U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Pursuant to Section 13 or 15 (d) of the Securities
Exchange Act of 1934
For the quarter ended March 31, 1996
Commission File Number 33-6658-C
Pioneer Railcorp
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(Exact name of Registrant as specified in its charter)
Iowa 37-1191206
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(State or other jurisdiction of (IRS Employer ID #)
incorporation or organization)
1318 S. Johanson Rd Peoria, IL 61607
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(Address of principal executive offices) (Zip code)
Registrant's telephone number: 309-697-1400
Securities registered pursuant to Section 12(g) of the Act:
Title of each Class Name of each exchange on which registered
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Common Stock, Class A NASDAQ, Chicago Stock Exchange
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. YES X NO.
4,511,043
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(Shares of Common Stock outstanding on March 31, 1996)
<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended March 31, 1996 and 1995
UNAUDITED
First Quarter
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1996 1995
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Operating revenue .................................. $2,450,441 $1,940,600
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Operating expenses
Maintenance of ways ............................. 201,518 187,655
Maintenance of equipment ........................ 279,920 257,975
Transportation expenses ......................... 455,289 422,716
Administrative expenses ......................... 615,457 471,762
Depreciation & amortization .................... 314,576 208,674
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Total operating expenses ........................... 1,866,761 1,548,783
Operating income ................................... 583,680 391,817
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Other income & expense
Other (income) expense .......................... (59,433) (62,898)
Interest expense, equipment ..................... 200,167 89,480
Interest expense, other ......................... 87,267 76,456
Net (gain) loss on fixed assets ................. (29,505) (4,050)
---------- ----------
Total other income & expense ....................... 198,496 98,988
---------- ----------
Net income before income taxes ..................... 385,184 292,829
Provision for income taxes ......................... 142,400 111,300
---------- ----------
Income before minority interest in preferred
stock dividends of consolidated subsidiaries .... 242,784 181,529
Minority interest in preferred stock dividends of
consolidated subsidiaries ...................... 31,308 31,308
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Net income available to
common stockholders ............................ $ 211,476 $ 150,221
========== ==========
Earnings per share ................................. $ 0 $ 0
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Weighted average number of
common shares outstanding .......................... 8,385,796 7,552,951
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<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
March 31, 1996 and December 31, 1995
UNAUDITED
<TABLE>
March 31 December 31
1996 1995
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<S> <C> <C>
Current Assets
Cash ............................................... $ 669,174 $ 276,230
Accounts receivable, less allowance
for doubtful accounts (1996 $26,892; 1995 $14,000) 2,110,176 1,283,124
Inventories ........................................ 439,210 287,772
Prepaid expenses ................................... 99,929 123,609
Income tax refund claims ........................... 86,615 50,998
Deferred taxes ..................................... 35,000 35,000
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Total current assets .......................... 3,440,103 2,056,733
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Property and Equipment
Land ............................................... 432,110 280,606
Railroad facilities ................................ 8,247,660 4,840,367
Locomotives & transportation equipment ............. 1,930,836 1,594,150
Leasehold improvements ............................. 28,776 14,614
Buildings .......................................... 858,344 673,344
Machinery and equipment ............................ 853,986 704,117
Office equipment and computers ..................... 330,094 297,665
Railcars ........................................... 9,409,781 8,328,206
Capital projects in progress ....................... 478,200 467,096
Less accumulated depreciation .................... (2,283,441) (1,979,998)
----------- -----------
Total property and equipment .................. 20,286,346 15,220,169
----------- -----------
Intangible assets, less accumulated amortization ...... 626,168 637,301
1996 $111,628; 1995 $66,887
Other assets .......................................... 9,479 9,729
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Total Assets .......................................... $24,362,096 $17,923,932
=========== ===========
Current Liabilities
Accounts payable ................................... $ 2,719,101 $ 1,115,241
Notes payable ...................................... 309,560 80,333
Income taxes payable ............................... 123,885 17,367
Current maturities of long-term debt ............... 1,827,054 1,412,552
Accrued liabilities ................................ 538,153 354,834
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Total current liabilities ..................... 5,517,753 2,980,327
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Long-term debt ........................................ 12,785,234 9,934,737
Deferred income taxes ................................. 1,618,476 843,000
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Total liabilities & debt ...................... 19,921,463 13,758,064
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Minority interest in subsidiaries ..................... 1,195,000 1,195,000
Stockholders' Equity
Common stock ....................................... 4,510 4,487
Additional paid-in capital ......................... 1,881,610 1,832,353
Retained earnings .................................. 1,359,514 1,134,028
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Total stockholders' equity .................... 3,245,633 2,970,868
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Total Liabilities and Equity .......................... $24,362,096 $17,923,932
=========== ===========
</TABLE>
<PAGE>
PIONEER RAILCORP AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
Quarter Ended March 31, 1996 and 1995
UNAUDITED
<TABLE>
First Quarter
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1996 1995
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<S> <C> <C>
Cash Flows From Operating Activities
Net income .................................................. $ 211,476 $ 150,222
Adjustments to reconcile net income to net cash
provided by operating activities:
Minority interest in preferred stock dividends of
consolidated subsidiaries ....................... 31,308 31,308
Depreciation ...................................... 303,444 199,733
Amortization ...................................... 11,132 8,941
(Gain) on sale of property & equipment ............ (29,505) (4,050)
Deferred taxes .................................... -0- -0-
Change in assets and liabilities, net of effects from
acquisition of subsidiaries
(Increase) decrease accounts receivable ........... (61,720) (88,211)
(Increase) decrease inventories ................... (6,188) 2,356
(Increase) decrease prepaid expenses .............. 57,385 31,779
(Increase) decrease other assets .................. 249 (108,136)
Increase (decrease) accounts payable .............. 213,389 103,403
(Increase) decrease income tax refund claims ...... 50,998
Increase (decrease) income tax payable ............ 106,518 21,545
Increase (decrease) accrued liabilities ........... 65,148 74,628
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Net cash provided by operating activities ......... 953,634 423,518
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Cash Flows From Investing Activities
Proceeds from sale of property & equipment ........ -0- 24,400
Purchase of property & equipment, net of property
and equipment from acquisition of subsidiaries (714,690) (703,635)
Acquisition of subsidiaries, net of cash acquired . (2,786,882) -0-
---------- ----------
Net cash (used in) investing activities ........... (3,501,572) (679,235)
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Cash Flows From Financing Activities
Proceeds from short-term borrowings, net of debt
assumed in acquisition of subsidiaries ......... 278,438 143,500
Proceeds from long-term borrowings, net of debt
assumed in acquisition of subsidiaries ......... 3,046,000 566,613
Payments on short-term borrowings ................. (49,212) (32,151)
Payments on long-term borrowings .................. (358,084) (222,779)
Repurchase of preferred stock ..................... -0-
Proceeds from warrants exercised .................. 41,040
Payments to minority interest ..................... (17,300) (17,300)
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Net cash provided by financing activities: ........ 2,940,882 437,883
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Net increase (decrease) in cash ............................. 392,944 182,166
Cash, beginning of period ................................... 276,230 179,415
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Cash, end of period ......................................... 669,174 361,581
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</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
PIONEER RAILCORP AND SUBSIDIARIES
NOTE 1. STATEMENTS
The accompanying unaudited interim financial statements have been prepared
pursuant to the rules and regulations for reporting on Form 10-QSB. Accordingly,
certain disclosures required by generally accepted accounting principles are not
included herein. These interim statements should be read in conjunction with the
latest financial statements and notes thereto included in the Company's latest
Annual Report on Form 10-KSB and subsequent Form 10-QSB filings.
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principals of consolidation:
The consolidated financial statements include Pioneer Railcorp (Pioneer) and its
wholly-owned and controlled subsidiaries which are as follows: West Michigan
Railroad Co. (WJ), Wabash & Western Railway Co. (WGRY), Fort Smith Railroad Co.
(FSR), Alabama Railroad Co. (ALAB), Mississippi Central Railroad Co. (MSCI),
Alabama & Florida Railway Co., Inc. (AF), Decatur Junction Railway (DT),
Vandalia Railroad Company (VRRC), Minnesota Central Railroad Co.(MCTA), Keoukuk
Junction Railway Co. (KJRY) formerly KNRECO, Inc., Pioneer Railroad Equipment
Co., Ltd. (PREL), Pioneer Railroad Services, Inc. (PRSI), and Pioneer Air, Inc.
(PAR). All significant intercompany balances and transactions have been
eliminated in consolidation.
Inventories:
Inventories consisting of various mechanical parts, track materials and
locomotive supplies are stated at the lower of cost (determined by the average
cost method) or market.
Property and equipment:
Property and equipment is stated at cost. Depreciation is computed principally
on a straight-line basis over the following estimated useful lives:
Roadbed - 20 years
Transportation equipment - 10 to 15 years
Railcars - 10 to 15 years
Buildings - 20 to 40 years
Machinery and equipment - 5 to 10 years
Office equipment - 5 to 10 years
Maintenance and repair expenditures, which keep the rail facilities in proper
operating condition, are charged to operations as incurred. Expenditures
considered to be renewals and betterments are capitalized if such expenditures
improve track conditions and benefit future operations with more efficient use
of rail facilities.
Intangible assets:
Intangible assets consist principally of goodwill which is being amortized by
the straight-line method over a forty-year period. The Company reviews
intangible assets quarterly to determine potential impairment by comparing the
carrying value of the intangible with the undiscounted anticipated future cash
flows of the related property before interest charges. If future cash flows are
less than the carrying value, the Company will determine the fair market value
of the property and adjust the carrying value of the intangibles if the fair
market value is less than the carrying value.
Earnings per common and common equivalent share:
Primary and fully diluted earnings per common share were computed by dividing
net income by the weighted average number of shares of common stock and common
stock equivalent outstanding at the end of the respective periods under the
Treasury Stock Method. Earnings per share information for 1995 has been
retroactively restated to reflect the effect of the stock split and warrants
described in Note 5 below.
<PAGE>
NOTE 3. ESTIMATED IMPACT OF THE ADOPTION OF RECENT ACCOUNTING STANDARDS
In November 1995, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standard No. 123 (SFAS 123), "Accounting for Stock Based
Compensation." SFAS 123 encourages, but does not require, accounting for stock
based compensation awards on the basis of fair value at the date the awards are
granted. The fair value of the award is included in expense on the statement of
income. Companies that do not adopt SFAS 123 will be required to disclose what
net income and earnings per share would have been, had they adopted SFAS 123.
SFAS 123 is effective for fiscal years beginning after December 15, 1996. The
Company does not intend to adopt SFAS 123.
The Company is not aware of any other recent accounting standard issued, but not
yet required to be adopted by the Company, that would have a material effect on
its financial position or results of operations.
NOTE 4. STOCK OPTION PLAN
On April 12, 1994, the Company adopted, with the subsequent approval of its
shareholders, a stock option plan permitting the issuance of up to 836,000
shares of common stock. Options granted under the plan are incentive based. When
Pioneer Railcorp common shares reached a closing price of $4.00 per share, or
higher, for any consecutive 10-day period, as reported in the Wall Street
Journal, the options were exercisable at the market price of the common shares
at the date the options were granted, in whole or in part, at any time for five
years after vesting. The conditions for their vesting were met on July 5, 1995
and the effect on earnings per share has been reflected in the accompany
financial statements. None of the outstanding options have been exercised as of
March 31, 1996.
NOTE 5. STOCK SPLIT AND STOCK WARRANTS ISSUED AS DIVIDENDS
On May 16, 1995 the Board of Directors authorized a 2 for 1 stock split to
shareholders of record June 30, 1995, payable July 1, 1995. In addition, on June
24, 1995 the shareholders ratified an amendment to the Articles of Incorporation
authorizing the issuance of stock warrants as a dividend to shareholders
immediately after the stock split. Each shareholder received one warrant for
each share of stock owned. Each warrant permits shareholders to purchase an
additional share of stock at a predetermined price of $2 per share. The warrants
expire on July 1, 2015, and the effect of the warrants on earnings per share has
been reflected in the accompanying financial statements. Earnings per share
information for 1995 has been retroactively restated to reflect the effect of
the stock split and warrants. As of March 31, 1996, a total of 39,774 warrants
had been exercised.
NOTE 6. MINORITY INTERESTS IN SUBSIDIARIES
Three of the Company's subsidiaries have preferred stock outstanding. This stock
is accounted for as minority interest in subsidiaries and dividends on the stock
are accounted for as a current expense.
NOTE 7. PURCHASE OF RAILROAD FACILITIES
On March 12, 1996, the Company purchased 176,675 shares of the common stock of
KNRECO, Inc., (an Iowa corporation d.b.a. Keokuk Junction Railway hereinafter
"KNRECO") from the shareholders, for $16.50 per share. This represents
approximately 93% of the outstanding common stock of KNRECO. Operating results
of KNRECO are included in the consolidated statements of income from the date of
acquisition.
Unaudited pro forma consolidated results of operations for the quarter ended
March 31, 1996 and 1995, as though KNRECO had been acquired as of January 1st of
each period follows:
1996 1995
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Operating revenue ............................ $2,870,000 $2,648,000
Income from continuing operations ............ 520,000 469,000
Net income ................................... 157,000 250,000
Earnings per share ........................... $ .03 $ .04
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The Company operated the following nine railroads during the third quarter of
1995: West Michigan Railroad Co. (WJ), Fort Smith Railroad Co. (FSR), Alabama
Railroad Co. (ALAB), Mississippi Central Railroad Co. (MSCI), Alabama & Florida
Railway Co. (AF), Decatur Junction Railway Co. (DT), Vandalia Railroad Company
(VRRC), Minnesota Central Railroad Co. (MCTA), and Keokuk Junction Railway Co.
(KJRY) . The Company also operated three railroad-related subsidiaries, Pioneer
Railroad Equipment Co., Ltd. (PREL), Pioneer Railroad Services, Inc. (PRSI), and
Pioneer Air, Inc (PAR).
The Company's net income in the first quarter 1996 increased by 41% to $211,400
up from $150,000 for the same period last year. Operating revenues in the first
quarter 1996 increased by $510,000 or 27% to $2.5 million from $2.0 million
during the same period last year. Operating expenses increased in the first
quarter 1996 by $300,000, or 21%, to $1.9 million from $1.6 million for the same
period last year. Operating income increased in the first quarter 1996 by
$191,900 or 49% to $583,700 from $391,800 for the same period last year.
Operating Revenues:
Operating revenues increased in the first quarter 1996 by $500,000 or 27%, to
$2.5 million from $2.0 million in the first quarter 1995. The increase in
operating revenues is attributable to the growth of the Company's railcar fleet
and the revenues generated from the Keokuk Junction Railway Co., which began
operations under Pioneer Railcorp ownership on March 13, 1996. Carhire revenues
from the Company's railcar fleet (approximately 750 cars at 3/31/96) increased
by $200,000 or 56%, to $555,000 from $355,000 in the prior year. In addition
revenues generated from leasing railcars and excess locomotives to
non-affiliated entities provided an additional $130,000 in revenues in the first
quarter 1996; the Company was not significantly involved in this activity in the
first quarter 1995. The Keokuk Junction Railway contributed $140,000 in
operating revenues from the period March 13-31, 1996. The loss of the West
Jersey Railroad lease in April 1995 and it's subsequent operation of the former
KLSC railroad as the West Michigan Railroad, had an immaterial affect on
operating revenues.
The remaining operating subsidiaries had constant overall revenues in the first
quarter 1996 compared to the same period last year.
Operating Expenses:
Operating expenses increased in the first quarter 1996 by $300,000 or 21%, to
$1.9 million from $1.6 million in the same period last year. This increase
primarily resulted from the additional depreciation expense of $90,000 as a
result of the Company's railcar fleet growth, increases in administrative
expense of $120,000 resulting from the addition of support personnel and other
overhead incurred as a result of current and anticipated future growth of the
Company. In addition, the Keokuk Junction incurred $95,000 of operating expense
during its operations in March of 1996. The loss of the West Jersey Railroad
lease in April 1995 and it's subsequent operation of the former KLSC railroad as
the West Michigan Railroad, had an immaterial effect on operating expenses in
1996.
The remaining operating subsidiaries had constant overall operating expenses in
the first quarter 1996 compared to the same period last year.
Other Income and Expense Income Statement Line Item Discussion:
Equipment interest expense increased $110,000, or 124% to $200,000 compared to
$90,000 in the same period last year. All of this increase is a result of
financing activities for the Company's railcar acquisitions.
Net gain on fixed asset dispositions of $29,505 in the first quarter 1996
resulted form the sale of 5.36 miles of Alabama Railroad Co. right of way. The
real estate was not located on an active part of the rail line.
Liquidity and Capital Resources:
The Company primarily uses cash generated from operations to fund working
capital needs and relies on long-term financing for railcars, new operating
subsidiaries, and other significant capital expenditures.
The Company has $800,000 in unused working capital facilities available at the
end of the first quarter 1996. In addition, the Company has seen the market
value of its railcar fleet increase significantly over the last several years.
This increase in value has resulted from the short supply of railcars compared
to the increased demand for their use. The Company believes it could refinance
part of its railcar fleet with an asset based lender and generate up to $1
million in cash .
<PAGE>
On July 1, 1995, the Company's stock split and warrant issuance became payable
to shareholders. The 2 for 1 stock split increased the number of shares issued
and outstanding from 2,098,042 to 4,196,084. At the same time shareholders
became entitled to purchase an additional 4,196,084 shares through stock
warrants issued by the Company as dividends. One warrant was issued for each
share of common stock held after the split, entitling the holder to purchase 1
share of common stock for $2.00 per share. The shares purchased through the
exercise of the warrants must be held for 1 year from date of purchase. In the
first quarter 1996, a total of 20,520 warrants were exercised, and the Company
realized $41,040 on the issuance of the warrants. The Company expects increased
capital to be generated by the continued exercise of warrants, but is uncertain
as to the amount. A total of 4,156,310 warrants are outstanding as of March 31,
1996.
The Company granted 836,000 options to certain employees under its 1994
incentive stock option plan. The options are exercisable at prices equal to the
market value of the Company's stock at the date of grant. The exercise price
ranges from $1.50 to $4.40 per share. The Company expects increased capital to
be generated by the exercise of options in 1996, but is uncertain as to the
amount. No options have been exercised as of the date of this report.
In the first quarter 1996 the Company negotiated a credit facility with its
primary bank to provide a $2.5 million annual revolving acquisition line of
credit. This facility is collateralized by the common stock of the Alabama
Railroad Co. and the Mississippi Central Railroad Co., as well as the Company's
investment in stock of any subsidiaries acquired under the line. The interest
rate for the line is currently 11%. The interest rate is adjustable quarterly to
2.5% over New York Prime, limited, however, to a one percent annual increase or
decrease, not to exceed 13.5% or be reduced below 10%. Any amounts drawn on the
line must be repaid monthly over a seven year period. As of the date of this
filing, the line has been fully drawn upon in connection with the Company's
March 12, 1996 acquisition of a controlling interest of KNRECO, Inc. d/b/a
Keokuk Junction Railway, common stock (See Item 5- Other Information). The
current monthly debt service resulting from the $2.5 million borrowed is
$43,000, with monthly payments beginning on April 8, 1996.
Long-term equipment financing has historically been readily available to the
Company for its railcar acquisition program. The Company believes it will be
able to continue obtaining long-term equipment financing should the need arise.
The Company's plans for new debt in the foreseeable future are contingent upon
new railroad acquisitions and increased needs and/or opportunities for railcars.
The Company does not expect to make significant additions to its railcar fleet
in 1996. The Company is considering and analyzing the refinancing of some of its
present debt.
The Company anticipates favorable outcomes involving current legal proceedings.
The Company does not anticipate any material judgements against it or any of its
subsidiaries will arise out of the current proceedings.
The Company believes its cash flow from operations and its available working
capital credit lines, will be more than sufficient to meet liquidity needs for
at least the next twelve months.
Balance Sheet and Cash Flow Items:
The Company generated net cash from operating activities of $953,000 in the
first quarter 1996 compared to $428,000 in the first quarter 1995. Net cash from
operating activities for the first quarter 1996 resulted from $211,500 of net
income, $303,500 of depreciation and amortization, an increase in trade payables
of $213,000, an increase in income tax payable of $106,000, and $119,000 net
cash received by changes in operating assets and liabilities, of which no
amounts are individually material.
In the first quarter 1996 the Company purchased approximately $715,000 of fixed
assets and capital improvements. Included in the capital additions were 20
railcars at a total cost of $600,000. All of the railcars purchased were
financed with long-term fixed rate financing. The Company capitalized $30,000 of
track betterments in the first quarter 1996, all of which was funded with
operating cash flows. The remaining capital additions were primarily machinery
and equipment and were funded by operating cash.
The Company's consolidated balance sheet in the first quarter 1996 includes the
assets and liabilities acquired in the purchase of KNRECO stock on March 12,
1996. Additions to the balance sheet as a result of the purchase of KNRECO stock
are as follows:
<PAGE>
Cash $339,000, Accounts Receivable $747,000, Inventory $145,000, Prepaid
Expenses $34,000, Fixed Assets $4,654,000, Accounts Payable $1,390,000, Note
Payable $577,000, Deferred Income Tax Liability of $775,000, and Other
Liabilities of $50,000. In addition, the Company borrowed $2.5 million and used
$625,000 of working capital to finance the acquisition. The Purchase accounting
values assigned to the assets are subject to final appraisal. As a result of
this appraisal it is possible that some of assets values may be allocated to
goodwill. At this time, management does not anticipate this to be a material
amount.
PART II. OTHER INFORMATION
Item 1. LEGAL PROCEEDINGS
Several lawsuits were pending by and against Pioneer Railcorp and/or its
subsidiaries (collectively, the "Company") during the first quarter of 1996.
There is litigation pending between Minnesota Central Railroad Co. ("MCTA") and
MNVA Railroad, Inc. ("MNVA") and Dakota, Missouri Valley & Western Railroad,
Inc., resulting from the asset sale from MNVA to MCTA in December, 1994. Three
cases, involving claims by and against MCTA and Pioneer, are currently pending
in Minnesota and Illinois. Management does not believe that any these cases will
result in a material adverse effect on the Registrant's consolidated financial
position or results of operation.
A Federal Employer's Liability Act ("FELA") lawsuit is also pending against the
Alabama & Florida Railway in Alabama. That action was brought by a former
employee of a track contractor (or its sub-contractor), and is being defended by
the contractor pursuant to an indemnification agreement. The Company does not
believe it has any liability in the matter, and does not believe the case will
result in a material adverse effect on the Registrant's consolidated financial
position or results of operation. In addition, a lawsuit that was brought
against the West Jersey Railroad Co. (as a result of a crossing accident that
occurred in December, 1990), was dismissed, based upon the statute of
limitations, during the first quarter of 1996. That dismissal is now on appeal
to the Appellate Division of the New Jersey Superior Court. The Company believes
the Appellate Division will likely uphold the dismissal, and does not believe
the case is likely to result in a material adverse effect on the Registrant's
consolidated financial position or results of operation.
Pioneer's subsidiary railroads have a number of claims against delinquent
licensees, customers and others, some of which are in litigation, and others of
which are likely to result in litigation. None of the amounts involved, however,
would have a material impact on the Company's consolidated financial position or
results of operations if they proved to be uncollectible.
In the course of business, the Company experiences crossing accidents, employee
injuries, delinquent and/or disputed accounts, and other incidents, which give
rise to claims that may result in litigation. Management vigorously pursues
settlement and release of such claims, but at any one time, some such incidents,
which could result in lawsuits by and against the Company, remain unresolved.
Management believes it has valid claims for, or good defenses to, these actions.
Management considers such claims to be a routine part of the Company's business,
and as of the date of this Form-10-QSB, management believes that no such
incident, which is not described herein, is likely to result in a liability that
would materially effect the Company's consolidated financial position or results
of operation.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
There were no matters submitted to security holders for vote in the first
quarter 1996.
Item 5. OTHER INFORMATION
On March 12, 1996, the Registrant purchased 176,675 shares of the common stock
of KNRECO, Inc., an Iowa corporation (hereinafter "KNRECO") from the
shareholders, for $16.50 per share. This represents approximately 93% of the
outstanding common stock of KNRECO. The Registrant also offered to purchase all
of the remaining common shares of KNRECO, and as of the date of this report
Pioneer Railcorp has acquired 100% of said shares.
KNRECO operates a common carrier railroad line within the City of Keokuk, Iowa,
and from Keokuk to LaHarpe, Illinois, as well as a branch from Hamilton to
Warsaw, Illinois, a total of approximately 38 miles, under the d/b/a "Keokuk
Junction Railway". KNRECO also owns 5 locomotives, 30 railcars (of various
descriptions), an office building, engine house, and several vehicles,
miscellaneous pieces of equipment, materials and supplies. In addition, KNRECO
owns all of the common stock of Keokuk Union Depot Company, a Iowa corporation,
that owns the former Keokuk Union Depot building, along with surrounding track
and real estate. KNRECO changed its corporate name to Keokuk Junction Railway
Co. effective April 10, 1996.
<PAGE>
Prior to the purchase there was no material relationship between the Registrant
and KNRECO, or any of the officers, directors or shareholders of KNRECO and the
Registrant.
The total consideration for the purchase of 100% of the outstanding shares of
KNRECO was $3,125,597. This was paid by $3,124,357 in cash, and the remainder in
Pioneer Railcorp Class A common stock (342 shares). The purchase was financed
largely through a $2.5 million acquisition line of credit Pioneer Railcorp has
with Citizens Bank & Trust Company of Chillicothe, Missouri. The line of credit
is collateralized by the Common Stock of the Alabama Railroad Co. and the
Mississippi Central Railroad Co., as well as the Company's investment in stock
of any subsidiaries acquired under the line. The interest rate for the line is
currently 11%. The interest rate is adjustable quarterly to 2.5% over New York
Prime, limited, however, to a one percent annual increase or decrease, not to
exceed 13.5% or be reduced below 10%. Any amounts drawn on the line must be
repaid monthly over a seven year period. The current monthly debt service
resulting from the $2.5 million borrowed is $43,000, with monthly payments
beginning on April 8, 1996. The remainder of the purchase price was financed
through internal cash flow.
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
Exhibit # 27 - Financial Data Schedule
The Following reports were filed on From 8-K during the first quarter 1996:
(1) Form 8-K filed February 20, 1996 regarding the letter of intent to purchase
a controlling interest in the outstanding common stock of KNRECO, Inc., d/b/a/
Keokuk Junction Railway.
(2) Form 8-K filed March 27, 1996 regarding the purchase of a controlling
interest in the outstanding common stock of KNRECO, Inc., d/b/a/ Keokuk Junction
Railway.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on it's behalf by the
undersigned thereunto duly authorized.
PIONEER RAILCORP
(Registrant)
5/14/96
DATE /s/ GUY L. BRENKMAN
---------------------------
PRESIDENT & CEO
5/14/96
DATE /s/ J. MICHAEL CARR
----------------------------
ASSISTANT TREASURER &
CHIEF FINANCIAL OFFICER
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
Registrant's 1st Quarter 1996 Form 10-QSB and is qualified in its entirety by
reference to such financial statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<CASH> 669,174
<SECURITIES> 0
<RECEIVABLES> 2,137,068
<ALLOWANCES> 26,892
<INVENTORY> 439,210
<CURRENT-ASSETS> 3,440,103
<PP&E> 22,569,787
<DEPRECIATION> 2,283,441
<TOTAL-ASSETS> 24,362,096
<CURRENT-LIABILITIES> 5,517,753
<BONDS> 0
0
0
<COMMON> 4,510
<OTHER-SE> 3,241,123
<TOTAL-LIABILITY-AND-EQUITY> 24,362,096
<SALES> 0
<TOTAL-REVENUES> 2,450,441
<CGS> 0
<TOTAL-COSTS> 1,866,761
<OTHER-EXPENSES> 0<F1>
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 287,434
<INCOME-PRETAX> 385,184
<INCOME-TAX> 142,400
<INCOME-CONTINUING> 242,784
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 211,476<F1>
<EPS-PRIMARY> .04
<EPS-DILUTED> .04
<FN>
<F1>The difference between Net Income and Income from Continuing Operations of
$31,308 relates to Minority Interests in Preferred Stock Dividends of
Consolidated Subsidiaries.
</FN>
</TABLE>
