U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-QSB
(Mark One)
X Quarterly report under Section 13 or 15(d) of the Securities Exchange
act of 1934
For the quarterly period ended January 31, 2000
__ Transition report under Section 13 or 15(d) of the Exchange Act
For the transition period from ___________ to ___________
Commission file number Securities Act Registration No. 33-75276
OMNI Rail Products, Inc.
- --------------------------------------------------------------------------------
(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 68-0281098
-------- ----------
(State or Other Jurisdiction of (I.R.S. Employer Identification NO.)
Incorporation or Organization)
975 SE Sandy Blvd. Portland, Oregon 97214
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(Address of Principal Executive Offices)
(503)230-8034
- --------------------------------------------------------------------------------
(Issuer's Telephone Number, Including Area Code)
- --------------------------------------------------------------------------------
(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.
Yes X No _____
APPLICABLE ONLY TO ISSUERS INVOLVED IN
BANKRUPTCY PROCEEDINGS DURING THE
PRECEDING FIVE YEARS
Check whether the registrant filed all documents and reports required to be
filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of
securities under a plan confirmed by a court.
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: 1,703,098 Common Shares at
$.01 par value outstanding as of February 29, 2000
<PAGE>
OMNI RAIL PRODUCTS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JANUARY 31, 2000
INDEX
PART I. FINANCIAL
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets....................1
Unaudited Condensed Consolidated Statements of Operations..........2
Unaudited Condensed Consolidated Statements of Cash Flows..........3
Notes to Unaudited Condensed Consolidated Financial
Statements.........................................................4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations......................8
PART II. OTHER INFORMATION....................................................13
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES....................................................................14
<PAGE>
<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC., & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
ASSETS
------
January 31, 2000 April 30, 1999
(Unaudited)
----------- -----------
Current Assets:
<S> <C> <C>
Cash $ 79,470 $ 36,280
Accounts receivable, net 923,868 1,478,337
Inventories, net 1,720,088 1,330,663
Prepaid expenses and deposits 104,896 51,241
----------- -----------
Total current assets 2,828,322 2,896,521
Real estate held for sale 1,400,000 1,400,000
Property, plant and equipment, net 1,948,965 1,904,156
----------- -----------
$ 6,177,287 $ 6,200,677
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
----------------------------------------------
Current Liabilities:
Accounts payable $ 1,183,831 $ 1,480,166
Accrued liabilities 809,648 879,995
Notes payable 1,079,235 1,693,135
Current portion of long-term debt 1,256,022 1,373,412
----------- -----------
4,328,736 5,426,708
Long-term debt, less current portion 1,469,761 1,403,115
Stockholders' equity (deficit):
Common stock 17,031 17,031
Preferred stock -- 1,956
Additional paid in capital 2,371,836 2,369,880
Accumulated deficit (2,010,077) (3,018,013)
----------- -----------
Total stockholders' equity (deficit) 378,790 (629,146)
----------- -----------
$ 6,177,287 $ 6,200,677
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Nine Months Ended
January 31, January 31,
2000 1999 2000 1999
------------ ------------ ------------ ------------
<S> <C> <C> <C> <C>
Sales $ 2,686,629 $ 2,276,761 $ 10,081,246 $ 9,101,868
Cost of sales 1,880,734 1,706,252 7,119,894 6,719,839
------------ ------------ ------------ ------------
Gross profit 805,895 570,509 2,961,352 2,382,029
Selling expenses 233,399 197,341 721,718 729,513
General & administrative expenses 275,310 229,108 915,345 804,258
Engineering 16,956 25,907 46,185 99,084
Restructuring charges -- (105,436) -- (130,436)
------------ ------------ ------------ ------------
525,665 346,920 1,683,248 1,502,419
Earnings from operations 280,230 223,589 1,278,104 879,610
Other income (expense):
Interest expense (112,842) (119,531) (347,860) (429,908)
Gain on asset disposal -- 157,899 -- 168,750
Miscellaneous income 21,701 55,847 77,693 156,842
------------ ------------ ------------ ------------
Total other income (expense) (91,141) 94,215 (270,167) (104,316)
Earnings before income taxes 189,089 317,804 1,007,937 775,294
Income taxes -- -- -- --
------------ ------------ ------------ ------------
Net earnings $ 189,089 $ 317,804 $ 1,007,937 $ 775,294
============ ============ ============ ============
Basic earnings per share $ 0.11 $ 0.19 $ 0.59 $ 0.44
============ ============ ============ ============
Diluted earnings per share $ 0.06 $ 0.15 $ 0.32 $ 0.41
============ ============ ============ ============
Weighted average common
shares outstanding 1,703,098 1,703,098 1,703,098 1,745,974
Weighted average diluted
shares outstanding 3,209,342 2,185,848 3,209,342 1,906,891
See accompanying notes to unaudited condensed consolidated financial statements.
2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended
January 31,
2000 1999
----------- -----------
Cash Flows from Operating Activities
<S> <C> <C>
Net earnings $ 1,007,937 $ 775,294
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation 152,384 120,542
Gain on asset disposal -- (156,842)
Change in assets and liabilities:
Accounts receivable 554,469 980,152
Inventories (389,425) 295,967
Prepaid expenses and deposits (53,655) (31,507)
Accounts payable (296,335) (372,355)
Accrued liabilities (70,347) (721,967)
----------- -----------
Net cash provided by operating activities 905,028 889,284
----------- -----------
Cash Flows from Investing Activities
Proceeds from sale of property, plant & equipment -- 825,778
Purchase of property, plant & equipment (197,193) (79,240)
----------- -----------
Net cash provided (used) in investing activities (197,193) 746,538
----------- -----------
Cash Flows from Financing Activities
Common stock redemption -- (18,752)
Proceeds from Subordinated Convertible debt -- 275,160
Net payments on notes payable (731,291) (2,001,990)
Net borrowings on long-term debt 66,646 --
----------- -----------
Net cash used in financing activities (664,645) (1,745,582)
----------- -----------
Increase (decrease) in cash 43,190 (109,760)
Cash at beginning of period 36,280 393,877
----------- -----------
Cash at end of period $ 79,470 $ 284,117
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
3
</TABLE>
<PAGE>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL INFORMATION
OMNI Rail Products, Inc. (the "Company") has prepared the accompanying
unaudited condensed consolidated financial statements, pursuant to the
rules and regulations of the Securities and Exchange Commission. Certain
information and footnote disclosures normally included in consolidated
financial statements prepared in accordance with generally accepted
accounting principles have been omitted pursuant to such rules and
regulations. In the opinion of Management, all adjustments (consisting of
normal recurring adjustments) considered necessary for fair presentation
have been included in the accompanying unaudited condensed consolidated
financial statements. Results for the period ended January 31, 2000 are not
necessarily indicative of the results that may be expected for the fiscal
year ending April 30, 2000. For further information, refer to the
consolidated financial statements and footnotes thereto, for the fiscal
year ended April 30, 1999, included in the Company's Form 10-KSB.
(2) DESCRIPTION OF THE COMPANY, BASIS OF PRESENTATION AND SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES.
The Company, through its wholly-owned subsidiary, OMNI Products, Inc.
("OMNI"), is a supplier of premium virgin rubber and concrete/rubber
highway-rail grade crossing surfaces. OMNI supplies crossing surfaces to
all major North American railroads, numerous short line and regional
railroads, independent railway contractors, transit systems, ports,
intermodal yards, manufacturing facilities with rail access, and
municipalities.
The preparation of financial statements in conformity with generally
accepted accounting principles ("GAAP") requires management to make certain
estimates and assumptions that affect reported amounts of assets,
liabilities, revenues, and expenses. GAAP also requires disclosure of
contingent assets and liabilities. Actual results may differ from those
estimates.
Book overdrafts of $211,809 and $357,702 are included in accounts payable
as of January 31, 2000 and April 30, 1999, respectively. Book overdrafts
consist of outstanding checks that have not (1) cleared the bank and (2)
been funded by the Company's revolving credit facility (see Note 5). The
revolving credit facility and other senior debt activity are reported on a
net basis in the Consolidated Statements of Cash Flows.
The Company recognizes revenue as products are shipped. Certain
reclassifications have been made to the fiscal 1999 income statement in
order to conform to the fiscal 2000 presentation.
4
<PAGE>
The Company conducts its business within one industry segment, the
production and sale of premium railroad crossing materials. For fiscal 1999
and 2000, the Company's operations had no components of other comprehensive
income.
(3) COMPANY RESTRUCTURING
During Fiscal 1998, the Company began a restructuring plan to reduce the
over-capacity in its recycled rubber manufacturing operations and to
increase its concrete production capabilities. The refocus of business
stemmed from changes in industry demand away from recycled rubber and more
toward virgin rubber and concrete grade crossing materials. The Company
ceased production of recycled rubber during fiscal 1998 at its Portland,
Oregon, and Lancaster, Pennsylvania, facilities and liquidated its recycled
rubber manufacturing equipment and real estate at both locations during
fiscal 1999. Some pieces of equipment, primarily concrete forms, were
transferred to the Company's remaining facilities. At the same time the
Company extended agreements with a pre-cast concrete company to produce the
Company's proprietary concrete and rubber grade crossings, and with an
extruder of virgin rubber products to make various rail product materials
of virgin rubber. The Company has completed its efforts in re-engineering
the Company and is now implementing plans to expand production and improve
service while ensuring continued quality production.
The Company, in conjunction with its restructuring, wrote down assets to be
liquidated, wrote-off excess and obsolete recycled rubber inventory and
accrued expected shutdown and liquidation costs. The asset write-down and
inventory write-off did not have an impact on the Company's liquidity.
Other charges were recorded as liabilities and were fully paid out during
fiscal year 1999.
(4) INVENTORIES
Inventories consist of the following at January 31, 2000 and April 30,
1999:
January 31 April 30
---------- --------
Raw materials $ 253,103 $ 175,692
Finished goods 1,486,985 1,179,971
---------- ----------
1,740,088 1,355,663
Less allowance for excess or
obsolete inventory 20,000 25,000
---------- ----------
Inventories, net $1,720,088 $1,330,663
========== ==========
(5) DEBT
On August 12, 1999, the Company entered into Amendment No. 11 to Loan and
Security Agreement ("Amendment") with its Senior lender Finova Capital
Corporation, ("Finova") that extended the due date of the Company's
5
<PAGE>
borrowings until August 31, 2000. Under terms of the Amendment, the Company
reduced its line of credit facility to $1.8 million of total borrowing
availability (previously $3.5 million), and its interest rate to 1-1/2 %
over prime (previously 2-1/4% over prime). The Amendment also reinstates
certain financial covenants that were previously excused under the
Company's and Finova's Forbearance Agreement (entered into in fiscal 1999),
that include both senior debt and total debt coverage ratios and waives all
existing defaults as defined in the Forbearance Agreement. As part of the
Amendment an unused line fee equal to 1/4% of the unused line replaces the
previous $12,500 annual fixed revolver fee.
The Amendment also extended and increased the term note borrowings to
$608,000 with interest at 2-1/4% over prime and monthly payments based on a
five-year term. The new term note replaced the previous Capital Expenditure
note balance and provided an additional $371,000 of term borrowings for the
Company's use in making capital expenditures. The Amendment also permits
the Company to borrow up to an additional $500,000 from other sources.
(6) BASIC AND DILUTED NET EARNINGS PER COMMON SHARE
Net earnings per share ("EPS") is computed based on the provisions of
Statement of Financial Accounting Standards No. 128, "Earnings per Share"
("SFAS 128"). Under SFAS 128, Basic EPS is computed by dividing income
available to common shareholders by the weighted-average number of common
shares outstanding during the period. Contingently issuable shares, that
are issuable for little or no cash consideration are considered outstanding
common shares and included in the computation of basic EPS as of the date
that all necessary conditions have been satisfied. The computation of
diluted EPS is similar to the computation of basic EPS except that the
denominator is increased to include the number of additional common shares
that would have been outstanding if the dilutive potential common shares
had been issued.
The following table reconciles basic earnings per common share (EPS) to
diluted EPS for the three and nine months ended January 31, 2000:
<TABLE>
<CAPTION>
Weighted 3 months 9 months
3 months 9 months average per share per share
Fiscal 2000 earnings earnings shares amount amount
----------- -------- -------- ------ ------ ------
<S> <C> <C> <C> <C> <C>
Earnings available to common
shareholders $ 189,089 $1,007,937 1,703,098 $ 0.11 $ 0.59
Effect of dilutive securities:
Stock options -- -- 82,020 (0.01) (0.03)
Convertible notes 5,503 16,510 1,424,224 (0.04) (0.24)
---------- ---------- ---------- -------- --------
Diluted EPS $ 194,592 $1,024,447 3,209,342 $ 0.06 $ 0.32
========== ========== ========== ======== ========
6
</TABLE>
<PAGE>
The following tables reconcile basic earnings per common share (EPS) to
diluted EPS for the three and nine months ended January 31, 1999:
Weighted 3 months
3 months average per share
Fiscal 1999 earnings shares amount
----------- -------- ------ ------
Earnings available to common
shareholders $ 317,804 1,703,098 $ 0.19
Effect of dilutive securities:
Convertible notes 1,881 482,750 (0.04)
--------- --------- --------
Diluted EPS $ 319,685 2,185,848 $ 0.15
========= ========= ========
Weighted 9 months
9 months average per share
earnings shares amount
-------- ------ ------
Earnings available to common
shareholders $ 775,294 1,745,974 $ 0.44
Effect of dilutive securities:
Convertible notes 1,881 160,917 (0.03)
--------- --------- --------
Diluted EPS $ 777,175 1,906,891 $ 0.41
========= ========= ========
Any potentially antidilutive securities are excluded from the EPS
calculation.
(7) CONVERTIBLE PREFERRED STOCK SERIES B
The Company had authorized 1,000,000 shares of Series B convertible
preferred stock, of which 195,619 were issued and outstanding at April 30,
1999. The Series B preferred stock was convertible into a like number of
common shares had the Company reported gross annual revenues of $20,000,000
or annual pre-tax earnings of $1,500,000 during either of the fiscal years
ended April 30, 1998 or 1999. The Company neither reported gross annual
revenues of $20,000,000 nor annual pre-tax earnings of $1,500,000 during
either of such fiscal years. Accordingly, the Company canceled the series B
preferred stock effective as of the date of the issuance of its April 30,
1999 audited consolidated financial statements.
7
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
- --------------------------------------------------------------------------------
Results of Operations
---------------------
The following discussion is intended to assist the reader in understanding
and evaluating the financial condition and results of operations of OMNI
Rail Products, Inc. and its operating subsidiary (collectively the
"Company"). The following Selected Financial Data for the periods ended
January 31, 2000 and 1999 have been derived from the unaudited financial
statements of the Company. This Selected Financial Data should be read in
conjunction with, and is qualified in its entirety by reference to, the
unaudited financial statements and related notes thereto included elsewhere
in this Report.
Except for the historical information contained herein, the matters set
forth in this Report include forward-looking statements within the meaning
of the "safe harbor" provisions of the Private Securities Litigation Reform
Act of 1995. These forward-looking statements are subject to risks and
uncertainties that may cause actual results to differ materially. These
risks and uncertainties are detailed throughout this Report and are
discussed from time to time in the Company's periodic reports filed with
the Securities and Exchange Commission. The forward-looking statements
included in this Report speak only as of the date hereof.
Results of Operations -- Three and nine months ended January 31, 2000
compared with the three and nine months ended January 31, 1999
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
January 31 January 31
--------------------- ----------------------
2000 1999 2000 1999
---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue 2,686,629 2,276,761 10,081,246 9,101,868
- As a percent of revenue:
Gross Profit 30.0% 25.1% 29.4% 26.2%
Earnings from Operations 10.4% 9.8% 12.7% 9.7%
Net earnings 7.0% 14.0% 10.0% 8.5%
Basic earnings per share $0.11 $0.19 $0.59 $0.44
Diluted earnings per share $0.06 $0.15 $0.32 $0.41
</TABLE>
REVENUE
The Company derives its revenue from the sale of premium highway-rail grade
crossings to railroads, general contractors and municipalities. Revenues for the
nine months ended January 31, 2000, increased over the same period last year by
$979,378 or an increase of 11%. Concrete crossing sales for the nine-month
period declined 21% from the same period last year, while sales of virgin rubber
grade crossing materials increased 42%. The change in product sales mix is due
to the buying trends of the Compan s major customers. The Company's largest
customers have different product preferences. As a result, the Company can
experience a wide variation in the annual buying pattern of each customer that
in turn has a significant impact on the Company's product sales mix.
8
<PAGE>
Revenues for the three months ended January 31, 2000, were $409,868 greater than
the same period last year, or an 18% increase. Sales of the Company's virgin
rubber products were 7% lower in the three month period as compared to the same
period last year, while sales of the Company's concrete products increased by
55%. Again, the change in the product mix is due to variations in buying demands
of the Company's customers.
Because the Company's products are installed outside as part of a construction
or maintenance operation, sales fluctuate seasonally with weather conditions.
Unusually mild weather in November and December 1999, extended the construction
season in many areas and enhanced sales revenues in those months. With the
return to more normal weather patterns in January 2000, construction activity
declined and sales revenue for the month was at the anticipated level.
Also contributing to the increased sales for the three months and nine months
ended January 31, 2000 is the expansion of the customer base to include a
greater number of contractors and smaller railroads. As a result of improved
customer diversity, the Company has seen increased overall demand and more
consistency in its order flow. The Company's order backlog is higher this year
as compared to last year. In addition, the Company has expanded its production
capacity and increased inventories to better meet customer demand.
By July 31, 1998, the end of the Company's first quarter in fiscal 1999, the
Company had liquidated all of its recycled rubber product line and closed two
recycled rubber operations. Approximately $100,000 of fiscal 1999 sales were the
Company's discontinued recycled rubber products. Sales of recycled rubber
products were eliminated by the end of the first quarter of fiscal 1999.
Virgin rubber products are produced at the Company's processing facility in
McHenry, Illinois, and are also purchased through an out source provider.
Concrete crossing materials are produced at the Company's Ennis, Texas, facility
as well as by a third party provider.
COST OF SALES
Cost of sales increased by $400,055 in the nine months ended January 31, 2000,
as compared to the same period last year, or an increase of 6%. The increase is
directly related to higher sales. At the same time, the percentage increase in
cost of sales is less than the corresponding increase in revenues thus improving
the Company's gross margin. Much of the improvement in gross margin is due to
changes in product mix with greater sales of higher margin virgin rubber
products.
Cost of sales for the three months ended January 31, 2000, increased by $174,482
as compared to the same period last year, or a 10% increase. As with the nine
months ended January 31, 2000, cost of sales increase for such three month
period is due to the increase in revenues, although the increase in cost of
sales is at a lesser percentage rate, contributing to the improvement in the
Company's gross margin. The Company's improved operating results are also
realized from greater efficiencies in producing its redesigned concrete and
embedded virgin rubber crossing material ("ECR"). The Company began selling the
new ECR product in May of the current fiscal year and has now completely
converted from its former design to the new product.
9
<PAGE>
SELLING EXPENSES
Selling expenses for the nine months ended January 31, 2000, were $721,718 as
compared to $729,513 for the same period last year. The 1% decline, is mainly
due to an approximate $68,000 decline in salaries and sales commissions,
resulting from a reduced sales commission rate and marketing structure. At the
same time, the Company has incurred approximately $60,000 more this year in
advertising, marketing, promotional and travel and entertainment expenses that
have contributed to higher sales.
Selling expenses for the three months ended January 31, 2000, increased by
$36,058 or 18%. Sales commissions and sales salaries for the quarter were up
$19,731 or 12% mainly due to increased sales and the addition of sales staff.
Other promotional, marketing and travel and entertainment costs are also up for
the quarter due to increased marketing efforts by the Company, including the
Company's new Internet World-wide Web site at www.omnirail.com.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the nine months ended January 31, 2000,
were $915,345 representing a $111,087 or a 14% increase over the same nine month
period last year. In the first quarter of fiscal year ended April 30, 1999,
general and administrative salaries were dramatically reduced when the Company's
then Chief Executive Officer and Vice President of Operations were terminated
and the Company's Chief Financial Officer resigned. The Company's interim Chief
Financial Officer was paid as a consultant until August of 1998 when he accepted
a full time position with the Company. In October 1998, the Company's Vice
President of Sales and Marketing was promoted to President and Chief Operating
Officer. Inclusion of these salaries represents the primary reason for the
increase in general and administrative expenses. At the same time, several other
expense areas are down compared to last fiscal year including professional and
consulting fees, bank financing fees and insurance costs. This decline was
partially offset by $22,070 in a onetime, unforeseen environmental expense
incurred as part of the Company's withdrawal from the recycled rubber business
and final departure from its Portland, Oregon, facility.
General and administrative expenses for the three months ended January 31, 2000,
were up $46,202 or 20% compared to the same period last year. As with the
nine-month period, increases came in the areas of salaries and human resource
related costs while declines occurred in consulting fees, legal costs, payroll
servicing costs, insurance and financial fees and licenses.
ENGINEERING
One of the Company's engineers was laid off in December 1998. As a result,
Engineering costs for both the three and nine months ended January 31, 2000 are
lower due to this termination. Costs for the three months ended January 31,
2000, are also lower as outside consultants used last year for the Company's
M-1003 certification efforts were eliminated.
10
<PAGE>
INTEREST EXPENSE
Interest expense for the nine months ended January 31, 2000 was $347,860 as
compared to $429,908 for the same period ended January 31, 1999, a 19%
reduction. The decrease reflects the Company's substantial reduction of its term
debt and lower borrowing on the Company's revolving line of credit (a nearly $1
million reduction in the average debt outstanding between fiscal year 2000 and
fiscal year 1999). The Company's line of credit and term debt borrowing rates
were lowered with Amendment No. 11 to the Finova financing agreement, but at the
same time, interest rates for the period increased by1/2% due to the increase in
the prime lending rate.
Interest expense for the three months ended January 31, 2000, was down $6,689 or
6%. Borrowing against the line of credit had increased at October 31, 1999, the
end of the fiscal 2000 second quarter, to finance the Company's increased
working capital requirements. Working capital levels have remained higher than
last year due to the Company's planned increase in inventories and higher sales
level (current assets excluding cash are $664,226 higher at January 31, 2000
than the same period end last year). In addition, the Company last year, paid
down its mortgage liability by $605,000 on November 30, 1998 using proceeds from
the sale of the Company's Lancaster, Pennsylvania, facility. The reduction of
this interest bearing debt reduced the Company's average level for most of the
three months ended January 31, 2000.
LIQUIDITY AND CAPITAL RESOURCES
At January 31, 2000, the Company had a cash balance of $79,470. The Company's
operating activities generated cash of $905,028 during the nine months ended
January 31 2000.
The net working capital deficit at January 31, 2000, equaled $1,500,414.
Although an improvement over the first two quarters of fiscal 2000 and the
fiscal year ended April 30, 1999, the Company's current debt maturities and
other short-term commitments still exceed the Company's liquid assets available
to pay such obligations. The Company's largest mortgage was due December 1999,
but has been extended until June 30, 2000. The Company is actively trying to
sell the property that secures this mortgage.
On August 12, 1999, the Company entered into Amendment No. 11 to Loan and
Security Agreement ("Amendment") with its senior lender Finova Capital
Corporation, ("Finova") that extended the due date of the Company's borrowings
until August 31, 2000. Under terms of the Amendment, the Company has a reduced
line of credit facility ($1.8 million total availability, previously $3.5
million) with interest at 1-1/2% over prime (previously 2-1/4% over prime). The
Amendment also reinstated certain financial covenants that were previously
excused under the Forbearance Agreement that include both senior debt and total
debt coverage ratios and waives all existing defaults as defined in the
Forbearance Agreement. As part of the Amendment the previous $12,500 annual
fixed revolver fee was eliminated and an unused line fee equal to 1/4% of the
unused line was put in its place.
11
<PAGE>
The Amendment also extends and increases the term note borrowing availability to
$608,000 with interest at 2-1/4% over prime and monthly payments based on a
five-year term. The new term note replaced the capital expenditure note balance
and provides an additional $371,000 of term borrowings for the Company's use in
making capital expenditures. The Amendment also permits the Company to borrow up
to an additional $500,000 from other sources. Finova's debt facility and the
opportunity for additional financing will permit the Company to expand its
operating capacity to meet future needs. The Company is also actively pursuing a
new line of fixed term and revolver financing.
The Company's capital expenditures for the nine months ended January 31, 2000
were $197,193. Most of the expenditures were for costs to modify existing
concrete forms for product improvements and to purchase new rubber molds to
expand capacity.
The Company's primary source of funds is from its operations. The Company is
restricted as to the amount it can borrow from Finova based on a percent of
eligible accounts receivable and inventory. Additionally, the Company will need
replacement debt or equity financing after the end of the Finova agreement on
August 31, 2000. The Company's debt will require restructuring or additional
financing must be found in the event sufficient funds are not available to
payoff certain debt that comes due in fiscal 2000 and 2001. maturity date, nor
can there be any assurance that the Company will generate sufficient funds from
its operations to satisfy the working capital deficit. The Company is actively
pursuing new lines of financing, and although it believes such financing will be
secured before the due dates of the Company's various obligations, there can be
no assurance that the Company will secure such new financing timely.
The Company's stock is traded on the OTC Electronic Bulletin Board under the
ticker symbol ORXR.
12
<PAGE>
OTHER INFORMATION - PART II
Item 1. Legal Proceedings
- -------------------------
Not applicable.
Item 2. Changes in Securities
- -----------------------------
Not applicable.
Item 3. Defaults Upon Senior Securities
- ---------------------------------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- -----------------------------------------------------------
See information included with the Company's quarterly filing on form 10-QSB
for the six months ended October 31, 1999.
Item 5. Other Information
- -------------------------
Not applicable.
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
--------
27 Financial Data Schedule for the nine months ended January 31,
2000.
(b) Reports on Form 8-K
-------------------
None
13
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
OMNI Rail Products, Inc.
- ------------------------
Registrant
February 15, 2000 /s/ Robert E. Tuzik
- ----------------- -------------------
Date Robert E. Tuzik
President and Chief Operating Officer
February 15, 2000 /s/ M. Charles Van Rossen
- ----------------- -------------------------
Date M. Charles Van Rossen
Chief Financial Officer
14
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<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> APR-30-2000
<PERIOD-END> JAN-31-2000
<CASH> 79,470
<SECURITIES> 0
<RECEIVABLES> 973,545
<ALLOWANCES> 49,677
<INVENTORY> 1,720,088
<CURRENT-ASSETS> 2,828,322
<PP&E> 4,089,043
<DEPRECIATION> 740,078
<TOTAL-ASSETS> 6,177,287
<CURRENT-LIABILITIES> 4,328,736
<BONDS> 0
0
0
<COMMON> 17,031
<OTHER-SE> 361,759
<TOTAL-LIABILITY-AND-EQUITY> 6,177,287
<SALES> 10,081,246
<TOTAL-REVENUES> 10,081,246
<CGS> 7,119,894
<TOTAL-COSTS> 1,683,248
<OTHER-EXPENSES> (77,693)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 347,860
<INCOME-PRETAX> 1,007,937
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,007,937
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,007,937
<EPS-BASIC> 0.59
<EPS-DILUTED> 0.32
</TABLE>
