cash equivalents $664,302 $823,458
Trade receivable, net of allowance 2,483,953 2,567,392
Inventories:
Production 2,223,082 2,829,142
Cemetery and mausoleum space 654,393 663,791
Markers, urns & flowers 25,188 24,388
Deferred income taxes 161,675 245,000
Other current assets 44,975 10,731
---------- ----------
Total current assets 6,257,568 7,163,902
---------- ----------
Property and equipment 4,127,229 3,632,908
Allowance for depreciation (1,441,541) (1,347,698)
---------- ----------
2,685,688 2,285,210
---------- ----------
Other assets 55,067 60,191
---------- ----------
$8,998,323 $9,509,303
========== ==========
</TABLE>
<TABLE>
<CAPTION>
LIABILITIES December 31,1998 June 30,1998
________________ ____________
<S> <C> <C>
Note payable & current maturities $1,442,910 $2,378,250
Accounts payable 792,280 950,791
Accrued customer deposits 426,660 329,914
Accrued compensation 223,228 469,980
Accrued perpetual care fund 226,574 226,858
Accrued deferred revenue 483,309 452,661
Accrued marker & inscription costs 67,119 98,676
Accrued warranty - 138,883
Income tax payable 164,566 -
Other current liabilities 171,285 140,944
---------- ----------
Total current liabilities 3,997,931 5,186,957
---------- ----------
Long-term debt 3,123,833 3,123,833
---------- ----------
Total liabilities 7,121,764 8,310,790
---------- ----------
STOCKHOLDERS' EQUITY
Common stock additional
paid-in-capital 2,151,468 2,071,468
Accumulated deficit (274,909) (872,955)
---------- ----------
1,876,559 1,198,513
---------- ----------
$8,998,323 $9,509,303
========== ==========
</TABLE>
<TABLE>
OAKRIDGE HOLDINGS, INC.
CONSOLIDATED STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
(UNAUDITED)
<CAPTION>
Three Months Ended December 31, Six Months Ended December 31,
1998 1997 1998 1997
_______________________________ ____________________________
<S> <C> <C> <C> <C>
Revenue, net:
Cemetery $ 612,363 $ 584,152 $1,213,576 $1,265,606
Aviation 2,622,697 - 5,541,875 -
Interest - Care Funds 54,120 42,261 97,497 91,854
Other 133,229 150 136,554 150
---------- ---------- ---------- ----------
Total revenue 3,422,409 626,563 6,989,502 1,357,610
---------- ---------- ---------- ----------
Operating expenses:
Cost of aviation sales 2,181,823 - 4,530,105 -
Cost of cemetery sales 326,820 323,091 648,181 642,012
Sales and marketing 136,416 49,042 272,586 122,885
General and administrative 316,006 144,716 489,299 323,957
---------- ---------- ---------- ----------
Total operating expenses 2,961,065 516,849 5,940,171 1,088,854
---------- ---------- ---------- ----------
Income from operations 461,344 109,714 1,049,331 268,756
Interest expense 102,011 33,104 203,101 35,405
---------- ---------- ---------- ----------
Income from continuing operations
before income taxes 359,333 76,610 846,230 233,351
Provision for income taxes 102,115 20,000 248,184 65,000
---------- ---------- ---------- ----------
Net income 257,218 56,610 598,046 168,351
========== ========== ========== ==========
Net income per common
share - basic $ .190 $ .043 $ .443 $ .129
========== ========== ========== ==========
Weighted average number of common
shares outstanding - basic 1,349,670 1,309,670 1,349,670 1,309,670
========== ========== ========== ==========
Net income per common
share - diluted $ .131 $ .042 $ .302 $ .126
========== ========== ========== ==========
Weighted average number of common
shares outstanding - diluted 2,098,128 1,340,965 2,097,635 1,339,254
========== ========== ========== ==========
</TABLE>
<TABLE>
OAKRIDGE HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
<CAPTION>
Six Months Ended December 31,
1998 1997
_____________________________
<S> <C> <C>
Cash flows from operating activities:
Net income $598,046 $168,351
Adjustments to reconcile net income to
cash flows from operating activities:
Depreciation & Amortization 96,896 35,647
Change in receivables 83,439 146,403
Change in inventories 614,658 (3,063)
Change in deferred income taxes 83,325 -
Change in prepaid and other assets (32,173) 27,146
Change in accounts payable (158,511) 418
Change in accrued liabilities (95,175) (57,621)
---------- ----------
Net cash from operating activities 1,190,505 317,281
---------- ----------
Cash flows from investing activities:
Purchase of property and equipment (494,321) (51,934)
---------- ----------
Net cash from investing activities (494,321) (51,934)
---------- ----------
Cash flows from financing activities:
Repayments on long-term debt (40,993) (21,413)
Repayment on short-term borrowing (894,347) 27,012
Proceeds from issuance of common stock 80,000 -
---------- ----------
Net cash from financing activities (855,340) 5,599
---------- ----------
Net increase (decrease) in cash: (159,156) 270,946
Cash at beginning of period 823,458 382,287
---------- ----------
Cash at end of period $644,302 $653,233
========== ==========
</TABLE>
OAKRIDGE HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
A. BASIS OF PRESENTATION
The condensed consolidated financial statements include the accounts of Oakridge
Holdings, Inc. (the Company ) and its wholly-owned subsidiaries. All
significant intercompany transactions and balances have been eliminated. In the
opinion of management, the accompanying unaudited condensed consolidated
financial statements include all adjustments, consisting only of normal
recurring adjustments, necessary to present such information fairly. Certain
information and footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles have been
condensed or omitted pursuant to Securities and Exchange Commission rules and
regulations. These condensed consolidated financial statements should be read
in conjunction with the consolidated financial statements and related notes
included in the Company s Annual Report on Form 10-KSB for the fiscal year ended
June 30, 1998. Operating results for the six month period ended December 31,
1998 may not necessarily be indicative of the results to be expected for any
other interim period or for the full year.
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 date of the financial statements, and
the reported amounts of revenues and expenses during the reporting period. The
most significant estimates in the financial statements include but are not
limited to accounts receivable, sales, and accruals. Actual results could
differ from those estimates.
The Company adopted Statement of Financial Accounting Standards No. 131 ( SFAS
131") Disclosures about Segments of an Enterprise and Related Information
( SFAS 131"), effective July 1, 1998. SFAS 131 does not need to be applied to
interim financial statements in the initial year of its application, but
comparative information for interim periods in the initial year of application
is to be reported in financial statements for interim periods in the second year
of application. SFAS 131 establishes standards for the way that public business
enterprises report selected information about operating segments in annual
financial statements and requires that those
enterprises report selected information about operating segments in interim
financial reports issued to shareholders. SFAS 131 also establishes standards
for related disclosures about products and services, geographic areas and major
customers. The Company will make the necessary disclosures in conjunction with
the filing of their annual 10-KSB for the year ended June 30, 1999.
The Company s Consolidated Statements of Operations for the six month period
ended December 31, 1998, reflect all components of Comprehensive Income as
defined by SFAS No. 130, Reporting Comprehensive Income. Accordingly, no
separate Consolidated Statement of Comprehensive Income is presented as would
otherwise be required.
B. Reconciliation of Basic and Diluted Shares
Six Months Ended December 31,
1998 1997
---------- ----------
Income from continuing operations $ 598,046 $ 168,351
Average shares of common stock
outstanding used to compute basic
earnings per common share 1,349,670 1,309,670
Additional common shares to be issued
assuming exercise of stock options, and
conversion of convertible debentures 747,965 29,584
Additional income from continuing
operations, assuming conversion of
convertible debentures at the beginning
of the period $36,234 -
Shares used to compute dilutive effect
of stock options and convertible
debentures 2,097,635 1,339,254
Basic earnings per common share
from continuing operations $.443 $.129
Diluted earnings per common share
from continuing operations $.302 $.126
ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
OVERVIEW
Management s Discussion and Analysis of Financial Condition and Results of
Operations, as well as other portions of this document, include certain forward-
looking statements about the Company s business and products, revenues,
expenditures and operating and capital requirements. The Private Securities
Litigation Reform Act of 1995 contains certain safe harbors regarding forward-
looking statements. From time to time, information provided by the Company or
statements made by its directors, officers or employees may contain forward-
looking information subject to numerous risks and uncertainties. Any
statements made herein that are not statements of historical fact are forward-
looking statements including, but not limited to, statements concerning the
characteristics and growth of the Company s markets and customers, the Company s
objectives and plans for the future operations and products and the Company s
expected liquidity and capital resources. Such forward-looking statements are
based on a number of assumptions and involve a number of risks and
uncertainties, and, accordingly, actual results could differ materially.
OAKRIDGE HOLDINGS, INC. AND SUBSIDIARIES
PART I - FINANCIAL STATEMENTS
ITEM 2. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
FINANCIAL CONDITION AND LIQUIDITY
The Company s liquidity needs arise from its acquisition-related activity, debt
service, working capital and capital expenditures. The Company has historically
funded its liquidity needs with proceeds from equity contributions, bank
borrowing, cash flow from operations and the offering of its subordinated
debentures. The Company for the first six months of fiscal year 1999 had a
decrease in cash of $ 159,156 compared to a cash increase in the same period in
fiscal year 1998 of $270,946. As of December 31, 1998, the Company held cash
and cash equivalents of $664,302.
During the six month period ended December 31, 1998, the Company recorded net
income of $598,046. The Company s net cash provided by operating activities was
$1,190,505 in the six months of fiscal year 1999 compared to $317,281 in the
same period in fiscal year 1998. The increase was due to net income of $598,046
and decrease in inventory of $614,658 due to implementing a just in time
inventory method of purchasing for the aviation ground support equipment
company. Cash flows used in investing activities increased $442,387 primarily
due to the paving of roads at the cemetery operations and upgrading the plant
facility of the aviation ground support company . Net cash used in financing
activities increased $855,340 due to the repayment of short term debt incurred
to acquire the aviation ground support equipment business. The remaining
increases and decreases in the components of the Company s financial position
reflect normal operating activity.
The Company continues to maintain a good financial position, with net working
capital of $2,259,637, an increase of $282,692 since June 30, 1998. The increase
was primarily due to repayment of bank borrowing and short term debt less
inventory on hand. Current assets amounted to $6,257,568 and current liabilities
were $3,997,931, resulting in a current ratio of 1.56 to 1, compared with 1.4 to
1 at June 30, 1998. Total liabilities to equity was 3.8 to 1 at December 31,
1998 compared to 6.9 to 1 at June 30, 1998.
The Company s present working capital has continued to improve and is sufficient
to meet current operating needs.
Capital expenditures for the six months of fiscal year 1999 were $494,321
compared with $51,934 the same period in fiscal year 1998. With capital
expenditures of $269,459 occurring at the aviation ground support company to
upgrade the manufacturing facility and $224,862 for paving of roads at the
cemetery operations. These investments reflect the Company's continuing program
to achieve business growth and upgrade its facilities. The Company anticipates
that it will spend approximately $150,000 on capital expenditures during the
next two quarters of fiscal year 1999. The Company intends to finance these
capital expenditures primarily from cash flow from operations.
The Company's stock price ranged from $2.00 to $3.50 per share during the six
months of Company s fiscal year 1999. The Company s book value per share at
December 31, 1998 was $1.39 compared with $.92 at June 30, 1998. The Company s
annualized return from continuing operations on average equity for the six
months of fiscal year 1999 was 78% compared with 31% for the six months of
fiscal year 1998. The annualized return from continuing operations on average
assets was 30.8% compared with 18.8% for the six months of fiscal year 1998.
The Company has available through two banks, a $3,225,000 revolving credit
facility. As of December 31, 1998 there was $1,330,000 in aggregate borrowing
outstanding under these facilities.
As indicated by the above, the Company s financial position and borrowing
capacity should enable it to meet its current and reasonably foreseeable future
requirements. As additional resources are needed, the Company should be able to
obtain funds readily and at competitive costs.
INFLATION
Because of the relatively low levels of inflation experienced this past fiscal
year, and as of December 31, 1998, inflation did not have a significant effect
on the Company s results in the first six months of fiscal year 1999.
YEAR 2000
The Company utilizes management information systems and software technology that
may be affected by Year 2000 issues throughout its businesses. During fiscal
year 1998, the Company began to implement plans to ensure those systems continue
to meet its internal and external requirements. During fiscal year 1999, the
Company will continue to complete the modifications and testing of its
information systems to ensure it is Year 2000 compliant. The Company has
developed questionnaires and contacted key suppliers and customers regarding
their Year 2000 compliance to determine any impact on its operations. In
general, the suppliers and customers have developed or are in the process of
developing plans to address Year 2000 issues. The Company will continue to
monitor and evaluate the progress of its suppliers and customers on this
critical matter.
The Year 2000 is not expected to have a material impact on the Company s current
information systems as a result of the steps already completed to make the
Company s systems Year 2000 compliant. Based on the nature of the Company s
business, the Company anticipates it is not likely to experience material
business interruption due to the impact of Year 2000 compliance on its customers
and vendors. As a result, the Company does not anticipate that incremental
expenditures to address Year 2000 compliance will be material to the Company s
liquidity, financial position or results of operations.
RESULTS OF OPERATIONS
SIX MONTHS OF FISCAL YEAR 1999 COMPARED
WITH SIX MONTHS OF FISCAL YEAR 1998
Revenue for the six months ended December 31, 1998 was $6,989,502 or 415% above
1998's comparable period. The increase was due to the inclusion of aviation
ground support equipment business acquired on the last day of fiscal year 1998.
Cemetery revenue decreased $52,030 or 4% over the prior comparable period
primarily due to an extraordinary sale of a marker for $50,200 in fiscal year
1998.
Cost of products and services sold increased 2% for the cemetery business
primarily due to the mix of sales products, and 3% increase in grounds wages and
related benefits. Cost of sales averaged 51% for the past years, but increased
to 53% for the six month period. Cost of sales for the aviation ground support
equipment business was 82%.
Interest from care funds increased $5,643 or 6% due to the timing of interest
payments and recognition of trust income.
Other income increased $136,404, and included $132,500 from the Illinois
Department of Transportation in condemnation proceeds for taking of land for an
easement.
Selling expenses for the cemetery business in relation to sales decreased from
10% in fiscal year 1998 to 9% in fiscal year 1999. The decrease is due to the
elimination of sales manager position. Selling expenses for the aviaiton ground
support equipment business in relation to sales was 3% for the first six months
of fiscal year 1999.
General and administrative expenses arise in connection with supporting the
Company's day-to-day management of its existing businesses and the holding
company. General and administrative expenses for the cemetery business decreased
$1,438 or 1%. General and administrative expenses for the aviation ground
support equipment business in relation to sales was 4% for the six months of
fiscal year 1999. The holding company general and administrative expense
decreased $34,509 or 21%. The decrease is due to the allocation of salary
expense of the Company's Chief Executive Officer being allocated to the aviation
ground support equipment business.
Depreciation and amortization expenses increased 171% to $96,896 for the six
month period ended December 31, 1998. The increase is a result of the
acquisition of the aviation ground support equipment business.
Interest expense increased $167,696 for the six month period ended December 31,
1998 in comparison to the prior fiscal period of 1997. The increase in interest
expense was attributable to increased borrowings associated with the Company's
acquisition during the fiscal year 1998.
RESULTS OF OPERATIONS
SECOND QUARTER OF FISCAL YEAR 1999 COMPARED
WITH SECOND QUARTER OF FISCAL YEAR 1998
Second quarter revenues of $3,422,409 were 446% above 1998's comparable period.
The increase was due to the inclusion of aviation ground support equipment
business acquired on the last day of fiscal year 1998. Cemetery revenue
increased $28,211 or 5% over the prior comparable period primarily due to
increased case load.
Cost of products and services sold decreased 2% for the cemetery business
primarily to the mix of sales products. Cost of sales averaged 51% for the past
year, but increased to 53% for the second quarter of fiscal year 1999. Cost of
sales for the aviation ground support equipment business was 83% for the second
fiscal quarter of 1999.
Interest from care funds increased $11,859 or 28% due to timing of interest
payments and recognition of trust income.
Other income increased $133,079, with $132,500 attributable from a settlement
with Illinois Department of Transportation in regards to taking of land for an
easement.
Selling expenses for the cemetery business in relation to sales increased from
8.4% in fiscal year 1998 to 9.4% in fiscal year 1999. Selling expenses for the
aviation ground support equipment business in relation to sales were 3% for the
second fiscal quarter of 1999.
General and administrative expenses, which are expenses associated with
supporting the Company s day-to-day management of its existing businesses and
the holding company, increased $171,290 or 118% in comparison to prior period.
The increase is due to the aviation ground support equipment company.
Interest expense increased $68,907 for the six month period ended December 31,
1998 in comparison to the six month period ended December 31, 1997. The
increase in interest expense was attributable to increased borrowing associated
with the Company s acquisition during fiscal year 1998.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in ordinary litigation incidental to
the conduct of its businesses. The Company believes that none of its pending
litigation will have a material adverse effect on the Company s businesses,
financial condition or results of operations.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
In July 1998 the Company sold 40,000 shares of unregistered common stock to a
director of the Company at a purchase price of $2.00 per share resulting in net
proceeds to the Company of $80,000 per share. The common stock was in reliance
on an exemption provided by Section 4(2) of the Securities Act of 1933.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Not applicable.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits are included herein
(b) Reports on Form 8-K. The Company filed a report on form 8-K on July 10,
1998, with respect to the acquisition of aviation ground support equipment
business.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has
duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Oakridge Holdings, Inc.
/s/ Robert C. Harvey
Robert C. Harvey
Chief Executive Officer
Date: February 10, 1999
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-1999
<PERIOD-END> DEC-31-1998
<CASH> 664,302
<SECURITIES> 0
<RECEIVABLES> 2,769,953
<ALLOWANCES> 286,000
<INVENTORY> 2,902,663
<CURRENT-ASSETS> 6,257,568
<PP&E> 4,127,229
<DEPRECIATION> 1,441,541
<TOTAL-ASSETS> 8,998,323
<CURRENT-LIABILITIES> 3,997,931
<BONDS> 0
0
0
<COMMON> 134,968
<OTHER-SE> 1,741,591
<TOTAL-LIABILITY-AND-EQUITY> 8,998,323
<SALES> 6,755,451
<TOTAL-REVENUES> 6,989,502
<CGS> 5,178,286
<TOTAL-COSTS> 761,885
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 203,101
<INCOME-PRETAX> 846,230
<INCOME-TAX> 248,184
<INCOME-CONTINUING> 598,046
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 598,046
<EPS-PRIMARY> .443
<EPS-DILUTED> .302
</TABLE>
