FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (Fee required)
For the fiscal year ended December 31, 1994 or
( ) Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
Commission file number 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 Number)
One Hundred Field Drive, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (708) 735-2800
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock -- $1 par value New York Stock Exchange
(voting) Chicago Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No ___.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of Registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. (X)
As of March 24, 1995, 4,295,353 shares of Registrant's common stock were
issued and outstanding and the aggregate market value of such shares (based
upon the closing price for such shares shown on the Composite Tape on that
date) held by non-affiliates of Registrant was approximately $43,246,000. For
this purpose, non-affiliates are deemed to be all stockholders other than
directors and officers of the Registrant.
Portions of Registrant's 1994 Annual Report to Stockholders (Parts I, II
and IV of Form 10-K) and portions of PORTEC, Inc.'s Proxy Statement for its
1995 Annual Meeting of Stockholders (Parts I and III of Form 10-K) are
incorporated herein by reference.
PART I
Item 1. Description Of Business.
(a) General Development Of Business.
Registrant (hereinafter referred to as the "Company") was incorporated in
Delaware in 1928 as Poor & Company, combining the businesses of several compa-
nies which supplied the railroad industry with a line of track components and
equipment and supplied other industries with steel forgings. Since then, the
Company has changed the scope of its operations through internal development,
acquisitions and dispositions to include the manufacture and sale of track
components, load securement systems, construction equipment and materials
handling equipment. Additional information regarding the Company's business
is contained on pages 4 through 9 of the Company's 1994 Annual Report to
Stockholders ("1994 Annual Report") and said Section is incorporated herein by
reference. The Company's name was changed to PORTEC, Inc. in 1968.
The Company executed a Credit Agreement amended as of April 26, 1994
("Credit Agreement") with the NBD Bank which provides the Company with a term
loan and a revolving credit facility.
None of the Company's assets were required to be pledged as security under the
amended Credit Agreement. Portec, Ltd., a wholly-owned subsidiary of the
Company, executed a Credit Authorization as of July 15, 1994 with NBD Bank,
Canada which provides for a term loan of $4,000,000 on an unsecured basis.
For additional information on the Credit Agreement and Credit Authorization
see Note 5 of the Notes to Consolidated Financial Statements appearing on page
23 of the 1994 Annual Report.
During the past five years, the Company has made acquisitions as follows:
On November 1, 1993, Portec, Ltd., the Company's Canadian subsidiary,
acquired the assets of Welland Vale, Ltd. Located in St-Jean, Quebec,
Welland Vale, Ltd. had been the principal supplier of rail anchors, the
primary product of Portec Ltd., for many years.
In November 1993, the Company acquired the assets of Nor-East Equipment, a
manufacturer of conveyor systems for solid waste recycling facilities. In
December, Portec (U.K.) Ltd., the Company's subsidiary in the United
Kingdom, purchased the assets of PVH Engineering which added a number of
products related to existing materials handling lines.
On April 29, 1994, the Company acquired certain of the assets of Count
Recycling Systems, Inc. Located in Des Moines, Iowa, Count Recycling Systems,
Inc. is a supplier of materials recovery facilities (MRF's) for the sorting
and recycling of residential and commercial solid waste.
The Company acquired certain assets of Innovator Manufacturing, Inc. on July
18, 1994. Innovator Manufacturing, Inc., located in London, Ontario, Canada,
is a producer of equipment used for the processing of green yard waste, waste
wood and demolition debris. Immediately following the purchase, production
was transferred from London, Ontario to Yankton, South Dakota. Portec, Ltd.,
a wholly-owned subsidiary of the Company acquired the stock of Innovator
Holdings on July 20, 1994.
(b) Financial Information About Industry Segments.
Financial information and identifiable assets' information applicable to
the Company's business segments are contained in the Section entitled "Busi-
2
ness Segments", appearing on page 10 of the 1994 Annual Report. Note 14 of
the Notes to Consolidated Financial Statements appearing on page 31 of the
1994 Annual Report contains additional information related to the business
segments, and said Section and Note are incorporated herein by reference.
(c) Narrative Description Of Business.
(i) Description Of Business, Products And Markets. A description of the
Company's continuing business and descriptive information about the Company's
products, business units and methods of distribution included in each business
segment are contained on pages 4 through 9 of the 1994 Annual Report and those
pages are incorporated herein by reference. Principal markets served are
reflected in the Company's three business segment's namely,Construction Equip-
ment, Materials Handling and Railroad.
(ii) Announced New Products Or Segments Of Material Importance. The
Company regularly makes improvements to its existing products and develops new
products. However, during 1994 these activities did not require the invest-
ment of a material amount of the assets of the Company and this practice is
expected to continue in 1995.
(iii) Sources And Availability Of Materials. Steel and steel fabrica-
tions are the principal materials used in the Company's products. There are a
large number of domestic and foreign suppliers of these materials.
(iv) Patents, Trademarks And Licenses. The Company owns a number of
patents, trademarks and licenses applicable to each of its business segments
and considers them, in the aggregate, to be of competitive importance.
However, the Company does not consider that any single patent, trademark or
license or group of patents, trademarks or licenses is of such importance that
its or their loss would materially affect the Company's business as a whole.
(v) Seasonality Of Business. The demand for certain of the Company's
products is subject to seasonal fluctuations. In particular, the Company's
Construction Equipment and Railroad product lines experience normal downturns
in sales during the end of the third and throughout the fourth quarters due in
large part to reductions in construction and track work. This reduction in
sales generally has a negative impact on the Company's fourth quarter results.
(vi) Working Capital. The Company's working capital requirements are
consistent with those of other industrial companies with which it is in
competition. As pointed out in the immediately preceding paragraph (v), the
demand for certain of the Company's products is subject to seasonal fluctua-
tions. These fluctuations result in a need for increased working capital
during the first six months of a year. The Company had current ratios of 1.6,
1.5 and 1.5 to 1 at December 31, 1994, 1993 and 1992, respectively.
(vii) Principal Customers Of Business Segments. No segment of the Com-
pany's business is dependent upon a single customer; however, the Company's
Railroad segment is mainly dependent upon sales to United States and Canadian
railroads and TTX Company. In 1994, no single customer accounted for 10 perce
or more of the Company's consolidated revenues.
(viii) Backlog Of Orders. The Company's backlog of orders at December
31, 1994, was $24,339,000, compared with backlog at December 31, 1993, of
$21,055,000. The backlog at December 31, 1994, is believed to be firm and
100% is deliverable in 1995. Orders received in 1994 were $100,687,000, an
18% increase from $84,996,000 in orders received in 1993.
3
(ix) Government Contracts. The Company provides goods to various
branches or departments of the United States Government. These sales are
routine in nature and do not comprise a significant amount of the Company's
business.
(x) Competitive Conditions. The markets in which the Company sells its
products are highly competitive in the areas of price, delivery, service,
warranty and product performance. In each of its business segments, the
Company competes with several different companies, some of which are larger
and have greater financial resources.
(xi) Research And Development. The Company estimates research expendi-
tures for continuing operations related to the development
of new products and improvements of existing products were $510,000, $475,000
and $445,000 for the years 1994, 1993 and 1992, respectively. Customer-spon-
sored research activities were not material in those years.
(xii) Environment Expenditures. Compliance with federal, state and local
laws relating to the discharge of materials into the environment or otherwise
relating to the protection of the environment did not have a material effect
upon capital expenditures, earnings or competitive position of the Company in
1994 and are not expected to have a material effect on 1995 results. In
regard to environmental matters, see the Subsection entitled "Environmental"
of the Section entitled "Management's Discussion And Analysis" appearing on
page 15 of the 1994 Annual Report and said Subsection is incorporated herein
by reference.
(xiii) Number Of Employees. The number of persons employed by the
Company as of December 31, 1994, was 779 compared with 619 at December 31,
1993.
(d) Financial Information About Foreign And Domestic Operations And
Exports Sales.
The Section entitled "Geographic Areas" appearing on page 11 of the 1994
Annual Report contains information as to the Company's United States, interna-
tional and export net sales, operating profit and identifiable assets and said
Section is incorporated herein by reference for each of the years 1994, 1993
and 1992. The Company is not aware of any extraordinary risks related to its
foreign operations.
Item 2. Properties.
The Company's principal operations are conducted at the designated
properties listed below. The buildings on these properties are of various
ages and construction, generally considered satisfactorily maintained and
suitable for the Company's operations and, except as otherwise indicated, are
owned by the Company.
<TABLE>
<S><C>
United States Properties:
Approx. Principal
Business Sq. Ft. Segments Using
Location of Bldg. Description Property
Lake Forest, Illinois 3,200 Principal office of the Company Corporate Office
occupied under lease expiring
October 21, 1999.
Canon City, Colorado 61,000 Flomaster and Pathfinder (c)
4
Divisions' production facility.
Canon City, Colorado 58,800 Material Handling Group's (c)
principal office and
production facility.
Des Moines, Iowa 5,000 Count Recycling Systems Division's (c)
principal offices occupied under
lease expiring October 1999.
Huntington, West Virginia 103,600 Railway Maintenance Products (b)
Division's principal production
facility occupied under lease
expiring October 1999.
Minneapolis, Minnesota 139,000 Pioneer Division's former -
office and production
facility. (d)
Oak Brook, Illinois 5,200 Principal offices of the (b)
Shipping Systems Division
occupied under lease expiring
November 1997 with option
to cancel on January 31, 1996.
Pittsburgh, Pennsylvania 166,000 Railway Maintenance Products (b)
Division's office and former
railway maintenance equipment
production facility. (e)
Troy, New York 137,000 Railway Maintenance Products -
Division's former rail joint
production facility. (d)
Yankton, South Dakota 230,000 Construction Equipment (a)
Division's principal
offices and production
facilities.
Foreign Properties:
Approx. Principal
Business Sq. Ft. Segments Using
Location of Bldg. Description Property
Birmingham, England 3,800 PORTEC (U.K.) Ltd's Research & (b)
Development office occupied under
lease expiring March 1, 1998.
Ruabon, Wrexham
Clwyd, Wales 22,000 Portec (U.K.) Ltd.'s principal (b)
office and production facility.
Stoke on Trent 65,000 Portec (U.K.) Ltd.'s production (b)
Staffordshire, England facility - occupied under lease
expiring November 30, 1996.
Montreal, Canada 6,300 Portec, Ltd.'s principal (b)
office - occupied under lease
expiring April 30, 1996.
5
Saint-Jean, Canada 35,000 Portec, Ltd.'s principal (b)
production facility
St. Thomas, Canada 4,000 Innovator Holdings principal (a)
office occupied under lease
expiring November 11, 1997.
(a) Construction Equipment Segment.
(b) Railroad Segment.
(c) Materials Handling Segment.
(d) Presently being offered for sale.
(e) Presently leased to a tenant who has an option to buy.
</TABLE>
Item 3. 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 request-
ed 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. An appeal of this
decision by Dellelce and the successor of Kesmark Ltd. is pending before the
Ontario Court of Appeal in Toronto, Canada.
The Company was a defendant in a case entitled Northern Engineering
Industries, plc. Parsons-Peebles Electric Products Inc. and NEI Cranes Ltd.
vs. PORTEC, Inc. (RMC Division) in the Circuit Court of Cook County, Illinois,
Case No. 84-CH-9086. The case commenced in November 1984. On November 1,
1984, the final payment of $900,000 was due the Company on a note from
Parsons-Peebles Electric Products, Inc., the company which bought Portec's
Electric Products Division in 1979, and said amount was guaranteed by Northern
Engineering Industries ("NEI"). The plaintiffs claimed that the Company
defaulted under its license agreement with NEI Cranes, Ltd., also a subsidiary
of NEI, and, as a result, NEI Cranes lost royalties and profits, etc. in an
amount in excess of ten million dollars. As part of their claim for damages,
plaintiffs alleged that the Company fraudulently induced NEI Cranes to enter
into the license agreement. On November 15, 1994 a settlement agreement was
entered into whereby the plaintiff paid the Company $2,002,000 in cash and the
charges against the Company were dismissed. Interest of $1,102,000 on the
note had not been accrued by the Company.
There are various other lawsuits and claims pending against the Company.
In the opinion of management, any liabilities that may result from such
lawsuits and claims will not materially affect the consolidated financial
position of the Company.
Item 4. Submission Of Matters To A Vote Of Security Holders.
During the fourth quarter of 1994, there were no matters submitted to a
vote of security holders of the Company through the solicitation of proxies or
otherwise.
Executive Officers Of The Company.
The following is a list of the Company's executive officers, their ages,
and their positions and offices as of March 24, 1995:
6
Name of Age as of Current Position with Officer
Executive March 24, 1995 The Company Since
Albert Fried, Jr. 65 Chairman of the Board 1989
Michael T. Yonker 52 President and Chief 1988
Executive Officer and Director
John S. Cooper 60 Senior Vice President, 1983
Group Executive of the
Railroad Group and
General Manager of the
Railway Maintenance
Products Division
Nancy A. Dedert-Kindl 53 Vice President, 1982
Treasurer, Secretary,
Controller and Chief
Financial Officer
Family Relationships And Agreements
There are no family relationships among the officers. Each executive officer
except Mr. Fried has an agreement with the Company relating to his or her
employment as generally described in the Section entitled "Employment,
Termination, and Change-in-Control Agreements" appearing on pages 13 and 14
of the Company's 1995 Proxy Statement and said Section is incorporated herein
by reference. The Company's officers are chosen by its Board of Directors.
Any officer elected or appointed by the Board may be removed with or without
cause at any time by the affirmative vote of the majority of the whole Board.
Business Experience
Mr. Albert Fried, Jr. became a member of the Company's Board of Directors
in December 1988 and the Company's Chairman of the Board in October 1989. He
has been a member of the Company's Nominating Committee since December 1989.
He has been the Managing Partner of Albert Fried & Company, New York, New York
(investment banking) for more than ten years and also is the Managing Partner
of Buttonwood Specialists, L.P. New York, New York, specialists on the New
York Stock Exchange. He is a member of the New York Stock Exchange, Inc. and
the New York Futures Exchange. He is a director and vice-chairman of Oneita
Industries, Inc. and is also a director of various civic and philanthropic
organizations.
Mr. Michael T. Yonker joined the Company as President and Chief Executive
Officer in December 1988, and continues to serve the Company in that capacity.
He became a director in December 1989 and has been a member of the Company's
Nominating Committee since December 1989. For the period of October 1981
until December 1988, he was the Vice President and Drive Division Manager of
P. T. Components, Inc., of Philadelphia, Pennsylvania (industrial gear drives)
which was formed as a private company in October 1981. He is a director of
Crown Andersen, Inc., Modine Manufacturing Company and Woodward Governor
Company.
Mr. John S. Cooper was employed by the Company in July 1979 as Division
Vice President of Operations of the Company's Railcar Division, became
Division Vice President and General Manager of the Railcar Division in August
1980, Vice President and Group Executive in June 1983, Vice President and
General Manager of the RMC Division in April 1985 and Senior Vice President
and Group Executive of the Railroad Group in February 1987.
7
Ms. Nancy A. Dedert-Kindl was employed by the Company in August 1974, and
has held various accounting, auditing, tax and other financial positions with
the Company. She left the Company in December 1988 to take a position with
Amoco Technology Company as the Director of Acquisition Projects and returned
to the Company in November 1989 to fill the position of Vice President,
Treasurer
and Controller. She also assumed the positions of Secretary and Chief
Financial Officer effective January 1, 1993.
Other
There have been no events under any bankruptcy act, no criminal proceed-
ings and no judgments or injunctions material to the evaluation of the ability
and integrity of the above-name executive officers during the past five years.
PART II
Item 5. Market For The Company's Common Stock And Related Stockholder
Matters.
(a) Principal Markets. The principal markets on which the Company's
common stock is traded are the: New York Stock Exchange and Chicago Stock
Exchange.
(b) Approximate Number of Holders of Common Stock. Based on information
provided by the Company's stock transfer agent, the number of holders of
record of the Company's common stock as of March 24, 1995 was 1,321.
(c) Stock Prices and Dividend Information. The information contained in
the Section entitled "Quarterly Stock & Dividend Information" appearing on
page 36 of the 1994 Annual Report presents for the years 1994 and 1993
quarterly high and low prices of the Company's common stock, and said Section
is incorporated herein by reference. There were no cash dividends paid in
1994 or 1993; however, a 10 percent stock dividend was paid on the shares of
common stock on December 14, 1993 and on December 15, 1994. The closing price
for shares of common stock on the Composite Tape on March 24, 1995 was $12.25.
The Company's Agreement with NBD Bank limits the Company's right to pay
cash dividends to an amount not to exceed 50% of the cumulative consolidated
net income of the Company and its subsidiaries earned after February 12, 1993.
Item 6. Selected Financial Data.
The Section entitled "Five-Year Summary" appearing on page 1 of the 1994
Annual Report contains selected financial data relating to the Company and
should be read in conjunction with the Consolidated Financial Statements and
Notes thereto appearing on pages 17 through 32 of the 1994 Annual Report.
Said Section and pages 17 through 32 are incorporated herein by reference.
Also, Item 1.(a) of this Report should be read in conjunction with this item.
Item 7. Management's Discussion And Analysis Of Financial Condition And
Results Of Operations.
The Section entitled "Management's Discussion And Analysis" appearing on
pages 12 through 16 of the 1994 Annual Report contains information as to the
Company's financial condition, changes in financial condition and results of
operations and said Section is incorporated herein by reference. Also, the
letter "To Our Stockholders and Employees" appearing on pages 2 and 3, of the
1994 Annual Report, is incorporated herein by reference.
8
Item 8. Financial Statements And Supplementary Data.
The Consolidated Financial Statements, and Notes thereto appearing on
pages 17 through 32 in the 1994 Annual Report, together with the report
thereon of Price Waterhouse LLP dated February 16, 1995, appearing on page 33
in the 1994 Annual Report contain financial information relating to the
Company and are incorporated herein by reference.
Item 9. Changes In And Disagreements With Accountants On Accounting and
Financial Disclosure.
None.
PART III
Item 10. Directors And Executive Officers Of The Company.
The Sections entitled "Nominees For Election As Directors", "Directors
Whose Term Continue Until 1996", and "Directors Whose Term Continue Until
1997" appearing on pages 3 through 5, of the Company's 1995 Proxy Statement
contain information relating to directors and nominees for directors and are
incorporated herein by reference. Certain information as to the Company's
executive officers is contained in the Section entitled "Executive Officers Of
The Company" in Part I of this Form 10-K.
Item 11. Executive Compensation.
The Section entitled "Compensation Of Executive Officers" and the Subsec-
tions thereunder appearing on pages 10 through 17 of the 1995 Proxy Statement,
the Section entitled "Employment, Termination, and Change-in-Control Agree-
ments" appearing on pages 13 and 14 of the 1995 Proxy Statement, the Subsec-
tion entitled "Compensation" of the Section entitled "Board of Director's
Matters" appearing on page 6 of the 1995 Proxy Statement, the Section entitled
"Compensation Committee Interlocks and Insider Participation" appearing on
page 7 of the 1995 Proxy Statement, the Section entitled "Report Of The Stock
Option and Compensation Committee Of The Board of Directors" appearing on
pages 14 through 16 of the 1995 Proxy Statement and the Section entitled
"Performance Graph" appearing on page 17 of the 1995 Proxy Statement are
incorporated herein by reference and contain certain information relating to
past and prospective remuneration matters applicable to directors and execu-
tive officers of the Company and said Sections and Subsections are incor-
porated herein by reference.
Item 12. Security Ownership Of Certain Beneficial Owners And Management.
The Section entitled "Stock Ownership" appearing on pages 7 through 9 of
the 1995 Proxy Statement contains information relating to ownership of common
stock of the Company by certain beneficial owners and management, and said
Section is incorporated herein by reference.
Item 13. Certain Relationships And Related Transactions.
None.
PART IV
9
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K.
(a)(1) Consolidated Financial Statements of PORTEC, Inc.:
Page In 1994
Annual Report
Consolidated Statements of Income For the
Years Ended December 31, 1994, 1993 and 1992............... 17
Consolidated Balance Sheets at December 31, 1994 and 1993... 18
Consolidated Statements of Cash Flows For the Years
Ended Decenber 31, 1994, 1993 and 1992..................... 19
Notes to Consolidated Financial Statements (including Unaud-
ited Quarterly Financial Information)...................... 20
Report of Independent Accountants........................... 33
(2) Financial Statement Schedules:
Report of Independent Accountants on Financial Statement
Schedules................................................... 17
Valuation and Qualifying Accounts and Reserves (Schedule
VIII)....................................................... 18
All other schedules are omitted, because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) Exhibits:
3(a) The Company's Certificate of Incorporation, as amended to April 29,
1987, a copy of which was included as Item 6(a)3 of the Company's Form
10-Q Report for the quarter ended March 31, 1987.*
3(b) The Company's By-Laws, as amended April 23, 1991, a copy of which was
included as Item 6(a) 3 of the Company's Form 10-Q Report for the
quarter ended March 31, 1991.*
4(a) Credit Agreement dated as of February 12, 1993 by and
between NBD Bank and the Company, a copy of which was
included as Item 7 (4)(a) of the Company's Form 8-K Report
dated March 18, 1993.*
4(b) First amendment to Credit Agreement dated as of April 26, 1994 by and
between NBD Bank and the Company.
10(a) The Division Management Incentive Compensation Plan effective January
1, 1995.(x)
10
10(b) The Key Management Incentive Compensation Plan effective January 1,
1995.(x)
10(c) The Company's Supplemental Non-Qualified Retirement Income Plan For
Designated Executive Employees as amended effective January 1, 1994.
(x)
10(d) The 1982 PORTEC, Inc. Employees' Stock Benefit Plan, as amended effec-
tive April 24, 1984, a copy of which was included as Item 14(a)(3)10-
(l) of Part IV of the Company's Form 10-K Report for the year ended
December 31, 1984.*(x)
10(e) The 1988 PORTEC, Inc. Employees' Stock Benefit Plan, as amended effec-
tive April 26, 1994.(x)
10(f) Amendment to The 1988 PORTEC, Inc. Employees' Stock Benefit Plan, a
copy of which was included as Proposal 2 on pages 18 through 25 of the
Company's 1995 Proxy Statement.*(x)
10(g) Agreement dated February 28, 1989, between the Company and M. T.
Yonker, a copy of which was included as Item 14
(a)(3)10(o) of Part IV of the Company's Form 10-K Report for the year
ended December 31, 1988.*(x)
10(h) Letter Agreement dated December 12, 1989, between the Company and M.
T. Yonker which amended the agreement dated February 28, 1989, between
the Company and M. T. Yonker, a copy of which was included as Item
14(a)(3)10(o) of Part IV of the Company's Form 10-K Report for the
year ended December 31, 1989.*(x)
10(i) Agreement and Release made January 9, 1990, between the Company and
John S. Cooper, a copy of which was included as Item 14(a)(3)10(p) of
Part IV of the Company's Form 10-K Report for the year ended December
31, 1989.*(x)
10(j) Employment Agreement dated November 16, 1989, between
the Company and N. A. Dedert-Kindl, a copy of which was
included as Item 14(a)(3)10(r) of Part IV of the
Company's Form 10-K Report for the year ended
December 31, 1989.*(x)
11 The Company's statement regarding computations of per share earnings.
13 The Company's 1994 Annual Report to Stockholders.**
21 List of the Company's subsidiaries.
23 Consent of Independent Accountants.
27 Financial Data Schedule
* Incorporated herein by reference.
** The 1994 Annual Report to Stockholders, except for those portions
thereof which are expressly incorporated by reference in this
Report on Form 10-K, is furnished for the information of the
Securities and Exchange Commission only and is not to be deemed
filed as part of this filing.
(x) Management contract or compensatory plan or arrangement.
11
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of 1994.
For purposes of complying with the amendments to the rules governing Form S-8
(effective July 13, 1990) under the Securities Act of 1933, the undersigned
Registrant hereby undertakes as follows, which undertaking shall be incorpo-
rated by reference into Part II of Registrant's Registration Statements on
Form S-8 File No. 2-76476; File No. 2-79004; and File No. 33-32700.
Insofar as indemnification for liabilities arising under the Securities Act of
1933 may be permitted to directors, officers and controlling persons of the
Registrant, the Registrant has been advised that in the opinion of the Securi-
ties and Exchange Commission such indemnification is against public policy as
expressed in the Securities Act of 1933 and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other
than the payment by the Registrant of expenses incurred or paid by a director,
officer or controlling person of the Registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
Registrant will, unless in the opinion of its counsel the matter had been
settled by controlling precedent, submit to a court of appropriate jurisdic-
tion the question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final adjudication of such
issue.
REPORT OF INDEPENDENT ACCOUNTANTS ON
FINANCIAL STATEMENT SCHEDULES
To the Board of Directors
of PORTEC, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 16, 1995 appearing on page 33 of the 1994 Annual Report to
Stockholders of PORTEC, Inc., (which report and consolidated financial state-
ments are incorporated by reference in this Annual Report on Form 10-K) also
included an audit of the Financial Statement Schedules listed in Item 14(a)
of this Form 10-K. In our opinion, these Financial Statement Schedules
present fairly, in all material respects, the information set forth therein
when read in conjunction with the related consolidated financial statements.
Price Waterhouse LLP
Chicago, Illinois
February 16, 1995
<TABLE>
<S><C>
Schedule VIII
PORTEC, Inc. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 1994, 1993, 1992
($000's omitted)
Additions
Charged
Balance to Costs Balance
Beginning and Deductions at End
of Year Expenses from Reserve of Year
1994 Allowance for doubtful accounts $ 337 $ 214 $ 88 $ 463
1993 Allowance for doubtful accounts 226 165 54 337
1992 Allowance for doubtful accounts 482 23 279 226
</TABLE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange of 1934, PORTEC, Inc. has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
PORTEC, Inc.
By: /S/Michael T. Yonker
Michael T. Yonker
President and Chief
Executive Officer and
Director
By: /S/Nancy A. Dedert-Kindl
Nancy A. Dedert-Kindl
Vice President -
Finance, Treasurer,
Controller, and Secretary
(Chief Financial and
Accounting Officer)
March 24, 1995
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
on Form 10-K has been signed below by the following persons on behalf of PORTEC,
Inc. and in the capacities and on the dates indicated:
Signature Title Date
/S/ Albert Fried, Jr. Chairman March 24, 1995
Albert Fried, Jr. of the Board
/S/ J. Grant Beadle Director March 24, 1995
J. Grant Beadle
/S/ Frederick J. Mancheski Director March 24, 1995
Frederick J. Mancheski
/S/ John F. McKeon Director March 24, 1995
John F. McKeon
/S/ Arthur McSorley, Jr. Director March 24, 1995
Arthur McSorley, Jr.
Robert D. Musgjerd
/S/ Michael T. Yonker Director March 24, 1995
16
Michael T. Yonker
/S/ L. L. White, Jr. Director March 24, 1995
L. L. White, Jr.
EXHIBIT INDEX
Page No.
Within
Sequential
Numbering
System of
Exhibit
Exhibit Description
3(a) The Company's Certificate of Incorporation, as
amended to April 29, 1987, a copy of which was
included as Item 6(a)3 of the Company's Form
10-Q Report for the quarter ended March 31, 1987.*
3(b) The Company's By-Laws, as amended April 23, 1991,
a copy of which was included as Item 6(a)3 of the
Company's Form 10-Q Report for the quarter ended
March 31, 1991.*
4(a) Credit Agreement dated as of February 12, 1993 by and between
NBD Bank and the Company, a copy of which was included as Item
7(4)(a) of the Company's Form 8-K Report dated March 18, 1993*
4(b) First amendment to Credit Agreement dated as of April 26, 1994 by and
between NBD Bank and the Company.
10(a) The Division Management Incentive Compensation Plan effective January 1,
1995.(x)
10(b) The Key Management Incentive Compensation Plan effective January 1,
1995.(x)
10(c) The Company's Supplemental Non-Qualified Retirement Income Plan For
Designated Executive Employees as amended effective January 1, 1994.(x)
10(d) The 1982 PORTEC, Inc. Employees' Stock Benefit Plan, as amended effec-
tive April 24, 1984, a copy of which was included as Item 14(a)(3)10(1)
of Part IV of the Company's Form 10-K Report for the year ended December
31, 1984.*(x)
10(e) The 1988 PORTEC, Inc. Employees' Stock Benefit Plan, as amended effec-
tive April 26, 1994.(x)
17
10(f) Amendment to The 1988 PORTEC, Inc. Employees' Stock Benefit
Plan, a copy of which was included as Proposal 2 on pages 18
through 25 of the Company's 1995 Proxy Statement.*(x)
10(g) Agreement dated February 28, 1989, between the Company and M. T. Yonker,
a copy of which was included as Item 14(a)(3)10(o) of Part IV of the
Company's Form 10-K Report for the year ended December 31, 1988.*(x)
10(h) Letter Agreement dated December 12, 1989, between the Company and M. T.
Yonker which amended the agreement dated February 28, 1989, between the
Company and M. T. Yonker, a copy of which was
included as Item 14(a)(3)10(o) of Part IV of the Company's Form 10-K
Report for the year ended
December 31, 1989.*(x)
10(i) Agreement and Release made January 9, 1990, between the Company and John
S. Cooper, a copy of which was included as Item 14(a)(3)10(p) of Part IV
of the Company's Form 10-K Report for the year ended December 31,
1989.*(x)
10(j) Employment Agreement dated November 16, 1989, between the Company and N.
A. Dedert-Kindl, a copy of which was included as Item 14(a)(3)10(r) of
Part IV of the
Company's Form 10-K Report for the year ended December 31, 1989.*(x)
11 The Company's statement regarding computations of per share earnings.
13 The Company's 1994 Annual Report to Stockholders.
21 List of the Company's subsidiaries.
23 Consent of Independent Accountants.
27 Financial Data Schedule
* Incorporated herein by reference.
(x) Management contract or compensatory plan or arrangement.
Exhibit 4(b)
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement ("First Amendment"), dated as of
April 26, 1994, by and between PORTEC, INC., a Delaware corporation (the
"Company"), and NBD BANK, an Illinois banking corporation (the "Bank").
WITNESSETH:
WHEREAS, the Company and the Bank have executed a Credit Agreement (the
"Credit Agreement"), dated as of February 12, 1993 to provide for, among other
things a term loan in the principal amount of $6,000,000 and a revolving credit
facility in aggregate principal amount not to exceed $12,000,000.
WHEREAS, the Company has requested that the Bank amend certain provisions
of the Credit Agreement, and the Bank has agreed to do so on the terms and
conditions set forth herein.
NOW THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
1. Upon satisfaction by the Company of the conditions set forth in
paragraph 3 hereof, the Credit Agreement shall be amended as of the effective
date hereof as follows:
(a) The definitions of "Borrowing Base", "Borrowing Base
Certificate", "Eligible Accounts Receivable", "Eligible Inventory", and
"Pledge Agreement" in Section 1.1 of the Credit Agreement are hereby deleted.
(b) The definition of "Security Documents" in Section 1.1 of the
Credit Agreement is hereby amended by deleting the words "Pledge Agreement"
therefrom.
(c) The definition of "Termination Date" in Section 1.1 of the
Credit Agreement is hereby amended by deleting the date "April 30, 1996"
therefrom and inserting the date "April 30, 1997" in place thereof.
(d) Section 2.1(a) of the Credit Agreement is hereby amended by
deleting the clause "the lesser of (i) the amount of the Borrowing Base shown on
the most recent Borrowing Base Certificate delivered by the Company to the Bank,
and (ii)" therefrom.
(e) Section 2.10 of the Credit Agreement is hereby deleted.
(f) Section 3.1(d) of the Credit Agreement is hereby deleted and
the phrase "intentionally omitted" is substituted as Section 3.1(d) in place
thereof.
(g) Section 4.14 of the Credit Agreement is hereby deleted.
(h) Section 5.1(d)(iv) of the Credit Agreement is hereby amended
in its entirety to read as follows:
(iv) As soon as available and in any event
within 90 days after the end of each fiscal year
of the Company, a copy of the consolidated balance
sheet of the Company and its Subsidiaries as of
the end of such fiscal year and the related con-
solidated statements of income and cash flow of
the Company for such fiscal year, with a customary
audit report of Price Waterhouse, or other inde-
pendent certified public accountants selected by
the Company and acceptable to the Bank, without
qualifications unacceptable to the Bank;
(i) Section 5.1(d)(v) of the Credit Agreement is hereby deleted
and the phrase "intentionally deleted" is substituted as Section 5.1(d)(v) in
place thereof.
(j) Section 5.2(k)(iii) of the Credit Agreement is hereby
amended by deleting the figure "$1,500,000" and substituting the figure
"$3,000,000" in place thereof.
(k) Exhibit C to the Credit Agreement is hereby deleted.
Exhibit C shall be deemed intentionally omitted.
2. From and after the effective date hereof, references to the
Credit Agreement in the Credit Agreement, the Notes and the Security Documents
and all other documents executed pursuant to the Credit Agreement shall be
deemed to be references to the Credit Agreement as amended hereby.
3. This First Amendment shall not become effective until:
(a) The Company shall have delivered to the Bank certificate of
recent date of the appropriate government official certifying as to the corpo-
rate existence of the Company;
(b) The Company and the Bank shall have each executed and
delivered this First Amendment; and
(c) The Company shall have delivered to the Bank a certified
copy of resolutions of the board of directors of the Company authorizing
execution and delivery of this First Amendment.
4. Upon satisfaction by the Company of the conditions set forth in
paragraph 3 hereof, the Bank shall release and cancel that certain Pledge
Agreement dated as of February 12, 1993 executed by the Company in favor of the
Bank relating to the shares of capital stock of Portec (UK) Limited, and shall
promptly return to the Company the original share certificates of Portec (UK)
Limited stock.
5. The Company represents and warrants to the Bank that:
(a) The execution, delivery and performance of this First
Amendment by the Company have been duly authorized by all necessary partnership
action and will not require any consent or approval of its stockholders, violate
any provision of any law, rule, regulation, order, writ, judgment, injunction,
decree, determination or award presently in effect having applicability to it or
constitute a default under any indenture or loan or credit agreement or any
other agreement, lease or instrument to which the Company is a party or by which
it or its properties may be bound or affected;
(b) No consent, approval or authorization of or declaration or
filing with any governmental authority or any non-governmental person or entity,
including without limitation, any creditor or partner of the Company is required
on the part of the Company, in connection with the execution, delivery and
performance of this First Agreement or transactions contemplated hereby and
thereby:
(c) This First Amendment is the legal, valid and binding
obligations of the Company, enforceable against it in accordance with the terms
thereof;
(d) After giving effect to the amendments contained herein and
effective pursuant hereto, the representations and warranties contained in
Article IV of the Credit Agreement are true and correct on and as of the
effective date hereof in the same force and effect as if made on and as of such
effective date:
(e) The most recent audited financial statements of the Company
delivered to the Bank are complete and accurate in all material respects and
present fairly the financial condition of the Company and its subsidiaries as of
such date in accordance with generally accepted accounting principles. There
has been no adverse material change in the condition of the business properties,
operations or condition, financial or otherwise of the Company since the date of
such financial statements. There are no liabilities of the Company or any of
its subsidiaries, fixed or contingent, which are material but not reflected on
such financial statements or in the notes thereto; and
(f) No Event of Default and no event or condition which would
become an Event of Default after the lapse of time or the giving of notice or
both, shall have occurred and be continuing or exist under the Credit Agreement,
as amended hereby, as of the effective date hereof.
6. The Company agrees to pay and save the Bank harmless from
liability for the payment of all costs and expenses arising in connection with
this First Amendment, including the reasonable fees and expenses of Dickinson,
Wright, Moon, Van Dusen & Freeman, counsel to the Bank, in connection with the
preparation and review of this First Amendment and any related documents.
7. The capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. Except as
expressly contemplated hereby, the Credit Agreement, the Security Documents and
all related notes, guaranties, certificates, instruments and other documents are
hereby ratified and confirmed and shall remain in full force and effect.
8. This First Amendment shall be governed by and construed in
accordance with the laws of the State of Illinois.
9. The First Amendment may be executed in two counterparts, each of
which together shall constitute the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this First Amend-
ment to be duly executed and delivered as of the day and year first above
written.
NBD BANK
By: Peter K. Gillespie
Its: Vice President
PORTEC, INC,
By: Nancy A. Dedert
Its: Vice President & CFO
Exhibit 1
AMENDMENT TO CREDIT AGREEMENT
PORTEC, INC.
WHEREAS, this Corporation desires to amend certain provisions of a Credit
Agreement (the "Credit Agreement") entered into in favor of NBD Bank, dated
February 12, 1993
NOW, THEREFORE, BE IT RESOLVED, that the President and any Vice President
of this Corporation is hereby authorized and directed to enter into,
execute and deliver on behalf of this Corporation the First Amendment to
Credit Agreement and any and all instruments or other documents incidental
or related thereto, and to take such further action as he or she may deem
reasonable, necessary or proper in order to consummate the transaction
contemplated herein.
Dated: April 26, 1994
DIVISION MANAGEMENT INCENTIVE COMPENSATION PLAN
The following Plan is to be in effect for the calendar year 1995. It will
be reviewed at the close of that year and will be continued, modified, or
cancelled with respect to succeeding years solely at the discretion of the Stock
Option and Compensation Committee of the PORTEC, Inc. Board of Directors.
1. PARTICIPATION
a. The President & General Manager and key management employees of each
division, employed as of January 1 of the year, will, upon recommenda-
tion by the President & General Manager and subject to approval of the
President & Chief Executive Officer of PORTEC, Inc., participate in
the plan for such division. Persons promoted or employed subsequent
to January 1 to fill an eligible management position vacancy may be
included in the division's incentive compensation program on a pro
rata basis, upon the President & Chief Executive Officer's approval.
The incentive compensation payable to such an employee shall be based
on the number of calendar months during the year the person has held
that management position. However, the inclusion of such an employee
in the program shall not result in a reduction of the Total Target
Bonus Fund, defined below, for the other participants.
b. "Individual Target Bonus Levels" for each eligible position will be
established as a percentage of actual salary paid during the calendar
year, or portion of the years determined by date of entry into the
program, in accordance with the corporate standards relating to the
position of the participant (Exhibit A attached). Exceptions to these
standards require approval of the President & Chief Executive Officer.
"Individual Maximum Bonus Levels" shall equal double the Individual
Target Bonus Levels.
2. DIVISION TARGET BONUS FUND
a. A "Total Target Bonus Fund" will be calculated for each division by
means of bonus formulas such that if certain targets for Pre-Tax
Profit and Working Capital to Sales Objectives are satisfactorily
attained, an amount equal to the sum of the Individual Target Bonus
Levels for eligible management people in that division will accrue.
b. The minimum point below which no bonus fund will be developed relating
to the Pre-Tax Profit and Working Capital to Sales Objectives is
called the "threshold" which will generally be established at 70
percent of the target performance. Below this level, no bonus will be
paid.
DIVISION TARGET BONUS FUND (CONTINUED)
c. The "Total Maximum Bonus Fund" shall equal twice the Total Target
Bonus Fund and will generally be established in the range of 130
percent to 150 percent of the target performance.
d. The bonus fund (meaning the total actual bonuses paid) will be limited
to 8 percent of Pre-Tax Profits, regardless of other calculations.
3. GENERAL PERFORMANCE OBJECTIVES
a. Shortly after the beginning of each year, the President & Chief
Executive Officer will consider the approved profit plan, current
backlog, and invested capital of each division together with such
other factors as he deems appropriate to set Pre-Tax Profit and
Working Capital to Sales Objectives for each Division subject to
approval of the Board of Directors' Stock Option and Compensation
Committee. These targets will normally be determined at the
performance level set by the approved business plan for that year.
However, the President & Chief Executive Officer may set targets which
are different than profit plan performance depending on specific
circumstances.
b. The percentage of such Total Target Bonus Fund for each division
related to Pre-Tax Profit and Working Capital to Sales Objectives, and
the objectives established for Pre-Tax Profits and Working Capital to
Sales are shown in Exhibit B.
4. INDIVIDUAL ALLOCATION AND ADJUSTMENT
a. Customary practice will be to distribute available bonus funds pro
rata over the Target Bonus levels of participants. However, unless a
participant is actively at work for the Company on December 31, or
retires (within the meaning of the Company's plan), becomes disabled,
or dies during the operating year, no incentive compensation shall be
payable to him. If any participant shall retire, become disabled, or
die during the year, the incentive compensation for such year payable
to him, his estate or designee, shall be based on the number of months
during the year he was in the active employ of the Company. Incentive
compensation that would have been payable to participants had they
remained in the employ of the Company during the full calendar year,
but not payable to them under the foregoing provisions, shall not be
used to increase the incentive compensation of the other participants.
INDIVIDUAL ALLOCATION AND ADJUSTMENT (CONTINUED)
b. Notwithstanding, the preceding paragraph, the President & General
Manager can adjust the bonus level of any participant, other than
himself by a factor of 75 percent to 125 percent to reflect low or
high personal performance during the year. The President & General
Manager's bonus level may be adjusted in the same manner as recom-
mended and approved by the President & Chief Executive Officer.
However, such adjustments cannot increase the Total Bonus Fund as
determined in Paragraph 2 or exceed a participant's Individual Maximum
Bonus Level. Available bonus funds will then be distributed pro rata
over the bonus levels which exclude these adjustments.
c. The adjustment recommendations of each President & General Manager
will be submitted to and will be subject to the final approval of the
President & Chief Executive Officer of PORTEC, Inc. Recommendations
as to the incentive compensation to be paid to General Managers will
be made by the President & Chief Executive Officer.
5. PAYMENT
a. Payment of incentive compensation for the year will not be made until
after the completion of the year-end Company audit by the outside
Public Accountants. Payment should generally be made not later than
February 28 of the next succeeding year. However, the President &
Chief Executive Officer may elect to pay 80% of the estimated bonus
amounts prior to December 31, with the remainder of the bonus amounts
paid after the year-end audit. For the purpose of pension plan
computations and for making deductions for withholding and social
security taxes, incentive compensation payments will be taken into
account in the year of payment. Incentive compensation payments will
not influence levels of group insurance coverage.
b. Total bonus amounts payable for each individual shall be rounded to
the nearest dollar.
6. ACCOUNTING PROCEDURES
a. PRE-TAX PROFIT: This portion of the bonus will be determined by the
relationship of actual Pre-Tax Profit relative to the Pre-Tax Profit
target. In the determination of Pre-Tax Profits, standard accounting
practices (as shown below and covered in the Accounting Procedures
Manual of PORTEC, Inc.) currently in effect at PORTEC, Inc. will be
continued, including practices as to depreciation charges, allocation
of general office expense, methods of inventory valuation, retirement
fund provisions, divisional charges, and other operating procedures.
Gains or
ACCOUNTING PROCEDURES (CONTINUED)
losses on the disposition of fixed assets will be excluded except for
those realized in the ordinary course of business. Incentive
compensation will be included in the calculation of both target and
actual Pre-Tax Profit.
b. WORKING CAPITAL TO SALES (WC/S): This portion of the bonus will be
determined by the relationship of the actual WC/S ratio relative to
the Plan ratio for that year. The WC/S ratio for this purpose is
defined as:
Average (A/R + Inventory - A/P)
Working Capital to Sales = -------------------------------
Gross Sales
Where: A/R = Net Accounts Receivable Trade balance at month-end.
INVENTORY = Net Inventory balance at month-end.
A/P = Net Accounts Payable Trade & Unvouchered balance at
month-end.
GROSS SALES = Gross sales for the year.
In the determination of these items, standard accounting practices as
shown in the current Accounting Procedures Manual of Portec, Inc. will
be continued. Twelve month-end balances for (January through
December) A/R, A/P, and Inventory will be averaged for the numerator
of the ratio.
7. ADJUSTMENTS TO THE PLAN
a. Changes of major significance not contemplated at the time the Pre-Tax
Profit Objectives are determined for a division, such as but not
limited to, acquisitions of products or businesses, major expenditures
for plant or equipment expansion or modernization, and disposition of
assets or a product line may require a revision in the Pre-Tax Profit
Objectives for a particular division. In such cases, the President &
Chief Executive Officer can adjust the Pre-Tax Profit Objectives,
subject to the approval of the Board of Directors' Stock Option and
Compensation Committee, in order to establish a revised basis for the
computation of incentive compensation.
b. In unusual circumstances, it may not be possible to construct a bonus
formula meeting all of these criteria to provide reasonable incentives
for division management. In this event, the President & Chief
Executive Officer can seek approval of an alternative bonus formula
from the Stock Option and Compensation Committee of the Board of
Directors.
EXHIBIT A
TARGET BONUS SCHEDULE
TARGET BONUS
POSITION AS % OF SALARY
GENERAL MANAGER 25%
DIRECT REPORTS TO G.M. OF:
MANUFACTURING,
ACCOUNTING,
SALES, OR
ENGINEERING(1) 20%
ALL OTHER PARTICIPANTS 15%
NOTES:
(1) ALSO INCLUDES PLANT MANAGERS OF MAJOR REMOTELY LOCATED MANUFACTURING
FACILITIES.
EXHIBIT B
1995 BONUS PERFORMANCE OBJECTIVES
DIVISION:
CATEGORY
WEIGHT THRESHOLD TARGET MAXIMUM
PRE-TAX PROFITS $ $ $
WORKING CAPITAL
TO SALES
TOTAL 100%
DISTRIBUTED ONLY TO THE
APPLICABLE DIVISION
KEY MANAGEMENT INCENTIVE COMPENSATION PLAN
1. The officers and other key executive employees entitled to participate in
the Plan for each calendar year and the Target Bonus levels for each
position shall be recommended by the President and Chief Executive Officer
and approved by the Stock Option and Compensation Committee of the Board of
Directors, preferably prior to the beginning of such calendar year.
Customary practice will be to distribute available bonus funds pro rata
over the Target Bonus levels of participants. However, unless a partici-
pant is actively at work for the Company on December 31, or retires (within
the meaning of the Company's plan), becomes disabled, or dies during the
operating year, no incentive compensation shall be payable to him. If any
participant shall retire, become disabled, or die during the year, the
incentive compensation for such year payable to him, his estate or
designee, shall be based on the number of months during the year he was in
the active employ of the Company. Incentive compensation that would have
been payable to participants had they remained in the employ of the Company
during the full calendar year, but not payable to them under the foregoing
provisions, shall not be used to increase the incentive compensation of the
other participants.
2. "Target Bonus" and "Maximum Bonus" levels for each eligible position shall
be established by multiplying the applicable percentages shown in Exhibit A
by the participant's base salary for the calendar year. Maximum Bonus
amounts shall be converted to earned bonus amounts by the application of a
Corporate Bonus Percentage. This percentage will be determined as
described in the following paragraphs.
3. A predetermined percent of the Corporate Bonus Percentage shall be
determined by actual financial performance compared to the Profit Plan.
This quantitative portion of the bonus will include two factors:
A. PRE-TAX PROFIT: A predetermined percent of the bonus will be
determined by the relationship of actual Pre-Tax Profit relative to
Pre-Tax Profit in the approved business plan for the year.
Pre-Tax Profit for this purpose is income before provision for taxes
on income, and before:
(i) interest on long-term debt (debt due after one year);
(ii) profits and losses derived from the sale or other disposition
of property other than in the ordinary course of business;
(iii) income and all charges against income from or on account of the
disposal or permanent termination of the operations of any
plant, division, operating unit, or significant segment
thereof, a significant product line of the company in its
entirety or substantially in its entirety;
(iv) income and all charges against income from or on the account of
any unbudgeted expenses associated with: start-up, acquisition,
or major capital expansion of a plant, division, operating
unit, or significant segment thereof, or a significant product
line of the company in its entirety or substantially in its
entirety; and
(v) translation gains or losses due to currency changes.
B. WORKING CAPITAL TO SALES (WC/S): A predetermined percent of the
bonus will be determined by the relationship of the actual WC/S
ratio relative to the Plan ratio for that year. The WC/S ratio for
this purpose is defined as:
Average (A/R + Inventory - A/P)
Working Capital to Sales =
Gross Sales
Where: A/R = Net Accounts Receivable Trade balance at month-end.
INVENTORY = Net Inventory balance at month-end.
A/P = Net Accounts Payable Trade & Unvouchered balance at
month-end.
GROSS SALES = Gross sales for the year.
In the determination of these items, standard accounting practices
as shown in the current Accounting Procedures Manual of Portec, Inc.
will be continued. Twelve month-end balances for (January through
December) A/R, A/P, and Inventory will be averaged for the numerator
of the ratio.
4. A predetermined percent of the Corporate Bonus Percentage will be
determined by the accomplishment of non-financial objectives of Key
Management Bonus participants. The factor for this portion of the bonus
will depend upon a review of planned and unplanned non-financial events
which occurred during the year. The Chairman or Chief Executive Officer
will make recommendations to the Stock Option and Compensation Committee
for this portion of the bonus.
5. In addition to the aggregate of bonus amounts payable to officers, the
Stock Option and Compensation Committee may approve an amount payable
for key executive employees other than officers as identified by the
President & Chief Executive Officer. This portion of the Key Management
Incentive Compensation Plan (President's Key Executive Fund) may equal an
amount based on a Maximum Bonus percentage of 30% of salaries of such
individuals as of the beginning of the year. The method of calculating
the Key Executive Fund is not necessarily indicative of the bonus amount
payable to any individual participating in the Fund.
6. The bonus amount payable to any individual is subject to judgmental
variation by the President & Chief Executive Officer, but such variation
shall not result in increasing the calculated total bonus fund or to
exceed Maximum Bonus for that position. At the President's & Chief
Executive Officer's discretion, these funds may also be used for
discretionary awards to other employees. The Stock Option and
Compensation Committee shall approve the total bonus amount to be paid
under the President's Key Executive Fund.
7. Payment of incentive compensation for the year will not be made until
after the completion of the year-end Company audit by the outside Public
Accountants. Payment should generally be made not later than February 28
of the next succeeding year. However, the President & Chief Executive
Officer may elect to pay 80% of the estimated bonus amounts prior to
December 31, with the remainder of the bonus amounts paid after the year-
end audit. For the purpose of pension plan computations and for making
deductions for withholding and social security taxes, incentive compensa-
tion payments will be taken into account in the year of payment.
Incentive compensation payments will not influence levels of group
insurance coverage.
8. All determinations of the Board or any Committee thereof, made under the
Plan, shall be final, conclusive, and binding upon all persons
participating in the plan; and in making such determination the Board, or
any such Committee, may rely and shall be fully protected in relying,
upon any statements prepared or reviewed by the independent accountants
examining the books of account of the Corporation.
9. The Board reserves the right at any time and from time to time to amend
or terminate the Plan, provided, however, that no such amendment or
termination shall be made after the beginning of any calendar year which
shall adversely affect the rights under the Plan of any officer or any
other employee as theretofore determined, but it is expressly understood
and agreed that nothing in the Plan shall in any manner prejudice or
adversely affect the right of the Corporation at any time to terminate
the employment of any officer or other employee.
EXHIBIT A
TARGET AND MAXIMUM BONUS SALARY PERCENTAGES
Target Bonus Maximum Bonus
Position Percentage Percentage
President and Chief Executive Officer 50 100
Chief Operating Officer 40 80
Sr. Vice President 35 70
Vice President 30 60
Chairman of the Board 25 50
President's Key Exec. Fund Participants 15 30
All Other Participants 5 10
EXHIBIT B
CORPORATE BONUS PERCENTAGE
I. PRE-TAX PROFIT OBJECTIVE PORTION (75% Weighting)
Earned % of
% Achievement Target Bonus
70% & Below 0.0%
100% 75.0%
130% & Above 150.0%
II. WORKING CAPITAL/SALES PORTION (25% Weighting)
Earned % of
% Achievement Target Bonus
70% & Below 0.0%
100% 25.0%
130% & Above 50.0%
III
. NON-FINANCIAL PORTION (0% Weighting)
Earned % of
% Achievement Target Bonus
This percentage will be determined 0.0%
by the Stock Option and Compensation to
Committee after recommendations by the 0.0%
Chairman or Chief Executive Officer.
IV. DETERMINATION OF CORPORATE BONUS PERCENTAGE
Levels of profit goal achievement and working capital management return
between the amounts shown above will earn bonuses proportional to the
amounts actually shown, i.e. the amounts will be interpolated from the
tables above.
The Corporate earned bonus percentage will be the sum of the earned
percentages derived from Tables I, II, and III.
EXHIBIT C
PARTICIPANT LIST
OFFICERS
PARTICIPANT'S NAME POSITION TITLE
MICHAEL T. YONKER PRESIDENT & CHIEF EXECUTIVE OFFICER
NANCY A. KINDL VICE PRESIDENT & TREASURER
ALBERT FRIED CHAIRMAN OF THE BOARD
PRESIDENT'S KEY EXECUTIVE FUND PARTICIPANTS
PARTICIPANT'S NAME POSITION TITLE
PATRICIA A. RICCIO EMPLOYEE BENEFITS MANAGER
ALL OTHER PARTICIPANTS
PARTICIPANT'S NAME POSITION TITLE
D. MICHAEL DUTLER TAX/GENERAL ACCOUNTANT
CAROLINA D. GURSKI BENEFITS ADMINISTRATOR
JOHN W. KERR ACCOUNTANT
SANDRA J. OZIER ADMINISTRATIVE SECRETARY
MELINDA M. WARD PAYROLL/TAX ACCOUNTANT
EXHIBIT D
1995 BONUS PERFORMANCE OBJECTIVES
CATEGORY WEIGHT THRESHOLD TARGET MAXIMUM
Pre-Tax Profits 75 $ $ $
Working Capital
to Sales 25
Non-Financial 0
TOTAL 100%
SUPPLEMENTAL RETIREMENT INCOME PLAN
FOR SALARIED EMPLOYEES OF PORTEC, INC.
As Amended and Restated Effective January 1, 1994
The Supplemental Retirement Income Plan for Salaried Employees of
Portec, Inc., as amended and restated effective as of January 1, 1994 (the
"Plan"), is hereby adopted. The Plan has been established and maintained by
Portec, Inc. solely for the purpose of providing benefits for certain of its
salaried employees who participate in the Portec, Inc. Employees' Retirement
Program (or any predecessor, successor or replacement employees' retirement
plan) in excess of any limitations on benefits imposed by the Internal Revenue
Code of 1986 on qualified retirement plans.
Accordingly, Portec, Inc. hereby adopts the Plan as amended and
restated, effective January 1, 1994, pursuant to the terms and provisions set
forth below:
ARTICLE I
Definitions
Wherever used herein the following terms shall have the meanings
hereinafter set forth:
1.1 "Board" means the Board of Directors of the Company.
1.2 "Code" means the Internal Revenue Code of 1986, as amended from
time to time, and any regulations relating thereto.
1.3 "Company" means Portec, Inc., a Delaware corporation, or, to the
extent provided in Section 7.9 below, any successor corporation or other entity
resulting from a merger or consolidation into or with the Company or a transfer
or sale of substantially all of the assets of the Company.
1.4 "Earnings" means the amount taken into account pursuant to
Section 2.1(n) of the Qualified Plan (or any successor section), without regard
to any dollar limitations imposed by the Code. Notwithstanding the foregoing,
however, a Participant's Earnings taken into account under the Plan for any Plan
Year shall be limited to $350,000.
1.5 "Normal Retirement Date" means the first day of the calendar
month coinciding with or next following a Participant's 65th birthday.
1.6 "Participant" means a salaried employee of the Company who is a
participant under the Qualified Plan and to whom or with respect to whom a
benefit is payable under the Plan.
1.7 "Plan" means this Supplemental Retirement Income Plan for
Salaried Employees of Portec, Inc.
1.8 "Plan Year" means the year ending December 31, or any other
twelve-consecutive-month period that may hereafter be designated by the Company
as the fiscal year of the Plan
1.9 "Qualified Plan" means the Portec, Inc. Employees' Retirement
Program, as amended and restated effective January 1, 1992, and each
predecessor, successor or replacement employees' retirement plan.
1.10 "Qualified Plan Retirement Benefit" means the aggregate benefit
payable to a Participant pursuant to all Qualified Plans and all annuities
purchased for the Participant under all Qualified Plans (whether or not
terminated) by reason of his termination of employment with the Company and all
affiliates for any reason other than death.
1.11 "Qualified Plan Surviving Spouse Benefit" means the aggregate
benefit payable to the Surviving Spouse of a Participant pursuant to all
Qualified Plans and all annuities purchased for the Participant under all
Qualified Plans (whether or not terminated) in the event of the death of the
Participant at any time prior to commencement of payment of his Qualified Plan
Retirement Benefit.
1.12 "Supplemental Retirement Benefit" means the benefit payable to a
Participant pursuant to the Plan by reason of his termination of employment with
the Company and all affiliates for any reason other than death.
1.13 "Surviving Spouse" means a person who is married to a Participant
at the date of his death and for at least one year prior thereto.
1.14 "Supplemental Surviving Spouse Benefit" means the benefit payable
to a Surviving Spouse pursuant to the Plan.
1.15 Words in the masculine gender shall include the feminine and the
singular shall include the plural, and vice versa, unless qualified by the
context. Any headings used herein are included for ease of reference only, and
are not to be construed so as to alter the terms hereof.
ARTICLE II
Eligibility
A participant who is eligible to receive a Qualified Plan Retirement
Benefit, the amount of which is reduced by reason of the application of any
limitations on benefits imposed by any provision of the Code, as in effect on
the date for commencement of the Qualified Plan Retirement Benefit, or as in
effect at any time thereafter, to the Qualified Plan shall be eligible to
receive a Supplement Retirement Benefit.
The Surviving Spouse of a Participant described in the preceding
sentence who dies prior to commencement of payment of his Qualified Plan
Retirement Benefit shall be eligible to receive a Supplemental Surviving Spouse
Benefit.
ARTICLE III
Supplemental Retirement Benefit
3.1 Amount. The Supplemental Retirement Benefit payable to an
eligible Participant, in the form of a straight life annuity over the lifetime
of the Participant only, commencing on his Normal Retirement Date, shall be a
monthly amount equal to the difference between (a) and (b) below:
(a) the monthly amount of the Qualified Plan Retirement Benefit to
which the Participant would have been entitled under the Qualified Plan if such
Benefit were computed (i) without giving effect to any limitations on benefits
imposed by any provisions of the Code, and (ii) by using the definition of
Earning set forth in Section 1.4 of this Plan in lieu of the definition set
forth in Section 1.10 of the Qualified Plan;
LESS
(b) the monthly amount of the Qualified Plan Retirement Benefit
actually payable to the Participant under the Qualified Plan.
The amounts described in (a) and (b) shall be computed as of the date
of termination of employment of the Participant with the Company and all
affiliates, in the form of a straight life annuity payable over the lifetime of
the Participant only, commencing on his Normal Retirement Date.
3.2 Form of Benefit. Except as otherwise provided herein, the
Supplemental Retirement Benefit payable to a Participant shall be paid in the
same form under which the Qualified Plan Retirement Benefit is payable to the
Participant. Except as otherwise provided herein, the Participant's election
under the Qualified Plan of any optional form of payment of his Qualified Plan
Retirement Benefit (with the valid consent of his Surviving Spouse where
required under the Qualified Plan) shall also be applicable to the payment of
his Supplemental Retirement Benefit.
3.3 Commencement of Benefit. Payment of the Supplemental Retirement
Benefit to a Participant shall commence on the same date as payment of the
Qualified Plan Retirement Benefit to the Participant commences. Any election
under the Qualified Plan made by the Participant with respect to the
commencement of payment of his Qualified Plan Retirement Benefit shall also be
applicable with respect to the commencement of payment of his Supplemental
Retirement Benefit.
3.4 Approval of Company. Notwithstanding the provisions of sections
3.2 and 3.3 above, an election made by the Participant under the Qualified Plan
with respect to the form of payment of his Qualified Plan Retirement Benefit
(with the valid consent of his surviving Spouse where required under the
Qualified Plan), or the date for commencement of payment thereof, shall not be
effective with respect to the form of payment or date for commencement of
payment of his Supplemental Retirement Benefit hereunder unless such election is
expressly approved in writing by the Company with respect to his Supplemental
Retirement Benefit. If the Company shall not approve such election in writing,
then the form of payment or date for commencement of payment of the
Participant's Supplemental Retirement Benefit shall be selected by the Company
in its sole discretion. Notwithstanding the foregoing, however, if the Company
in its sole discretion deems it in the best interests of the Participant, the
Company shall pay the actuarial equivalent of the value of the Participant's
Supplemental Retirement Benefit to him in a single lump sum in lieu of any other
form under which the Qualified Plan Retirement Benefit is payable.
3.5 Actuarial Equivalent. A Supplemental Retirement Benefit that is
payable in any form other than a straight life annuity over the lifetime of the
Participant, or which commences at any time prior to the Participant's Normal
Retirement Date, or a Supplemental Surviving Spouse Benefit that is payable in a
lump sum, shall be the actuarial equivalent of the Supplemental Retirement
Benefit set forth in Section 3.1 above, or the Supplemental Surviving Spouse
Benefit set forth in Section 4.1 below, as determined by the same actuarial
adjustments as those specified in the Qualified Plan, at the time for
commencement of payment, with respect to the determination of the amount of the
Qualified Plan Retirement Benefit or the Qualified Plan Surviving Spouse
Benefit.
ARTICLE IV
Supplemental Surviving Spouse Benefit
4.1 Amount. If a Participant dies prior to commencement of payment
of his Qualified Plan Retirement Benefit under circumstances in which a
Qualified Plan Surviving Spouse Benefit is payable to his Surviving Spouse, then
a Supplemental Surviving Spouse Benefit is payable to his Surviving Spouse as
hereinafter provided. The monthly amount of the Supplemental Surviving Spouse
Benefit payable to a Surviving Spouse shall be equal to the difference between
(a) and (b) below:
(a) the monthly amount of the Qualified Plan Surviving Spouse Benefit
to which the Surviving Spouse would have been entitled under the Qualified Plan
if such Benefit were computed (i) without giving effect to any limitations on
benefits imposed by any provision of the Code, and (ii) by using the definition
of Earnings set forth in Section 1.4 of this Plan in lieu of the definition set
forth in Section 1.10 of the Qualified Plan;
LESS
(b) the monthly amount of the Qualified Plan Surviving Spouse Benefit
actually payable to the Surviving Spouse under the Qualified Plan.
4.2 Form and Commencement of Benefit. A Supplemental Surviving
Spouse Benefit shall be payable over the lifetime of the Surviving Spouse, only
in monthly installments, commencing on the date for commencement of payment of
the Qualified Plan Surviving Spouse Benefit to the Surviving Spouse and
terminating on the date of the last payment of the Qualified Plan Surviving
Spouse Benefit made before the Surviving Spouse's death; provided, however, that
if the Company in its sole discretion deems it in the best interests of the
Surviving Spouse, the Company shall pay the actuarial equivalent of the value of
the Supplemental Surviving Spouse Benefit to the Surviving Spouse in a single
lump sum in lieu of a monthly installment form of benefit.
ARTICLE V
Administration of the Plan
5.1 Administration by the Company. The Company shall be responsible
for the general operation and administration of the Plan and for carrying out
the provisions thereof.
5.2 General Powers of Administration. All provisions set forth in
the Qualified Plan with respect to the administrative powers and duties of the
Company, expenses of administration, and procedures for filing claims shall also
be applicable with respect to the Plan. The Company shall be entitled to rely
conclusively upon all tables, valuations, certificates, opinions and reports
furnished by any actuary, accountant, controller, counsel or other person
employed or engaged by the Company with respect to the Plan.
ARTICLE VI
Amendment or Termination
6.1 Amendment or Termination. The Company intends the Plan to be
permanent but reserves the right to amend or terminate the Plan when, in the
sole opinion of the Company, such amendment or termination is advisable. Any
such amendment or termination shall be made pursuant to a resolution of the
Board and shall be effective as of the date of such resolution.
6.2 Effect of Amendment or Termination. No amendment or termination
of the Plan shall directly or indirectly deprive any Participant or Surviving
Spouse of all or any portion of any Supplemental Retirement Benefit or
Supplemental Surviving Spouse Benefit, payment of which has commenced prior to
the effective date of such amendment or termination. If a Participant is fully
vested under the Qualified Plan upon termination of his employment with the
Company and all affiliates thereof, no amendment or termination of the Plan,
whether made prior to or contemporaneously with such termination of employment,
shall reduce the Supplemental Retirement Benefit payable to the Participant, or
the Supplemental Surviving Spouse Benefit payable to his Surviving Spouse, as
the case may be, to a monthly amount, payable in the form of a straight life
annuity over the lifetime of the Participant or the Surviving Spouse, that shall
be less than a monthly amount equal to the difference between (a) and (b) below:
(a) The monthly amount of the Qualified Plan Retirement Benefit or
Qualified Plan Surviving Spouse Benefit to which the Participant or Surviving
Spouse would have been entitled under the Qualified Plan, as of the effective
date of such amendment or termination, if such Benefit were (i) computed without
giving effect to any limitations on benefits imposed by any provisions of the
Code, and (ii) by using the definition of Earnings set forth in Section 1.4 of
this Plan in lieu of the definition set forth in Section 1.10 of the Qualified
Plan;
LESS
(b) The monthly amount of the Qualified Plan Retirement Benefit or
Qualified Plan Surviving Spouse Benefit to which the Participant or the
Surviving Spouse is then actually entitled under the Qualified Plan.
For Purposes of determining the Qualified Plan Retirement Benefit or
the Qualified Plan Surviving Spouse Benefit payable to a Participant or
Surviving Spouse pursuant to (b) above, the limitations on benefits imposed by
the Code, as in effect on the date of termination of the Participant's
employment with the Company and all affiliates, shall apply.
ARTICLE VII
General Provisions
7.1 Funding. The Plan at all times shall be entirely unfunded and no
provision shall at any time be made with respect to segregating any assets of
the Company or any affiliate for payment of any benefits hereunder. No
Participant, Surviving Spouse or any other person shall have any interest in any
particular assets of the Company or any affiliate by reason of the right to
receive a benefit under the Plan and any such Participant, Surviving Spouse or
other person shall have only the rights of a general unsecured creditor of the
Company and its affiliates with respect to any rights under the Plan.
7.2 General Conditions. Except as otherwise expressly provided
herein, all terms and conditions of the Qualified Plan applicable to a Qualified
Plan Retirement Benefit or a Qualified Plan Surviving Spouse Benefit shall also
be applicable to a Supplemental Retirement Benefit or a Supplemental Surviving
Spouse Benefit payable hereunder. Any Qualified Plan Retirement Benefit or
Qualified Plan Surviving Spouse Benefit, or any other benefit payable under the
Qualified Plan, shall be paid solely in accordance with the terms and conditions
of the Qualified Plan and nothing in this Plan shall operate or be construed in
any way to modify, amend or affect the terms and provisions of the Qualified
Plan.
7.3 No Guaranty of Benefits. Nothing contained in the Plan shall
constitute a guaranty by the Company or any affiliate or any other entity or
person that the assets of the Company or any affiliate will be sufficient to pay
any benefit hereunder.
7.4 No Enlargement of Employee Rights. No Participant or Surviving
Spouse shall have any right to a benefit under the Plan except in accordance
with the terms of the Plan. Establishment of the Plan shall not be construed to
give any Participant the right to be retained in the service of the Company or
any affiliate.
7.5 Spendthrift Provision. No interest of any person or entity in,
or right to receive a benefit under, the Plan shall be subject in any manner to
sale, transfer, assignment, pledge, attachment, garnishment, or other alienation
or encumbrance of any kind; nor may such interest or right to receive a benefit
be taken, either voluntarily or involuntarily, for the satisfaction of the debts
of, or other obligations or claims against, such person or entity, including
claims for alimony, support, separate maintenance and claims in bankruptcy
proceedings.
7.6 Applicable Law. The Plan shall be construed and administered
under the laws of the State of Illinois except to the extent preempted by
applicable federal law.
7.7 Small Benefits. If the actuarial value of any Supplemental
Retirement Benefit or Supplemental Surviving Spouse Benefit, or any remaining
portion thereof, is less than $25,000, the Company may pay the actuarial value
of such Benefit to the Participant or Surviving Spouse in a single lump sum in
lieu of any further benefit payments hereunder.
7.8 Incapacity of Recipient. If any person entitle to a benefit
payment under the Plan is deemed by the Company to be incapable of personally
receiving and giving a valid receipt for such payment, then, unless and until
claim therefor shall have been made by a duly appointed guardian or other legal
representative of such person, the Company may provide for such payment or any
part thereof to be made to any other person or institution then contributing
toward or providing for the care and maintenance of such person. Any such
payment shall be a payment for the account of such person and a complete
discharge of any liability of the Company and the Plan therefor.
7.9 Corporate Successors. The Plan shall not be automatically
terminated by a transfer or sale of assets of the Company, or by the merger or
consolidation of the Company into or with any other corporation or other entity,
but the Plan shall be continued after such sale, merger or consolidation only if
and to the extent that the transferee, purchaser or successor entity agrees to
continue the Plan. In the event that the Plan is not continued by the
transferee, purchaser or successor entity, then the Plan shall terminate subject
to the provisions of Section 6.2.
7.10 Unclaimed Benefit. Each Participant shall keep the Company
informed of his current address and the current address of his spouse. The
Company shall not be obligated to search for the whereabouts of any person. If
the location of a Participant is not made known to the Company within three (3)
years after the date on which payment of the Participant's Supplemental
Retirement Benefit may first be made, payment may be made as though the
Participant had died at the end of the three-year period. If, within one
additional year after such three-year period has elapsed, or, within three years
after the actual death of a Participant, the Company is unable to locate any
Surviving Spouse of the Participant, then the Company shall have no further
obligation to pay and benefit hereunder to such Participant or Surviving Spouse
or any other person and such benefit shall be irrevocably forfeited.
7.11 Limitations on Liability. Notwithstanding any of the preceding
provisions of the Plan, neither the Company, nor any individual acting as an
employee or agent of the Company, shall be liable to any Participant, former
Participant, Surviving Spouse or any other person for any claim, loss, liability
or expense incurred in connection with the Plan.
IN WITNESS WHEREOF, Portec, Inc., by its duly authorized officer, has
executed this Plan on this 16th day of June, 1994.
PORTEC. INC.
By: /S/ N. A. Kindl
N. A. Kindl
EXHIBIT (e)
1988 PORTEC, INC. EMPLOYEES' STOCK BENEFIT PLAN
1. PURPOSE
The purpose of the 1988 Portec, Inc. Employees' Stock Benefit Plan (the
"Plan") for officers and executive personnel ("key employees") of Portec, Inc.,
a Delaware corporation (the "Company"), and each corporation with respect to
which the Company directly or indirectly controls 50% or more of the combined
voting power of all classes of stock ("subsidiary"), and for non-employee
members ("non-employee directors") of the Board of Directors (the "Board") of
the Company, is to provide an incentive for key employees to join or remain with
the Company and its subsidiaries, to provide an incentive for non-employee
directors to have a greater proprietary interest in, and closer identity with,
the Company and its subsidiaries and with their financial success, and to
provide an incentive for key employees and non-employee directors to continue to
promote the best interest of the Company and its subsidiaries and to enhance
their long term performance.
2. ADMINISTRATION
(a) Board of Directors. The Plan shall be administered by the Stock Option
and Compensation Committee (the "Committee") appointed by the Board and composed
of not less than three non-employee directors who shall be appointed from time
to time by the Board, none of whom shall have received an award entitling him to
stock, restricted stock, stock options, stock appreciation rights, limited
rights or any other derivative security of the Company under this Plan, or any
similar plan of the Company or its subsidiaries, during his tenure on the
Committee, or during the twelve month period prior to commencing service on the
Committee, except as permitted by Rule 16b-3(c)(2)(i)(A) through (D), or any
successor provisions, under the Securities Exchange Act of 1934. Members of the
Committee shall be subject to any additional restrictions necessary to satisfy
the requirements for disinterested administration of the Plan as set forth in
Rule 16b-3 as it may be amended from time to time. References hereinafter to
the Committee shall be deemed to include the Board acting as such provided that
the employee members of the Board shall not participate in the Board's
deliberations and actions when the Board is acting as such Committee.
(b) Committee. Subject to approval of the Board, the Committee shall
determine, within the limits of the express provisions of the Plan: (i) the key
employees to whom awards shall be granted, (ii) the time or times at which such
awards shall be granted and exercisable, (iii) the form and amount of the
awards, and (iv) the limitations, restrictions and conditions applicable to any
such award. In making such determinations, the Committee may take into account
the nature of the services rendered by such employees or classes of employees,
their present and potential contributions to the Company's success and such
other factors as the Committee in its discretion shall deem relevant. Any
decision or determination which is reduced to writing and signed by all of the
members of the Committee shall be as fully effective as if it had been made by
majority vote at a meeting of the Committee duly called and held. The Committee
may make such rules and regulations for the conduct of its business as it shall
deem advisable.
(c) Interpretations. Subject to the express provisions of the Plan, the
Committee may interpret the Plan, prescribe, amend and rescind rules and
regulations relating to it, determine the terms and provisions of the respective
awards and make all other determinations it deems necessary or advisable for the
administration of the Plan.
(d) Determinations. The determinations of the Committee on all matters
regarding the Plan shall be conclusive. No member of the Board or the Committee
shall be liable for any action taken or determination made in good faith.
Service on the Committee shall constitute service as a director of the Company
so that members of the Committee shall be entitled to such indemnification and
reimbursement as they may be entitled as a director.
(e) Nonuniform Determinations. The Committee's determinations under the
Plan, including without limitation, determinations as to the persons to receive
awards, the terms and provisions of such awards and the agreements evidencing
the same, need not be uniform and may be made by it selectively among persons
who receive or are eligible to receive awards under the Plan, whether or not
such persons are similarly situated.
3. AWARDS UNDER THE PLAN
(a) Form. Awards under the Plan may be granted as follows:
1. Awards may be granted to key employees in any one of the following
forms: (i) incentive stock options ("Incentive Stock Options"), as described
in Section 4, (ii) non-qualified stock options ("Non-qualified Stock
Options"), as described in Section 5, (iii) stock appreciation rights
("Rights"), as described in Section 6, (iv) restricted stock awards
("Awards"), as described in Section 7, and (v) performance units ("Units"),
as described in Section 8.
2. Non-employee directors shall be granted Non-qualified Stock Options
as described in Section 4A.
Incentive Stock Options and Non-qualified Stock Options granted to key employees
are sometimes referred to collectively as "Options." Non-qualified Stock
Options granted to non-employee directors also are sometimes referred to as
"Options." An eligible key employee (sometimes referred to as a "Grantee") may
be granted one or more awards under the Plan. A non-employee director is
sometimes referred to herein as a "Grantee" with respect to an award of Non-
qualified Stock Options pursuant to Section 4A.
(b) Maximum Limitations. The aggregate number of Units that may be granted
under the Plan, and the aggregate number of common shares of the Company
("Common Stock" or "Common Shares") available for grant as Options, Rights or
Awards, or in payment of Units, under the Plan, is increased from 450,000 to
850,000, subject to adjustment pursuant to Section 9 hereof and subject to the
provisions of the remainder of this paragraph. Shares of Common Stock issued
pursuant to the Plan may be either authorized but unissued shares or issued
shares now or hereafter held in the treasury of the Company. In the event that,
prior to the end of the period during which an Option, Right, Award or Unit may
be granted under the Plan, (i) any Option granted under the Plan expires
unexercised or is terminated, surrendered or cancelled (other than in connection
with the exercise of a Right) without being exercised, in whole or in part, for
any reason, (ii) any Award is forfeited, in whole or in part, for any reason or
(iii) all or any part of the Units included in a Performance Unit Agreement are
terminated or unearned for any reason, then the number of shares theretofore
subject to the unexercised, terminated, forfeited or unearned portion thereof
shall be added to the remaining number of shares of the Company's Common Stock
and of Units available for grant as an Option, Right, Award or Unit under the
Plan, including a grant to a former holder of such an Option, Right, Award or
Unit upon such terms and conditions as the Committee shall determine, which
terms may be more or less favorable than those applicable to such former Option,
Right, Award or Unit.
4. INCENTIVE STOCK OPTIONS
(a) Intended Legal Status of Options. It is intended that Incentive Stock
Options granted pursuant to this Section shall constitute incentive stock
options within the meaning of Section 422A of the Internal Revenue Code of 1986,
as amended (the "Code").
(b) Eligible Employees. Any key employee eligible to receive awards under
the Plan may receive Incentive Stock Options, provided such employee, at the
time the Incentive Stock Option is granted does not own (as defined in Section
425(d) of the Code) stock possessing more than 10 percent of the total combined
voting power of all classes of stock of the Company, its parent or any
subsidiary. However, the foregoing limitation with respect to any employee who
owns more than 10 percent of the total combined voting power of all classes of
stock of the Company, its parent or any subsidiary shall not apply if at the
time the Incentive Stock Option is granted, the option price is at least 110
percent of the fair market value of the Common Stock subject to the Incentive
Stock Option and such Incentive Stock Option by its terms is not exercisable
after the expiration of five years from the date such Incentive Stock Option is
granted.
(c) Terms of Options. Incentive Stock Options may be granted under the
Plan for the purchase of shares of Common Stock of the Company. Incentive Stock
Options shall be in such form and upon such terms and conditions as the
Committee shall from time to time determine, subject to the following:
(i) Option Prices. Except as otherwise provided in Section 4(b) above,
the option price of each Incentive Stock Option to purchase shares of Common
Stock shall be at least 100% of the fair market value of the Common Stock at
the date such option is granted; provided, however, that the option price
shall not be less than the par value of the Common Stock subject to such
Incentive Stock Option.
(ii) Exercise and Expiration Dates. Each Incentive Stock Option shall
become exercisable as determined by the Committee. Each Incentive Stock
Option shall expire on the first to occur of: (A) the date determined by the
Committee, provided that such Incentive Stock Option by its terms shall not
be exercisable after the expiration of ten years from the date granted, and
(B) upon the exercise of any Right (granted under Section 6 hereof) related
to such Incentive Stock Option.
(iii) Limitation on Amount. The aggregate fair market value (determined
with respect to each Incentive Stock Option as of the time such Incentive
Stock Option is granted) of the capital stock with respect to which Incentive
Stock Options are exercisable for the first time by a Grantee during any
calendar year (under this Plan or any other plan of the Company or the parent
or any subsidiary of the Company) shall not exceed $100,000.
(iv) Other Terms. The Committee may prescribe such other terms and
conditions for the Incentive Stock Options granted under the Plan which are
neither inconsistent with, nor prohibited by, the Plan or Section 422A of the
Code.
(v) Severability. No term of the Plan inconsistent with Section 422A of
the Code shall be applicable to Incentive Stock Options.
4A. GRANTS TO NON-EMPLOYEE DIRECTORS
(a) Grants. Each non-employee director shall automatically be granted a
Non-qualified Stock Option to purchase 1,000 shares of Common Stock on the date,
and as of the time on such date, of each annual meeting of the Board held on and
after April 26, 1994 while he is a member of the Board and while the Plan is in
existence.
(b) Exercise Price. The per share exercise price of each Non-qualified
Stock Option granted to a non-employee director pursuant to this Section shall
be 100% of the Fair Market Value (determined pursuant to Section 12(k) below) of
a share of Common Stock on the date of grant.
(c) Exercise Period. Each Non-qualified Stock Option granted to a non-
employee director pursuant to this Section may be exercised, in whole or in
part, not earlier than six months after the date of grant and shall expire on
the date ten years from the date of grant.
(d) Payment of Exercise Price. Payment of the exercise price of each Non-
qualified Stock Option granted to a non-employee director pursuant to this
Section shall be made pursuant to any of the methods set forth in Section 12(a),
or by a combination thereof, as determined at the time of exercise by the non-
employee director to whom the Non-qualified Stock Option is granted.
(e) Termination of Service. If the service of a non-employee director as a
member of the Board ceases for any reason other than death, he may exercise all
of his then unexercised Non-qualified Stock Options at any time during the
period ending on the first to occur of (1) the date three months after the date
his service ceases, and (2) the date ten years from the date of grant of the
applicable Non-qualified Stock Option. If a non-employee director dies while a
member of the Board, or within three months after his cessation of service as a
member of the Board, his estate or the person that acquires his Non-qualified
Stock Options by bequest or inheritance or by reason of this death, shall have
the right to exercise all of his then unexercised Non-qualified Stock Options at
any time within one year from the date of death. In any such event, unless so
exercised within such one year period, his Non-qualified Stock Options shall
terminate at the expiration of said period.
(f) Miscellaneous. It is intended that each Non-qualified Stock Option
granted to a non-employee director pursuant to this Section shall not qualify as
an incentive stock option under Section 422 of the Code. Each such Non-
qualified Stock Option shall be subject to the provisions of this Section, and
not to any other section of the Plan, except that the provisions of Sections 9,
10(b) and 12 (except to the extent otherwise provided in paragraph (d) of this
Section) shall apply to each Non-qualified Stock Option granted to a non-
employee director hereunder.
5. NON-QUALIFIED STOCK OPTIONS
(a) Intended Legal Status of Non-qualified Stock Options. It is intended
that Non-qualified Stock Options granted pursuant to the Plan shall not qualify
as incentive stock options under Section 422A of the Code.
(b) Terms of Options. Non-qualified Stock Options may be granted under the
Plan for the purchase of shares of Common Stock of the Company. Non-qualified
Stock Options shall be in such form and upon such terms and conditions as the
Committee shall from time to time determine, subject to the following:
(i) Option Prices. The option price of each Non-qualified Stock Option
to purchase Common Stock shall be such price as shall be set forth in an
individual option agreement with the Grantee; provided, however, that the
option price shall not be less than the greater of 50% of the fair market
value or the par value of the Common Stock subject to such Non-qualified
Stock Option.
(ii) Exercise and Expiration Dates. Each Non-qualified Stock Option
shall become exercisable as determined by the Committee. Each Non-qualified
Stock Option shall expire on the first to occur of: (A) the date determined
by the Committee, provided that such Non-qualified Stock Option by its terms
shall not be exercisable after the expiration of ten years from the date
granted, and (B) upon the exercise of any Right (granted under Section 6
hereof) related to such Non-qualified Stock Option.
6. STOCK APPRECIATION RIGHTS
(a) Award. If deemed by the Committee to be in the best interests of the
Company, any Option granted under the Plan may include a Stock Appreciation
Right either at the time of grant or thereafter while the Option is outstanding.
Notwithstanding the preceding sentence, in no event shall a Right be granted in
connection with any Incentive Stock Option in such a manner as will disqualify
the Incentive Stock Option under Section 422A of the Code.
(b) Terms of Rights. Rights shall be subject to such terms and conditions
not inconsistent with the Plan as the Committee shall determine, provided that:
(i) Limitation. A Right shall be exercisable to the extent, and only to
the extent, the Option to which it relates is exercisable and shall be
exercisable only for such period as the Committee may determine (which
period may expire prior to the expiration date of such Option).
(ii) Exercise of Right. A Right shall entitle the Grantee, to the extent
the related Option, or portion thereof, is unexercised, to receive from the
Company in exchange therefor the number of shares of Common Stock having an
aggregate fair market value equal to the excess of the fair market value of
one share as of the trading date next preceding the date on which the Right
is exercised over the option price per share specified in such Option,
multiplied by the number of shares of Common Stock subject to the Option, or
portion thereof. Upon the exercise of a Right, the unexercised Option, or
portion thereof, to which the Right is related, shall expire. The Company
shall be entitled to elect to settle any part or all of its obligation
arising out of the exercise of a Right by the payment of cash in lieu of part
or all of the shares of Common Stock it would otherwise be obligated to
deliver. If shares of Common Stock are to be received upon the exercise of a
Right, cash shall be delivered in lieu of any fractional shares.
(iii) Cancellation of Stock Appreciation Rights. The exercise of any
Option shall cancel that number of the Rights related to such Option, which
is equal to the number of shares subject to such exercise.
(c) Cash Settlement Restriction. Notwithstanding Sections 6(b) and 10
hereof, so long as the Grantee of a Right is an officer, director or holder of
more than 10% of any class of equity securities of the Company, the Company's
right to elect to settle any part or all of its obligation arising out of the
exercise of a Right by the payment of cash shall not apply unless such exercise
occurs either; (A) pursuant to the provisions of subsection (i) below, or (B)
during the period beginning on the third business day following the date of
release for publication of quarterly and annual summary statements of sales and
earnings of the Company and ending on the twelfth business day following such
date, unless a different period is specified in Rule 16b-3 under the Securities
Exchange Act of 1934, as in effect at the time of such exercise, or any law,
rule, regulation or other provision that may hereafter replace such Rule (the
"Window Period").
(i) Exercise Upon Reorganization. In the event that, pursuant to
Section 10 hereof, the Company shall cancel all unexercised Options as of the
effective date of a merger or other transaction provided therein or in the
cases of dissolution of the Company, each Right held by a Grantee shall be
automatically exercised on such date within 30 days prior to the effective
date of such transaction or dissolution as the Committee shall determine and,
in the absence of such determination, on the last business day immediately
prior to such effective date, unless both the Committee and the Grantee agree
in writing that the Right shall not be exercised at that time.
7. RESTRICTED STOCK AWARDS
(a) Award. Restricted Stock Awards may be granted under the Plan with
respect to shares of Common Stock of the Company. Awards shall be granted upon
such terms and conditions as the Committee may determine, subject to the
following:
(b) Agreements. Awards issued under the Plan shall be evidenced by written
agreements ("Restricted Stock Agreements") in such form as the Committee may
from time to time determine.
(c) Receipt of Shares. Each Restricted Stock Agreement shall set forth the
number of shares of Common Stock issuable under the Award evidenced thereby.
Subject to the provisions of Sections 7(d) and (e) hereof, the number of shares
of Common Stock granted under an Award shall be issued or transferred from the
Company to the Grantee thereof, on the date of grant of such Award or as soon as
may be practicable thereafter as a bonus paid to the Grantee.
(d) Rights of Grantees. Subject to the provisions of Section 7(e) hereof
and the restrictions set forth in the related Restricted Stock Agreement, the
Grantee of an Award shall thereupon be a stockholder with respect to all the
shares of Common Stock represented by such certificate or certificates and shall
have all the rights of a stockholder with respect to such shares, including the
right to vote such shares and to receive dividends and other distributions paid
with respect to such shares. In aid of such restrictions, certificates for
shares awarded hereunder, together with a suitably executed stock power signed
by each Grantee, shall be held by the Company in its control for the account of
such Grantee until the restrictions under the related Restricted Stock Agreement
lapse pursuant to the Agreement or such shares are theretofore forfeited to the
Company as provided by the Plan or the Agreement.
(e) Restrictions. Each share of Common Stock issued pursuant to an Award
shall be subject, in addition to any other restrictions set forth in the related
Restricted Stock Agreement, to the following restrictions, except to the extent
that such restrictions have lapsed pursuant to Section 7(f) below:
(i) Disposition. None of such shares shall be sold, exchanged,
transferred, pledged, hypothecated or otherwise disposed of; provided,
however, that such shares may be transferred upon the death of the Grantee to
such of his legal representatives, heirs and legatees as may be entitled
thereto by will or the laws of intestacy.
(ii) Forfeiture. All of such shares shall be forfeited to the Company
without notice and without consideration therefor immediately upon the
occurrence of any of the following events: (A) the termination of the
Grantee's employment with the Company and all subsidiaries for any reason
other than (1) retirement pursuant to a retirement plan of the Company or any
subsidiary, (2) disability as determined by the Committee or (3) death; or
(B) without the express written consent of the Company, the performance of
services by the Grantee, as an employee, consultant or independent contractor
for, or the acquisition of an ownership interest in excess of 5% in, any
competitor of the Company or any subsidiary at a time when the Grantee is an
employee of the Company or any subsidiary; or (C) an attempt to transfer such
shares in violation of Section 7(e)(i) hereof.
(f) Lapse of Restrictions. Unless otherwise stated in the related
Restricted Stock Agreement, the restrictions set forth in Section 7(e) hereof on
shares of Common Stock issued under an Award, to the extent such shares have not
theretofore been forfeited pursuant to Section 7(e)(ii) hereof, shall lapse, and
certificates for the shares shall be appropriately distributed: (i) on the
first to happen of: (A) the death of the Grantee or (B) the termination of the
Grantee's employment by reason of his retirement or disability as determined by
the Committee, and (ii) as otherwise determined by the Committee.
8. PERFORMANCE UNITS
(a) Grant. The Board may, from time to time, subject to the provisions of
the Plan and such other terms and conditions as the Committee may prescribe,
grant one or more Performance Units to any key employee.
(b) Performance Unit Agreements. Units granted under the Plan shall be
evidenced by written agreements ("Performance Unit Agreements") in such form as
the Committee may from time to time determine.
(c) Conditions. Upon making an award of Units, the Committee shall
determine, and the Performance Unit Agreement shall state: (i) the number of
Units included therein, (ii) the stated value (("Stated Value") of each such
Unit (which shall be 100% of the fair market value of a share of Common Stock of
the Company on the trading date next preceding the date such Units are granted),
and (iii) the primary and minimum performance targets ("Performance Targets")
for such Units as described in Section 8(f) hereof for a specified period not
exceeding five years ("Award Period").
(d) Payments of Performance Units. Subject to the provisions of Section
11(e) hereof, payment in respect of Units shall be made to the Grantee thereof
within 90 days after the Award Period for such Units has ended, but only with
respect to those Units which have been earned as hereinafter described. Such
payment shall be an amount equal to the Stated Value of the Units earned.
(e) Method of Payment. Payment for Units shall be made in cash or shares
of Common Stock of the Company, or partly in cash and partly in shares of Common
Stock, as the Committee shall determine. To the extent that payment is made in
shares of Common Stock, the number of shares shall be determined by dividing the
dollar amount of such
payment by the fair market value per share of the Common Stock on the trading
date next preceding the date payment is made.
(f) Performance Targets. Performance Targets for any Award Period may be
expressed as an increase in the Company's earnings per share, net income or
return on equity or in terms of any other such standard as the Committee may
determine. Attainment by the Company of the primary Performance Target in
respect of an Award Period will result in the Stated Value of all the related
Units included in the Performance Unit Agreement being earned. Failure by the
Company to attain the minimum Performance Target will result in no portion of
the Stated Value of any of the related Units being earned. Attainment between
the primary and the minimum Performance Targets in respect of an Award Period
shall result in the Stated Value of a proportionate number of the related Units
as specified in the Performance Unit Agreement being earned.
(g) Creation of Reserve. Upon making an award of Units the Committee shall
reserve from the aggregate maximum number of shares of Common Stock and of Units
otherwise available for grant under the Plan a number of shares equal to the
number of Units included in such award. At the end of the related Award Period,
the number of Units, if any, which are unearned under the award and the number
of reserved shares of Common Stock not issued to pay Units shall be released
from such reserve and shall again become available for grant in accordance with
Section 3(b) hereof.
9. ADJUSTMENTS
(a) Incentive Stock Options, Non-qualified Stock Options, Stock
Appreciation Rights, Restricted Stock Awards and Performance Units. The
aggregate number of shares of Common Stock and of Units available for issuance
or grant, as the case may be, under the Plan, the number of shares of Common
Stock subject to each outstanding Option, Right and Award and the option price
per share of each such Option, may all be appropriately adjusted, as the
Committee may determine, for any increase or decrease in the number of shares of
issued Common Stock of the Company resulting from a subdivision or consolidation
of shares, whether through reorganization, recapitalization, stock split-up,
stock distribution or combination of shares, or the payment of a share dividend
or other increase or decrease in the number of such shares of Common Stock
outstanding effected without receipt of consideration by the Company.
Adjustments under this Section 9 shall be made according to the sole discretion
of the Committee, and its decisions shall be binding and conclusive.
(b) Performance Units. The Committee may in its discretion and for
purposes of determining whether Performance Targets set pursuant to Section 8(f)
hereof have been met, equitably restate the Company's earnings per share, net
income or any other factor utilized in establishing the Performance Targets in
order to take into account the effect, if any, of (i) acquisitions or
dispositions of businesses by the Company, (ii) extraordinary and non-recurring
events, (iii) an event set forth in Section 9(a) hereof and (iv) changes in
accounting practices, tax laws or other laws or regulations that significantly
affect the Company's financial performance.
10. REORGANIZATION AND DISSOLUTION
(a) Reorganization and Changes in Control. Subject to any required action
by the stockholders, in the event the Company shall be a party to a transaction
involving a sale of all or substantially all of its assets, a merger or a
consolidation ("Transaction"), the Committee may in its discretion revise,
alter, amend or modify any Option, Right, Award or Unit outstanding under the
Plan in any one or more of the following respects:
(i) Substitution of Securities. In respect of a Transaction, any or all
Options, Rights and Awards may be deemed to pertain and apply to the
securities to which a holder of the number of shares of Common Stock subject
to the respective Option, Right or Award would have been entitled if the
Grantee actually owned such shares immediately prior to the time the
Transaction became effective.
(ii) Cancellation of Options. In respect of a Transaction, any or all
unexercised Options may be cancelled as of the effective date of the
Transaction by the giving of notice to holders thereof of the Company's
intention so to cancel and by permitting the exercise of all partly or wholly
unexercised Options in full (without regard to installment exercise
limitations) during not less than 30 days preceding such effective date.
(iii) Change of Exercise Dates. The dates upon which outstanding Options
and Rights related thereto may be exercised may be advanced (without regard
to installment exercise limitations).
(iv) Reduction or Elimination of Restrictions. Any or all of the
restrictions on any or all Awards may be reduced or eliminated.
(v) Adjustment of Performance Units. Equitable adjustments may be made
to any or all Units, including the modification of Performance Targets and
acceleration of Award Periods.
(vi) Settlement of Company's Obligations. Subject to the provisions of
Section 6(c) hereof, obligations of the Company under any Option, Right,
Award or Unit may be settled in whole or in part in cash, in Common Stock or
in other securities substituted for Common Stock pursuant to this Section
10(a).
(vii) Miscellaneous Adjustments. Other adjustments may be made in the
discretion of the Committee as may be appropriate to provide Grantees of
awards payable in Common Stock with equivalent benefits offered or provided
to stockholders of the Company generally in connection with the Transaction.
(b) Dissolution. In the case of the dissolution of the Company:
(i) Termination of Options or Rights. Every outstanding Option, and
Right included therein, if any, shall terminate; provided, however, that each
Grantee shall have 30 days prior written notice of such event, during which
time he shall have a right to exercise all or part of his unexercised Option,
and Right included therein, if any (without regard to installment exercise
limitations).
(ii) Lapse of Restrictions. Any and all restrictions on all Awards shall
lapse and such shares shall be and become freely transferable at least 30
days prior to such dissolution.
(iii) Adjustment of Performance Units. The Committee may, in its
discretion, make equitable adjustments to any or all Units, including
modifications of Performance Targets and acceleration of Award Periods.
11. TERMINATION OF EMPLOYMENT
In the event that a Grantee under the Plan shall die or cease to be employed
by the Company and its subsidiaries, his rights under the Plan shall be affected
as provided in this Section.
(a) Cessation. Except as otherwise set forth in (b) next below, a Grantee
shall be deemed to cease to be employed by the Company and its subsidiaries upon
(i) retirement pursuant to a retirement plan of the Company or its subsidiaries,
(ii) death or (iii) upon the actual cessation of employment, whichever occurs
earlier.
(b) Former Employee with Options. A former employee who holds Options or
Rights under the Plan and whose employment ceases for any reason other than
death, may exercise his Option or Right at any time within the period ending on
the first to occur of (1) the date three months after the date his employment
ceases, and (2) the date such Option or Right expires pursuant to Section
4(c)(ii) or 5(b)(ii), but only to the extent his Option or Right was exercisable
at the date his employment ceased. The Committee, in its discretion, may
provide that if a former employee who holds a Non-qualified Stock Option or a
Right, enters into a non-compete agreement with the Company at the date his
actual employment with the Company ceases, his employment will be deemed to
cease for purposes of his right to exercise such Option or Right pursuant to
this Section 11 on the first to occur of (1) the date of the expiration of such
Option or Right pursuant to Section 4(c)(ii) or 5(b)(ii), (2) the date of his
violation of such agreement, or (3) the date of termination of such agreement.
(c) Death of a Grantee. If a Grantee of an Option or Right dies while in
the employ of the Company, its parent or its subsidiaries, or within three
months after the cessation of his employment, his estate or the person that
acquires his Options or Rights by bequest or inheritance or by reason of his
death shall have the right to exercise his Options and Rights at any time within
one year from the date of cessation of employment but only to the extent the
Options or Rights were exercisable on the date of his cessation of employment.
In any such event, unless so exercised within such one-year period, the Options
and Rights shall terminate at the expiration of said period.
(d) Forfeiture of Restricted Stock Award. All shares of Common Stock
subject to an Award shall be forfeited upon the termination of employment of the
Grantee with the Company and all subsidiaries to the extent set forth in
Sections 7(e)(ii) and 7(f) above.
(e) Termination of Performance Units. Except as provided in Sections 10
and 11(f) hereof, or as otherwise determined by the Committee, all Units granted
to a Grantee under the Plan shall terminate immediately without notice or
payment upon his death, retirement or other termination of employment with the
Company and its subsidiaries.
(f) Post-Employment Performance Unit Payments. Grantees of Units whose
employment ceases prior to the expiration of the applicable Award Period, or the
legal representatives, heirs or legatees of a deceased Grantee who may be so
entitled by will or the laws of intestacy, shall be entitled to receive within
120 days after the end of the Award Period, payment with respect to such Units
to the same extent, if at all, as would the Grantee if the Grantee were an
employee throughout the Award Period; provided, however, that such payment shall
be adjusted by multiplying the amount earned under the award by a fraction, the
numerator of which shall be the number of full calendar months between the date
of the award of the Unit and the date that employment terminated, and the
denominator of which shall be the number of full calendar months from the date
of the award to the end of the Award Period.
12. MISCELLANEOUS
Except as otherwise provided above:
(a) Manner of Exercise of Options and Payment for Common Stock.
Options may be exercised by giving written notice to the Secretary of the
Company stating the number of shares of Common Stock with respect to which
the Option is being exercised and tendering payment therefor. No Common
Shares shall be delivered pursuant to the exercise of any Option, in whole or
in part, until qualified for delivery under any applicable securities laws
and regulations and until payment in full of the option price is received by
the Company (i) in cash, (ii) by check, (iii) in shares of Common Stock
previously acquired by the Grantee, valued at fair market value on the last
trading day preceding the date of delivery of such shares, (iv) a combination
of the above, (v) if authorized by the Committee and accomplished in
accordance with such authorization, by delivery to the Company of a properly
executed exercise notice together with a copy of irrevocable instructions to
a broker or dealer to sell an amount of Common Stock, the proceeds of which
are sufficient to pay the option price, and to deliver promptly to the
Company such proceeds, or (vi) if authorized by the Committee and
accomplished in accordance with such authorization, by delivery to the
Company of a properly executed exercise notice together with a copy of
irrevocable instructions to a broker to lend sufficient funds to pay the
option price and to deliver promptly to the Company such funds; provided,
that if the proceeds of such loan are not sufficient to pay fully the option
price, then no shares shall be delivered until the Company has received
payment in another manner provided by this Section in an amount sufficient to
cover any such deficiency. Neither the Grantee of an Option nor such
Grantee's legal representative, legatee, or distributee shall be deemed to be
a holder of any shares of Common Stock subject to such Option unless and
until a certificate or certificates therefor is issued in his or her name or
in the name of a person designated by him or her.
(b) Non-Transferability. No Option, Right, Award or Unit hereunder may
be transferred, assigned, pledged or hypothecated (whether by operation of
law or otherwise), except as provided by will or by the applicable laws of
descent and distribution, and no Option, Right, Award or Unit shall be sub-
ject to execution, attachment or similar process. Any attempted assignment,
transfer, pledge, hypothecation or other disposition of an Option, Right,
Award or Unit, or levy of attachment or similar process upon the Option,
Right, Award or Unit, not specifically permitted herein shall be null and
void and without effect. An Option or Right may be exercised only by a
Grantee during his or her lifetime, or pursuant to Section 11, by his or her
estate or the person who acquires the right to exercise such Option or Right
upon his or her death by bequest or inheritance.
(c) Legal and Other Requirements. The obligation of the Company to sell
and deliver Common Stock under the Plan shall be subject to all applicable
laws, regulations, rules and approvals, including, but not by way of
limitation, the effectiveness of a registration statement under the
Securities Act of 1933 if deemed necessary or appropriate by the Company and
the listing upon any stock exchange upon which the Common Stock reserved for
issuance under the Plan is listed. Shares of Common Stock issued hereunder
may be legended as the Committee shall deem appropriate to reflect the
restrictions imposed under the Plan, the agreements evidencing the award, or
by securities laws generally.
(d) No Obligation to Exercise Options. The granting of an Option shall
impose no obligation upon the Grantee to exercise such Option.
(e) Termination and Amendment of Plan. The Board, without further
action on the part of the stockholders of the Company, may from time to time
alter, amend or suspend the Plan or any Option, Right, Unit, Award or
Agreement granted hereunder, or may at any time terminate the Plan, except
that it may not (except to the extent provided in Section 9(a) hereof) (i)
change the total number of shares of Common Stock and of Units available for
grant or award under the Plan, (ii) extend the duration of the Plan, (iii)
increase the maximum term of Options, (iv) decrease the minimum option price
below the par value per share of the Common Stock or (v) change the class of
employees eligible to be granted Options, Rights, Units or Awards under the
Plan. No such action enumerated above in this Section 12(e) may materially
and adversely affect any outstanding Option, Right, Award, Unit or Agreement
without the consent of the Grantee thereof.
(f) Application of Funds. The proceeds received by the Company from the
sale of Common Stock pursuant to Options will be used for general corporate
purposes.
(g) Withholding Taxes. Each Grantee receiving or exercising an Option,
Right, Unit or Award, as a condition to such receipt or exercise, shall pay
to the Company the amount, if any, required to be withheld from distributions
resulting from such receipt or exercise under applicable Federal and State
income tax laws ("Withholding Taxes"). Such Withholding Taxes shall be
payable as of the date income from the Option, Right, Unit or Award, is
includible in the Grantee's gross income for Federal income tax purposes (the
"Tax Date"). The Grantee may satisfy this requirement by electing one of the
following methods (or a combination thereof), which election is subject to
the approval of the Committee: (i) remitting to the Company in cash or by
check the amount of such Withholding Taxes, (ii) remitting to the Company a
number of shares of Common Stock having an aggregate fair market value as of
the last trading date preceding the Tax Date equal to the amount of such
Withholding Taxes, (iii) if a taxable event occurs with respect to the
Grantee in connection with an Option, Right, Unit or Award and the Grantee
receives cash as a result thereof, electing to have the Company withhold from
the resulting cash distribution an amount equal to the amount of such
Withholding Taxes, or (iv) if a taxable event occurs with respect to the
Grantee in connection with an Option, Right, Unit or Award and the Grantee
receives shares of Common Stock as a result thereof, electing to have the
Company withhold from such distribution the number of shares of Common Stock
having an aggregate fair market value as of the last trading date preceding
the Tax Date equal to the amount of such Withholding Taxes. Any election by
a Grantee pursuant to clauses (ii), (iii) or (iv) of this Section 12(g) must
be made on or prior to the Tax Date and will be irrevocable. In addition, if
the Grantee is a director, officer or holder of more than 10% of the equity
securities of the Company, an election pursuant to clauses (ii) or (iii) of
this Section 12(g) cannot be made until at least six months after the grant
of the Option, Right, Unit or Award (except that this limitation shall not
apply in the event the death or disability of the Grantee occurs prior to the
expiration of the six-month period), and such election must be made either by
the date which is at least six months prior to the Tax Date or during a
Window Period which begins prior to the Tax Date.
(h) Right to Terminate Employment. Nothing in the Plan or any agreement
entered into pursuant to the Plan shall confer upon any Grantee the right to
continue in the employment of the Company or any subsidiary or affect any
right which the Company or any subsidiary may have to terminate the
employment of such Grantee.
(i) Rights as a Stockholder. Subject to the provisions of Section 7
hereof, the Grantee of any award under the Plan shall have no rights as a
stockholder with respect thereto unless and until certificates for shares of
Common Stock are issued to him.
(j) Leaves of Absence and Disability. The Committee shall be entitled
to make such rules, regulations, and determinations as it deems appropriate
under the Plan in respect of any leave of absence taken by, or disability of,
the Grantee of any Option, Right, Unit or Award. Without limiting the
generality of the foregoing, the Committee shall be entitled to determine (i)
whether or not any such leave of absence shall constitute a termination of
employment within the meaning of the Plan, and (ii) the impact, if any, of
any such leave of absence on awards under the Plan theretofore made to any
Grantee who takes such leave of absence.
(k) Fair Market Value. Unless otherwise provided in the Plan, whenever
the fair market value of Common Stock is to be determined under the Plan as
of a given date, such fair market value shall be:
(i) If the Common Stock is listed on a national securities exchange,
the average of the high and low reported sales prices of a share of Common
Stock on the Composite Tape for the ten consecutive trading days
immediately preceding such given date;
(ii) If the Common Stock is traded on the over-the-counter market, the
average of the mean between the bid and the asked price for the Common
Stock at the close of trading for the ten consecutive trading days
immediately preceding such given date; and
(iii) If the Common Stock is neither traded on the over-the-counter
market nor listed on a national securities exchange, such value as the
Committee, in good faith, shall determine.
(l) Notices. Every direction, revocation or notice authorized or
required by the Plan shall be deemed delivered to the Company (a) on the date
it is personally delivered to the Secretary of the Company at its principle
executive offices or (b) three business days after it is sent by registered
or certified mail, postage prepaid, addressed to the Secretary at such
offices; and shall be deemed delivered to a Grantee (a) on the date it is
personally delivered to him or her or (b) three business days after it is
sent by registered or certified mail, postage prepaid, addressed to him or
her at the last address shown for him or her on the records of the Company.
(m) Applicable Law. All questions pertaining to the validity,
construction and administration of the Plan and awards granted hereunder
shall be determined in conformity with the laws of the State of Illinois, to
the extent not inconsistent with Section 422A of the Code with respect to
Incentive Stock Options.
(n) Elimination of Fractional Shares. If under any provision of the
Plan which requires a computation of the number of shares of Common Stock
subject to an award, the number so computed is not a whole number of shares
of Common Stock, such number of shares of Common Stock shall be rounded down
to the next whole number.
13. EFFECTIVE DATE
The Plan as amended became effective on December 16, 1993, the date it was
adopted by the Board of Directors, subject to the approval of the first
amendment to the Plan by the holders of a majority of the shares of Common Stock
of the Company present or represented at the 1994 Annual Meeting of Stockholders
of the Company and entitled to vote; provided, that if such approval is not
obtained, the first amendment shall be null and void and of no effect and each
Option, Right, Award or Unit granted pursuant to the provisions of the first
amendment hereunder shall, notwithstanding the preceding provisions of this
Plan, be null and void and of no effect. If such approval of the stockholders
of the Company of the first amendment is not obtained, the Plan as in existence
prior to the effective date of the first amendment shall continue in full force
and effect pursuant to the provisions thereof. There shall be no Options,
Rights, Awards or Units granted or awarded under the Plan as amended after June
2, 1998; provided, however, that all Options, Rights, Awards and Units granted
or awarded under the Plan as amended prior to such date shall remain in effect
and subject to adjustment and amendment as herein provided, until they have been
satisfied or terminated in accordance with the Plan as amended and the terms of
the respective awards and the related agreements.
Exhibit 11
PORTEC, Inc.
COMPUTATION OF NET INCOME PER COMMON SHARE
Year Ended December 31,
1994 1993 1992
Average shares outstanding 4,572,468 4,464,877* 4,034,571*
Net income $6,825,000 $4,696,000 $5,513,000
Per share amount $ 1.49 $ 1.05* $ 1.37*
* Adjusted retroactively for 10% stock dividends paid in December 1994 and
1993.
CORPORATE PROFILE
Portec is a leading manufacturer of quality engineered products for the
construction, materials handling and railroad industries. Founded in 1906,
Portec completed a successful restructuring in the late 1980's. Since 1990, the
focus has been on achieving above average growth in sales and earnings through
new product development, acquisitions of related businesses, continuous cost
reduction and international market development. Financial performance in 1994
showed significant gains over 1993, continuing a steady trend over the last
several years. Headquartered near Chicago, Illinois, Portec's shares are traded
on the New York and Chicago stock exchanges under the symbol POR.
Principal product groups are:
<TABLE>
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MAJOR PRODUCTS APPLICATIONS
CONSTRUCTION EQUIPMENT
(Pie Chart Depicting 40% of Sales)
o Aggregate Equipment o Produce and recycle crushed stone, sand and
gravel-the primary components of asphalt and
concrete.
o Environmental Equipment o Treat contaminated soils and sludges. Process and
recycle green yard waste, waste wood and
demolition debris, reducing landfill requirements.
MATERIALS HANDLING
(Pie Chart Depicting 18% of Sales)
o Specialty Belt Conveyors o Automated handling of baggage, packages, food and
pharmaceutical products, newspaper, etc. to lower
material handling cost.
o Recycling Conveyors and o Separate glass, plastics and metals from municipal
Systems solid waste for recycling, also reducing landfill
requirements.
RAILROAD PRODUCTS
(Pie Chart Depicting 42% of Sales)
o Track Components o Fasten rails to rails and rails to ties in
railroad and mass transit track systems worldwide.
o Railcar Components o Secure loads to railcars, including intermodal
container cars, lumber cars and automobile rack
cars.
o Jacking Systems o Lift locomotives and railcars for maintenance and
service.
</TABLE>
CONTENTS
PORTEC, Inc. 1994 Annual Report
Letter to Stockholders and Employees 2
Construction Equipment Segment . . . 4
Materials Handling Segment . . . . . 6
Railroad Products Segment . . . . . 8
Business Segments . . . . . . . . . 10
Geographic Areas . . . . . . . . . . 11
Management's Discussion and Analysis 12
Consolidated Statements of Income . 17
Consolidated Balance Sheets . . . . 18
Consolidated Statements of Cash Flows 19
Notes to Consolidated Financial Statements . 20
Report of Independent Accountants . 33
Corporate Information . . . . . . . 34
Stockholders' Information . . . . . 36
FIVE-YEAR SUMMARY
For Years Ended December 31
<TABLE>
<S><C>
(Dollars in thousands)(1) 1994 1993 1992 1991 1990
INCOME AND OPERATING DATA
Net sales $ 96,474 $ 76,324 $ 68,638 $ 65,027 $ 80,551
Cost of products sold 65,681 51,387 46,232 45,262 55,301
Selling, general and administrative expense 21,718 18,309 13,854 16,052 19,101
Depreciation and amortization 2,012 1,478 1,376 1,493 1,572
Other income, net 1,091 559 378 1,054 1,691
Interest expense 829 750 1,220 1,665 2,003
Income before income taxes and
extraordinary credit 7,325 4,959 6,334 1,609 4,265
Income tax provision 500 263 821 1,064 2,152
Income before extraordinary credit 6,825 4,696 5,513 545 2,113
Extraordinary credit - tax loss carryforward - - - 262 1,368
Net income 6,825 4,696 5,513 807 3,481
FINANCIAL DATA
Working capital $ 12,797 $ 8,554 $ 7,924 $ 4,543 $ 3,143
Property, plant and equipment-net 13,372 12,129 9,671 10,053 10,847
Total assets 57,522 42,478 38,045 38,707 40,595
Long-term debt 7,623 5,277 8,094 10,408 11,179
Stockholders' equity 24,959 17,744 12,309 7,912 6,778
PER SHARE OF COMMON STOCK(2)
Income before extraordinary credit 1.49 1.05 1.37 .14 .54
Extraordinary credit - tax loss carryforward - - - .06 .35
Net income 1.49 1.05 1.37 .20 .89
Stockholders' equity-end of year 5.83 4.19 3.03 1.97 1.73
Average shares outstanding 4,572,468 4,464,877 4,034,571 3,994,365 3,912,269
Number of employees 779 619 518 499 612
Number of stockholders 1,335 1,412 1,473 1,527 1,613
(1) Dollars in thousands except per share data, number of stockholders, average number of shares outstanding and number of
employees.
(2) Adjusted retroactively for 10% stock dividends paid in December 1992, 1993 and 1994.
(Bar Graph Depicting Last Five Years of Net Sales as itemized in above table.)
(Bar Graph Depicting Last Five Years of Net Income as itemized in above table,
except for nonrecurring gain in 1992 of 3.3 million.)
</TABLE>
(Bar Graph Depicting Last Five Years of Net Worth as itemized in above table.)
TO OUR STOCKHOLDERS AND EMPLOYEES:
Portec had another excellent year in 1994, with significant increases in sales,
earnings and stockholders' equity. Our performance was helped by a generally
strong economy, but, more importantly, the growth strategy which we have
described and pursued during recent years is showing results.
SALES, EARNINGS AND NET WORTH UP
Sales in 1994 increased to $96.5 million from $76.3 million in 1993, a 26% year-
to-year gain. During the year, we made two acquisitions and these accounted for
approximately one-third of the $20.2 million volume increase. The remaining
increase was generated by market growth, market share expansion and new product
introductions.
Net income in 1994 was $6.8 million, our highest level since 1981. This
represents an increase of 45% over 1993 net income of $4.7 million. The
dramatic earnings improvement was a result of the significant volume gain and
our on-going focus on continuous cost reduction and productivity improvement.
Stockholders' equity increased to $25.0 million. This represents a 41% increase
over the year earlier level of $17.7 million and continues the favorable trend
of recent years.
ALL SEGMENTS STRONG
Each of our three business segments achieved strong results in 1994.
Construction Equipment, which represents 40% of our overall sales, saw sales
volume increase by 30% over 1993. Major factors in the increase included a
recovery in traditional aggregate equipment, continued expansion of soil and
sludge remediation equipment, and the acquisition of Innovator Manufacturing, a
supplier of green waste recycling equipment. Profits at Construction Equipment
were up 134% on the higher volume and some improvement in price levels.
Our Materials Handling segment accounted for 18% of total 1994 sales and
achieved a 37% volume increase over 1993. About half of the revenue gain was
due to strong activity in our specialty conveyor business, with the remaining
increase from solid waste recycling conveyors, including the acquisition of
Count Recycling Systems. Operating profit in the Materials Handling segment
increased by 45% as greater volume, and our ability to leverage fixed costs,
more than offset somewhat lower margins in the recycling conveyor products.
Sales of Railroad Products comprised 42% of our 1994 revenue and increased by
20% from the 1993 level. The largest gain was registered at Portec (U.K.) Ltd.,
our United Kingdom operation, where sales more than doubled due to the
acquisition of PVH Industries. Although the bulk of Portec U.K.'s business has
historically been in railroad products, PVH's principal business is fabricated
steel products. Strong sales gains were also recorded in our railroad load
securement business which shipped a large order for hold-down devices on
flatcars. Despite the volume increase, the Railroad segment profit was about
the same as last year's strong performance. Earnings increases in securement
products and U.S. track components were offset by weak market conditions in
Canada and by a loss at PVH in the United Kingdom.
TWO SIGNIFICANT ACQUISITIONS
During 1994, we made two significant acquisitions. The first, in April, was of
Count Recycling Systems, a leading supplier of sorting systems for solid waste
recycling. Count's systems are sold to materials recycling facilities (MRF's)
and allow the efficient separation of glass, plastic and metals for recycling,
PORTEC, Inc. 1994 Annual Report
while reducing the volume of waste which goes to a landfill. The Count
acquisition greatly enhances our position and product offering in this fast
growing market. Demand for these conveyors and systems was strong during the
last half of 1994, prompting an expansion of our Materials Handling
manufacturing plant in Canon City, Colorado. The 30,000 square foot addition
should be in full operation by the third quarter of 1995.
In July, we acquired Innovator Manufacturing, a producer of grinding and
screening equipment used to process green waste, waste wood and demolition
debris. These products are used by municipalities and private waste haulers in
composting and recycling operations which create useful end products, while
again, reducing landfill requirements. Production of Innovator products has
been transferred to our Construction Equipment manufacturing facility in
Yankton, South Dakota, and the line has been enthusiastically received by our
existing dealer network. Although Innovator had little impact on our 1994 sales
volume, we expect a growing, positive contribution during 1995.
We believe that both of these acquisitions offer considerable marketing and
manufacturing synergy with our existing operations. In addition, each of these
new businesses promises above average growth potential.
FUNDAMENTALS REMAIN POSITIVE
The macro factors which drive our businesses remain generally strong. In the
Construction Equipment segment, the ISTEA program for federally funded
infrastructure projects helped to boost aggregate production by 6% to 7% in
1994. ISTEA continues through 1997 and industry analysts expect aggregate
production in 1995 to match 1994's growth. Also, environmental regulations
continue to force the removal of underground storage tanks and the remediation
of contaminated soils. Finally, more than 40 states have set long-term
recycling objectives which attempt to reduce landfill usage, and this should
drive a 12% to 15% per year growth rate in the market for Innovator products.
In Materials Handling, airline baggage systems will be driven by worldwide
passenger seat mile growth which is nearly double the expected GDP growth. In
addition, a broad range of industries continues to search for productivity
improvements in their material handling operations and automated conveyor
systems are often the best solution. Finally, the growing need to handle and
sort the nearly 600,000 tons of solid waste produced each day in the U.S. is
both an enormous challenge and an enormous opportunity for our recycling
products and systems.
Our Railroad Products segment should benefit from strong fundamentals in the
North American rail industry. Reflecting advantages in fuel efficiency, lower
pollution and public safety, U.S. railroads are increasing their share of inter-
city freight markets. In 1994, ton miles of freight carried by railroads
increased by over 8%, with intermodal traffic increasing by more than 14%. We
have been highlighting this growth for several years and believe that the trend
will continue for at least the rest of this decade.
LOOKING AHEAD
During the last several years, we have followed a strategy whose objective is to
create above average growth in Portec sales and earnings. The major elements of
the strategy are:
1) to introduce five to 10 new products each year,
2) to seek acquisitions in related businesses (such as Count and Innovator
in 1994),
3) to emphasize continuous cost reduction and productivity improvement
(capital expenditures in 1994 increased to $3.6 million, largely for
manufacturing cost reduction projects), and
4) to increase international market share (sales outside the U.S. increased
from $18.7 million in 1993, to $27.7 million in 1994, a 48% increase).
We believe this strategy has served us well to date, as witnessed by our
favorable financial performance, and we intend to continue with this approach.
Looking at the year ahead, there is more uncertainty in the general economic
outlook than there was one year ago. However, our backlog at December 31, 1994,
was $24.4 million, a 16% increase over the year earlier level, and order rates
in the first several months of this year continue strong. In addition, we do
feel there are some very positive factors underlying the markets we serve,
regardless of short-term economic swings.
We appreciate the continued support from our stockholders and Board of
Directors. We also thank our customers for their valued business and our
employees for their dedication and commitment to the Company's success.
Albert Fried, Jr. Michael T. Yonker
Chairman of the Board President and CEO
AGGREGATE PRODUCTS
(5 photographs of equipment as described by captions)
A Pioneer 5260 impact crusher
and Kolberg conveyors at work
producing aggregate from
recycled concrete (left and
below).
This Kolberg classifying system sizes
and cleans sand products for the aggregate
industry (left).
ENVIRONMENTAL PRODUCTS
PORTEC, Inc. 1994 Annual Report
A Kolberg Model 52
pugmill mixing
a lime-based additive with
flyash to
produce roadbed material
(left).
A patented Innovator Tumble Grinder
shredding wood waste prior to
composting (right).
CONSTRUCTION EQUIPMENT DIVISION
Portec's Construction Equipment Division is headquartered in Yankton, South
Dakota, and accounted for 40% of total Company sales in 1994. Historically, the
division's product lines have been used by the construction and road building
industries for the production of crushed stone, sand and gravel-the basic raw
materials for concrete and asphalt. In recent years, new products have been
developed or acquired which have applications in environmental markets,
primarily soil remediation, sludge treatment and green waste processing.
1994 FINANCIAL PERFORMANCE
During 1994, the Construction Equipment segment had sales of $38.8 million, up
30% from $29.9 million in 1993. The significant increase in volume was a result
of strong sales in both aggregate and environmental product lines. The
acquisition of Innovator Manufacturing accounted for less than $1 million of the
$9 million year-to-year sales increase. Operating profit in 1994 was $2.9
million, more than double last year's $1.3 million. Volume, market pricing and
cost control all contributed to this outstanding profit improvement.
INNOVATOR ACQUISITION
In July 1994, we acquired the stock of Innovator Manufacturing, a privately held
company, in London, Ontario, Canada. Innovator has developed a patented line of
grinders and screens for the processing of green yard waste, waste wood and
demolition debris. The common thread in all these applications is the desire to
produce useful products from what has often been considered waste material. An
added benefit is a reduction in the waste stream taken to landfills, helping to
reduce tipping fees and meet recycling mandates as well. Our market research
shows that the related equipment markets will nearly double in the next five
years.
In addition to positioning us in a growth market, the Innovator acquisition
provides the following benefits:
1) MANUFACTURING SYNERGY. The Innovator products are very similar, in a
manufacturing sense, to our existing products, and can be manufactured
efficiently in our existing facility. Shortly after the purchase of
Innovator in July, 1994, we closed the leased plant in London, and started
the transfer of production to Yankton. This move should be complete by the
end of the first quarter, 1995.
2) MARKETING SYNERGY. The Innovator line fits well with the new environmental
products which we have introduced in recent years. We have been able to
add the Innovator products into our existing sales organization with few
changes, and many of our current dealers are very enthusiastic.
In the twelve months prior to the acquisition, Innovator sales were
approximately $5 million. In 1995, our goal is to increase Innovator volume by
at least 50%, and we are expanding Innovator's new product development efforts
for the future.
PRODUCTIVITY IMPROVEMENT
One of the keys for growth in our Construction Equipment business is the ability
to produce a high quality product at low cost, in order to compete effectively
in our price sensitive markets. During 1994, we continued with an aggressive
capital expenditures program, spending more than $2.2 million on new machinery
and equipment to improve our productivity. In addition, we have made a
concerted effort to standardize and modularize products to take advantage of
better fixturing and tooling. In 1995, nearly 50% of our equipment sales will
be in the standard category.
<TABLE>
<S><C>
LINE PRODUCTS APPLICATION MARKET SALES CHANNELS
Pioneer o Crushers o Production, sizing, o Construction o Direct & through dealers
& o Conveyors & stackers cleaning & handling o Mining to end-users
of bulk materials
Kolberg o Screens & feeders o Soil remediation o Roadbuilding
o Washers & classifierso Sludge treatment o Recycling
o Pugmills o Environmental remediation
Innovator o Tumble grinders o Size reduction for green waste, o Recycling o Direct & through dealers
o Tub grinders waste wood & demolition debris o Composting to end-users
o Trommel screens o Sizing & cleaning of wet,
sticky materials
</TABLE>
SPECIALTY CONVEYORS
(6 photographs of equipment as described by captions)
Flomaster belt turns in a check-in
counter baggage handling system
(left).
A Flomaster spiral belt conveyor moving
inventory in a parts warehouse (right).
RECYCLING CONVEYORS
PORTEC, Inc. 1994 Annual Report
A Count Recycling McMRF 500 sorting
glass, plastic and metal containers in a
materials recycling facility (left and
above).
PATHFINDER PRODUCTS
This Pathfinder
automatic
steering kit
guides a narrow
aisle forklift
truck automati-
cally freeing
operator to pick
stock more
efficiently
(left).
MATERIALS HANDLING GROUP
Portec's Materials Handling segment consists of three business units-the
Flomaster Division and the Pathfinder Division, located in Canon City, Colorado,
and Count Recycling Systems in Des Moines, Iowa. In 1994, this segment
accounted for 18% of total Portec revenues. Product lines include specialty
belt conveyor components, electronic wire guidance packages for lift trucks and
conveyor systems for solid waste recycling. The common thread in all products
is the automation of material handling activities in our customer's facilities,
resulting in lower costs, higher production and improved productivity.
1994 FINANCIAL PERFORMANCE
During 1994, Materials Handling sales were $16.9 million, up 37% from $12.4
million in 1993. Contributing to the sales increase was a strong performance at
Flomaster and the acquisition of Count Recycling Systems in April, 1994. The
Count acquisition accounted for approximately one-half of the $4.5 million sales
increase. Operating profit in 1994 was $2.5 million, an increase of 45% over
1993's $1.7 million. Greater volume was the predominant factor behind the
profitability improvement.
COUNT ACQUISITION
In April, 1994, we acquired the stock of Count Recycling Systems, of Des Moines,
Iowa. Count's principal business is the supply of sorting and conveyor systems
to materials recycling facilities (MRF's). One patented Count design uses
magnets, air streams, and an eddy current device to automatically remove steel
and aluminum containers from the solid waste stream, while diverting plastic and
glass containers to different sorting conveyors. This system dramatically
reduces the number of people required by a MRF operator for the sorting
operation. The Count product line compliments the heavy duty conveyor design
used primarily for fiber recycling, which we obtained through the acquisition of
Nor-East Equipment in late 1993.
The market for recycling equipment is growing rapidly. In the last five years,
the number of curbside recycling programs in the U.S. has increased from 1,000
to 6,600. The economics of recycling have improved dramatically with rising
prices for recycled materials, and increasing tipping fees for landfill
disposal. In addition, recycling efforts enjoy wide popular support. In excess
of 40 states now have mandated recycling objectives. More than 20 states have
adopted an objective to recycle more than 40% of their solid waste stream, and
this represents twice the actual recycling rate in 1994. All in all, we believe
that this is an exciting equipment market, and that a growing demand for lower
handling costs through more automation will play to our historical strengths.
In the twelve months prior to our acquisition, Count's revenues were
approximately $3 million. In 1995, it is our objective to nearly double this
volume.
PLANT EXPANSION UNDERWAY
Our traditional specialty conveyor products generated a record volume in 1994,
and entered 1995 with a strong order backlog and quotation rate. Encouragingly,
the record volume came from a variety of end-use industries and not just one or
two large orders.
Due to this strength in our traditional products and the expected growth in
recycling conveyors, we have decided to expand our manufacturing capacity at
Canon City. We are currently in the process of adding 30,000 square feet to the
Flomaster facility. The new addition has been designed especially for the
efficient manufacture of heavy duty recycling conveyors, but will be able to
take any overflow of Flomaster products as well.
<TABLE>
<S><C>
UNIT PRODUCTS APPLICATION MARKET SALES CHANNELS
Flomaster o Belt power turns o Transport of materials o Baggage & package handling o Direct & through
o Spiral belt conveyors through turns & from o Warehousing & distribution representatives to
o Angle merge conveyors one level to another o Printing OEM's & end-users
o Food & pharmaceutical
Pathfinder o Electronic wire guidanceo Automatic steering for o Warehousing & distribution o Direct & through
for lift trucks manned lift trucks o General industry representatives to
o Automatic control of o Hospitals OEM's & end-users
unmanned lift trucks
Count Recycling o Conveyor systems o Handling & sortation o Municipal & private materials oDirect & through
of solid waste recycling facilities representatives to end-
users
</TABLE>
TRACK PRODUCTS
(4 photographs of equipment as decribed by captions)
Portec rail joints, such as
this polyurethane
encapsulated joint
(foreground) fasten rails
together. We also supply
rail anchors (inset) which
transfer forces from the
rails to the ties (left).
PORTEC, Inc. 1994 Annual Report
This Portec electric rail lubricator senses a
passing train, and applies grease between the
rail head and wheel flange, reducing wear and
fuel usage (right).
FREIGHT SECUREMENT SYSTEMS
Shipping Systems Division
supplies locking
devices to secure containers
to railcars in
the high growth intermodal
freight market
(left).
RAILCAR JACKING SYSTEMS
A Portec jack system positions and lifts
a railcar to allow maintenance or repair
(right).
RAILROAD PRODUCTS
The Railroad Products segment includes four business units: the Railway
Maintenance Products Division in Pittsburgh, Pennsylvania; the Shipping Systems
Division in Oak Brook, Illinois; Portec, Ltd. in Lachine, Quebec; and Portec
(U.K.) Ltd., our British subsidiary located in North Wales. In 1994, Railroad
Products accounted for 42% of total Portec revenues. Product lines include a
broad range of track components including rail joints, rail anchors and
lubricators, securement devices for holding loads on railroad cars and jacking
systems for railroad car repair facilities.
1994 FINANCIAL PERFORMANCE
In 1994, sales in the Railroad Products segment totalled $40.7 million, up 20%
from $34.0 million in the prior year. Contributing to the increase was strong
performance in our freight securement products, U.S. track components business
and Portec (U.K.) Ltd. The Portec U.K. increase was a result of the acquisition
of PVH Industries, whose principal business is general steel fabrication.
Reflecting poor operating conditions for Canada's two major railroads, Portec
Canada's sales of track components declined.
Operating profit for Railroad Products was $3.0 million, about the same as last
year's $3.1 million, which represented a five-year high for the segment. Gains
in securement systems products and U.S. track components were offset by lower
profitability in both Canada and the United Kingdom. Specifically at Portec
U.K., the PVH acquisition added nearly $3.0 million to sales, but produced an
operating loss. We are currently reviewing a number of options to improve this
unit's performance by mid-year 1995.
U.S. RAIL INDUSTRY UP
For the eighth consecutive year, railroad freight traffic set a new record.
Overall ton miles were up 8% over the prior year and intermodal container
traffic was up nearly 15%. These rates of increase were roughly double the rate
of traffic increase in recent years. The driving forces behind the traffic
increase continue to be:
1) Railroads are more fuel efficient than trucks.
2) Railroads produce less pollution per ton-mile than trucks.
3) The safety record for railroads exceeds that of trucks.
As if to footnote these factors, cooperative ventures between trucking companies
and railroads continue to expand, and we believe the growth of rail traffic will
continue through the end of this decade.
NEW PRODUCTS
During the year, we introduced several new track lubricator products, adding to
our leadership position in this market segment. The Road RunnerTM is a portable
lubrication unit which can be used with existing hi-rail inspection vehicles to
lubricate low volume trackage where wayside lubricators are not economically
justified. Another new product, the Centrac on-board lubricator has primary
application on transit systems. The Centrac system utilizes solid lubricant
sticks which are positioned against both sides of the transit cars wheel
flanges, eliminating wear and noise in tight corners. Both of these products
can be handled easily by our existing sales and service network.
<TABLE>
<S><C>
UNIT PRODUCTS APPLICATION MARKET SALES CHANNELS
Railway Main- o Car repair systems o Lift railcars for service o Repair shops o Direct & through
tenance Products & o Rail joints o Join track sections o Railroads worldwide representatives to
Portec (U.K.) Ltd. o Rail lubricators o Lubricate track for reduced o Transit authorities end-users
wear & fuel usage o Industrial track owners
Portec, Ltd. o Rail anchors o Transfer rail forces to ties
Shipping Systems o Securement devices o Secure loads to railcars o Railroads & railcar lessors
BUSINESS SEGMENTS
(Dollars in thousands) 1994 1993 1992 1991 1990
NET SALES
Construction equipment $ 38,806 $ 29,922 $ 25,203 $ 25,393 $ 31,837
Materials handling 16,943 12,394 12,979 11,235 14,399
Railroad 40,725 34,008 30,456 28,399 34,315
Total $ 96,474 $ 76,324 $ 68,638 $ 65,027 $ 80,551
PORTEC, Inc. 1994 Annual Report
OPERATING PROFIT (LOSS)
Construction equipment $ 2,942 $ 1,256 $ 73 $ (305) $ 1,128
Materials handling 2,472 1,703 2,451 2,194 2,581
Railroad 3,033 3,051 2,118 1,209 2,776
Total 8,447 6,010 4,642 3,098 6,485
General corporate and litigation expenses (1,384) (860) 2,534 (878) (1,908)
Interest expense (829) (750) (1,220) (1,665) (2,003)
Other income 1,091 559 378 1,054 1,691
Income before income taxes
and extraordinary credit $ 7,325 $ 4,959 $ 6,334 $ 1,609 $ 4,265
IDENTIFIABLE ASSETS AT DECEMBER 31
Construction equipment $ 26,251 $ 14,257 $ 13,274 $ 14,105 $ 18,619
Materials handling 7,101 4,198 5,289 4,946 5,038
Railroad 16,881 17,348 11,894 12,094 10,065
50,233 35,803 30,457 31,145 33,722
Corporate 7,289 6,675 7,588 7,562 6,873
Total $ 57,522 $ 42,478 $ 38,045 $ 38,707 $ 40,595
GEOGRAPHIC AREAS
(Dollars in thousands) 1994 1993 1992 1991 1990
NET SALES
United States $ 81,852 $ 65,372 $ 55,593 $ 53,570 $ 69,791
International(1) 14,622 10,952 13,045 11,457 10,760
Total $ 96,474 $ 76,324 $ 68,638 $ 65,027 $ 80,551
EXPORT SALES $ 13,121 $ 7,787 $ 8,592 $ 7,000 $ 6,670
OPERATING PROFIT
United States $ 7,801 $ 4,448 $ 2,808 $ 1,847 $ 5,171
International(1) 646 1,562 1,834 1,251 1,314
Total 8,447 6,010 4,642 3,098 6,485
General corporate and litigation
expenses (1,384) (860) 2,534 (878) (1,908)
Interest expense (829) (750) (1,220) (1,665) (2,003)
Other income 1,091 559 378 1,054 1,691
Income before income taxes
and extraordinary credit $ 7,325 $ 4,959 $ 6,334 $ 1,609 $ 4,265
IDENTIFIABLE ASSETS AT DECEMBER 31
United States $ 44,962 $ 32,497 $ 31,892 $ 32,812 $ 36,443
International(1) 12,560 9,981 6,153 5,895 4,152
Total $ 57,522 $ 42,478 $ 38,045 $ 38,707 $ 40,595
(1) Sales in Canada were $6,570,000, $7,789,000, $8,475,000, $8,274,000 and $7,315,000 for 1994, 1993, 1992, 1991 and
1990, respectively. Sales in Canada were greater than 10% of total sales for 1993, 1992 and 1991. Operating profits
in Canada were $361,000, $1,251,000, $1,345,000, $1,169,000 and $1,087,000 for the respective years. The Canadian
operating profits do not include the Corporate allocations. Identifiable assets in Canada were $7,885,000,
$5,842,000, $4,135,000, $3,470,000 and $1,736,000 for 1994, 1993, 1992, 1991 and 1990, respectively.
</TABLE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
Management's discussion and analysis of the Company's financial condition and
results of operations consists of the Business Segments information on pages 4
through 11, the Company's Financial Statements and notes thereto on pages 17
through 32, Five-Year Summary on page 1 and the following information:
RESULTS OF OPERATIONS
1994 COMPARED WITH 1993
Net sales for the year ended December 31, 1994, were $96,474,000, an increase of
$20,150,000 or 26% from the corresponding period last year. Construction
Equipment sales of $38,806,000 were up 30% from the $29,922,000 sold in 1993 due
to strong market conditions in the aggregate-related markets and to growth in
new product introductions. Materials Handling net sales for 1994 were
$16,943,000, a 37% increase over the same period in 1993. The acquisition of
Count Recycling Systems, Inc. during the second quarter of 1994 contributed 62%
of the overall increase. New product sales and an improved general economy
resulted in the remaining increase. Railroad Products sales of $40,725,000 were
20% above those of last year. The high sales were primarily due to growth in
railroad traffic in the domestic market and improved demand for rail products in
certain foreign markets.
The Company's net income for the year ended Decem-
ber 31, 1994, was $6,825,000 compared with net income of $4,696,000 for 1993.
The 45% increase in net income was attributed to higher sales volume and an
increase in other income.
The Construction Equipment segment reported an operating profit for 1994 of
$2,942,000 compared with $1,256,000 in 1993. This increase was due to the
higher sales volume and improved gross margins. The acquisitionof the assets of
Innovator Manufacturing, Inc. in July of 1994 materially reduced the operating
performance in the last two quarters of 1994 due to the disruption caused by the
transfer of manufacturing to the Yankton, South Dakota, plant. The operating
profit of the Materials Handling segment increased from $1,703,000 in 1993 to
$2,472,000 in 1994. Higher sales volume and some improvement in pricing
resulted in this positive change. The Railroad Products segment had operating
profit of $3,033,000 for 1994 compared with $3,051,000 in 1993. Gross margins
were down in 1994 due to a shift in product mix.
Net other income increased from $559,000 in 1993 to $1,091,000 in 1994. The
settlement of a case entitled Northern Engineering Industries plc, Parsons-
Pebbles Electric Products Inc. and NEI Cranes Ltd. vs. Portec, Inc. (RMC
Division) resulted in the recording of $1,102,000 in interest income. Plant
relocation expenses, lower sales commissions and reduced other interest income
were offset by this gain. Other expense of $683,000 in 1994, $523,000 in 1993
and $225,000 in 1992 were legal and related expenses associated with the above
case.
The Company's cost of products sold, exclusive of depreciation and amortization,
was up from 67% in 1993 to 68% in 1994. The increase was attributable to the
impact of the Innovator Manufacturing, Inc. production transfer and shifts in
product mix. Selling, general and administrative expense of $21,035,000 was 22%
of sales in 1994 compared with 23% in 1993. Depreciation and amortization
increased $534,000 in 1994 compared with the prior year. Amortization of
$168,000 in 1994 related to goodwill from acquisitions. Depreciation expense
PORTEC, Inc. 1994 Annual Report
was greater in 1994 due to the acquisition of fixed assets and capital
expenditures made in 1994 and 1993.
Interest expense of $829,000 was up 11% above the prior year due to the
Company's higher interest rates, increased borrowing related to acquisitions and
increased working capital needs. The 1994 income tax provision of $500,000
included $376,000 related to income tax on earnings of the Company's foreign
subsidiaries. At December 31, 1993, a net deferred asset of $500,000 was
reflected on the balance sheet after recording a valuation reserve of
$7,074,000.
At December 31, 1994, the valuation reserve was reduced $2,764,000 for deferred
tax assets realized through reversing temporary differences. An additional
$200,000 reduction in the valuation reserve was reflected based on management's
estimation of future taxable income. This assessment considered budgeted
operating results and projected taxable income taking into consideration the
uncertainty in the general economic outlook.
Current assets of the Company at December 31, 1994, were up $9,640,000 from the
prior year. Accounts receivable, inventory and other current assets grew due to
acquisitions and increased sales. The decrease in cash and cash equivalents of
$1,881,000 during 1994 was attributable to acquisitions. At December 31, 1994,
goodwill of $3,032 was due to the acquisition of Count Recycling Systems, Inc.
and Innovator. Other assets and deferred charges increased by $931,000,
primarily because of patents associated with the Innovator Manufacturing, Inc.
asset acquisition.
The increase in current liabilities from $17,367,000 to $22,764,000 during 1994
was partially the result of the assumption of the current portion of long-term
debt associated with the acquisition of Innovator Holdings which was used to
finance working capital needs. Accounts payable and other accrued liabilities
grew as a result of the working capital required to support the additional sales
volume.
Long-term debt at December 31, 1994, was $7,623,000, an increase of $2,346,000
from the prior year. These funds along with the funds generated from operations
were used primarily for capital expenditures and acquisitions.
The Company's stockholders' equity increased $7,215,000 from December 31, 1993,
to December 31, 1994, to a level of $24,959,000, primarily due to earnings and
the issuance of common stock. Common stock was issued upon exercise of stock
options and for the Company's contribution to the Savings and Investment Plan
for Company employees.
Inflation, which was comparable to 1993, did not adversely affect the Company in
1994.
Bookings in 1994 of $100,687,000, up $15,691,000 or 18% over those of 1993, were
attributable to strengthening of demand in markets served by the Company and to
the acquisition of the assets of Count Recycling Systems, Inc. and Innovator
Manufacturing, Inc. The year-end order backlog of $24,339,000 was 16% above the
backlog at December 31, 1993.
1993 COMPARED WITH 1992
Net sales for 1993 were $76,324,000, an increase of 11% from sales of
$68,638,000 in 1992. Construction Equipment sales of $29,922,000 were 19% above
those of the prior year due to increased demand from the construction, mining
and road building industries. Materials Handling net sales decreased 5% to
$12,394,000, reflecting a slowdown in major project activity. Railroad Products
sales of $34,008,000 were 12% above those of last year. The higher sales were
primarily the result of increased maintenance expenditures and railcar
conversion programs by the domestic railroad industry. This was partially
offset by lower demand for rail products in the foreign markets which the
Company serves.
Net income for 1993 was $4,696,000 compared with net income of $5,513,000 for
1992. The net income for 1992 included a non-recurring gain of approximately
$3,300,000 related to a reduction of a judgement in a case entitled The Read
Corporation and F. T. Read and Sons, Inc. vs. Portec, Inc. Excluding this gain,
net income in 1993 increased by $2,483,000 due to higher sales volume, lower
interest expense and a lower income tax provision.
The Construction Equipment segment reported an operating profit in 1993 of
$1,256,000 compared with operating profit of $73,000 in 1992. This increase was
due to higher sales volume and improved gross margins. The operating profit of
the Materials Handling segment decreased from $2,451,000 in 1992 to $1,703,000
in 1993. The reduction was due to the lower volume in sales and the related
decrease in gross margins. The Railroad Products segment had operating profit
of $3,051,000 in 1993 compared with $2,118,000 in 1992. The increase in
operating profit reflected the higher sales volume and improved gross margins.
Net other income increased $181,000 in 1993. The increase was primarily due to
a lower net loss from translation of foreign currencies.
The cost of products sold, exclusive of depreciation and amortization, was 67%
of sales in both 1993 and 1992. LIFO liquidation reduced the cost of products
sold in 1992 by $564,000. There was minimal impact from LIFO liquidation in
1993. Selling, general and administrative expense increased $4,157,000.
Selling, general and administrative expense was reduced $3,300,000 in 1992 by a
non-recurring gain related to a case entitled The Read Corporation and F. T.
Read & Sons, Inc. vs. Portec, Inc. During 1993, travel and entertainment
expense and environmental expense increased and deferred costs associated with
Assets Held For Sale were recognized.
Interest expense of $750,000 in 1993 was 39% below the prior year due to the
reduction in the Company's borrowings and the lower interest rates granted by a
bank under the credit agreement entered into on February 12, 1993. The net
income tax provision of $263,000 for 1993 included $657,000 related to income
tax on earnings of the Company's foreign subsidiaries. The Company implemented
Statement of Financial Accounting Standards (SFAS) No. 109, "Accounting for
Income Taxes," as of January 1, 1992. At December 31, 1992, the net deferred
asset was $100,000 after recording a valuation reserve of $8,391,000. The
valuation reserve reflected management's uncertainty as to whether future
taxable income would be sufficient to ensure realization of future tax benefits.
At December 31, 1993, the valuation reserve was reduced $917,000 for deferred
tax assets realized through reversing temporary differences. An additional
$400,000 reduction in the valuation reserve was reflected based on management's
estimation of future taxable income. This assessment considered budgeted
operating results and projected taxable income.
Current assets at December 31, 1993, were up $3,006,000 from the prior year due
to an increase in inventory which was needed to support the higher order
backlog. Cash and cash equivalents also increased $528,000 during 1993
reflecting the cash generated from operations offset by cash used for capital
expenditures and the repayment of debt. These increases were partially offset
by a reduction in accounts receivable due to improved collections and a decrease
in other assets.
The reduction in other assets and deferred charges reflected the merger of
several hourly pension plans into the Portec, Inc. Employees' Retirement
PORTEC, Inc. 1994 Annual Report
Program. The related prepaid pension cost was consolidated with the unfunded
accrued pension costs as a deferred credit.
Current liabilities increased from $14,991,000 at Decem-ber 31, 1992, to
$17,367,000 at December 31, 1993. The increase reflected higher accounts
payable of $1,611,000 due to the increase in inventory and higher other accrued
liabilities of $813,000.
Long-term debt at December 31, 1993, was $5,277,000, a decrease of $2,817,000
from the prior year. Included in this decrease was a reduction of $2,720,000 in
the revolving credit and term loan.
Total stockholders' equity increased $5,435,000 from December 31, 1992, to
December 31, 1993, to a level of $17,744,000, primarily due to earnings and to
the issuance of common stock. Common stock was issued upon exercise of stock
options and for the Company's contribution to the Savings and Investment Plan
for Company employees.
Inflation, which was comparable to 1992, did not adversely affect the Company in
1993.
Bookings in 1993 were $84,996,000, an increase of 14% from those of 1992, which
reflected the strengthening of the market demand in the segments served by the
Company. The year-end order backlog of $21,055,000 was 45% above the backlog at
December 31, 1992.
LIQUIDITY
On February 12, 1993, the Company entered into a credit agreement with a bank
which was amended on April 26, 1994. The agreement provides for a term loan of
$6,000,000 and up to $12,000,000 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 in 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. A portion of property located in Minneapolis, Minnesota,
was sold in March 1995 and a commitment letter has been signed for the remaining
site. The 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 should 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 1.6, 1.5 and 1.5 to 1 at December 31,
1994, 1993 and 1992, respectively. At December 31, 1994, the Company had
available $7,061,000 of unused credit under its loan agreement, plus cash and
cash equivalents of $3,398,000 compared with $8,223,000 of unused credit and
$5,279,000 of cash and cash equivalents at December 31, 1993.
CAPITAL RESOURCES
The Company does not have any material commitments for capital expenditures.
Management estimates that capital expenditures for 1995 will be $4,000,000. Two
acquisitions of assets were made in 1994. Certain assets of Count Recycling
Systems, Inc. were purchased by the Company's Materials Handling segment. The
Company's Construction Equipment segment purchased certain assets of Innovator
Manufacturing, Inc. In addition, Portec, Ltd., the Company's Canadian
subsidiary, purchased the stock of Innovator Holdings.
ENVIRONMENTAL
During 1989, each of the Company's domestic manufacturing facilities, including
those former manufacturing facilities included in the balance sheet
classification as Assets Held For Sale, were reviewed for compliance with local
and federal environmental regulations. As a result of these reviews, the
Company initiated the remedial actions necessary to comply with such regulations
and these remedial actions have been completed. Management continues to review
several sites for possible future actions and a reserve has been established to
cover management's estimate of the maximum cost to remediate these sites, if
any. The most significant site is a former manufacturing facility in
Pennsylvania which is now leased as a warehouse. The Company has been in
discussion with the Pennsylvania Department of Environmental Resources for
several years concerning soil and groundwater contamination at this site, and
these discussions continued during 1994. The Company is currently monitoring
groundwater quality at the site and may at some time in the future be required
to take remedial actions. The Company believes that the continuation of a
monitoring program, without remediation, is the appropriate course of action.
During 1994, the Company and several other parties reached an agreement with the
Illinois Environmental Protection Agency for the clean-up of a site in Illinois
which contained drums of paint and other toxic paint-like materials. The
Company's share of the clean-up costs were $45,000, and these were taken against
a reserve established in 1993. Management believes that this situation has been
fully resolved.
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31
<TABLE>
<S><C>
(Dollars in thousands except per share data) 1994 1993 1992
REVENUES
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 96,474 $ 76,324 $ 68,638
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,091 559 378
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,565 76,883 69,016
COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation
and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . 65,681 51,387 46,232
Selling, general and administrative . . . . . . . . . . . . . . . . . . . 21,035 17,786 13,629
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 2,012 1,478 1,376
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 683 523 225
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 829 750 1,220
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90,240 71,924 62,682
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 7,325 4,959 6,334
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 500 263 821
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,825 $ 4,696 $ 5,513
PORTEC, Inc. 1994 Annual Report
EARNINGS PER COMMON SHARE(1)
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.49 $ 1.05 $ 1.37
The accompanying notes are an integral part of these financial statements.
(1) Adjusted retroactively for 10% stock dividends paid in December 1992, 1993 and 1994.
CONSOLIDATED BALANCE SHEETS
December 31
(Dollars in thousands) 1994 1993
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,398 $ 5,279
Accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,224 9,250
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,473 10,085
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,466 1,307
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35,561 25,921
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 295
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,437 9,594
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19,805 17,269
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29,462 27,158
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16,090) (15,029)
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 13,372 12,129
ASSETS HELD FOR SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,269 2,070
GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,212 181
OTHER ASSETS AND DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,108 2,177
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,522 $ 42,478
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4,253 $ 1,293
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11,248 9,455
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,263 6,619
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22,764 17,367
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,623 5,277
DEFERRED CREDITS
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,997 1,696
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 179 394
Total deferred credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,176 2,090
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 11)
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized - 10,000,000
shares; issued - 4,283,260 and 3,845,652 shares . . . . . . . . . . . . . . . . . . . 4,283 3,845
Additional capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,518 40,847
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . (455) (444)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (25,387) (26,504)
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24,959 17,744
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,522 $ 42,478
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
(Dollars in thousands) 1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,825 $ 4,696 $ 5,513
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 2,012 1,478 1,376
(Gain) loss on sales of property, plant and equipment . . . . . . . . . (25) 5 16
Changes in other balance sheet accounts:
Decrease (increase) in receivables . . . . . . . . . . . . . . . . . (3,974) 861 (343)
Decrease (increase) in inventories . . . . . . . . . . . . . . . . . (1,573) (3,773) 1,877
Decrease (increase) in other current assets . . . . . . . . . . . . . (124) 495 (563)
Increase (decrease) in accounts payable and accruals . . . . . . . . (333) 2,424 (2,447)
Decrease in other assets and liabilities . . . . . . . . . . . . . . 845 408 1,097
Net cash provided by operating activities . . . . . . . . . . . . . 3,653 6,594 6,526
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,908) (1,828) -
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,601) (2,130) (1,197)
Proceeds from disposal of property, plant and equipment . . . . . . . . . . 168 18 6
Net cash used by investing activities . . . . . . . . . . . . . . . . . (7,341) (3,940) (1,191)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) revolving credit agreement . . . . . . . . . 3,550 (1,520) (989)
Principal payments of long-term debt . . . . . . . . . . . . . . . . . . . (2,060) (1,200) (1,000)
Repayment of other long-term debt . . . . . . . . . . . . . . . . . . . . . (73) (145) (145)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 401 611 156
(Purchase) sale of treasury stock . . . . . . . . . . . . . . . . . . . . . - 66 (66)
Net cash provided (used) by financing activities . . . . . . . . . . . . 1,818 (2,188) (2,044)
EFFECT OF EXCHANGE RATE CHANGE . . . . . . . . . . . . . . . . . . . . . . . (11) 62 (1,206)
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . (1,881) 528 2,085
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . 5,279 4,751 2,666
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . . $ 3,398 $ 5,279 $ 4,751
SUPPLEMENTAL DISCLOSURES:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 792 $ 788 $ 1,080
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 952 585 923
Non-cash transaction-10% stock dividend . . . . . . . . . . . . . . . . . . 5,708 3,258 1,251
</TABLE>
The accompanying notes are an integral part of these financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
CONSOLIDATION
The consolidated financial statements include the accounts of all subsidiaries.
All material intercompany transactions and balances have been eliminated in the
consolidation.
CASH EQUIVALENTS
Short-term and highly liquid investments with a maturity of nine months or less
are considered to be cash equivalents.
ACCOUNTS RECEIVABLE
PORTEC, Inc. 1994 Annual Report
As of December 31, 1994, approximately 34% of the Company's accounts receivable
were concentrated with companies in the railroad industry. Economic and other
factors impacting the railroad industry could hinder these customers' ability to
satisfy their obligations. The Company does not require collateral for its
credit sales which are typically due within 30 days.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined on
the last-in, first-out (LIFO) method for domestic inventories, representing 82%
of total inventories, and on the first-in, first-out (FIFO) method for foreign
inventories.
PROPERTY, PLANT AND EQUIPMENT
Depreciation is computed using the straight-line method over the estimated
useful lives of the assets, ranging generally from 10 to 25 years for buildings
and from 5 to 18 years for machinery and equipment. Maintenance, repairs, minor
renewals and betterments are charged to expense as incurred; major renewals and
betterments are capitalized. The cost and related accumulated depreciation of
assets replaced, retired or otherwise disposed of are eliminated from the
property accounts, and any gain or loss is reflected in income.
INTANGIBLE ASSETS
Goodwill is amortized on a straight-line basis over fifteen years and is
recorded net of accumulated amortization of $168,000, 0 and 0 for 1994, 1993 and
1992, respectively. Costs of patents and license agreements are amortized on a
straight-line basis over the shorter of the legal or estimated useful life of
the asset. Amortization was $41,000 for 1994, $32,000 for 1993 and $7,000 for
1992.
RESEARCH EXPENDITURES
Expenditures for research and development are charged to expense as incurred and
amounted to approximately $510,000 for 1994, $475,000 in 1993 and $445,000 in
1992.
NET INCOME PER SHARE
Income per common and common equivalent share is computed based on the weighted
average number of common shares outstanding during the year plus outstanding
common stock equivalent shares subject to stock options, if dilutive. Income
per share amounts have been restated to give retroactive effect to 10% stock
dividends paid December 15, 1994, December 14, 1993 and December 1, 1992, as if
paid on January 1, 1992.
1994 1993 1992
AVERAGE SHARES OF COMMON STOCK AND EQUIVALENTS OUTSTANDING
Primary 4,572,468 4,464,877 4,034,571
FINANCIAL PRESENTATION CHANGES
Certain reclassifications have been made to conform prior year amounts with the
current year presentations.
NOTE 2. ACCOUNTS AND NOTES RECEIVABLE
The components of accounts and notes receivable at December 31, 1994, and 1993,
were as follows:
(Dollars in thousands) 1994 1993
Trade receivables net of allowance for doubtful
accounts of $403 and $337, respectively . . . . . . . $13,100 $ 8,223
Notes receivable . . . . . . . . . . . . . . . . . . . . 124 1,027
Total . . . . . . . . . . . . . . . . . . . . . . . . $ 13,224 $ 9,250
NOTE 3. INVENTORIES
The difference between LIFO value and approximate replacement cost of the LIFO
inventories was $7,213,000, $6,986,000 and $7,130,000 at December 31, 1994, 1993
and 1992, respectively. Liquidation of LIFO inventory quantities carried at
lower costs compared with the cost of purchases increased net income by $564,000
or $.14 per share for 1992.
The components of inventories at December 31, 1994, and 1993, were as follows:
(Dollars in thousands) 1994 1993
Raw material and supplies $ 5,297 $3,897
Work-in-process 5,058 2,715
Finished goods 7,118 3,473
Total $17,473 $10,085
Inventories, at LIFO value, are net of lower of cost or market reserves of
$1,203,000 in 1994 and $1,516,000 in 1993.
NOTE 4. INCOME TAXES
Effective January 1, 1992, the Company adopted Statement of Financial Accounting
Standards (SFAS) No. 109, "Accounting for Income Taxes." and, accordingly,
deferred income taxes represent the tax effect, at current statutory rates, of
temporary differences in the bases of assets and liabilities for financial
reporting and income tax purposes.
Pre-tax income from continuing operations was taxed under the following
jurisdictions:
(Dollars in thousands) 1994 1993 1992
Domestic . . . . . . . . . . . . . . . . . . . $ 6,999 $2,983 $4,015
Foreign . . . . . . . . . . . . . . . . . . . 326 1,976 2,319
Total . . . . . . . . . . . . . . . . . . $ 7,325 $4,959 $6,334
The provision for income taxes charged to operations was as follows:
(Dollars in thousands) 1994 1993 1992
Current expense:
Federal . . . . . . . . . . . . . . . . . . $ 309 $ - $ -
State and Foreign . . . . . . . . . . . . . 331 663 921
Total Current . . . . . . . . . . . . . . 640 663 921
Deferred tax expense:
Federal . . . . . . . . . . . . . . . . . . (196) (392) (98)
PORTEC, Inc. 1994 Annual Report
State and Foreign . . . . . . . . . . . . . 56 (8) (2)
Total Deferred . . . . . . . . . . . . . . (140) (400) (100)
Total provision . . . . . . . . . . . . . . . $ 500 $ 263 $ 821
Deferred tax liabilities (assets) at December 31, 1994, and 1993, include the
following:
(Dollars in thousands) 1994 1993
Depreciation . . . . . . . . . . . . . . . . . . . . . . . $1,734 $1,575
Plant closing costs . . . . . . . . . . . . . . . . . . . 853 739
Gross deferred tax liabilities . . . . . . . . . . . . . 2,587 2,314
Net operating loss carryforward . . . . . . . . . . . . . (2,077) (4,831)
Accrued liabilities . . . . . . . . . . . . . . . . . . . (988) (922)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . (1,103) (1,293)
Employee benefits . . . . . . . . . . . . . . . . . . . . (1,041) (968)
Product liability and warranty . . . . . . . . . . . . . . (1,178) (914)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . (392) (390)
Tax credit carryforward . . . . . . . . . . . . . . . . . (618) (570)
Gross deferred tax assets . . . . . . . . . . . . . . . (7,397) (9,888)
Deferred tax assets valuation allowance . . . . . . . . . 4,110 7,074
Net deferred assets . . . . . . . . . . . . . . . . . . . $ (700) $ (500)
The difference between the statutory federal income tax rate and the effective
income tax rate was as follows:
1994 1993 1992
Statutory federal income tax rate . . . . . . 34.0% 34.0% 34.0%
Difference resulting from:
Realization of deferred tax assets not
previously recognized . . . . . . . . . . . (30.9) (28.5) (23.1)
Foreign operations . . . . . . . . . . . . . 3.6 (.3) 1.7
State income taxes, net . . . . . . . . . . .1 .1 .4
6.8% 5.3% 13.0%
Domestic net operating losses of $5,768,000 expiring in 2001-2007 are available
to offset future taxable income for federal income tax purposes. The Tax Reform
Act of 1986 imposes an annual limitation on the amount of tax loss carryforward
which could be utilized by the Company if certain substantial changes in the
Company's ownership should occur.
NOTE 5. DEBT
The components of debt at December 31, 1994, and 1993, were as follows:
(Dollars in thousands) 1994 1993
Revolving credit and term loan . . . . . . . . . . . . . . $ 11,805 $6,410
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 71 160
11,876 6,570
Less current maturities . . . . . . . . . . . . . . . . . 4,253 1,293
Total long-term debt . . . . . . . . . . . . . . . . . . $7,623 $5,277
On February 12, 1993, the Company entered into a three-year unsecured credit
agreement with a bank which was amended on April 26, 1994. The Company borrowed
$6,000,000 under the term loan provision and can borrow up to $12,000,000 in
cash or under letters of credit on a revolving basis. The interest rate
currently applicable to the revolving line of credit is the bank's prime
interest rate or, at the Company's election, 1.5 percent over the London
Interbank Offered Rate (LIBOR). The interest rate currently applicable to the
term loan is .25 percent above the bank's prime interest rate or, at the
Company's election, 1.75 percent over LIBOR. The interest rates can vary from
prime to .50 percent over the bank's prime interest rate or, at the Company's
election, 1.5 or 2.5 percent over LIBOR depending on the Company's performance.
Principal payments under the term loan are $1,200,000 per annum, payable
quarterly, while any amounts outstanding on the revolving credit are due in
1997. The provisions of the credit agreement include minimum net worth,
interest coverage, working capital and leverage ratio requirements, and limit
additional indebtedness and cash dividend payments during the term of the
agreement.
On July 15, 1994, Portec, Ltd., a wholly-owned Canadian subsidiary of the
Company, entered into an unsecured credit agreement with a bank for a term loan
of $4,000,000 to finance working capital needs related to the acquisition of
Innovator Holdings. Portec, Ltd., may borrow in either U.S. or Canadian
dollars. The interest rate applicable to the U.S. dollar loan is the bank's
U.S. dollar prime rate, or at Portec, Ltd.'s election, 1.5 percent over LIBOR.
The interest rate applicable to the Canadian dollar loan is the bank's
Canadian prime rate or, at Portec, Ltd.'s election, 1.5 percent over a rate
negotiated based on the bank's cost of funds. The loan expires June 30, 1995.
At December 31, 1994, a total of $3,046,000 remained outstanding on this loan.
The Company's previous lending arrangement was a three-year secured loan
agreement with a bank. The interest rate on the previous loan was prime plus
.25 percent on the revolving line of credit and prime plus .75 percent on the
term loan.
NOTE 6. PENSION PLANS
The Company merged several noncontributory defined benefit plans into one
noncontributory defined benefit plan effective January 1, 1993, that covers
substantially all employees. Benefits under this plan are based on years of
service and, for salaried employees, the employee's average compensation during
defined periods of service. The Company's funding policy is to make the minimum
annual contributions required by applicable regulations.
Net pension cost for the pension plan and supplemental pension plan in 1994 and
1993 and the several predecessor pension plans in 1992 is summarized as follows:
(Dollars in thousands) 1994 1993 1992
Service cost . . . . . . . . . . . . . . . . . $ 609 $ 450 $ 484
Interest cost . . . . . . . . . . . . . . . . 1,148 1,091 983
Expected return on assets . . . . . . . . . . (515) (1,039) (984)
Net amortization and deferral . . . . . . . . (614) (148) (202)
Net pension cost . . . . . . . . . . . . . . . $ 628 $ 354 $ 281
PORTEC, Inc. 1994 Annual Report
Plan assets are stated at fair value and consist primarily of cash, corporate
equity and debt securities. The following table sets forth the funded status of
the plans and amounts recognized in the Company's consolidated balance sheets at
December 31, 1994, and 1993. As a result of the restructuring of the Railway
Maintenance Products Division (Note 17), certain predecessor plans were
curtailed and increased benefit obligations incurred. The amount of such
charges were deferred together with the other costs of consolidating the Railway
Maintenance Products Division.
The assumptions used in 1993 to develop the periodic pension costs were as
follows: the unit credit cost actuarial method; a discount rate of 7.5%; the
expected long-term rate of return on assets of 8.0%; and the rate of increase in
compensation levels of 4.5%. In 1994, the discount rate was increased to 8%.
(Dollars in thousands)
<TABLE>
<S><C>
Accumulated Benefit
Current Plan Assets
Obligations
Exceed Accumulated
Exceed Current
Benefit Obligation
Plan Assets
1994 1993 1994 1993
Actuarial present value of benefit obligation:
Vested benefit obligation . . . . . . . . . . . $ 12,793 $ 12,750 $ 571 $ 457
Non-vested benefit obligation . . . . . . . . . 453 337 - -
Accumulated benefit obligation . . . . . . . . . 13,246 13,087 571 457
Excess of projected benefit obligation
over accumulated benefit obligation . . . . . 1,641 1,588 - -
Projected benefit obligation . . . . . . . . . . 14,887 14,675 571 457
Plan assets at fair value . . . . . . . . . . . 13,960 14,837 - -
Projected benefit obligation
(in excess of) less than plan assets . . . . . (927) 162 (571) (457)
Unrecognized net loss . . . . . . . . . . . . . (869) (1,556) - -
Unrecognized prior service cost . . . . . . . . 34 38 - -
Unrecognized net (asset) obligation . . . . . . (293) (569) 13 26
Unfunded accrued pension cost . . . . . . . . . $ (2,055) $ (1,925) $ (558) $ (431)
</TABLE>
NOTE 7. SAVINGS AND INVESTMENT PLAN
Under the Company's Savings and Investment Plan, qualified under Section 401(k)
of the Internal Revenue Code, generally all domestic salaried and hourly
employees, including officers, at least twenty-one years old may elect to defer
a portion of their compensation to a trust established under the plan.
Depending on its sales and net income for the year, the Company may contribute
up to an amount equal to the participating employees' contributions, but not in
excess of six percent of the participating employees' earnings. Contributions
of $371,000, $321,000 and $298,000 were made for the years ended December 31,
1994, 1993 and 1992, respectively, representing 80%, 70% and 90% of eligible
employees' contributions. The plan permits the Company's contribution to be
made in shares of the Company's common stock.
NOTE 8. OTHER POST-RETIREMENT BENEFIT PLANS
The Company has defined benefit post-retirement medical and life insurance plans
covering most full-time salaried and hourly employees. The post-retirement
health care plan is contributory, with retiree contributions adjusted annually,
and contains other cost-sharing features such as deductibles and coinsurance.
The life insurance plan is non-contributory.
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employees'
Accounting for Post-retirement Benefits other than Pensions." The effect of
adopting the new guidelines increased the net periodic post-retirement benefit
expense for the above defined
plans and decreased earnings from continuing operations by $107,000 or $.02 per
share in 1993 and $80,000 or $.02 per share in 1992.
The Company's current policy is to fund the cost of the post-retirement medical
and life insurance benefits on a pay-as-you-go basis, as in prior years. The
following table presents the status of the plans at December 31, 1994, and 1993:
(Dollars in thousands)
1994 1993
Accumulated post-retirement benefit obligation (APBO):
Retirees . . . . . . . . . . . . . . . . . . . . . . . . $1,074 $1,283
Actives . . . . . . . . . . . . . . . . . . . . . . . . 597 452
Total . . . . . . . . . . . . . . . . . . . . . . . . 1,671 1,735
Plan assets at fair value . . . . . . . . . . . . . . . . - -
APBO in excess of plan assets . . . . . . . . . . . . . . (1,671) (1,735)
Unrecognized transition obligation . . . . . . . . . . . . 1,692 1,792
Unrecognized prior service costs . . . . . . . . . . . . . (356) (407)
Unrecognized actuarial loss . . . . . . . . . . . . . . . 269 163
Accrued post-retirement benefit costs . . . . . . . . . . $ (66) $ (187)
Net periodic post-retirement benefit expense for 1994, 1993 and 1992 included
the following components:
(Dollars in thousands) 1994 1993 1992
Service cost . . . . . . . . . . . . . . . . . $ 58 $ 41 $ 32
Interest cost . . . . . . . . . . . . . . . . 123 127 162
Amortization of transition obligation
over 20 years . . . . . . . . . . . . . . . 100 99 99
Unrecognized prior service cost . . . . . . . (43) (50) -
Net periodic post-retirement benefit expense . $ 238 $ 217 $ 293
For measurement purposes, the assumed trend rate for post-retirement medical
benefits during 1994 and 1993 was 12.6% and 13.4%, respectively, for employees
less than age-65 and 10.9% and 11.6%, respectively, for employees 65 and older.
These rates decrease gradually to 7.0% and 6.0%, respectively, by 2001 and
remain at that level thereafter. The health care cost trend rate assumption has
a significant effect on the amounts reported. For example, increasing the
assumed health care cost trend rates by one percentage point in each year would
increase the accumulated post-retirement benefit obligation as of December 31,
1994, and 1993, by approximately $139,000 and $70,000, respectively, and the
aggregate of the service and interest cost components of net periodic post-
retirement benefit cost for 1994 by approximately $25,000 and for 1993 by
approximately $13,000.
The discount rate used in determining the accumulated post-retirement benefit
obligation was 8.0% at December 31, 1994, and 7.5% at December 31, 1993.
NOTE 9. INCENTIVE PROGRAM
PORTEC, Inc. 1994 Annual Report
The 1982 PORTEC, Inc. Employees' Stock Benefit Plan was adopted by stockholders
in 1982 and amended in 1984, and provided for the granting of awards thereunder
to key employees. This plan provided for the granting of incentive and
nonqualified stock options; tandem Stock Appreciation Rights (SARs) in relation
to such options, restricted stock awards and performance units. There were no
SAR's, restricted stock awards or performance units outstanding under the plan
at December 31, 1994.
SARs entitle the optionee to receive the appreciation in value of the shares
(i.e. the difference between market value price of a share at time of exercise
of the SARs and the option price) in cash, shares or a combination thereof.
SARs utilize the same shares reserved for issuance of options, and the exercise
of a SAR or an option automatically cancels the related option or SAR. Options
and related SARs were granted at prices which were not less than the fair market
value of such shares on the date the option was granted, and may be exercisable
for periods of up to 10 years from the date of grant. This plan permitted the
Company's Board of Directors to make restricted stock awards to key employees
whereby designated employees would have shares issued in their names which would
be restricted as to the right of sale and other disposition until certain
predetermined performance and/or time requirements were met. Also, the Board
could contract with key employees to issue shares to them upon their
accomplishment of predetermined performance targets. There were 2,662 shares
reserved for issuance under this plan at December 31, 1994, after adjustment for
10% stock dividends in 1992, 1993 and 1994, and no additional awards could be
made under this plan.
The 1988 PORTEC, Inc. Employees' Stock Benefit Plan was adopted by stockholders
in 1988 and amended in 1994, and provides for the granting of awards of the same
type and duration as provided by the 1982 PORTEC, Inc. Employees' Stock Benefit
Plan. The plan was amended in 1994 to increase by 440,000 the shares available
for grant under the plan and to grant non-employee directors a 1,000 share non-
qualified stock option on the anniversary of each Annual Meeting starting in
1994. Options may be granted at prices not less than the greater of 50% of the
fair market value of the shares or the par value of the shares. The granting of
awards under this plan may be made until June 2, 1998. By prior agreement, all
145,000 outstanding SAR's under this plan are exercisable only at the discretion
of the Company. There were 886,535 shares reserved for issuance under this plan
at Decem-
ber 31, 1994, after adjustment for 10% stock dividends in 1992, 1993 and 1994.
<TABLE>
<S><C>
1994 1993
Option Average Option Average
Shares Option Shares Option
Price Price
STOCK OPTIONS:
Outstanding beginning of year . 474,683 $3.55 588,786 $3.10
Granted . . . . . . . . . . . . 149,600 12.73 38,720 8.47
Exercised . . . . . . . . . . . (25,993) 3.04 (152,823) 3.05
Cancelled or expired . . . . . . - - - -
Outstanding end of year . . . . 598,290 $5.87 474,683 $3.55
Exercisable end of year . . . . 565,290 $5.35 435,963 $3.12
Available for grant . . . . . . 290,460 - 60 -
</TABLE>
NOTE 10. STOCKHOLDERS EQUITY
Changes in components of stockholders' equity for the years 1992 through 1994
follow:
(Dollars in thousands except share data)
<TABLE>
<S><C>
Cumulative No. of Shares
Common Additional Treasury Accum. Translation Common Stock
Stock Capital Stock Deficit
Adjustment Issued
Balance at
December 31, 1991 $ 3,013 $ 36,323 $ - $(32,124) $ 700 3,013,361
Net income - - - 5,513 - -
Company's 1991 Investment
Plan contribution 20 59 - - - 19,675
Stock dividend-10% 303 948 - (1,251) - 303,292
Exercise of stock options 21 56 - - - 21,390
Treasury stock acquired - - (66) - - -
Current year translation adjustment - - - - (1,206) -
Balance at
December 31, 1992 $ 3,357 $ 37,386 $ (66) $ (27,862) $ (506) 3,357,718
Net income - - - 4,696 - -
Company's 1992 Investment
Plan contribution 32 267 - - - 31,606
Exercise of stock options 106 286 - - - 106,723
Stock dividend-10% 350 2,908 - (3,258) - 349,605
Treasury stock retired - - 66 (80) - -
Current year translation adjustment - - - - 62 -
Balance at
December 31, 1993 $ 3,845 $ 40,847 $ - $(26,504) $ (444) 3,845,652
Net income - - - 6,825 - -
Company's 1993 Investment
Plan contribution 25 297 - - - 24,591
Exercise of stock options 24 55 - - - 23,630
Stock dividend-10% 389 5,319 - (5,708) - 389,387
Current year translation adjustment - - - - (11) -
Balance at
December 31, 1994 $ 4,283 $ 46,518 $ - $(25,387) $ (455) 4,283,260
</TABLE>
On October 26, 1993, the Company declared a 10 percent stock dividend to
shareholders of record November 10, 1993, paid on December 14, 1993. The
transaction was valued based on the closing market price of the Company's stock
on October 25, 1993. Accumulated deficit was charged $3,258,000 as a result of
the issuance of 349,605 shares of the Company's common stock and cash of $5,000
was paid in lieu of fractional shares.
On October 26, 1994, the Company declared a 10 percent stock dividend to
shareholders of record November 9, 1994, paid on December 15, 1994. The
transaction was valued based on the closing market price of the Company's stock
on October 25, 1994. Accumulated deficit was charged $5,708,000 as a result of
the issuance of 389,387 shares of the Company's common stock and cash of $7,000
was paid in lieu of fractional shares.
The Company has 1,000,000 authorized, but unissued, shares of no par preferred
stock.
PORTEC, Inc. 1994 Annual Report
NOTE 11. COMMITMENTS AND CONTINGENT LIABILITIES
There are various lawsuits and claims pending against the Company. In the
opinion of management, any liabilities that may result from such lawsuits and
claims will not materially affect the consolidated financial position of the
Company. The Company has provided for the estimated costs of any known losses.
The Company leases the Shipping Systems Division facility in Oak Brook,
Illinois, the Railway Maintenance Products Division facility in Huntington, West
Virginia, the corporate headquarters in Lake Forest, Illinois, the PORTEC, Ltd.
(Canada) offices in Lachine, Quebec, several other properties and various
transportation and data processing equipment.
Future minimum rent payments for major operating leases as of December 31, 1994,
which expire on or after December 31, 1995, are as follows:
(Dollars in thousands)
Year ending December 31,
1995 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $500
1996 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 507
1997 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 310
1998 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 201
1999 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Later years . . . . . . . . . . . . . . . . . . . . . . . . . . . 0
Total minimum payments . . . . . . . . . . . . . . . . . . . . . . $1,675
Amortization of deferred gains from a sale and lease-back transaction reduced
base rents for operating leases by $486,000 for 1992.
Net rent expense of $618,000, $412,000 and $366,000 was recorded in 1994, 1993
and 1992, respectively.
The Oak Brook, Illinois, office lease may be cancelled on February 1, 1996, with
six months' written notice.
NOTE 12. OTHER EXPENSE
Other expense reflects legal and other related expenses associated with a case
entitled Northern Engineering Industries plc, Parsons-Pebbles Electric Products
Inc. and NEI Cranes Ltd. vs. Portec, Inc. (RMC Division) which was finalized in
1994.
NOTE 13. UNAUDITED QUARTERLY FINANCIAL INFORMATION
Included in the results of operations for the three months ended December 31,
1994, was a net gain of $707,000 related to a settlement of a judgment on a case
entitled Northern Engineering Industries plc, Parsons-Pebbles Electric Products
Inc. and NEI Cranes Ltd. vs. Portec, Inc. (RMC Division).
(Dollars in thousands except per share data)
<TABLE>
<S><C>
First Second Third Fourth
Quarter Quarter Quarter Quarter
1994
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $ 25,500 $ 27,687 $ 23,160 $ 20,127
Gross Margin . . . . . . . . . . . . . . . . . . . . . . 8,343 8,768 6,499 5,811
Income before income taxes . . . . . . . . . . . . . . . 2,314 2,648 1,190 1,173
Income tax provision . . . . . . . . . . . . . . . . . . 500 443 (232) (211)
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 1,814 $ 2,205 $ 1,422 $ 1,384
Earnings per common share . . . . . . . . . . . . . . . $ .40 $ .48 $ .31 $ .30
(Dollars in thousands except per share data)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1993
Net Sales . . . . . . . . . . . . . . . . . . . . . . . $ 20,094 $ 21,913 $ 18,009 $ 16,308
Gross Margin . . . . . . . . . . . . . . . . . . . . . . 6,185 6,593 5,633 5,611
Income before income taxes . . . . . . . . . . . . . . . 1,438 1,747 924 850
Income tax provision . . . . . . . . . . . . . . . . . . 327 260 20 (344)
Net Income . . . . . . . . . . . . . . . . . . . . . . . $ 1,111 $ 1,487 $ 904 $ 1,194
Earnings per common share . . . . . . . . . . . . . . . $ .25 $ .33 $ .20 $ .27
</TABLE>
NOTE 14. FINANCIAL INFORMATION BY BUSINESS SEGMENTS AND GEOGRAPHIC AREAS
Pages 4 through 11 of this Annual Report to Stockholders contain certain
information by business segments and geographic areas for the years 1990 through
1994.
The following table summarizes additional financial information by business
segments for the years 1994, 1993 and 1992.
(Dollars in thousands) 1994 1993 1992
DEPRECIATION AND AMORTIZATION
Construction Equipment . . . . . . . . . . . . . $1,022 $ 817 $ 807
Materials Handling . . . . . . . . . . . . . . . 337 247 219
Railroad . . . . . . . . . . . . . . . . . . . . 601 359 317
Corporate . . . . . . . . . . . . . . . . . . . 52 55 33
Total . . . . . . . . . . . . . . . . . . . . $2,012 $ 1,478 $1,376
CAPITAL EXPENDITURES
Construction Equipment . . . . . . . . . . . . . $2,231 $ 681 $ 382
Materials Handling . . . . . . . . . . . . . . . 397 283 95
Railroad . . . . . . . . . . . . . . . . . . . . 938 859 463
Corporate . . . . . . . . . . . . . . . . . . . 35 307 257
Total . . . . . . . . . . . . . . . . . . . . $3,601 $ 2,130 $1,197
NOTE 15. LITIGATION SETTLEMENT
On July 10, 1992, the U.S. Court of Appeals for the Federal Circuit reduced a
judgment against the Company in a case entitled The Read Corporation and F. T.
Read & Sons, Inc. vs. Portec, Inc. The Court of Appeals affirmed the Company's
liability for infringement of one of the two patents involved in this case;
reversed liability for infringement of the other patent; vacated the enhanced
damages against the Company; vacated the award of attorney fees to Read; and
remanded the case to the U.S. District Court for the District of Delaware for
modification of its injunction and for reconsideration of the award of attorney
fees in light of this decision. The net reduction in accrued litigation expense
PORTEC, Inc. 1994 Annual Report
was $3,300,000. On September 29, 1992, a settlement of $1,900,000 was reached
with Read for the unreduced portion of the original judgment, post judgment
interest, costs and attorneys fees. The Company had accrued the original
judgment at December 31, 1989.
On November 16, 1994, the Company entered into a settlement agreement in a case
entitled Northern Engineering Industries plc, Parsons-Pebbles Electric Products
Inc. and NEI Cranes Ltd. vs. Portec, Inc. (RMC Division). The terms of the
agreement resulted in the recognition of a net increase in operating income of
$419,000 in 1994.
NOTE 16. ACQUISITIONS
In October 1993, Portec, Ltd., a wholly-owned Canadian subsidiary of the
Company, acquired for cash of $1,828,000 and an earnout based on future
production, certain assets of Allegheny International Canada, Ltd., a
manufacturer of rail anchors.
In April 1994, the Company acquired certain assets of Count Recycling Systems,
Inc., a supplier of materials recovery facilities in the sorting and recycling
of residential and commercial solid waste.
In July 1994, the Company acquired certain assets of Innovator Manufacturing,
Inc. and Portec, Ltd., a wholly-owned Canadian subsidiary of the Company,
acquired the outstanding shares of Innovator Holdings. Innovator Manufacturing,
Inc. is a leading producer of equipment used for the processing of green yard
waste, waste wood and demolition debris.
The two businesses acquired in 1994 were acquired for cash of approximately
$3,908,000 and earnouts to be based upon the future profitability of the
respective businesses. The earnouts are payable annually for a period of three
years.
All of the acquisitions in the two-year period ended December 31, 1994, have
been accounted for as purchases. The operating results of each acquisition have
been included in the Company's consolidated statements of income since the date
of acquisition. Assuming the 1994 acquisitions occurred on January 1, 1993, the
Company estimates that consolidated net sales would have been increased by 5
percent and 10 percent in 1994 and 1993, respectively, while net income would
not have been materially different from amounts reported in 1994 and
approximately 11 percent more than reported in 1993. Goodwill acquired,
aggregating $3,263,000, will be amortized over no more than fifteen years using
the straight-line method.
NOTE 17. RESTRUCTURING COSTS
In 1989, the Company sold the operations of its track machinery business and
consolidated its former domestic manufacturing facilities into a single
manufacturing facility in Huntington, West Virginia. Excess properties located
in Troy, New York, and Pittsburgh, Pennsylvania, are included in the balance
sheet under the caption Assets Held For Sale at the lower of their cost or
estimated net realizable value.
Management estimates that the gain from the sale of the Company's track
machinery business combined with the anticipated gains from the sale of the
related Assets Held For Sale will offset the costs of consolidation of the
Railway Maintenance Products Division. Accordingly, the Company has deferred
the costs of consolidation of the Railway Maintenance Products Division. A net
deferred charge of $1,194,000 is reflected in the balance sheet as a part of
Other Assets and Deferred Charges at December 31, 1994, 1993 and 1992. The
Company expensed $190,000 and $334,000 in 1993 and 1992, respectively, relating
to costs and maintenance of Assets Held For Sale since management does not
expect gains to be sufficient to offset these additional costs.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Stockholders and
Board of Directors of
PORTEC, Inc.
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and accumulated deficit and of cash flows
present fairly, in all material respects, the financial position of PORTEC, Inc.
and its subsidiaries at December 31, 1994, and 1993, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1994, in conformity with generally accepted accounting principles.
These financial statements are the responsibility of the Company's management;
our responsibility is to express an opinion on these financial statements based
on our audits. We conducted our audits of these statements in accordance with
generally accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
Chicago, Illinois
February 16, 1995
CORPORATE INFORMATION
BOARD OF DIRECTORS
J. GRANT BEADLE, 62, has been a director since 1984. From October 1991 to June
1993, he served as Associate Director at The Institute for the Learning Sciences
at Northwestern University in Chicago, involved in educational research.
Currently, he serves as Chairman of the Advisory Board for the Institute. Prior
PORTEC, Inc. 1994 Annual Report
to this, Mr. Beadle was Chairman and Chief Executive Officer of Union Special
Corporation, a Chicago-based manufacturer of industrial sewing machines. He
held this position from 1984 through 1991 and spent over 30 years with the firm.
Mr. Beadle also serves as a director for Woodward Governor Company, Batts, Inc.
and Oliver Products Company. * o !
ALBERT FRIED, JR., 65, has been a director since 1988 and Chairman of the Board
since October 1989. For more than 10 years, Mr. Fried has been Managing Partner
of Albert Fried & Company, a New York-based investment banking firm. He also is
the Managing Partner of Buttonwood Specialists, L.P., specialists on the New
York Stock Exchange. In addition, Mr. Fried is a member of the New York Stock
Exchange, Inc., the New York Futures Exchange, Inc. and a director and vice
chairman of
Oneita Industries, Inc., a manufacturer and marketer of activewear including T-
shirts and fleecewear. He is also a director of various civic and philanthropic
organizations. o
FREDERICK J. MANCHESKI, 68, has been a director since 1990. Mr. Mancheski is
Chairman and Chief Executive Officer of Echlin, Inc., a Branford, Connecticut,
manufacturer of products that improve motor vehicle safety and efficiency. He
has held this position since 1969. Mr. Mancheski also is a director of RB&W
Corporation. * !
JOHN F. MCKEON, 69, has been a director since 1987. Prior to his retirement in
1989, he served as President of Link-Belt Construction Equipment Company, owned
by FMC Corporation and Sumitomo Heavy Industries Ltd. In addition, Mr. McKeon
was Group Vice President of FMC Corporation, which manufactured construction
equipment, a position he held for more than 10 years. He serves on the boards
of Link-Belt Construction Equipment Company, LBS-Spa, Atwood Industries and
Dumore Corporation. *
ARTHUR MCSORLEY, JR., 66, has been a director since 1977. He is President and a
Director of Casey Company, a Pittsburgh-based construction management firm. Mr.
McSorley has held this position with Casey and its predecessor company for more
than 10 years. o !
ROBERT D. MUSGJERD, 71, has been a director since 1990. Prior to his retirement
in 1991, he served as Senior Vice President -- Marketing for the Construction
Equipment Division of Komatsu-Dresser Company, a worldwide construction
equipment firm. He held the same position with its predecessor company, Dresser
Industries, Inc., for more than seven years. * !
L. L. WHITE, JR., 67, has been a director since 1988. Mr. White served as
Portec's Chairman of the Board from 1988 through 1989 and was acting Chief
Executive Officer in December 1988. Prior to his retirement in 1984, Mr. White
held a number of executive positions with Portec, most recently as Senior Vice
President -- Commercial and Government Relations. Since then, he has been a
private investor. o !
MICHAEL T. YONKER, 52, has been a director since 1989. He has served as
Portec's President and Chief Executive Officer since December 1988. From 1981
through 1988, Mr. Yonker was Vice President and Drive Division Manager of P. T.
Components, Inc., a Philadelphia-based manufacturer of industrial gear drives.
Prior to P. T. Components, Mr. Yonker held several Division Manager positions
with FMC Corporation. He also is a director for Crown Andersen, Inc., Modine
Manufacturing Company and Woodward Governor Company. o
CODES
* Member of the Audit Committee
o Member of the Nominating Committee
! Member of the Stock Option and
Compensation Committee
OFFICERS
ALBERT FRIED, JR.
Chairman of the Board
MICHAEL T. YONKER
President and Chief Executive Officer
JOHN S. COOPER
Senior Vice President
NANCY A. KINDL
Vice President, Secretary, Treasurer and
Chief Financial Officer
GENERAL MANAGERS
JOHN S. COOPER
General Manager
Railway Maintenance Products Division
900 Freeport Road
Pittsburgh, Pennsylvania 15238
(412) 782-6000
(412) 782-1037-Fax
WALTER G. LOCK
President and General Manager
Construction Equipment Division
700 West 21st Street
Yankton, South Dakota 57078
(605) 665-9311
(605) 665-2623-Fax
JOHN F. O'BRIEN
President
PORTEC, Ltd.
2044 - 32nd Avenue
Lachine, Quebec H8T 3H7
Canada
(514) 636-5590
(514) 636-5747-Fax
KEVIN C. RORKE
President and General Manager
Materials Handling Group
1 Forge Road
Canon City, Colorado 81212
(719) 275-7471
(719) 269-3750-Fax
L. J. "COOK" SIEJA
President and General Manager
Shipping Systems Division
122 W. 22nd Street, Suite 101
Oak Brook, Illinois 60521
(708) 573-4778
(708) 573-4659-Fax
GRAHAM TARBUCK
Managing Director
PORTEC (U.K.) Ltd.
Vauxhall Industrial Estate
Ruabon, Wrexham, Clwyd LL14 6UY
United Kingdom
44-978-820820
44-978-821439-Fax
PORTEC, Inc. 1994 Annual Report
STOCKHOLDERS' INFORMATION
STOCK TRANSFER AGENT AND REGISTRAR COUNSEL
(Communications concerning: Schiff Hardin & Waite
ostock transfer, Chicago, Illinois
odividend disbursement,
ochange of address, STOCK LISTING
oloss of a stock certificate, or New York Stock Exchange
ononreceipt or loss of a dividend Chicago Stock Exchange
check Trading Symbol: POR
should be directed to:)
Harris Trust and Savings Bank EXECUTIVE OFFICES
Corporate Trust Operations - 11th Floor PORTEC, Inc.
311 W. Monroe St. 100 Field Dr, Ste 120
Chicago, Illinois 60606 Lake Forest, Illinois 60045
(312) 461-6838 (708) 735-2800
(708) 735-2828-Fax
INDEPENDENT ACCOUNTANTS
Price Waterhouse
Chicago, Illinois
FORM 10-K
ANNUAL MEETING A copy of Form 10-K for 1994, as filed
The Annual Meeting will be held at with the Securities and Exchange
10:00 A.M. on Commission will be available to stock-
Tuesday, April 25, 1995, in Room 710 of holders at no charge (except for
the exhibits) after March 31, 1995, by
Union League Club, 312 South Federal writing to the:
Street, Secretary, PORTEC, Inc., One Hundred
Chicago, Illinois. Field Drive,
Suite 120, Lake Forest, Illinois
60045.
QUARTERLY STOCK & DIVIDEND INFORMATION
First Second Third Fourth
Common Stock Prices(1) Quarter Quarter Quarter Quarter
1994 Common Stock Prices
High . . . . . . . . . . . . . . . . . $ 13.63 $ 14.75 $ 15.50 $ 16.88
Low . . . . . . . . . . . . . . . . . 10.25 12.25 12.50 11.75
1993 Common Stock Prices
High . . . . . . . . . . . . . . . . . $ 12.50 $ 15.13 $ 14.50 $ 12.63
Low . . . . . . . . . . . . . . . . . 6.63 10.13 8.88 9.25
(1) The high and low prices are based on
prices as reported on the Composite
Tape. Stock dividends of 10% were
paid in December 1992, 1993 and 1994.
Exhibit 21
SUBSIDIARIES
PERCENTAGE OF
VOTING STOCK OWNED
PLACE OF BY PORTEC, INC. AND
NAME INCORPORATION SUBSIDIARIES
Active (1)
PORTEC Ltd. Canada 100%
PORTEC (U.K.) Ltd. United Kingdom 100% (2)
PORTEC Overseas, Inc. Delaware 100%
PORTEC International, U.S. Virgin Islands 100%
Inc.
Kolberg Manufacturing Delaware 100%
Corporation
PORTEC B.V. Netherlands 100%
RPLeasing, Inc. Delaware 100%
PORTEC Railway Delaware 100%
Products, Inc.
1. This list does not include non-operating subsidiaries,
maintained for the purpose of name protection only.
2. This percentage does not include directors' qualifying shares.
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (Commission Registration File No. 2-76476; File No.
2-79004; and File No. 33-32700) of PORTEC, INC. of our report dated February 16,
16, 1995 appearing on page 33 of the 1994 Annual Report to Stockholders which is
incorporated in this Annual Report on form 10-K. We also consent to the
incorporation by reference of our report on the Financial Statement Schedules,
which appears on page 17 of this Form 10-K.
Price Waterhouse LLP
Chicago, Illinois
March 24, 1995
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted Portec, Inc. 1994
10-K and Annual Report and is qualified in its entirety by reference to such
10-K and Annual Report.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<CASH> 3398
<SECURITIES> 0
<RECEIVABLES> 13687
<ALLOWANCES> 463
<INVENTORY> 17473
<CURRENT-ASSETS> 35561
<PP&E> 29462
<DEPRECIATION> 16090
<TOTAL-ASSETS> 57522
<CURRENT-LIABILITIES> 22764
<BONDS> 0
<COMMON> 4283
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 57522
<SALES> 96474
<TOTAL-REVENUES> 97565
<CGS> 65681
<TOTAL-COSTS> 88728
<OTHER-EXPENSES> 683
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 829
<INCOME-PRETAX> 7325
<INCOME-TAX> 500
<INCOME-CONTINUING> 6825
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6825
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