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 Quarterly Period Ended June 30, 1995, or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from __________ to __________
Commission File No. 1-500
PORTEC, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-1637250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Hundred Field Drive, Suite 120, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
(708) 735-2800
(Registrant's telephone number, including area code)
Former address:
(Former name, former address and former fiscal year, if
changed since last report).
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 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
Number of shares of Registrant's Common Stock ($1 per share par value) issued
and outstanding at August 14, 1995 - 4,291,214.
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements
PORTEC, INC. CONSOLIDATED BALANCE SHEET
As of June 30, 1995; December 31, 1994; and June 30, 1994
(Thousands of Dollars)
<TABLE>
<S><C>
(Unaudited) (Unaudited)
6/30/95 12/31/94 6/30/94
CURRENT ASSETS
Cash and cash equivalents $ 3,946 $ 3,398 $ 5,506
Accounts and notes receivable, 15,183 13,224 17,383
less allowances
Inventories 18,037 17,473 9,643
Other current assets 1,036 1,466 861
Total current assets 38,202 35,561 33,393
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 295
Buildings and improvements 10,287 9,437 9,841
Machinery and equipment 20,400 19,805 19,246
30,907 29,462 29,382
Less accumulated depreciation (16,973) (16,090) (15,960)
Total property, plant and equipment 13,934 13,372 13,422
Assets Held For Sale 2,070 2,269 2,070
Goodwill 3,556 3,212 2,066
Other Assets and Deferred Charges 2,938 3,108 2,139
Total $ 60,700 $ 57,522 $ 53,090
CURRENT LIABILITIES
Current portion of long-term debt $ 2,500 $ 4,253 $ 1,235
Accounts payable 10,568 11,248 12,662
Other accrued liabilities 7,346 7,263 8,802
Total current liabilities 20,414 22,764 22,699
LONG-TERM DEBT 8,711 7,623 6,438
DEFERRED CREDITS
Pensions 1,997 1,997 1,696
Other deferred credits 471 179 309
Total deferred credits 2,468 2,176 2,005
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,297,176
4,283,260 and 3,870,243 shares 4,297 4,283 3,870
Additional capital 46,576 46,518 41,144
Cumulative translation adjustment (484) (455) (581)
Accumulated deficit (21,211) (25,387) (22,485)
29,178 24,959 21,948
Treasury stock, 5,962, 0 and 0
common shares at cost 71 - -
Total stockholders' equity 29,107 24,959 21,948
Total $ 60,700 $ 57,522 $ 53,090
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE AND SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATE)
(UNAUDITED)
Three Months Ended 6/30 Six Months Ended 6/30
1995 1994 1995 1994
Revenues
Net sales $ 28,929 $ 27,687 $ 55,588 $ 53,187
Other income 33 29 289 29
Total 28,962 27,716 55,877 53,216
Costs and expenses
Cost of goods sold 20,760 18,919 39,548 36,076
Selling, general and administrative 5,466 5,991 11,178 11,899
Interest 455 158 863 279
Total 26,681 25,068 51,589 48,254
Income before income taxes 2,281 2,648 4,288 4,962
Income tax provision 24 443 112 943
Net income $ 2,257 $ 2,205 4,176 4,019
Accumulated deficit - beginning of year (25,387) (26,504)
Accumulated deficit - end of period $ (21,211) $ (22,485)
Earnings per common share: $ .49 $ .48* $ .91 $ .88*
Average number of shares outstanding 4,602,726 4,594,539* 4,602,924 4,573,498*
*Adjusted retroactively for 10% stock dividend paid in December 1994.
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1995 AND JUNE 30, 1994
(THOUSANDS OF DOLLARS)
(UNAUDITED)
6 MONTHS ENDED 6/30
1995 1994
Cash flows from Operating Activities:
Net income $ 4,176 $ 4,019
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,199 989
Increase in receivables (1,959) (7,959)
Decrease (increase) in inventories (564) 871
Decrease in other net assets
and deferred charges 311 480
Gain on sale of assets (268) (5)
Increase (decrease) in deferred credits 292 (85)
Increase (decrease) in accounts payable
and accruals (216) 4,831
Net cash provided by operating
activities 2,971 3,141
Cash flows from Investing Activities:
Acquisitions (400) (2,018)
Capital expenditures (1,660) (2,305)
Proceeds from disposal of property,
plant and equipment 711 121
Net cash used by
investing activities (1,349) (4,202)
Cash flows from Financing Activities:
Net borrowing (repayment) of revolving
credit and term loan (647) 1,165
Repayment of other long-term debt (19) (62)
Issuance of common stock 72 322
Purchase of treasury stock (451) -
Net cash provided (used) by financing
activities (1,045) 1,425
Effect of exchange rate change (29) (137)
Net increase in cash and
cash equivalents 548 227
Cash and cash equivalents at
beginning of year 3,398 5,279
Cash and cash equivalents at
end of period $ 3,946 $ 5,506
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - JUNE 30, 1995
(THOUSANDS OF DOLLARS)
1. Inventories at June 30, 1995; December 31, 1994; and June 30, 1994 were:
6/30/95 12/31/94 6/30/94
Raw Materials and Supplies $ 5,709 $ 5,297 $ 3,564
Work-in-Process 5,242 5,058 3,277
Finished Goods 7,086 7,118 2,802
$ 18,037 $ 17,473 $ 9,643
</TABLE>
2. Financial statements for the six months ended June 30, 1995 are subject to
audit adjustments.
3. The accompanying financial statements reflect all adjustments which were, in
the opinion of management, necessary to a fair statement of the results for the
period presented.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net revenues of $28,962,000 for the quarter ended June 30, 1995, were 4.5
percent greater than net revenues of $27,716,000 for the quarter ended June 30,
1994. This increase was due to significant improvement in our Materials
Handling segment. Strong sales of our traditional specialty belt conveyors and
automatic steering products and the addition of the sales of Count Recycling
Systems nearly doubled last year's second quarter volume. Sales in the quarter
for both our Railroad Products and Construction Equipment segments were below
the prior year levels for the same period. Weaker industrial economic
conditions in Canada and a change in product requirements in the U.S. resulted
in lower sales in the Railroad Products segment. Interest rate concerns early
in the quarter dampened market activity for the Construction Equipment segment
and the disposition of the chemical processing product line in July of 1994
further decreased volume.
Net income of $2,257,000 for the second quarter of 1995 was 2.4 percent greater
than the prior year's net income of $2,205,000. The increase was attributable
to improved gross margins by the Company's Materials Handling segment as a
result of the increased sales volume and improved operating efficiency. Gross
margins for the quarter ended June 30, 1995 at both the Construction Equipment
and Railroad Products segments were below the prior year's results due to the
decreased sales volume. The Construction Equipment segment was also impacted by
product mix. In addition, Railroad Products gross margins were lower due to the
poor performance of our PVH acquisition in the United Kingdom. We completed the
disposition of the PVH business, except for certain materials handling product
lines that will be added to our United Kingdom operation, early in the third
quarter. The sale will have no material effect on third quarter results.
Selling, general and administrative expense during the second quarter of 1995
decreased from $5,991,000 for the same period last year to $5,466,000. The
lower expense was the result of cost reducing measures. Interest expense for
the period was up $297,000 due to increased activity in Construction Equipment's
floor plan support, greater borrowing by the Company and the increase in
interest rates. The income tax provision for the second quarter of 1995 was
down $419,000 due to lower foreign earnings.
Net revenues and corresponding net income were $55,877,000 and $4,176,000,
respectively, for the six months ended June 30, 1995, compared with net revenues
of $53,216,000 and net income of $4,019,000 for the first six months of 1994.
Net sales for the first six months of 1995 were 4.5 percent above the prior year
due to improved sales at the Company's Materials Handling segment. Sales of the
traditional specialty belt conveyor and automatic steering products were greater
than prior year and the acquisition of Count Recycling Systems in April of 1994
added volume. Construction Equipment sales were down due to the disposition of
the chemical processing product line in July of 1994 and uncertainty in the
marketplace due to rising interest rates. Sales of the Railroad Products
segment declined because of difficult conditions in the Canadian railroad
industry and lower volume in load securement products.
The increase in the net income for the first six months of 1995 reflected the
increased sales volume, lower selling, general and administrative expense,
higher other income and lower income taxes. These factors were partially offset
by a lower gross margin percentage and higher interest expense. Selling,
general and administrative expense was $11,178,000 compared with $11,899,000 for
the same period last year. Other income was up $260,000 due to the sale of a
property site located in Minneapolis, Minnesota which had been included in
Assets Held For Sale. The reduction in the income tax provision for the first
half of 1995 was the result of lower foreign earnings. Gross margins were
$16,040,000 for the period ended June 30, 1995 compared with $17,111,000 for the
same period last year. Interest expense increased $584,000 over the prior
year's level due to increased floor planning support, greater borrowing and
higher interest rates.
Current assets were $38,202,000 at June 30, 1995 compared with $35,561,000 at
December 31, 1994 and $33,393,000 as June 30, 1994. Receivables of $15,183,000
at June 30, 1995 were up $1,959,000 from December 31, 1994 and down $2,200,000
from June 30, 1994. The changes were due to fluctuations in volume and improved
collection efforts. Inventories increased $564,000 from December 31, 1994 and
$8,394,000 from June 30, 1994. The increase from year end resulted from changes
in volume. The acquisition of Count Recycling Systems and the Innovator product
line accounted for approximately one half of the increase in inventory from June
30, 1994. Stocking programs and increased work-in-process accounted for the
remaining change. Other current assets decreased $430,000 from December 31,
1994 due to changes in prepaid expenses and increased $175,000 from June 30,
1994 due to acquisitions.
Fixed asset acquisitions were $1,660,000 during the first half of 1995 versus
$2,305,000 during the same period of last year. Assets Held For Sale decreased
$199,000 from December 31, 1994 with the sale of two property sites in
Minneapolis, Minnesota. This completes the disposition of all properties at
this location. Goodwill increased from June 30, 1994 due to the acquisition of
Innovator Holdings in July of 1994. The additional increase from December 31,
1994 was due to certain earn out provisions related to acquisitions. Other
Assets and Deferred Charges were $2,938,000 at June 30, 1995 compared with
$2,139,000 at June 30, 1994 as a result of the addition of patents related to
acquisitions.
At June 30, 1995, current liabilities were down $2,350,000 from December 31,
1994 and $2,285,000 from June 30, 1994. The decrease from December 31, 1994 was
due to reductions in the current portion of long-term debt. The change from
June 30, 1994 was the result of lower accounts payable and other accrued
liabilities partially offset by an increase in current portion of long-term debt
which related to an acquisition. The Company's long-term debt at June 30, 1995
was $8,711,000, an increase of $1,088,000 from December 31, 1994 and $2,273,000
from June 30, 1994. The increase from December 31, 1994 was due to repayment of
short-term debt. The increase from June 30, 1994 was for working capital needs.
Other deferred credits increased from both December 31, 1994 and June 30, 1994
principally because of the deferral of a gain on the sale of property in
Minneapolis, Minnesota.
The increase in stockholders' equity of $4,148,000 from December 31, 1994 to
June 30, 1995 was attributable to earnings and to the exercise of stock options
These increases were partially offset by a slightly higher cumulative
translation adjustment and to the purchase of treasury stock through the
Company's stock repurchase program. The $7,159,000 increase in stockholders'
equity from June 30, 1994 to June 30, 1995 was due to earnings during the last
two quarters of 1994 and the first two quarters of 1995, to the exercise of
stock options and to a decrease in cumulative translation adjustment. These
were partially offset by the purchase of treasury stock during the first and
second quarters of 1995.
The Company received new orders of $25,518,000 during the second quarter of 1995
compared with $23,161,000 for the second quarter of 1994. The 10 percent
increase was attributable to higher orders in both the Materials Handling and
Railroad Products segments. The order backlog was $17,796,000 at June 30, 1995
compared with $24,339,000 and $17,475,000 at December 31, 1994 and June 30,
1994, respectively.
Liquidity
On February 12, 1993, the Company entered into a credit agreement with a bank
which was amended on April 26, 1994 and June 13, 1995. The amended agreement
provides up to $15,300,000 of credit available as either cash or letters of
credit. The provisions of the agreement include minimum net worth, interest
coverage, net working capital and leverage ratio requirements and limit cash
dividend payments and additional indebtedness.
On July 15, 1994, Portec, Ltd., a wholly-owned subsidiary of the Company,
entered into an unsecured agreement with a bank for a term loan of $4,000,000.
The provisions of the loan are similar to those of the above agreement.
The Company does not have available lines of credit beyond its existing bank
agreements and is prohibited by these agreements from making other borrowings.
The Company presently has a facility for sale or lease in Troy, New York. Due
to economic conditions and other factors, the efforts to sell this property have
not been successful. Property in Pittsburgh, Pennsylvania has been leased on a
long-term lease with an option to buy. The proceeds from the sale and lease of
these properties are expected to improve the Company's liquidity position.
Due to the seasonal fluctuation in the Company's working capital needs and the
limitations on borrowing, the Company will need to exert careful cash controls.
However, management believes its existing line of credit and anticipated
operating results will provide the Company with sufficient funds for working
capital, capital expenditures and acquisitions to support anticipated growth.
The Company's working capital ratios were 1.9, 1.6 and 1.5 to 1 at June 30,
1995, December 31, 1994 and June 30, 1994, respectively. At June 30, 1995, the
Company had available $7,706,000 of unused credit under its loan agreement, plus
cash and cash equivalents of $3,946,000. This compared with $7,061,000 and
$8,309,000 of unused credit and $3,398,000 and $5,506,000 of cash and cash
equivalents at December 31, 1994 and June 30, 1994, respectively.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company was a defendant in a suit entitled "Dellelce Construction and
Equipment v. PORTEC, Inc. and Kesmark Ltd." in the Supreme Court of Ontario,
District of York, Canada, Case No. 4490A/81. This case involved a rock crushing
plant manufactured by the Company and purchased by Dellelce in 1977. Dellelce
claimed that the plant did not perform to specifications and requested damages
of several million dollars related primarily to alleged lost profits. The case
was heard by the Court which decided in May 1990 that the Company was not
responsible for damages to Dellelce. Dellelce and the successor of Kesmark Ltd.
appealed this decision. On June 2, 1995 a settlement agreement was entered into
whereby the plaintiff paid the Company $149,000 in legal fees and interest and
the charges against the Company were dismissed.
ITEM 5. ELECTION OF OFFICER
Effective July 1, 1995, the Company's Board of Directors elected Kevin C. Rorke
to be a Vice President of PORTEC, Inc.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 The Company's statement regarding computation of
per share earnings.
(b) Reports on Form 8-K
During the quarter ended June 30, 1995, the Company
did not file any reports on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PORTEC, Inc.
Dated: August 8, 1995
By:
Nancy A. Kindl
Vice President, Treasurer,
Secretary and Chief Financial Officer
EXHIBIT INDEX
Page No.
Within
Sequential
Numbering
System of
Exhibit
Exhibit
Description
11 Registrant's statement regarding 12
computation of per share earnings.
Exhibit 6(a) 11
PORTEC, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
THREE MONTHS
ENDED JUNE 30,
1995 1994
Average Shares Outstanding 4,602,726 4,594,539*
Net Income $2,257,000 $2,205,000
Per Share Amount $ .49 $ .48*
*Adjusted retroactively for 10% stock dividend paid in December 1994.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec
Inc. 1995 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
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