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 October 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
Incorporation or Organization) Identification NO.)
975 SE Sandy Blvd. Portland, Oregon 97214
----------------------------------------
(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: 3,178,528 Common Shares at
$.01 par value outstanding as of October 31,2000
<PAGE>
OMNI RAIL PRODUCTS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED OCTOBER 31, 2000
INDEX
PART I. FINANCIAL
Item 1. Financial Statements
Unaudited Condensed Consolidated Balance Sheets......................3
Unaudited Condensed Consolidated Statements of Operations............4
Unaudited Condensed Consolidated Statements of Cash Flows............5
Notes to Unaudited Condensed Consolidated Financial
Statements...........................................................6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.....................8
PART II. OTHER INFORMATION..................................................10
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults on 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...................................................................12
2
<PAGE>
OMNI RAIL PRODUCTS, INC., & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
October 31, 2000 April 30, 2000
(Unaudited) Audited
ASSETS ----------- -----------
------
Current Assets:
Cash $ 98,555 $ 157,813
Accounts receivable, net 1,981,538 1,627,030
Inventories, net 2,331,444 1,593,645
Current deferred taxes -- 168,000
Prepaid expenses and deposits 109,783 78,658
----------- -----------
Total current assets 4,521,320 3,625,146
Deferred taxes 153,748 325,000
Real estate held for sale 1,305,000 1,400,000
Property, plant and equipment, net 2,073,130 2,098,590
Other assets 97,991 --
----------- -----------
$ 8,151,189 $ 7,448,736
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 1,278,783 $ 1,462,280
Accrued liabilities 607,244 855,262
Notes payable 1,539,375 748,029
Current portion of long-term debt 384,755 404,805
----------- -----------
Total current liabilities 3,810,157 3,470,376
Long-term debt, less current portion 2,137,186 2,585,061
Stockholders' equity:
Common stock 31,785 17,401
Additional paid in capital 2,654,330 2,387,457
Accumulated deficit (482,269) (1,011,559)
----------- -----------
Total stockholders' equity 2,203,846 1,393,299
----------- -----------
$ 8,151,189 $ 7,448,736
=========== ===========
See accompanying notes to unaudited condensed consolidated financial statements.
3
<PAGE>
<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended Six Months Ended
October 31, October 31,
2000 1999 2000 1999
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Sales $ 3,158,657 $ 3,973,828 $ 6,974,047 $ 7,394,617
Cost of sales 2,199,022 2,770,540 4,757,845 5,239,160
----------- ----------- ----------- -----------
Gross profit 959,635 1,203,288 2,216,202 2,155,457
Selling expenses 232,889 265,534 468,543 488,319
Administrative expenses 341,544 328,415 667,787 640,035
Research, development and engineering 30,365 14,859 47,222 29,229
----------- ----------- ----------- -----------
604,798 608,808 1,183,552 1,157,583
Income from operations 354,837 594,480 1,032,650 997,874
Other income (expense):
Interest expense (98,536) (117,045) (198,086) (235,018)
Miscellaneous income 8,229 24,276 33,521 55,992
Loss on fair value of asset held for resale -- -- (95,000) --
----------- ----------- ----------- -----------
Total other expense (90,307) (92,769) (259,565) (179,026)
Income before tax and extraordinary item 264,530 501,711 773,085 818,848
Income tax 98,172 -- 302,634 --
----------- ----------- ----------- -----------
Income after tax and extraordinary item 166,358 501,711 470,451 818,848
Extraordinary item:
Gain on debt refinancing net of tax ($36,617) -- -- 58,839 --
Net income $ 166,358 $ 501,711 $ 529,290 $ 818,848
=========== =========== =========== ===========
Basic income per common share
Before extraordinary item $ 0.06 $ 0.29 $ 0.20 $ 0.48
=========== =========== =========== ===========
Net income $ 0.06 $ 0.29 $ 0.23 $ 0.48
=========== =========== =========== ===========
Diluted income per share
Before extraordinary item $ 0.05 $ 0.16 $ 0.15 $ 0.26
=========== =========== =========== ===========
Net income $ 0.05 $ 0.16 $ 0.16 $ 0.26
=========== =========== =========== ===========
Weighted average common
shares outstanding 2,958,853 1,703,098 2,348,771 1,703,098
Weighted average diluted
shares outstanding 3,268,117 3,209,342 3,256,150 3,209,342
See accompanying notes to unaudited condensed consolidated financial statements.
4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
Six months Six months
Ended Ended
Oct. 31,2000 Oct. 31,1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 529,290 $ 818,848
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 152,386 96,779
Loss on fair value of asset held for sale 95,000 --
Gain on debt refinancing (95,456) --
Change in assets and liabilities:
Accounts receivable (354,208) (595,030)
Inventories (737,799) (130,872)
Prepaid expenses and deposits (31,125) (29,862)
Accounts payable (183,497) 228,724
Accrued Liabilities (248,018) (85,326)
Deferred taxes 339,252 --
--------- ---------
Net cash provided by (used in) operating activities (534,475) 303,261
Cash Flow from Investing Activities
Purchase of plant, property & equipment (111,121) (156,774)
--------- ---------
Net cash provided by (used in) investing activities (111,121) (156,774)
Cash Flows from Financing Activities
Sale of common stock under options 5,954 --
Borrowings on notes payable - bank 791,346 (114,936)
Borrowings (payments) on long-term debt (97,166) (5,243)
Loan origination fees on refinancing of term debt (113,796) --
--------- ---------
Net cash provided by (used in) financing 586,338 (120,179)
--------- ---------
Net increase (decrease) in cash (59,258) 26,308
Cash at beginning of period 157,813 36,280
--------- ---------
Cash at end of period $ 98,555 $ 62,588
========= =========
See accompanying notes to unaudited condensed consolidated financial statements.
5
</TABLE>
<PAGE>
OMNI RAIL PRODUCTS, INC. & SUBSIDIARY
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(1) INTERIM FINANCIAL INFORMATION
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, the condensed consolidated financial statements include all
adjustments considered necessary for fair presentation. Results for the
period ended October 31, 2000 are not necessarily indicative of the results
that may be expected for the fiscal year ending April 30, 2001. For further
information, refer to the consolidated financial statements and footnotes
thereto for the fiscal year ended April 30, 2000, included in the Company's
Form 10-KSB.
(2) DEBT
On June 2, 2000, the Company entered into a new senior lending arrangement
with LaSalle Business Credit ("LaSalle"), whereby Finova and the Company's
mortgage lenders, were paid in full, and new term notes and line of credit
financing were established with LaSalle. The agreement with LaSalle
established $1,724,000 of new three-year term notes payable in monthly
installments of $15,400, plus interest at 1% over prime. This resulted in
the Company realizing a gain on debt refinancing of $95,456 (included in
net income for the period ended 7/31/2000) and has reclassified a portion
of the debt that was refinanced from current to long-term as of April 30,
2000. As of 10/31/00 the Company was in compliance with all bank and debt
covenants.
(3) 8% SECURED CONVERTIBLE NOTES
Pursuant to a loan agreement entered into in October 1998 in conjunction
with Finova's requirements for completing the Company's restructuring and
as an inducement for Mr. Cook to join the Board of Directors as Chairman,
the Company issued $275,160 in 8% Secured Convertible Notes due in October
2003 and Jan 2004.
On August 15, 2000 pursuant to the terms of these notes, the holders of the
notes converted them into a total of 1,424,224 common shares.
6
<PAGE>
<TABLE>
<CAPTION>
(4) INVENTORIES
Inventories consist of the following at 10/31/2000, 10/31/1999 and
4/30/2000:
10/31/2000 10/31/1999 4/30/2000
------------ ------------ ------------
Finished Goods $ 2,031,671 $ 1,280,703 $ 1,367,693
Raw Materials $ 299,773 $ 180,832 $ 225,952
------------ ------------ ------------
Total Inventories $ 2,331,444 $ 1,461,535 $ 1,593,645
(5) BASIC AND DILUTED NET INCOME PER COMMOM 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 to diluted
EPS for the three and six months ended October 31,2000;
Income Wt average shares Per share amount
3 months 6 months 3 months 6 months 3 months 6 months
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Income before extraordinary item $166,358 $470,451 2,958,853 2,348,771 $0.06 $0.20
Net income $166,358 $529,290 2,958,853 2,348,771 $0.06 $0.23
Effect of dilutive securities:
Stock options 90,153 82,419
8% Convertible notes $ 844 $ 6,347 219,111 824,960
Effect before extraordinary item ($0.01) ($0.05)
Effect after extraordinary item ($0.01) ($0.07)
Income before extraordinary item (diluted) $167,202 $476,798 3,268,117 3,256,150 $0.05 $0.15
Net income (diluted) $167,202 $535,637 3,268,117 3,256,150 $0.05 $0.16
7
</TABLE>
<PAGE>
Item 2 Management's Discussion and Analysis of Financial Condition and Results
of Operations
-------------------------------------------------------------------------------
Results of Operations
---------------------
The following Selected Financial Data for the periods ended October 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 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 -- Quarter and six months ended October 31, 2000
compared with the Quarter and six months ended October 31,1999;
<TABLE>
<CAPTION>
3 Months Ended Six Months Ended
October 31 October 31
----------------------- ------------------------
2000 1999 2000 1999
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Revenue $3,158,657 $3,973,828 $6,974,047 $7,394,617
- As a percent of revenue:
Gross Profit 30.4% 30.3% 31.8% 29.2%
Income from Operations 11.2% 15.0% 14.8% 13.5%
Net income 5.3% 12.6% 7.6% 11.1%
Basic income per share
Before extraordinary item $0.06 $0.29 $0.20 $0.48
Net income $0.06 $0.29 $0.23 $0.48
Diluted income per share
Before extraordinary item $0.05 $0.16 $0.15 $0.26
Net income $0.05 $0.16 $0.16 $0.26
</TABLE>
SALES (Revenue)
The Company derives its revenues from the sale of highway-rail grade
crossings to railroads, general contractors and municipalities. Changes
from period to period in product sales mix is highly dependent on the
procurement trends of the Company's major customers, seasonal construction
activity, railroad product requirements, product application preferences,
and the overall financial health of the railroad industry and the Company's
customers.
Total Sales for the first six months ended October 31, 2000 were $6,974,047
and is a decrease from the same six-month period last year of $420,570 or
5.7%. During the six-month period ended 10/31/00, sales of rubber
highway-rail grade crossings decreased and concrete highway-rail grade
crossings sales increased. Sales for the quarter ended 10/31/00 were
$3,158,657, a reduction of $815,171 or a 20.5% decrease over the same
period last year.
The sales decrease during the quarter and six-month period ended 10/31/00
is attributable to reduced product shipments to the Class I railroads,
which is the result of a general slowdown in railroad industry capital
expenditures for the last quarter.
8
<PAGE>
COST OF SALES
The Company manufactures a full product line of concrete and rubber
highway-rail grade crossings. Cost of Sales and gross margins can vary
significantly depending on the mix of products manufactured and shipped
during any comparative period.
For the six-month period ended 10/31/00 Cost of Sales was reduced $481,315
or 9.2% as compared to the same period last year. The decrease in Cost of
Sales is related to $420,570 in lower revenue for the period. Additionally,
the Company realized a gross margin improvement of 2.8% which is the result
of increased productivity and lower product manufacturing costs.
For the second quarter ended 10/31/00 Cost of Goods Sold decreased
$571,518, or 20.6%. The decrease is related to lower product shipments
(sales) during this period of $815,171 when compared to the same quarter
last year.
SELLING EXPENSE
Selling expense for the six-month period ended 10/31/00 and 10/31/99 was
$468,543 and $488,319 respectively, a decrease of $19,776 or 4.1%. Selling
expense for the quarter ended October 31, 2000 was $232,889 compared to
$265,534 for the quarter ended October 31, 1999, a decrease of $32,645 or
12.3%.
The decrease in Selling expense for both the six and three month periods is
primarily related to reduced sales commission expense which is the result
of lower sales volumes during each of these periods.
ADMINISTRATIVE EXPENSES
When compared to the same periods last year, Administrative expense for the
six-month period ended 10/31/00 increased $27,752 or 4.3% and during the
second quarter increased $13,129 or 4.0%. The increase in both the
six-month and quarter periods ended 10/31/00 is primarily related to
increased expense in salaries and benefits, accrued bonus cost, and trade
shows expense.
RESEARCH, DEVELOPMENT AND ENGINEERING
Research, Development and Engineering expense for the six-month and quarter
period ended 10/31/00 increased $17,993 and $14,859 respectively over the
same period last year. The increase in expense during these comparative
periods is associated with the engineering development of new highway-rail
grade crossing products.
INTEREST EXPENSE
Interest expense was lower for the six month and quarter periods ended
October 31, 2000 compared to the same period last year. Respectively,
during each of these periods, interest expense was reduced by $36,932 and
$18,509. The Company achieved lower interest expense primarily due to
reduced average debt levels in these periods and resulted in the Company
realizing an approximate 16% reduction in interest expense - when compared
to the same periods as last year.
9
<PAGE>
During the six month period ended 10/31/00 the interest expense reduction
was the result of lower borrowings on its Bank Lines of Credit. For the
quarter ended 10/31/00, the Company's interest expense reduction was the
result of reduced Bank Lines of Credit borrowing and the conversion of debt
(convertible notes) to common equity on 8/15/00.
LIQUIDITY AND CAPITAL RESOURCES
At October 31,2000, the Company had a cash balance of $98,555. The
Company's operating activities used cash of $534,475 during the six-month
period ended 10/31/00 compared to generating cash of $303,261for the
six-month period ended 10/31/99. The decrease in cash generated is
primarily the result of an increase in inventory of $737,799, an increase
in accounts receivable of $341,208, and is partially offset by a decrease
in accounts payable of $183,497, a decrease in accrued expenses of
$248,018, and a decrease in deferred taxes of $339,252. The increase in
inventory is primarily related to customers expected delivery requirements
in calendar Q4 2000 and Q1 2001, while the increase in receivables relates
to slower payments by a Class I Railroad over the previous comparative
six-month period. The reduction in accounts payable reflects lower sales
activity for the period while the decrease in accrued expenses reflects
reductions in warranty, bonus and accrued expenses for the six-month
period.
The Company's primary source of funds is from its operations. The Company
is restricted as to the amount it can borrow from its credit facility based
on a percent of eligible accounts receivable and inventory. On June 2,
2000, the Company entered into a new senior lending arrangement with
LaSalle Business Credit ("LaSalle"), whereby Finova and the Company's
mortgage lenders were paid in full. New term notes and line of credit
financing were established with LaSalle. The agreement with LaSalle
provided for $1,724,000 of new three-year term notes payable in monthly
installments of $15,400, plus interest at 1% over prime. As a result of the
refinancing, the Company realized a gain on debt refinancing of $95,456
(included in net income for the period ended 7/31/2000) and has
reclassified a portion of the debt that was refinanced from current to
long-term as of April 30, 2000.
The Company's stock is traded on the OTC Electronic Bulletin Board under
the ticker symbol ORXR.
OTHER INFORMATION - PART II
Item 1. Legal Proceedings
-------------------------
Not applicable.
Item 2. Changes in Securities
-----------------------------
Not applicable
Item 3. Defaults on Senior Securities
-------------------------------------
Not applicable
10
<PAGE>
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
The Annual meeting of the Company's shareholders was held on October 11,
2000 and two items were submitted to a vote.
Item #1:
--------
The following three Directors were re-elected at this meeting, William E.
Cook, Edward S. Smith, John E. Hart. Directors hold office for one year and
until their successors are elected.
Total shares voted were 2,956,480. Voting for Mr. Cook were 2,679,589
shares, 276,891 shares were withheld. Voting for Mr. Smith were 2,879,529
shares, 76,951 shares were withheld. Voting for Mr. Hart were 2,679,635
shares, 276,845 shares were withheld.
Item #2:
--------
A proposal to amend the Company's certificate of Incorporation. This
proposal reduced the number of authorized shares of the Company's Common
Stock to 20,000,000 and the number of authorized shares of the Company's
Preferred Stock to 1,000,000. This proposal was approved. Voting for the
amendment to the Company's Certificate of Incorporation were 2,929,779
shares, against were 1,148 shares, and 25,553 shares were withheld.
Item 5. Other Information
-------------------------
Not applicable
Item 6. Exhibits and Reports on Form 8-K
----------------------------------------
(a) Exhibits
--------
10.22 Amendment No. 11 to Loan and Security Agreement between the
Company and Finova Capital Corporation. Previously filed as an
exhibit to the Company's Form 10-QSB filed on September 17,1999.
10.23 Term Loan A Promissory Note between the Company and Finova
Capital Corporation. Previously filed as an exhibit to the
Company's Form 10-QSB filed on September 17,1999.
10.24 Loan and Security Agreement dated as of June 2, 2000 with
LaSalle Business Credit. Previously filed as an exhibit to the
Company's Form 10-KSB for fiscal year ended 4/30/2000.
27 Financial Data Schedule October 31,2000.
(b) Reports on Form 8-K
-------------------
None
11
<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
December 20, 2000 By: /s/ Robert E. Tuzik
----------------- -----------------------
Date Robert E. Tuzik
President and Chief
Operating Officer
December 20, 2000 By: /s/ David C. Anderson
----------------- -------------------------
Date David C Anderson
Chief Financial Officer
12
