UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period endedDecember 31, 2012
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR
15(d) OF THE EXCHANGE ACT
For the transition period from _________________to _________________
Commission file number 0-1937
OAKRIDGE HOLDINGS, INC.
(Exact name of Registrant as specified in its charter)
| MINNESOTA | 41-0843268 |
| (State or other jurisdiction of | (I.R.S. Employer |
| Incorporation or organization) | Identification Number) |
| 400 WEST ONTARIO STREET, CHICAGO, ILLINOIS | 60654 |
| (Address of principal executive offices) | (Zip Code) |
(312) 505-9267
(Issuer's telephone number)
(Former name, former address and former fiscal year, if changed since last report)
Check whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days
[X] Yes [ ] No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (232.405 of this chapter) during the preceding 12 months (or for such a shorter period that the registrant was required to submit and post such files.)
[X] Yes [ ] No
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
[ ] Yes [X] 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:
1,431,503 shares as of the date of this report
Indicate by check mark, whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 or the Exchange Act.
| Large Accelerated filer [ ] | Accelerated Filer [ ] |
| Non-accelerated filer [ ] | Smaller reporting Company [X] |
| (Do not check if a smaller reporting company) |
OAKRIDGE HOLDINGS, INC.
FORM 10-Q
For the quarter ended December 31, 2012
TABLE OF CONTENTS
| PART I. | Financial Information | 3 |
| ITEM 1. | Condensed Consolidated Financial Statements: | 3 |
| (a) | Condensed Consolidated Balance Sheets as of December 31, 2012 (unaudited) and June 30, 2012 (audited) | 3 | |
| (b) | Condensed Consolidated Statements of Income for the three months ended December 31, 2012 and 2011 (unaudited) and six months ended December 31, 2012 and 2011 (unaudited) | 5 | |
| (c) | Condensed Consolidated Statements of Cash Flows for the six months ended December 31, 2012 and 2011 (unaudited) | 7 | |
| (d) | Notes to Condensed Consolidated Financial Statements | 8 |
| SIGNATURES | 21 |
| PART I - FINANCIAL INFORMATION | FORM 10-Q |
| ITEM 1 – FINANCIAL STATEMENTS |
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31,2012 | June 30,2012 | ||||
| (unaudited) | (audited) | ||||
ASSETS | ||||||
| ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 264,826 | $ | 374,861 | ||
Restricted Cash | 38,090 | 86,915 | ||||
Receivables, net | 1,700,977 | 1,179,851 | ||||
Inventories: | ||||||
Production, net | 4,345,661 | 6,046,477 | ||||
Cemetery, mausoleum space, markers and related | 566,013 | 619,530 | ||||
Other current assets | 100,364 | 54,586 | ||||
Deferred income taxes | 173,000 | 242,000 | ||||
Total current assets | 7,188,931 | 8,604,220 | ||||
| ||||||
Property, plant and equipment: | ||||||
Property, plant and equipment, at cost | 7,181,816 | 7,073,242 | ||||
Less accumulated depreciation | (4,848,769 | ) | (4,741,669 | ) | ||
Property, plant and equipment, net | 2,333,047 | 2,331,573 | ||||
| ||||||
Other assets: | ||||||
Preneed trust investments | 2,353,294 | 2,326,926 | ||||
Cemetery perpetual care trusts | 5,621,364 | 5,475,078 | ||||
Deferred income taxes | 703,000 | 703,000 | ||||
Debt issuance costs, net | 41,941 | 45,813 | ||||
Other | 7,549 | 7,549 | ||||
Total other assets | 8,727,148 | 8,558,366 | ||||
| ||||||
| ||||||
Total assets | $ | 18,249,126 | $ | 19,494,159 |
See accompanying notes to the condensed
consolidated financial statements
3
| PART I - FINANCIAL INFORMATION | FORM 10-Q |
| ITEM 1 – FINANCIAL STATEMENTS |
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
| December 31,2012 | June 30,2012 | ||||
| (unaudited) | (audited) | ||||
| ||||||
LIABILITIES | ||||||
| ||||||
Current liabilities: | ||||||
Lines of credit - bank | $ | 1,010,845 | $ | 1,210,845 | ||
Trade accounts payable | 968,164 | 1,198,937 | ||||
Due to finance company | 908,084 | 1,456,083 | ||||
Accrued liabilities | 848,244 | 789,110 | ||||
Deferred revenue | 1,403,171 | 1,913,926 | ||||
Short-term notes payable – officers | 300,000 | 300,000 | ||||
Current maturities of long-term debt | 262,549 | 2,077,432 | ||||
Total current liabilities | 5,701,057 | 8,946,333 | ||||
| ||||||
| ||||||
Long-term liabilities: | ||||||
Long-term debt, net of current maturities | 2,807,843 | 1,092,245 | ||||
Convertible subordinated debentures- officers | 560,000 | 560,000 | ||||
Convertible subordinated debentures - others | 80,000 | 80,000 | ||||
Non-controlling interest in pre-need care trust investments | 2,353,294 | 2,326,926 | ||||
Total long-term liabilities | 5,801,137 | 4,059,171 | ||||
| ||||||
Total liabilities | 11,502,194 | 13,005,504 | ||||
| ||||||
Non-controlling interest in perpetual | ||||||
trust investments | 5,621,364 | 5,475,078 | ||||
| ||||||
Stockholders’ equity: | ||||||
Common stock | 143,151 | 143,151 | ||||
Additional paid-in-capital | 2,028,975 | 2,028,975 | ||||
Accumulated deficit | (1,046,558 | ) | (1,158,549 | ) | ||
Total stockholders’ equity | 1,125,568 | 1,013,577 | ||||
| ||||||
Total liabilities and stockholders’ equity | $ | 18,249,126 | $ | 19,494,159 |
See accompanying notes to the condensed
consolidated financial statements
4
| PART I - FINANCIAL INFORMATION | FORM 10-Q |
| ITEM 1 – FINANCIAL STATEMENTS |
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
| Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||
| ||||||||||||
Revenue, net: | ||||||||||||
Cemetery | $ | 860,679 | $ | 876,538 | $ | 1,609,842 | $ | 1,804,220 | ||||
Aviation | 2,410,802 | 2,045,567 | 5,593,416 | 4,115,709 | ||||||||
Interest – Care Funds | 43,579 | 20,657 | 65,554 | 40,835 | ||||||||
Other | 334 | 2,036 | 502 | 2,036 | ||||||||
Total revenue | 3,315,394 | 2,944,798 | 7,269,314 | 5,962,800 | ||||||||
| ||||||||||||
Operating expenses: | ||||||||||||
Cost of cemetery sales | 573,834 | 502,113 | 1,052,734 | 1,050,309 | ||||||||
Cost of aviation sales | 2,207,969 | 1,601,640 | 5,029,542 | 3,684,871 | ||||||||
Sales and marketing | 89,125 | 128,112 | 172,644 | 230,224 | ||||||||
General and administrative | 323,705 | 329,455 | 621,695 | 643,556 | ||||||||
Total operating expenses | 3,194,633 | 2,561,320 | 6,876,615 | 5,608,960 | ||||||||
| ||||||||||||
Operating income | 120,761 | 383,478 | 392,699 | 353,840 | ||||||||
| ||||||||||||
Other income (expense): | ||||||||||||
Interest income | 4,883 | 1,826 | 8,048 | 7,216 | ||||||||
Interest expense | (103,720 | ) | (127,245 | ) | (219,756 | ) | (234,016 | ) | ||||
Total other expense | (98,837 | ) | (125,419 | ) | (211,708 | ) | (226,800 | ) | ||||
| ||||||||||||
Income from continuing operations | 21,924 | 258,059 | 180,991 | 127,040 | ||||||||
before income taxes | ||||||||||||
| ||||||||||||
Provision for income taxes | 8,000 | 100,000 | 69,000 | 50,000 | ||||||||
| ||||||||||||
Net income | $ | 13,924 | $ | 158,059 | $ | 111,991 | $ | 77,040 | ||||
5
Continued: | Three Months Ended December 31, | Six Months Ended December 31, | ||||||||||
| 2012 | 2011 | 2012 | 2011 | ||||||||
| ||||||||||||
Net income per common share – basic | $ | .010 | $ | .110 | $ | .078 | $ | 0.054 | ||||
| ||||||||||||
Weighted average number of common shares outstanding– basic | 1,431,503 | 1,431,503 | 1,431,503 | 1,431,503 | ||||||||
| ||||||||||||
Net income per common shares – diluted | $ | .009 | $ | .064 | $ | 0.046 | $ | 0.039 | ||||
| ||||||||||||
Weighted average number of common shares outstanding – diluted | 3,031,503 | 2,771,503 | 3,031,503 | 2,771,503 | ||||||||
See accompanying notes to the
condensed consolidated financial statements
6
| PART I - FINANCIAL INFORMATION | FORM 10-Q |
| ITEM 1 – FINANICAL STATEMENTS |
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
| Six Months Ended December 31, | |||||
| 2012 | 2011 | ||||
| ||||||
Cash flows from operating activities: | ||||||
Net income | $ | 111,991 | $ | 77,040 | ||
Adjustments to reconcile net income | ||||||
to cash flows from operating activities: | ||||||
Depreciation and amortization | 110,972 | 127,804 | ||||
Deferred income taxes | 69,000 | 50,000 | ||||
Accounts receivable | (521,126 | ) | (1,181,364 | ) | ||
Inventories | 1,754,333 | 688,770 | ||||
Other assets | (45,778 | ) | (81,230 | ) | ||
Accounts payable and due to finance Company | (778,772 | ) | (551,650 | ) | ||
Gains on non-controlling trust investments | 29,004 | 61,877 | ||||
Deferred revenue | (510,755 | ) | 1,008,147 | |||
Accrued liabilities | 59,134 | 97,718 | ||||
| ||||||
Net cash provided by operating activities | 278,003 | 297,112 | ||||
| ||||||
Cash flows from investing activities: | ||||||
Purchases of property and equipment | (108,574 | ) | (159,010 | ) | ||
Purchases of non-controlling investments in trusts | (492,185 | ) | (137,399 | ) | ||
Sales of non-controlling investments in trusts | 463,181 | 75,522 | ||||
Restricted cash | 48,825 | 3,105 | ||||
| ||||||
| ||||||
Net cash used by investing activities | ( 88,753 | ) | (217,782 | ) | ||
| ||||||
Cash flows used in financing activities: | ||||||
Net repayments lines of credit | (200,000 | ) | - | |||
Payments of short-term debt | - | (20,000 | ) | |||
Principal payments on long-term debt | ( 99,285 | ) | (120,922 | ) | ||
| ||||||
Net cash used in financing activities | (299,285 | ) | (140,922 | ) | ||
| ||||||
Net change in cash | (110,035 | ) | (61,592 | ) | ||
| ||||||
Cash and cash equivalents: | ||||||
| ||||||
Beginning of year | 374,861 | 416,997 | ||||
| ||||||
End of period | $ | 264,826 | $ | 355,405 | ||
| ||||||
Supplemental Disclosure of Cash Flow Information: | ||||||
Cash paid for interest | $ | 219,756 | $ | 234,016 | ||
See accompanying notes to the condensed
consolidated financial statements
7
| PART I - FINANCIAL INFORMATION | FORM 10-Q |
| ITEM 1 – FINANICAL STATEMENTS |
OAKRIDGE HOLDINGS, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying Condensed Consolidated Financial Statements include the accounts of Oakridge Holdings, Inc. (the “Company”) and its wholly owned subsidiaries. All significant intercompany transactions and balances have been eliminated. In the opinion of management, the accompanying unaudited condensed consolidated financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present such information fairly. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to Securities and Exchange Commission rules and regulations. These condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the fiscal year ended June 30, 2012. Operating results for the six-month period ended December 31, 2012 may not necessarily be indicative of the results to be expected for any other interim period or for the full year.
The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. The most significant estimates in the financial statements include but are not limited to accounts receivable, inventory reserves, investment fair value, depreciation and accruals. Actual results could differ from those estimates.
2. EARNINGS PER COMMON SHARE
Earnings per Common Share (EPS) are presented on both a basic and diluted basis in accordance with the provisions of Accounting Standards Codification Topic 260 – Earnings per Share. Basic EPS is computed by dividing net income by the weighted average number of shares of common stock outstanding during the period. Diluted EPS reflects the maximum dilution that would result after giving effect to dilutive stock options and convertible debentures. The following table presents the computation of basic and diluted EPS for the six and three months ended December 31, 2012 and 2011:
8
| Six Months Ended December 31, | |||||
| 2012 | 2011 | ||||
| ||||||
Income from continuing operations | $ | 111,991 | $ | 77,040 | ||
| ||||||
Average shares of common stock outstanding used to compute basic earnings per common share | 1,431,503 | 1,431,503 | ||||
| ||||||
Additional common shares to be issued assuming exercise of stock options, and conversion of convertible debentures | 1,600,000 | 1,280,000 | ||||
| ||||||
Additional income from continuing operations, assuming conversion of convertible debentures at the beginning of the period | 28,800 | 28,800 | ||||
| ||||||
Shares used to compute dilutive effect of stock options and convertible debentures | 3,031,503 | 2,711,503 | ||||
| ||||||
Basic earnings per common share from continuing operations | $ | .078 | $ | .054 | ||
| ||||||
Diluted earnings per common share from continuing operations | $ | .046 | $ | .039 | ||
| Three Months Ended December 31, | |||||
| 2012 | 2011 | ||||
| ||||||
Income from continuing operations | $ | 13,924 | $ | 158,059 | ||
| ||||||
Average shares of common stock outstanding used to compute basic earnings per common share | 1,431,503 | 1,431,503 | ||||
| ||||||
Additional common shares to be issued assuming exercise of stock options, and conversion of convertible debentures | 1,600,000 | 1,280,000 | ||||
| ||||||
Additional income from continuing operations, assuming conversion of convertible debentures at the beginning of the period | 14,400 | 14,400 | ||||
| ||||||
Shares used to compute dilutive effect of stock options and convertible debentures | 3,031,503 | 2,711,503 | ||||
| ||||||
Basic earnings per common share from continuing operations | $ | .010 | $ | .110 | ||
| ||||||
Diluted earnings per common share from continuing operations | $ | .009 | $ | .064 | ||
9
3. COMPREHENSIVE INCOME
The Company has no significant components of other comprehensive income and accordingly, comprehensive income is the same as net income for all periods.
4. OPERATING SEGMENTS AND RELATED DISCLOSURES
The Company’s operations are classified into two principal industry segments: cemeteries and aviation ground support equipment.
The Company evaluates the performance of its segments and allocates resources to them based primarily on operating income.
The table below summarizes information about reported segments for the three months and six months ended December 31, 2012 and 2011:
SIX MONTHS ENDED | ||||||||||||
DECEMBER 31, 2012: | ||||||||||||
| Aviation | |||||||||||
| Ground | |||||||||||
| Support | |||||||||||
| Equipment | Cemeteries | Corporate | Consolidation | ||||||||
| ||||||||||||
Revenues | $ | 5,593,416 | $ | 1,675,396 | $ | 502 | $ | 7,269,314 | ||||
| ||||||||||||
Depreciation and amortization | 52,472 | 57,500 | 1,000 | 110,972 | ||||||||
| ||||||||||||
Gross Margin | 563,874 | 622,662 | 502 | 1,187,038 | ||||||||
| ||||||||||||
Selling Expenses | 49,785 | 122,859 | - | 172,644 | ||||||||
| ||||||||||||
General & Administrative Expenses | 154,298 | 306,848 | 160,549 | 621,695 | ||||||||
| ||||||||||||
Interest Expense | 176,411 | 1,045 | 42,300 | 219,756 | ||||||||
| ||||||||||||
Interest Income | 54 | 7,994 | - | 8,048 | ||||||||
| ||||||||||||
Income (loss) before Taxes | 183,434 | 199,904 | (202,347 | ) | 180,991 | |||||||
| ||||||||||||
Capital Expenditures | 49,101 | 59,473 | 108,574 | |||||||||
| ||||||||||||
Segment Assets: | ||||||||||||
Inventory | 4,345,661 | 566,013 | - | 4,911,674 | ||||||||
Property, Plant & Equipment | 1,620,803 | 706,150 | 6,094 | 2,333,047 | ||||||||
10
SIX MONTHS ENDED | ||||||||||||
DECEMBER 31, 2011: | ||||||||||||
| Aviation | |||||||||||
| Ground | |||||||||||
| Support | |||||||||||
| Equipment | Cemeteries | Corporate | Consolidation | ||||||||
| ||||||||||||
Revenues | $ | 4,115,709 | $ | 1,845,055 | $ | 2,036 | $ | 5,962,800 | ||||
| ||||||||||||
Depreciation and amortization | 48,272 | 78,000 | 1,532 | 127,804 | ||||||||
| ||||||||||||
Gross Margin | 430,838 | 794,746 | 2,036 | 1,227,620 | ||||||||
| ||||||||||||
Selling Expenses | 68,744 | 161,480 | - | 230,224 | ||||||||
| ||||||||||||
General & Administrative Expenses | 148,127 | 348,998 | 146,431 | 643,556 | ||||||||
| ||||||||||||
Interest Expense | 191,268 | 448 | 42,300 | 234,016 | ||||||||
| ||||||||||||
Interest Income | 106 | 7,110 | - | 7,216 | ||||||||
| ||||||||||||
Income (loss) before | ||||||||||||
Taxes | 22,805 | 290,930 | (186,695 | ) | 127,040 | |||||||
| ||||||||||||
Capital Expenditures | 115,158 | 43,852 | - | 159,010 | ||||||||
| ||||||||||||
Segment Assets: | ||||||||||||
Inventory | 6,852,077 | 593,850 | - | 7,445,927 | ||||||||
Property, Plant & Equipment | 1,595,067 | 736,255 | 6,724 | 2,388,046 |
THREE MONTHS ENDED | ||||||||||||
DECEMBER 31, 2012: | ||||||||||||
| Aviation | |||||||||||
| Ground | |||||||||||
| Support | |||||||||||
| Equipment | Cemeteries | Corporate | Consolidation | ||||||||
| ||||||||||||
Revenues | $ | 2,410,802 | $ | 904,258 | $ | 334 | $ | 3,315,394 | ||||
| ||||||||||||
Depreciation and amortization | 26,236 | 28,750 | 500 | 55,486 | ||||||||
| ||||||||||||
Gross Margin | 202,833 | 330,424 | 334 | 533,591 | ||||||||
| ||||||||||||
Selling Expenses | 21,835 | 67,290 | - | 89,125 | ||||||||
| ||||||||||||
General & Administrative Expenses | 75,386 | 176,184 | 72,135 | 323,705 | ||||||||
| ||||||||||||
Interest Expense | 81,525 | 1,045 | 21,150 | 103,720 | ||||||||
| ||||||||||||
Interest Income | 9 | 4,874 | - | 4,883 | ||||||||
| ||||||||||||
Income (loss) before Taxes | 24,096 | 90,779 | (92,951 | ) | 21,924 | |||||||
| Capital Expenditures | 30,512 | 55,198 | - | 85,710 |
11
THREE MONTHS ENDED | ||||||||||||
DECEMBER 31, 2011: | ||||||||||||
| Aviation | |||||||||||
| Ground | |||||||||||
| Support | |||||||||||
| Equipment | Cemeteries | Corporate | Consolidation | ||||||||
| ||||||||||||
Revenues | $ | 2,045,567 | $ | 897,195 | $ | 2,036 | $ | 2,944,798 | ||||
| ||||||||||||
Depreciation and amortization | 24,300 | 39,000 | 500 | 63,800 | ||||||||
| ||||||||||||
Gross Margin | 443,927 | 395,082 | 2,036 | 841,045 | ||||||||
| ||||||||||||
Selling Expenses | 34,755 | 93,357 | - | 128,112 | ||||||||
| ||||||||||||
General & Administrative Expenses | 80,804 | 174,717 | 73,934 | 329,455 | ||||||||
| ||||||||||||
Interest Expense | 106,765 | 5 | 20,475 | 127,245 | ||||||||
| ||||||||||||
Interest Income | 65 | 1,761 | - | 1,826 | ||||||||
| ||||||||||||
Income (loss) before Taxes | 221,668 | 128,764 | (92,373 | ) | 258,059 | |||||||
| ||||||||||||
Capital Expenditures | 83,424 | 11,873 | (1,329 | ) | 93,968 |
5. FAIR VALUE MEASUREMENTS
The Company defines fair value as the price that would be received to sell an asset or paid to transfer a liability between market participants at a measurement date.
Generally accepted accounting principles describes a fair value hierarchy that includes three levels of inputs to be used to measure fair value. The three levels are defined as follows as interpreted for use by the Company:
Level 1 – Inputs into the fair value methodology are based on quoted market prices in active markets.
Level 2 – Inputs into the fair value methodology are based on quoted prices for similar items, broker/dealer quotes, or models using market interest rates or yield curves. The inputs are generally seen as observable in active markets for similar items for the asset or liability, either directly or indirectly, for substantially the same term of the financial instrument.
Level 3 – Inputs into fair value methodology are unobservable and significant to the fair value measurement (primarily consisting of alternative type investments, which include but are not limited to, limited partnership interests, hedges, private equity, real estate, and natural resource funds). Often, these types of investments are valued based on historical cost and then adjusted by shared earnings of a partnership or cooperative, which can require some varying degree of judgment.
Information regarding assets (principally cash and investments) and liabilities measured at fair value on a recurring basis as of December 31, 2012 and June 30, 2012 are as follows:
12
| Recurring Fair Value Measurements using | |||||||||||
| Level I | Level II | Level III | Total Fair Value | ||||||||
| ||||||||||||
December 31, 2012: | ||||||||||||
| ||||||||||||
Assets at Fair Value: | ||||||||||||
| ||||||||||||
| ||||||||||||
Cemetery perpetual care and pre-need trust investments | $ | - | $ | 7,974,658 | $ | - | $ | 7,974,658 | ||||
| ||||||||||||
Total Assets at fair value | $ | - | $ | 7,974,658 | $ | - | $ | 7,974,658 | ||||
| ||||||||||||
| ||||||||||||
Liabilities at fair value: | ||||||||||||
| ||||||||||||
Non-controlling interest in pre-need trust investments | $ | - | $ | 2,353,294 | $ | - | $ | 2,353,294 | ||||
| Recurring Fair Value Measurements using | ||||||||||||
| Level I | Level II | Level III | Total Fair Value | |||||||||
| June 30, 2012: | ||||||||||||
Assets at Fair Value: | ||||||||||||
| ||||||||||||
| ||||||||||||
Cemetery perpetual care and pre-need trust investments | $ | - | $ | 7,802,004 | $ | - | $ | 7,802,004 | ||||
| ||||||||||||
Total Assets at fair value | $ | - | $ | 7,802,004 | $ | - | $ | 7,802,004 | ||||
| ||||||||||||
| ||||||||||||
Liabilities at fair value: | ||||||||||||
| ||||||||||||
Non-controlling interest in pre-need trust investments | $ | - | $ | 2,326,926 | $ | - | $ | 2,326,926 | ||||
13
| ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS |
The following is management’s discussion and analysis of certain significant factors which have affected the Company's financial position and operating results during the periods included in the accompanying condensed consolidated financial statements.
Management's discussion and analysis of financial condition and results of operations, as well as other portions of this document, include certain forward-looking statements about the Company’s business and products, revenues, expenditures and operating and capital requirements. From time to time, information provided by the Company or statements made by its directors, officers or employees may contain “forward-looking” information subject to numerous risks and uncertainties. Any statements made herein that are not statements of historical fact are forward-looking statements including, but not limited to, statements concerning the characteristics and growth of the Company’s markets and customers, the Company’s objectives and plans for its future operations and products and the Company’s expected liquidity and capital resources. Such forward-looking statements are based on a number of assumptions and involve a number of risks and uncertainties, and, accordingly, actual results could differ materially for those discussed. Among the factors that could cause actual results to differ materially from those projected in any forward-looking statement are as follows: the effect of business and economic conditions; customer preferences for death care services; conditions in the industries in which the Company operates, particularly the airline industry; the Company’s ability to win government contracts; the impact of competitive products and continued pressure on prices realized by the Company for its products; constraints on supplies of raw material used in manufacturing certain of the Company’s products or services provided; capacity constraints limiting the production of certain products; changes in anticipated operating results, credit availability, equity market conditions or the Company’s debt levels that may further enhance or inhibit the Company’s ability to maintain or raise appropriate levels of cash; requirements for unforeseen maintenance, repairs or capital asset acquisitions; difficulties or delays in the development, production, testing, and marketing of products; market acceptance issues, including the failure of products to generate anticipated sales levels; difficulties in manufacturing process and in realizing related cost savings and other benefits; the effects of changes in trade, monetary and fiscal policies, laws and regulations; foreign exchange rates and fluctuations in those rates; the cost and effects of legal and administrative regulations and proceedings, including environmental proceedings; and the risk factors reported from time to time in the Company’s SEC reports. The Company undertakes no obligation to update any forward-looking statement as a result of future events or developments.
FINANCIAL CONDITION AND LIQUIDITY
The Company's liquidity needs arise from its debt service, working capital and capital expenditures. The Company has historically funded its liquidity needs with proceeds from equity contributions, bank borrowing, short-term notes from officers, cash flow from operations and the offering of its subordinated debentures. For the first six months of fiscal year 2013, the Company had a decrease in cash of $110,035 compared to a cash decrease in the same period in fiscal year 2012 of $61,592. As of December 31, 2012, the Company had no cash equivalents. During the six month period ended December 31, 2012, the Company recorded net income from operations after taxes of $111,991. The Company's net cash provided from operating activities was $278,003 in the first six months of fiscal year 2013 compared to net cash provided from operating activities of $297,112 in the same period in fiscal year 2012. The decrease in cash provided from operating activities was primarily due to a decrease in deferred revenue, partially offset by reductions in inventories and a smaller increase in receivables. During the first six months of fiscal 2013, cash used by investing activities was $88,753, primarily due to the purchase of equipment, and net cash used for financing activities was $299,285, primarily due to payment of debt to banks. The remaining increases and decreases in the components of the Company's financial position reflect normal operating activity.
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The Company had working capital of $1,487,874 at December 31, 2012, an increase of $1,829,987 from June 30, 2012. The increase in working capital was primarily due to the refinancing of long-term debt in February 2013, as this was previously classified as short-term. Current assets amounted to $7,188,931 and current liabilities were $5,701,057, resulting in a current ratio of 1.26 to 1.0 at December 31, 2012, which reflects an increase from a negative 0.96 to 1.0 at June 30, 2012. Long-term debt was $3,447,843 and equity was $1,125,568 at December 31, 2012. The Company’s present working capital must continue to improve in order for it to meet current operating needs.
Capital expenditures for the first six months of fiscal year 2013 were $108,574 compared with $159,010 for the same period in fiscal year 2012. The decrease in capital expenditures reflects the Company’s decrease in cash flow provided from operating activities. The Company anticipates that it will spend approximately $5,000 on capital expenditures during the final two quarters of fiscal year 2013 for technical manuals for aviation ground support operations and $20,000 for repairs on the mausoleums. The Company plans to finance these capital expenditures primarily through cash flows provided by operations.
The Company has three lines of credit facilities.As of December 31, 2012, $1,010,845 of aggregate borrowing capacity of $1,210,845 was outstanding, leaving available credit of $200,000.
As indicated above, the Company believes that its financial position and debt capacity should enable it to meet its current and future cash requirements despite the need for improved working capital to meet current operating needs.
INFLATION
As of December 31, 2012, inflation did not have a significant effect on the Company’s results in the first six months of fiscal year 2013 due to the relatively low levels of inflation experienced during the first half of this fiscal year.
RESULTS OF OPERATIONS
FIRST SIX MONTHS OF FISCAL YEAR 2013
COMPARED WITH FIRST SIX MONTHS OF FISCAL YEAR 2012
Cemetery Operations:
Revenue from operations for the six months ended December 31, 2012 was $1,675,396, a decrease of $169,659, or 9%, when compared to the six months ended December 31, 2011. The decrease was primarily due to a decrease in cemetery plots of $44,000, foundations $27,000, interment fees of $97,000, and grave boxes of $24,000. These decreases were partially offset by the increase in marker revenue of $24,000. The overall decrease is attributable to the increase in cremations.
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Cost of sales for the six months ended December 31, 2012 was $1,052,734, an increase of $2,425, or .2%, compared to the six months ended December 31, 2011.
The resulting cemetery gross profit margin was 37% for the first six months of fiscal year 2013 compared to 43% for the corresponding period in fiscal year 2012, representing a 6% decrease. The decrease was primarily due to less sales and increased fixed operating costs of salaries and related benefits.
Selling expenses for the six months ended December 31, 2012 were $122,859, a decrease of $38,621, or 24%, when compared to the six months ended December 31, 2011. The decrease was due to the allocation of payroll taxes to the sales department in the six months ended December 31, 2011 and less sales commissions with the decrease in overall sales.
General and administrative expenses for the six months ended December 31, 2012, were $306,848, a decrease of $42,150, or 12%, when compared to the six months ended December 31, 2011. The decrease was primarily due to a decrease in contributions of $15,166, employee relations of $14,826, office salaries for one less full-time employee of $16,365 and allocation of payroll taxes of $15,236. These decreases were partially offset by increases in health insurance of $11,152 and management salary of $8,955. All other costs remained constant with the prior year’s period.
Corporate:
General and administrative expenses for the six months ended December 31, 2012 were $160,549, an increase of $14,118, or 10%, when compared to the six months ended December 31, 2011. The increase was primarily due to an increase in professional fees for accountants and the related audit for fiscal year ended June 30, 2012.
Interest expense for the six months ended December 31, 2012 was $42,300, or no change when compared to the six months ended December 31, 2011.
Aviation Ground Support Operations:
Revenue for the six months ended December 31, 2012 was $5,593,416, an increase of $1,477,707, or 36%, when compared to the six months ended December 31, 2011. The increase was primarily due to the fact that the United States government resumed the shipment of all equipment, whereas in the prior year’s period it had stopped shipping because the 2011 Ford chassis was not able to run on jet fuel.
Cost of sales as a percentage of sales for the six months ended December 31, 2012 was 90%, or no change when compared to the six months ended December 31, 2011.
The resulting gross profit margin was 10% for the first six months of fiscal year 2013 or no change when compared to the fiscal year 2012.
Selling expenses for the six months ended December 31, 2012 were $49,785, a decrease of $18,959, or 28%, when compared to the six months ended December 31, 2011. The decrease was primarily due to no outside sales commissions and a decrease in sales salaries.
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General and administrative expenses for the six months ended December 31, 2012, were $154,298, a decrease of $6,171, or 4%, when compared to six months ended December 31, 2011. The decrease was primarily due to no longer requiring the services of an outside consultant for our electrical department.
Other expenses, which consist of interest expense and interest income, for the six months ended December 31, 2012, were a combined expense of $176,357, a decrease of $14,805, or 8%, when compared to the six months ended December 31, 2011. The decrease was due to less debt.
THREE MONTHS ENDED DECEMBER 31, 2012
COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 2011
Cemetery Operations:
Revenue for the three months ended December 31, 2012 was $904,258, an increase of $7,063, or 1%, when compared to the three months ended December 31, 2011.
Cost of sales for the three months ended December 31, 2012 was $573,834, an increase of $71,721, or 14%, when compared to the three months ended December 31, 2011. The increase is primarily due to increased salaries and related payroll costs of $49,500, gas and oil of $7,400, pension costs of $10,463 and workers compensation of $8,594. These costs were partially offset by a decrease in depreciation of $9,250.
The resulting cemetery gross profit margin was 37% for the three months ended December 31, 2012 compared to 44% for the corresponding period in the prior fiscal year, representing a 7% decrease. The decrease is related to greater cost of labor and related union benefits.
Selling expenses for the three months ended December 31, 2012 were $67,290, a decrease of $26,067, or 28%, when compared to the three-month period ended December 31, 2011. The decrease was primarily related to the allocation of payroll taxes in the prior year’s period.
General and administrative expenses for the three months ended December 31, 2012 were $176,184, an increase of $1,467, or .8%, when compared to the three months ended December 31, 2011.
Corporate:
General and administrative expenses for the three months ended December 31, 2012 were $72,135, a decrease of $1,799, or 2%, when compared to the three months ended December 31, 2011. The decrease was primarily due to decreased professional fees from attorneys and accountants.
Interest expense for the three months ended December 31, 2012 was $21,150, an increase of $675, or 3%, when compared to the three months ended December 31, 2011. The increase is due to higher debenture debt.
Aviation Ground Support Operations:
Revenues for the three months ended December 31, 2012 were $2,410,802, an increase of $365,235 or 18%, when compared to the three months ended December 31, 2011. The increase in revenue was primarily due to an increase in international sales.
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Cost of sales for the three months ended December 31, 2012, were $2,207,969, an increase of $606,329, or 38%, when compared to the three months ended December 31, 2011. The increase was primarily due to the increase in sales plus added costs related to a stairs contract with the United States Air Force, which was over engineered and cost more to build than was estimated.
The resulting gross profit margin was 8% for the three months ended December 31, 2012, compared to a gross profit margin of 22% for prior year’s period. The decrease of 14% is due to the stairs contract with the United States Air Force.
Selling expenses for the three months ended December 31, 2012 were $21,835, a decrease of $12,920, or 37%, when compared to the three months ended December 31, 2011. The decrease is due to lower wages for the VP of sales and marketing and related payroll costs.
General and administrative expenses for the three months ended December 31, 2012 were $75,386, a decrease of $5,418, or 7%, when compared to the three months ended December 31, 2011. The difference is primarily related to no electrical consulting fees.
Interest expense for the three months ended December 31, 2012 was $81,525, a decrease of $25,240, or 24%, when compared to the three months ended December 31, 2011. The decrease is primarily due to lower a debt balance with Ford Motor Credit and bank debt.
OFF-BALANCE SHEET ARRANGEMENTS
The Company has no off-balance sheet arrangements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS
Not applicable.
ITEM 4. CONTROLS AND PROCEDURES
An evaluation was carried out under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”)) as of the end of the period covered by this quarterly report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Company’s disclosure controls and procedures are not effective to ensure that information required to be disclosed by the Company in reports that it files or submits under the Exchange Act is (i) recorded, processed, summarized and reported within the time periods specified in SEC rules and forms and (ii) accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosures because of the material weaknesses relating to internal controls that were described in Item 9A of the Company’s Form 10-K for the year ended June 30, 2012, filed October 16, 2012.
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Notwithstanding the material weaknesses that existed as of June 30, 2012, our Chief Executive Officer and Chief Financial Officer concluded that the financial statements included in this report present fairly, in all material respects, the financial position, results of operations and cash flows of the Company in conformity with accounting principles generally accepted in the United States of America.
No change in the Company’s internal control over financial reporting was identified in connection with the evaluation required by Rule 13a-15(d) of the Exchange Act that occurred during the period covered by this quarterly report and that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. Management has concluded that the material weaknesses in internal control, as described in Item 9A of our Form 10-K for the year ended June 30, 2012, have not been fully remediated. We are committed to implementing the necessary enhancements to our policies and procedures to fully remediate the material weaknesses discussed above. Due to our lack of sufficient capital, we expect the material weaknesses to continue until our capital needs are met.
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is from time to time involved in ordinary litigation incidental to the conduct of its businesses. The Company believes that none of its pending litigation will have a material adverse effect on the Company’s businesses, financial condition or results of operations.
ITEM 1A. RISK FACTORS
Not applicable.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
Not applicable.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
None.
ITEM 5. OTHER INFORMATION
Not applicable.
ITEM 6. EXHIBITS
The following exhibits are filed as part of this Quarterly Report on Form 10-Q for the quarterly period ending December 31, 2012:
| 1.1 | Form of 9.00% Convertible Subordinated Debenture due July 1, 2014 (1) |
| 3(i) | Amended and Restated Articles of Incorporation, as amended (2) |
| 3(ii) | Amended and Superseding By-Laws of the Company, as amended (2) |
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| 31 | |
| 100 | XBRL Related Documents |
(1) Incorporated by reference to the like numbered Exhibit to the Company’s Current Report on Form 8-K filed with the Commission on February 7, 2011.
(2) Incorporated by reference to the like numbered Exhibit to the Company’s Annual Report on Form 10-KSB for the fiscal year ended June 30, 1996.
SIGNATURES
In accordance with the requirements of the Exchange Act, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Oakridge Holdings, Inc.
/s/ Robert C. Harvey
Robert C. Harvey
Chief Executive Officer, Principal
Accounting Officer,
and Chief Financial Officer
Date: February 14, 2013
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INDEX TO EXHIBITS
| EXHIBIT | DESCRIPTION | METHOD OF FILING | ||||
| 1.1 | Form of 9.00% Convertible Subordinated Debenture due July 1, 2014 | (incorporated by reference) | ||||
| 3(i) | Amended and Restated Articles of Incorporation of the Company | (incorporated by reference) | ||||
| 3(ii) | Amended and Superseding By-Laws of the Company, as amended | (incorporated by reference) | ||||
| 31 | Rule 13a-14(a)/15d-14(a) Certifications | (filed electronically) | ||||
| 32 | Section 1350 Certifications | (filed electronically) | ||||
| 100 | XBRL Related Documents | (filed electronically) |
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