UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One) Form 10-Q
[X]QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 2009
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)
(Issuer's telephone number) (312) 505-9267
________________________________________________________________
(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.)
{ }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, 2009
TABLE OF CONTENTS
PART I. FINANCIAL INFORMATION
ITEM 1. Condensed Consolidated Financial Statements:
(a) Condensed Consolidated Balance Sheets as of
December 31, 2009 (unaudited) and June 30, 2009
(b) Condensed Consolidated Statements of Operations
for the three months ended December 31, 2009 and
2008 (unaudited) and six months ended December 31,
2009 and 2008 (unaudited)
(c) Condensed Consolidated Statements of Cash Flows
for the six months ended December 31, 2009 and
2008 (unaudited)
(d) Notes to Condensed Consolidated Financial
Statements
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
ITEM 3. Quantitative and Qualitative Disclosures About
Market Risk
ITEM 4. Controls and Procedures
PART II. OTHER INFORMATION
ITEM 1. Legal Proceedings
ITEM 1A. Risk Factors
ITEM 2-3. Not Applicable
ITEM 4. Submission of Matters to a Vote of Security Holders
ITEM 5. Not Applicable
ITEM 6. Exhibits
SIGNATURES
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
ASSETS
December 31,2009 June 30,2009
(Unaudited)
_________________ ____________
<s> <c> <c>
Current assets:
Cash $402,655 $345,153
Trade receivables 2,097,616 2,295,234
Inventories:
Production 7,391,681 6,315,017
Cemetery, mausoleum space,
markers and related 628,963 630,746
Other current assets 142,024 119,864
Deferred income taxes 232,000 232,000
----------- -----------
Total current assets 10,894,939 9,938,014
----------- -----------
Property, plant and equipment:
Property, plant and equipment,
at cost 6,345,020 6,342,170
Less accumulated depreciation (4,210,167) (4,093,125)
----------- -----------
Property, plant and equipment, net 2,134,853 2,249,045
----------- -----------
Other assets:
Restricted cash 78,476 -
Preneed trust investments 1,919,133 2,059,056
Cemetery perpetual care trusts 4,958,286 4,687,816
Deferred income taxes 162,000 265,000
Deferred financing costs 65,170 69,042
Other 6,650 11,431
----------- -----------
Total other assets 7,189,715 7,092,345
----------- -----------
Total Assets $20,219,507 $19,279,404
=========== ===========
See accompanying notes to the condensed
consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED BALANCE SHEET
LIABILITIES
December 31,2009 June 30,2009
(Unaudited)
_____________ _____________
<s> <c> <c>
Current liabilities:
Notes payable bank - line of credit $970,598 $979,840
Accounts payable 1,640,624 1,274,591
Due to finance company 2,086,957 1,724,900
Accrued liabilities 1,020,701 875,396
Deferred revenue 1,438,720 1,615,936
Note payable - officers 300,000 250,000
Note payable - others 80,000 80,000
Debentures - officers 505,000 -
Current maturities of long-term debt 237,042 227,012
----------- -----------
Total current liabilities 8,279,642 7,027,675
----------- -----------
Long-term liabilities:
Long-term debt, net of current
maturities 3,541,514 3,668,231
Debentures - officers - 505,000
Non-controlling interest in pre-need
care trust investments 1,919,133 2,059,056
----------- -----------
Total long-term liabilities 5,460,647 6,232,287
----------- -----------
Total liabilities 13,740,289 13,259,962
----------- -----------
Non-controlling interest in
trust investments 4,958,286 4,687,816
----------- -----------
STOCKHOLDERS' EQUITY
Common stock 143,151 143,151
Additional paid-in-capital 2,028,975 2,028,975
Accumulated deficit (651,194) (840,500)
----------- -----------
Total stockholders' equity 1,520,932 1,331,626
----------- -----------
Total liabilities and
stockholders' equity $20,219,507 $19,279,404
=========== ===========
See accompanying notes to the condensed
consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
Three Months Ended December 31, Six Months Ended December 31,
2009 2008 2009 2008
__________ __________ __________ __________
<s> <c> <c> <c> <c>
Revenue, net:
Cemetery $784,421 $583,131 $1,621,926 $1,349,660
Aviation 2,911,604 1,622,049 5,886,504 4,084,668
Interest-Care Funds 28,644 29,525 51,745 58,885
Other (627) (3,716) (77) (6,365)
---------- ---------- ---------- ----------
Total revenue 3,724,042 2,230,989 7,560,098 5,486,848
---------- ---------- ---------- ----------
Operating expenses:
Cost of cemetery sales 453,815 429,785 968,413 891,768
Cost of aviation sales 2,930,886 1,638,749 5,292,207 3,788,993
Sales and marketing 113,095 60,243 231,328 205,756
General and administrative 237,033 283,865 571,104 608,529
---------- ---------- ---------- ----------
Total operating expenses 3,434,829 2,412,642 7,063,052 5,495,046
---------- ---------- ---------- ----------
Income (loss) from
operations 289,213 (181,653) 497,046 (8,198)
Other income (expense)
Interest income 3,289 6,250 20,546 18,437
Interest expense (110,028) (93,769) (225,286) (207,288)
---------- ---------- ---------- ----------
Total other expense (106,739) (87,519) (204,740) (188,851)
Income (loss) before income taxes 182,474 (269,172) 292,306 (197,049)
Income taxes provision (benefit) 67,000 (108,000) 103,000 (79,000)
---------- ---------- ---------- ----------
Net income (loss) $115,474 $(161,172) $189,306 $(118,049)
========== ========== ========== ==========
Net income (loss) per common
share - basic $.081 $(.113) $.132 $(.082)
========== ========== ========== ==========
Weighted average number of
common shares outstanding -
basic 1,431,503 1,431,503 1,431,503 1,431,503
========== ========== ========== ==========
Net income (loss) per common
shares - diluted $.064 $(.113) $.106 $(.082)
========== ========== ========== ==========
Weighted average number of
common shares outstanding -
diluted 1,992,614 Anti-dilutive 1,992,614 Antidilutive
========== ========== ========== ==========
See accompanying notes to the
condensed consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL STATEMENTS
OAKRIDGE HOLDINGS, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
Six Months Ended December 30, 2009 2008
____________ ___________
<s> <c> <c>
Cash flows from operating activities:
Net income (loss) 189,306 (118,049)
Adjustments to reconcile net income
(loss) to cash flows from (used in)
operating activities:
Depreciation and amortization 120,914 155,455
Deferred income taxes 103,000 (79,000)
Change in accounts receivable 197,618 614,250
Change in inventories (1,074,881) (434,626)
Change in other assets (17,379) (36,137)
Change in accounts payable and due to
finance company 728,090 (749,089)
Gains (losses) on non-controlling
trust investments (37,476) 9,864
Change in deferred revenue (177,216) 72,432
Change in accrued liabilities 145,305 (64,762)
---------- ----------
Net cash flows from (used in)
operating activities 177,281 (629,662)
---------- ----------
Cash flows from investing activities:
Purchases of property and equipment (2,850) (94,517)
Purchases of non-controlling
investments in trusts (55,288) (56,582)
Sales of non-controlling investments
in trusts 92,764 46,718
Payment of restricted cash (78,476) -
Payments of lease receivable - 460,200
---------- ----------
Net cash flows from (used in) investing
activities (43,850) 355,819
---------- ----------
Cash flows from financing activities:
Net borrowings (repayments) on note
payable bank (9,242) 459,840
Proceeds from notes payable - officers 50,000 -
Principal payments on long-term debt (116,687) (102,883)
---------- ----------
Net cash flows from (used in)
financing activities (75,929) 356,957
---------- ----------
Net change in cash: 57,502 83,114
Cash:
Beginning of year 345,153 278,202
---------- ----------
End of period $402,655 $345,843
========== ==========
Supplemental Disclosure of
Cash Flow Information:
Cash paid for interest $225,286 $207,288
========== ==========
See accompanying notes to the condensed
consolidated financial statements
PART I - FINANCIAL INFORMATION FORM 10-Q
ITEM 1 - FINANCIAL 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, 2009. Operating results for the six-month period
ended December 31, 2009 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, depreciation and accruals. Actual results could
differ from those estimates.
2. RECENT ACCOUNTING PRONOUNCEMENTS
In August 2009, the FASB issued additional guidance on the fair value
measurement of liabilities. The new guidance provides clarification on the
measurement and reporting of a liability in circumstances in which a quoted
price in an active market for the identical liability is not available. This
guidance is effective for the first reporting period beginning after August
2009. This guidance, which was applied by the Company as of October 1, 2009,
did not impact the Company's results of operations, cash flows or financial
position for the quarter ended December 31, 2009.
3. EARNINGS PER COMMON SHARE
Earnings per Common Share (EPS) are presented on both a basic and diluted basis.
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 six and three months ended
December 31, 2009:
Six Months Ended December 31, 2009 2008
Income (loss) from continuing $189,306 $(118,049)
operations
Average shares of common stock 1,431,503 1,431,503
outstanding used to compute basic
earnings per common share
Additional common shares to be 561,111 Antidilutive
issued assuming exercise of stock
options, and conversion of
convertible debentures
Additional income from continuing 22,725 Antidilutive
operations, assuming conversion of
convertible debentures at the
beginning of the period
Shares used to compute dilutive 1,992,614 1,431,503
effect of stock options and
convertible debentures
Basic earnings (loss) per common $.132 $(.082)
share from continuing operations
Diluted earnings (loss) per common $.106 $(.082)
share from continuing operations
Three Months Ended December 31, 2009 2008
Income (loss) from continuing $115,474 $(161,172)
operations
Average shares of common stock 1,431,503 1,431,503
outstanding used to compute basic
earnings per common share
Additional common shares to be 561,111 Antidilutive
issued assuming exercise of stock
options, and conversion of
convertible debentures
Additional income from continuing 11,363 Antidilutive
operations, assuming conversion of
convertible debentures at the
beginning of the period
Shares used to compute dilutive 1,992,614 1,431,503
effect of stock options and
convertible debentures
Basic earnings (loss) per common $.081 $(.113)
share from continuing operations
Diluted earnings (loss) per common $.064 $(.113)
share from continuing operations
4. 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 or 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 recurring basis as of December 31, 2009, is as
follows:
Recurring Fair Value Measurements using
Level I Level II Level III Total Fair Value
Assets at Fair Value:
Fixed Income and Debt
Securities -
Cemetery perpetual
careand pre-need
trust investments $ - $6,877,419 $ - $6,877,419
--------------------------------------------
Total Asset at
fair value $ - $6,877,419 $ - $6,688,419
============================================
Liabilities at fair value:
Non-controlling
interest in pre-need
trust investments $ - $1,919,133 $ - $1,919,133
============================================
5. SUBSEQUENT EVENTS
The Company has evaluated subsequent events through February 15, 2010, the date
the financial statements were available to be issued, for potential recognition
or disclosure in the financial statements.
6. COMPREHENSIVE INCOME
The Company has no significant components of other comprehensive
income and accordingly, comprehensive income (loss) is the same
as net income (loss) for all periods.
7. RECLASSIFICATIONS
Certain amounts in the June 30, 2009 balance sheet have been reclassified to
conform with December 31, 2009 presentation. These reclassifications have no
effect on consolidated net loss, consolidated accumulated deficit or
consolidated cash flows as originally reported.
8. 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, 2009 and 2008:
SIX MONTHS ENDED
DECEMBER 31, 2009:
Aviation Cemeteries Corporate Consolidation
Ground
Support
Equipment
Revenues $5,886,504 $1,673,671 $(77) $7,560,098
Depreciation &
Amortization 44,672 76,000 242 120,914
Gross Margin 594,297 705,258 (77) 1,299,478
Selling Expenses 92,114 139,214 - 231,328
General &
Administrative
Expenses 133,293 308,254 129,557 571,104
Interest Expense 181,167 1,595 42,524 225,286
Interest Income 2 20,544 - 20,546
Income (loss)
before Taxes 187,725 276,739 (172,158) 292,306
Capital
Expenditures - 2,850 - 2,850
Segment assets:
Inventory 7,391,681 628,963 - 8,020,644
Property, Plant
& Equipment 1,294,617 839,993 243 2,134,853
THREE MONTHS ENDED
DECEMBER 31, 2009:
Aviation Cemeteries Corporate Consolidation
Ground
Support
Equipment
Revenues $2,911,604 $813,065 $(627) $3,724,042
Depreciation &
Amortization 24,100 38,000 121 62,221
Gross Margin 280,718 359,250 (627) 639,341
Selling Expenses 46,777 66,318 - 113,095
General &
Administrative
Expenses 46,422 183,978 6,633 237,033
Interest Expense 87,370 1,148 21,510 110,028
Interest Income 2 3,287 - 3,289
Income (loss)
before Taxes 111,094 100,150 (28,770) 182,474
Capital
Expenditures - 2,850 - 2,850
SIX MONTHS ENDED
DECEMBER 31, 2008:
Aviation Cemeteries Corporate Consolidation
Ground
Support
Equipment
Revenues $4,084,688 $1,408,545 $(6,365) $5,486,868
Depreciation &
Amortization 52,472 102,000 983 155,455
Gross Margin 295,675 516,777 (6,365) 806,087
Selling Expenses 88,980 116,776 - 205,756
General &
Administrative
Expenses 183,502 268,065 156,962 608,529
Interest Expense 177,399 3,564 26,325 207,288
Interest Income 6,855 11,582 - 18,437
Income (loss)
before Taxes (147,351) 139,954 (189,652) (197,049)
Capital
Expenditures 5,760 88,757 - 94,517
Segment assets:
Inventory 6,092,147 645,416 - 6,737,563
Property, Plant
& Equipment 1,336,406 969,833 1,502 2,307,741
THREE MONTHS ENDED
DECEMBER 31, 2008:
Aviation Cemeteries Corporate Consolidation
Ground
Support
Equipment
Revenues $1,622,049 $612,656 $(3,716) $2,230,989
Depreciation &
Amortization 26,236 51,000 500 138,309
Gross Margin (16,700) 182,871 (3,716) 162,455
Selling Expenses 16,950 43,293 - 60,243
General &
Administrative
Expenses 73,276 117,779 92,810 283,865
Interest Expense 79,973 634 13,162 93,769
Interest Income 461 5,789 - 6,250
Income (loss)
before Taxes (186,438) 26,954 (109,688) (269,172)
Capital
Expenditures 137 7,735 - 7,872
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, cash flow from
operations and the offering of its subordinated debentures. For the first six
months of fiscal year 2010, the Company had an increase in cash of $57,502
compared to a cash increase in the same period in fiscal year 2009 of $83,114.
As of December 31, 2009, the Company had no cash equivalents.
During the six month period ended December 31, 2009, the Company recorded net
income after taxes of $189,306. The Company's net cash from operating
activities was $177,281 in the first six months of fiscal year 2010 compared to
net cash used in operating activities of $629,662 in the same period in fiscal
year 2009. The increase in net cash from operating activities was primarily
due to generating net income for the fiscal 2010 period. During the first six
months of fiscal 2010, cash used by investing activities was $43,850 primarily
due to sales of non-controlling investments in trusts and payment for
performance bond in which the cash had to be escrowed, while net cash used by
financing activities was $75,929 primarily due to paying down of debt. The
remaining increases and decreases in the components of the Company's financial
position reflect normal operating activity.
The Company had working capital of $2,615,297 December 31, 2009, a decrease of
$295,042 from June 30, 2009. The decrease in working capital was primarily due
to the debentures becoming short term and due July 1, 2010. Current assets
amounted to $10,894,939 and current liabilities were $8,279,642, resulting in
a current ratio of 1.31 to 1 at December 31, 2009. Long-term debt was
$3,541,514 and equity was $1,520,932 at December 31, 2009.
Capital expenditures for the first six months of fiscal year 2010 were $2,850
compared with $94,517 for the same period in fiscal year 2009. These low
investments reflect the Company's poor cash flow. The Company anticipates that
it will spend approximately $10,000 on capital expenditures during the final
two quarters of fiscal year 2010 for shop equipment 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 a bank line of credit for up to the lesser of (1) $1,000,000 or
(2) 75% of the Company's accounts receivable acceptable to the lender. The
line of credit contains certain financial covenants that require the Company to
maintain a debt-to-worth ratio of at least 4.5-to-1 and cash flow-to-current
maturity of at least 1.2-to-1. The line of credit matures on October 31,2010.
As of December 31, 2009 there was $970,598 outstanding under this facility.
The Company believes that its financial position, remaining debt capacity and
ability to issue subordinated debentures should enable it to meet its current
and future capital requirements.
INFLATION
Because of the relatively low levels of inflation experienced during the first
half of this fiscal year, and as of December 31, 2009, inflation did not have
a significant effect on the Company's results in the first six months of fiscal
year 2010.
RESULTS OF OPERATIONS
FIRST SIX MONTHS OF FISCAL YEAR 2010
COMPARED WITH FIRST SIX MONTHS OF FISCAL YEAR 2009
Cemetery Operations:
Revenue for the six months ended December 31, 2009 was $1,673,671, an increase
of $265,126, or 18%, when compared to the six months ended December 31, 2008.
The increase was primarily due to an increase in sales of cemetery plots of
$50,000, markers of $47,000, foundations of $50,000, inscriptions of $10,000,
grave liners of $26,000, interment fees of $38,000, overtime fees of $14,000,
vault sealing fees of $13,000, and mausoleum sales of $35,000, whereas
cremations decreased $4,000 in comparison to the prior year's period.
Management believes revenue will continue to increase because of the aging
population, the importance of heritage to the cemetery business and the
cemetery being over 110 years old.
Cost of sales for the six months ended December 31, 2009 was $968,413, an
increase of $76,645, or 8%, compared to the six months ended December 31, 2008.
The increase was primarily due to increased costs associated with sales, which
increased 18%. The majority of the increase is attributable to increased costs
of graveliners of $22,000, foundations of $45,000(due to allocation of costs
incurred to make and set the foundations), and health insurance of $6,000. All
other costs remained constant with the prior year's period. It is management's
opinion that costs will increase in the future due to the new law passed in
Illinois to oversee cemeteries because of past problems with other cemeteries
and a new union contract the Company expects to be negotiated in March 2010.
The resulting cemetery gross profit margin was 42% for the first six months of
fiscal year 2010 versus 36% for the corresponding period in fiscal year 2009,
representing an 6% increase. The increase was caused by an increase in sales
volume, whereas most of the cost of goods sold is fixed except for the markers,
foundations and grave liners.
Selling expenses for the six months ended December 31, 2009 were $139,293, an
increase of $22,517, or 19%, when compared to the six months ended
December 31, 2008. The increase was due to increased costs of health insurance
and increased commissions due to increased sales.
General and administrative expenses for the six months ended December 31, 2009,
were $308,254, an increase of $40,189, or 14%, when compared to the six months
ended December 31, 2008. The increase was primarily due to increases in
professional fees of $34,000 due to the allocation of accounting fees related
to the audit and preparing amended Forms 10-Q related to changes in the
accounting of perpetual care funds on the Company's cash flow statements for
non-controlling trusts as well as increased costs of health insurance of
$10,000. All other costs remained constant with the prior year's period.
Corporate:
Revenue for the six months ended December 31, 2009 was immaterial and the
changes related to the decrease in stock investment.
General and administrative expenses for the six months ended December 31, 2009
were $129,557, a decrease of $27,405, or 17%, when compared to the six months
ended December 31, 2008. The decrease was primarily due to the allocation of
accounting fees of $34,000 to the cemetery operations.
Interest expense for the six months ended December 31, 2009 was $42,524, an
increase of $16,199, or 61%, when compared to the six months ended
December 31, 2008. The increase is due to notes payable officers of $380,000
which was then advanced to Aviation operations due to the increase in sales
and related expenses to manufacture the equipment.
Aviation Ground Support Operations:
Revenue for the six months ended December 31, 2009 was $5,886,504, an increase
of $1,801,816, or 44%, when compared to the six months ended December 31, 2008.
The increase was primarily due to increased international equipment sales and
new government contracts.
Cost of sales as a percentage of sales for the six months ended
December 31, 2009 was 90%, or a decrease of 3%, when compared to the six
months ended December 31, 2008. The decrease in costs of sales as percentage
of sales was primarily due to increased sales, which the Company leveraged
across increased costs relating to a new plant manager and supervisors in all
departments in production.
The resulting gross profit margin was 10% for the first six months of fiscal
year 2010 versus 7% for the corresponding period in fiscal year 2009,
representing a $188,481 increase. This increase was primarily due to more
orders being taken for equipment which did not require the expense of a chassis.
Selling expenses for the six months ended December 31, 2009 were $92,114, an
increase of $3,134, or 3%, when compared to the six months ended
December 31, 2008. The increase was primarily due to the aviation ground
support European trade show.
General and administrative expenses for the six months ended December 31, 2009,
were $133,293, a decrease of $50,209, or 27%, when compared to six months
ended December 31, 2008. The decrease was primarily due to Robert C. Harvey
becoming Chief Financial Officer in addition to being the Chief Executive
Officer.
Other expenses, which consist of interest expense and interest income, for the
six months ended December 31, 2009, were a combined expense of $181,167, an
increase of $10,623, or 6%, when compared to the six months ended
December 31, 2008. The increase was due to no longer having lease revenue
earned from the United States Government, and an increase in financing costs
associated with the new credit facility entered into in the last quarter of
fiscal 2009.
RESULTS OF OPERATIONS
THREE MONTHS ENDED DECEMBER 31, 2009
COMPARED WITH THREE MONTHS ENDED DECEMBER 31, 2008
Cemetery Operations:
Revenue for the three months ended December 31, 2009 was $813,065, an increase
of $200,409, or 32%, when compared to the three months ended December 31, 2008.
The increase was primarily due to an increase in all revenue accounts,
specifically, cemetery space ($75,000), markers ($19,000), foundations
($25,000), grave liners ($35,000), interment fees ($9,000), overtime ($16,000),
vault sealing fees ($11,000), and mausoleum space (10,000). The Company's
management believes the increase in total revenue was due to problems at other
cemeteries which have been discussed in the media.
Cost of sales for the three months ended December 31, 2009 was $453,815, an
increase of $24,030, or 5%, when compared to the three months ended
December 31, 2008. The increase was primarily due to increased utilities, gas
and medical insurance costs and increases in sales and related costs associated
with those sales.
The resulting cemetery gross profit margin was 44% for the three months ended
December 31, 2009 versus 30% for the corresponding period in the prior fiscal
year, representing a 14% increase. The increase was do to a higher volume of
sales whereas most costs are fixed except for the grave liners, markers and
foundations.
Selling expenses for the three months ended December 31, 2009 were $66,318, an
increase of $23,025, or 53%, when compared to the three-month period ended
December 31, 2008. The increase was primarily due to higher sales commissions
and related payroll taxes.
General and administrative expenses for the three months ended
December 31, 2009 were $183,978, an increase of $66,199, or 56%, when compared
to the three months ended December 31, 2008. The increase was primarily due to
higher professional fees of $50,000, health insurance of $8,000, and salaries
of $6,000 with all other expenses remaining constant in comparison to the
prior year's period.
Corporate:
Revenue for the three months ended December 31, 2009 was immaterial.
General and administrative expenses for the three months ended
December 31, 2009 were $6,633, a decrease of $86,177, or 93%, when compared to
the three months ended December 31, 2008. The decrease was primarily due to no
accounting fees and allocation of past quarter fees to the cemetery operations.
Interest expense for the three months ended December 31, 2009 was $21,510, an
increase of $8,348, or 63%, when compared to the three months ended
December 31, 2008. The increase is due to higher debt associated with the short
term note payables.
Aviation Ground Support Operations:
Revenues for the three months ended December 31, 2009 were $2,911,604, an
increase of $1,289,555 or 79%, when compared to the three months ended
December 31, 2008. The increase in revenue was primarily due to increased
government and international sales.
Cost of sales for the three months ended December 31, 2009, were $2,630,886,
an increase of $992,137, or 60%, when compared to the three months ended
December 31, 2008. The increase was primarily related to the increase in sales
and related costs associated with manufacturing the equipment.
The resulting gross profit margin was 10% for the three months ended
December 31, 2009, versus a negative gross profit margin for the corresponding
period in fiscal year 2008. The difference is due to the volume of sales and
new contracts associated with the period, plus new supervisors in the plant.
Selling expenses for the three months ended December 31, 2009 were $46,777, an
increase of $29,827, or 176%, when compared to the three months ended
December 31, 2008. The increase was primarily due to the Company's
participation in the Aviation Ground Support air show in Munich, Germany and
increased sales commissions paid to international agents for sales.
General and administrative expenses for the three months ended
December 31, 2009 were $46,422, a decrease of $26,854, or 36%, when compared
to the three months ended December 31, 2008. The difference is the Chief
Executive Officer, Robert C. Harvey, also served as the Chief Financial Officer.
Interest expense for the three months ended December 31, 2009 was $87,372, an
increase of $7,399, or 9%, when compared to the three months ended
December 31, 2008. The increase is primarily due to higher interest rates
being charged on 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 has
concluded that the Company's disclosure controls and procedures are effective
to ensure that information required to be disclosed by the Company in reports
that it files or submits under the Exchange Act is (a) recorded, processed,
summarized and reported within the time periods specified in SEC rules and
forms and (b) accumulated and communicated to the Chief Executive Officer and
Chief Financial Officer to allow timely decisions regarding disclosure.
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.
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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The owners of 794,850 shares of common stock, or 55% of shares outstanding,
were represented at the annual meeting of shareholders on December 11, 2009 at
Faegre & Benson LLP, 2200 Wells Fargo Center, 90 South Seventh Street,
Minneapolis, Minnesota.
Elected as directors of the Company, each receiving a minimum of 681,901 votes
was:
787,401 Robert C. Harvey
787,401 Robert B. Gregor
681,901 Hugh McDaniel
781,901 Pamela Whitney
787,401 Robert Lindman
In addition, the shareholders ratified the appointment of Moquist Thorvilson
Kaufman Kennedy & Pieper LLC (formerly known as Carver Moquist & O'Connor)
as the independent auditors of the Company for fiscal year 2010. The
vote was 783,950 in favor; 9,600 against; and 1,300 abstaining.
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, 2009:
3(i) Amended and Restated Articles of Incorporation, as amended(1)
3(ii)Amended and Superseding By-Laws of the Company, as amended(1)
31 Rule 13a-14(a)/15d-14(a) Certifications
32 Section 1350 Certifications
(1) 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 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 15, 2010
INDEX TO EXHIBITS
EXHIBIT DESCRIPTION PAGE
3(i) Amended and Restated Articles of (incorporated
Incorporation of the Company by reference)
3(ii) Amended and Superseding By-Laws (incorporated
of the Company, as amended by reference)
31 Rule 13a-14(a)/15d-14(a) (filed
Certifications electronically
32 Section 1350 Certifications (filed
electronically