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 July 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.
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(Exact Name of Small Business Issuer as Specified in its Charter)
Delaware 68-0281098
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(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
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(Issuer's Telephone Number, Including Area Code)
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(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: 3,177,994 Common Shares at
$.01 par value outstanding as of August 15, 2000
<PAGE>
OMNI RAIL PRODUCTS, INC.
FORM 10-QSB
FOR THE QUARTERLY PERIOD ENDED JULY 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 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.................................................................. 11
2
<PAGE>
OMNI RAIL PRODUCTS, INC., & SUBSIDIARY
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
July 31, 2000 April 30, 2000
(Unaudited) (Audited)
----------- ---------
ASSETS
------
Current Assets:
Cash $ 114,264 $ 157,813
Accounts receivable, net 2,093,055 1,627,030
Inventories, net 2,042,501 1,593,645
Current deferred tax benefit -- 168,000
Prepaid expenses and deposits 86,235 78,658
----------- -----------
Total current assets 4,336,055 3,625,146
Deferred tax benefit 265,521 325,000
Real estate held for sale 1,305,000 1,400,000
Property, plant and equipment, net 2,086,446 2,098,590
Other assets 107,474 --
----------- -----------
$ 8,100,496 $ 7,448,736
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable $ 1,639,348 $ 1,462,280
Accrued liabilities 734,112 855,262
Notes payable - bank 1,025,413 748,029
Current portion of long-term debt 405,066 404,805
----------- -----------
Total current liabilities 3,803,939 3,470,376
Long-term debt, less current portion 2,534,325 2,585,061
Stockholders' equity:
Common stock 17,534 17,401
Additional paid in capital 2,393,324 2,387,457
Accumulated deficit (648,626) (1,011,559)
----------- -----------
Total stockholders' equity 1,762,232 1,393,299
----------- -----------
$ 8,100,496 $ 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
Quarter Quarter
Ended Ended
July 31,2000 July 31,1999
------------ ------------
<S> <C> <C>
Sales $ 3,815,390 $ 3,420,789
Cost of sales 2,558,823 2,468,620
----------- -----------
Gross profit 1,256,567 952,169
Selling expenses 235,654 222,785
Administrative expenses 326,243 311,620
Research, development and engineering 16,857 14,370
----------- -----------
578,754 548,775
Income from operations 677,813 403,394
Other income (expense):
Interest expense (99,550) (117,973)
Miscellaneous income 25,293 31,716
Loss on fair value of asset held for resale (95,000) --
----------- -----------
Total other expense (169,257) (86,257)
Income before tax and extraordinary item 508,556 317,137
Income tax 204,462 --
----------- -----------
Income before extraordinary item 304,094 317,137
Extraordinary item:
Gain on debt refinancing net of tax ($36,617) 58,839 --
Net income $ 362,933 $ 317,137
=========== ===========
Basic income per common share
Before extraordinary item $ 0.17 $ 0.19
=========== ===========
Net income $ 0.21 $ 0.19
=========== ===========
Diluted income per share
Before extraordinary item $ 0.09 $ 0.10
=========== ===========
Net income $ 0.11 $ 0.10
=========== ===========
Weighted average common shares outstanding 1,745,231 1,703,098
=========== ===========
Weighted average diluted shares outstanding 3,320,143 3,243,990
=========== ===========
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 FLOW
Quarter Quarter
Ended Ended
July 31,2000 July 31,1999
------------ ------------
<S> <C> <C>
Cash Flows from Operating Activities
Net income $ 362,933 $ 317,137
Adjustments to reconcile net earnings to
Net cash provided by operating activities:
Depreciation and amortization 73,575 44,898
Loss on fair value of asset held for sale 95,000 --
Gain on debt refinancing (95,456) --
Change in assets and liabilities:
Accounts receivable (452,725) (47,862)
Inventories (448,856) (279,855)
Prepaid expenses and deposits (20,877) (13,535)
Accounts payable 177,068 144,193
Accrued liabilities (121,150) (52,742)
Deferred taxes 227,479 --
Net cash provided by (used in) operating activities (203,009) 112,234
--------- ---------
Cash Flow from Investing Activities
Purchase of plant, property & equipment (55,109) (30,659)
--------- ---------
Net cash provided by (used in) investing activities (55,109) (30,659)
Cash Flows from Financing Activities
Sale of common stock under options 6,000 --
Net borrowings on notes payable 332,040 230,031
Net borrowings (payments) on long-term debt (9,675) 37,685
Loan origination fees on refinancing of term debt (113,796) --
--------- ---------
Net cash provided by (used in) financing activities 214,569 267,716
--------- ---------
Net increase (decrease) in cash (43,549) 349,291
Cash at beginning of period 157,813 36,280
--------- ---------
Cash at end of period $ 114,264 $ 385,571
========= =========
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 July 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.
(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 to a total of 1,424,224 common shares.
6
<PAGE>
INVENTORIES
Inventories consist of the following at 7/31/2000, 7/31/1999 and 4/30/2000:
7/31/2000 7/31/1999 4/30/2000
--------- --------- ---------
Finished Goods $1,684,648 $1,408,307 $1,367,693
Raw Materials $ 357,853 $ 202,211 $ 225,952
---------- ---------- ----------
Total Inventory $2,042,501 $1,610,518 $1,593,645
(5) BASIC AND DILUTED NET EARNINGS 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 (EPS) to
diluted EPS for the first quarter ended July 31, 2000:
Weighted Average Per share
Income Shares amount
------ ------ ------
Income before extraordinary item $ 304,094 1,745,231 $ 0.17
Net income $ 362,933 1,745,231 $ 0.21
Effect of dilutive securities:
Stock options 150,688
8% Convertible notes 5,503 1,424,224
Effect before extraordinary item $ (0.08)
Effect after extraordinary item $ (0.10)
Income before extraordinary item $ 309,597 3,320,143 $ 0.09
Net income $ 368,436 3,320,143 $ 0.11
7
<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 July 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 ended July 31, 2000 compared with the
Quarter ended July, 31,1999
As of and for the Quarters Ended
July 31
--------------------------------
1999
----
Revenue ($) 3,815,390 3,420,789
- As percent of revenue:
Gross Profit 32.9% 27.8%
Earnings from Operations 17.8% 11.8%
Net Income 9.5% 9.3%
Basic income per share
Before extraordinary item $ 0.17 $ 0.19
Net income $ 0.21 $ 0.19
Diluted income per share
Before extraordinary item $ 0.09 $ 0.10
Net income $ 0.11 $ 0.10
SALES (Revenue)
The Company derives its sales from the sale of highway-rail grade crossings
to railroads, general contractors and municipalities. Revenues for the
quarter ended July 31, 2000 increased from the same quarter last year by
$394,601 or a increase of 11.5%.
8
<PAGE>
Sales of recycled rubber products were eliminated by the end of the first
quarter of fiscal 1999. The change in product sales mix is the result of
buying trends of the Company's major customers. Because the Company's
largest customers have different product preferences, the wide swings in
their individual annual buying patterns have a significant impact on the
Company's product sales mix.
COST OF SALES
Cost of sales increased from $2,468,620 in the quarter ended July 31, 1999
to $2,558,823 in the quarter ended July 31, 2000, an increase of 3.7%. The
greatest part of this increase is directly related to higher sales. At the
same time the company has experienced gross margins improvement in both
concrete and rubber manufactured products. Gross Margins increased over the
previous quarter ended 7/31/99 by 5.1% and is primarily due to increased
operating efficiencies and lower production costs.
SELLING EXPENSES
Selling expenses for the Quarter ended July 31, 2000, were $235,654
compared to $222,785 for the Quarter ended July 31, 1999. The increase is
primarily related to higher sales commissions.
GENERAL AND ADMINISTRATIVE EXPENSES
General and administrative expenses for the quarter ended July 31, 2000,
increased to $326,243 representing a $14,623 or 4.7% increase over the same
quarter last year. The increase is mostly related to increases in salary
and bonus expenses while at the same time, several other expenses are down
from the Quarter ended 7/31/1999. These expenses were related to
environmental costs incurred as part of the Company's withdrawal from the
recycled rubber business and closure of its Portland, Oregon manufacturing
facility.
RESEARCH, DEVELOPMENT AND ENGINEERING
Engineering expenses for the quarter ended July 31, 2000, increased to
$16,857 representing a $2,487 or 17.3% increase over the same quarter last
year. The increase is primarily due to increased benefits expense for the
period. Offsetting this increase was a reduction of $1,550 in engineering
salary expense.
INTEREST EXPENSE
Interest expense for the quarter ended July 31, 2000, was $99,550 as
compared to $117,973 for the quarter ended July 31, 1999. The decrease
reflects the Company's substantial reduction of its term debt and lower
borrowing on the Company's revolving line of credit (a $772,574 reduction
in the total debt outstanding between fiscal first quarter 2001 versus
2000).
9
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
At July 31, 2000, the Company had a cash balance of $114,264. The Company's
operating activities used cash of $203,009 during the first Quarter ended
7/31/00 compared to generating cash of $112,234 for the Quarter dated
7/31/1999. The decrease in cash generated is primarily the result of an
increase in Inventory of $448,856, an increase in accounts receivable of
$452,725, and is partially offset by a decrease in deferred tax benefit of
$227,479. The increase in inventory is primarily related to customers
expected delivery requirements, while the increase in receivables relates
to higher sales over the previous fiscal quarter.
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 account 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 lines 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. 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.
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
Item 4. Submission of Matters to a Vote of Security Holders
-----------------------------------------------------------
Not applicable
Item 5. Other Information
-------------------------
Not applicable
10
<PAGE>
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 July 31, 2000.
(b) Reports on Form 8-K
A Form 8-K was filed on July 17,2000, pursuant to Item 5, Other Event,
concerning the Financial Statements for the FYE 4/30/2000.
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
September 13, 2000 /s/ Robert E. Tuzik
------------------ -------------------
Date Robert E. Tuzik
President and Chief Operating Officer
September 13, 2000 /s/ David C. Anderson
------------------ ---------------------
Date David C Anderson
Chief Financial Officer
11
