SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For Quarterly Period Ended September 30, 1995, or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from __________ to __________
Commission File No. 1-500
PORTEC, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-1637250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Hundred Field Drive, Suite 120, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
(708) 735-2800
(Registrant's telephone number, including area code)
Former address:
(Former name,former address and former fiscal year,
if changed since last report).
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
Number of shares of Registrant's Common Stock ($1 per share par value) issued
and outstanding at November 10, 1995 - 4,308,114.
PART I
FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS
PORTEC, INC. CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1995; DECEMBER 31, 1994; AND SEPTEMBER 30, 1994
(THOUSANDS OF DOLLARS)
<TABLE>
<S><C>
(Unaudited) (Unaudited)
9/30/95 12/31/94 9/30/94
CURRENT ASSETS
Cash and cash equivalents $ 3,956 $ 3,398 $ 4,005
Accounts and notes receivable, 13,080 13,224 18,961
less allowances
Inventories 17,809 17,473 10,689
Other current assets 1,754 1,466 1,583
Total current assets 36,599 35,561 35,238
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 295
Buildings and improvements 10,609 9,437 9,849
Machinery and equipment 20,505 19,805 19,766
31,334 29,462 29,910
Less accumulated depreciation (17,487) (16,090) (16,236)
Total property, plant and equipment 13,847 13,372 13,674
Assets Held For Sale 2,070 2,269 2,070
Goodwill 3,546 3,212 3,399
Other Assets and Deferred Charges 2,910 3,108 3,100
Total $ 58,972 $ 57,522 $ 57,481
CURRENT LIABILITIES
Current portion of long-term debt $ 0 $ 4,253 $ 5,040
Accounts payable 8,885 11,248 11,194
Other accrued liabilities 7,704 7,263 9,419
Total current liabilities 16,589 22,764 25,653
LONG-TERM DEBT 9,752 7,623 6,133
DEFERRED CREDITS
Pensions 1,997 1,997 1,696
Other deferred credits 511 179 350
Total deferred credits 2,508 2,176 2,046
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,317,675
4,283,260 and 3,890,243 shares 4,318 4,283 3,890
Additional capital 46,618 46,518 41,191
Cumulative translation adjustment (485) (455) (369)
Accumulated deficit (20,257) (25,387) (21,063)
30,194 24,959 23,649
Treasury stock, 5,962, 0 and 0
common shares at cost 71 - -
Total stockholders' equity 30,123 24,959 23,649
Total $ 58,972 $ 57,522 $ 57,481
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATE)
(UNAUDITED)
Three Months Ended 9/30 Nine Months Ended 9/30
1995 1994 1995 1994
Revenues
Net sales $ 21,918 $ 23,160 $ 77,506 $ 76,347
Other income 181 84 470 113
Total 22,099 23,244 77,976 76,460
Costs and expenses
Cost of goods sold 15,448 16,661 54,996 52,737
Selling, general and administrative 5,245 5,151 16,423 17,050
Interest 424 242 1,287 521
Total 21,117 22,054 72,706 70,308
Income before income taxes 982 1,190 5,270 6,152
Income tax provision 28 (232) 140 711
Net income $ 954 $ 1,422 $ 5,130 $ 5,441
Accumulated deficit - beginning of year (25,387) (26,504)
Accumulated deficit - end of period (20,257) (21,063)
Earnings per common share: $ 0.21 $ 0.31* $ 1.11 $ 1.19*
Average number of shares outstanding 4,599,347 4,605,386* 4,601,749 4,584,221*
*Adjusted retroactively for 10% stock dividend paid in December 1994.
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND SEPTEMBER 30, 1994
(THOUSANDS OF DOLLARS)
(UNAUDITED)
NINE MONTHS ENDED 9/30
1995 1994
Cash flows from Operating Activities:
Net income $ 5,130 $ 5,441
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 1,816 1,487
Decrease (increase) in receivables 144 (5,916)
Decrease (increase) in inventories (336) 1,136
Decrease in other net assets and deferred charges (187) (325)
(Gain) on sale of assets (334) (46)
Increase (decrease) in deferred credits 332 (44)
Increase (decrease) in accounts payable and accruals (1,542) 1,663
Net cash provided by operating activities 5,023 3,396
Cash flows from Investing Activities:
Payments for acquisitions (400) (3,954)
Capital expenditures (2,349) (2,568)
Proceeds from disposal of property,
plant and equipment 754 160
Net cash used by investing activities (1,995) (6,362)
Cash flows from Financing Activities:
Net borrowing (repayment) of revolving
credit and term loan (2,105) 1,307
Repayment of other long-term debt (19) (79)
Issuance of common stock 135 389
Purchase of treasury stock (451) -
Net cash provided (used) by financing activities (2,440) 1,617
Effect of exchange rate change (30) 75
Net increase (decrease) in cash and cash equivalents 558 (1,274)
Cash and cash equivalents at beginning of year 3,398 5,279
Cash and cash equivalents at end of period $ 3,956 $ 4,005
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS)
1. Inventories at September 30, 1995; December 31, 1994; and September 30, 1994 were:
9/30/95 12/31/94 9/30/94
Raw Materials and Supplies $ 4,840 $ 5,297 $ 4,528
Work-in-Process 5,556 5,058 3,086
Finished Goods 7,413 7,118 3,075
$ 17,809 $ 17,473 $ 10,689
</TABLE>
2. Financial statements for the nine months ended September 30, 1995 are
subject to audit adjustments.
3. The accompanying financial statements reflect all adjustments which were, in
the opinion of management, necessary to a fair statement of the results for the
peroid presented, and all of these adjustments were of a normal recurring
nature. For full disclosure of significant accounting policies, see Note 1 of
the PORTEC, Inc. 1994 Annual Report.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net revenues were $22,099,000 for the quarter ended September 30, 1995 or 5
percent below the net revenues of $23,244,000 for the quarter ended September
39, 1994. The decrease was due to reduced sales in the Construction Equipment
and Railroad segments. The Construction Equipment segment experienced weaker
market demand compared with that of last year for both traditional aggregate
equipment and green waste processing equipment. The Railroad segment had a
substantial decline in sales due to reduced demand for securement devices used
on all-purpose intermodal freight cars and the elimination of the sales of PVH
within PORTEC, (U.K.) Ltd. This unit was sold effective July 1, 1995. The
Materials Handling segment had a significant increase in sales as a result of
strong demand for automatic steering products and recycling systems.
Net income of $954,000 for the third quarter of 1995 was $468,000 below the
prior year's net income of $1,422,000. This change was attributable to the
lower earnings of the Construction Equipment and Railroad segments partially
offset by higher earnings from the Materials Handling segment. The gross margin
of the Construction Equipment segment was down due to the lower volume and
selling, general and administrative expense was up as a result of additional
support for the Innovator product line. Operating profits from the Railroad
segment were below the same period last year because of lower volume and some
pricing pressure in track components.
For the third quarter of 1995, the gross margin was 30 percent compared with 28
percent for the third quarter of 1994. Selling, general and administrative
expense was 24 percent of net sales for the three months ended September 30,
1995 versus 22 percent for the same period in 1994. Other income in the third
quarter of 1995 was $97,000 above that of 1994 partially due to a gain on the
sales of assets of the PVH business in the United Kingdom. Interest expense
increased $182,000 during the three months ended September 30, 1995 compared
with the same period last year as a result of expanded use of the Construction
Equipment dealer floor plan and higher interest rates. The income tax provision
increased in the third quarter of 1995 by $260,000. The income tax provision in
the third quarter of 1994 included a $100,000 reduction in the valuation reserve
for deferred taxes.
Net revenues and the corresponding net income for the nine months ended
September 30, 1995 were $77,976,000 and $5,130,000, respectively, compared with
net revenues of $76,460,000 and net income of $5,441,000 for the first nine
months of 1994. Sales for the period were 2 percent above the prior year due to
improved activity in the Materials Handling segment's traditional product lines
and the Count Recycling conveyor systems acquired early in 1994. The 6 percent
decrease in net income in the first nine months of 1995 reflected lower gross
margins of 29 percent versus 31 percent in 1994 and increased interest expense.
The increase in interest expense resulted from increased use of floor plans at
the Construction Equipment segment and increased interest rates. These changes
were partially offset by lower selling, general and administrative expense and
lower tax expense. The lower taxes were due to lower foreign earnings during
the first nine months of 1995.
Current assets were $36,599,000 at September 30, 1995 compared with $35,561,000
at December 31, 1994 and $35,238,000 at September 30, 1994. Other current
assets increased $288,000 from December 31, 1994 due to short term financing of
the sale of the PVH business. The reduction in accounts receivable from
September 30, 1994 of $5,881,000 was due to a reclassification to inventory and
improved collection efforts. The reclassification from accounts receivable back
to inventory resulted from dealer returns of Innovator equipment. The increase
in inventory of $7,120,000 was due to the above mentioned reclassification and
increased stocking programs at the Construction Equipment segment.
Fixed asset acquisitions were $2,349,000 during the first nine months of 1995
versus $2,568,000 during the same period of last year. Assets Held For Sale
decreased $199,000 from December 31, 1994 with the sale of two property sites in
Minneapolis, Minnesota. Goodwill increased $334,000 after amortization from
December 31, 1994 as a result of certain earn out provisions related to
acquisitions.
At September 30, 1995, current liabilities were down $6,175,000 from those of
December 31, 1994 and $9,064,000 from those of September 30, 1994. The
decreases from December 31, 1994 and September 30, 1994 were due to reductions
in the current portion of long-term debt and lower trade accounts payable.
These changes were partially offset by an increase in other accrued liabilities
from December 31, 1994. Other accrued liabilites decreased from September 30,
1994 as a result of lower operating accruals. The Company's long-term debt at
September 30, 1995 was $9,752,000, an increase of $2,129,000 from December 31,
1994 and $3,619,000 from September 30, 1994. These increases were the result of
the repayment of short-term debt.
Other deferred credits increased from both December 31, 1994 and September 30,
1994 principally because of the deferral of a gain on the sale of property in
Minneapolis, Minnesota.
The increase in stockholders' equity of $5,164,000 from December 31, 1994 to
September 30, 1995 was attributable to earnings and to the exercise of stock
options. These increases were partially offset by a slightly higher cumulative
translation adjustment and to the purchase of treasury stock through the
Company's stock repurchase program. The $6,474,000 increase in stockholders'
equity from September 30, 1994 to September 30, 1995 was due to earnings during
the last quarter of 1994 and the first three quarters of 1995 and to the
exercise of stock options during the period. These were partially offset by an
increase in the cumulative translation adjustment and the purchase of treasury
stock during the first and second quarters of 1995.
The Company received new orders of $23,701,000 during the third quarter of 1995
compared with $19,233,000 for the third quarter of 1994. The 23 percent
increase was attributable to higher orders in the Construction Equipment and
Materials Handling segments. The order backlog was $19,527,000 at September 30,
1995 compared with $24,339,000 and $13,092,000 at December 31, 1994 and
September 30, 1994, respectively. Approximately 72 percent of the 1995 backlog
is shippable in 1995 compare with 98 percent in 1994.
Liquidity
On February 12, 1993, the Company entered into a credit agreement with a bank
which was amended on April 26, 1994 and June 13, 1995. The amended agreement
provides up to $15,300,000 of credit available as either cash or letter 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.
This loan was repaid and the agreement has expired.
The Company does not have available lines of credit beyond its existing bank
agreement and is prohibited by this agreement from making other borrowings.
The Company presently has a facility for sale or lease in Troy, New York. Due
to economic conditions and other factors, the efforts to sell this property have
not been successful. Property in Pittsburgh, Pennsylvania has been leased on a
long-term lease with an option to buy. The proceeds from the sale and lease of
these properties are expected to improve the Company's liquidity position.
Due to the seasonal fluctuation in the Company's working capital needs and the
limitations on borrowing, the Company will need to exert careful cash controls.
However, management believes its existing line of credit and anticipated
operating results will provide the Company with sufficient funds for working
capital, capital expenditures and acquisitions to support anticipated growth.
The Company's working capital ratios were 2.2, 1.6 and 1.4 to 1 at September 30,
1995, December 31, 1994 and September 30, 1994, respectively. At September 30,
1995, the Company had available $4,866,000 of unused credit under its loan
agreement, plus cash and cash equivalents of $3,956,000. This compared with
$7,061,000 and $8,256,260 of unused credit and $3,398,000 and $4,005,000 of cash
and cash equivalents at December 31, 1994 and September 30, 1994, respectively.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
PORTEC, Ltd., a wholly-owned Canadian subsidiary of the Company, is a defendant
in a suit entitled "Arizona Wood Recycling Limited Partnership v. Innovator
Manufacturing, Inc. and Arizona Mite-E-Lift, Inc." institituted on July 6, 1995
in the Superior Court of the State of Arizona in and for the County of Maricopa,
Phoenix, Arizona, Case No.CV 95-10810. PORTEC, Ltd. acquired the stock of
Innovator Manufacturing, Inc on July 20, 1994. This case involves a grinder
manufactured by Innovator Manufacturing, Inc. and sold by Arizona Mite-E-Lift,
Inc to Arizona WoodRecycling in 1993. Arizona Wood claims that the plant did
not perform to specifications and requests damages of not less than $1,400,000
related primarily to alleged lost profits.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 The Company's statement regarding computation of
per share earnings.
(b) Reports on Form 8-K
During the quarter ended September 30, 1995, the
Company did not file any reports on Form 8-K.
SIGNATURE
Pursuant to the requirements of the securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PORTEC, Inc.
Dated: November 8, 1995
By:
Nancy A. Kindl
Vice President, Treasurer,
Secretary and Chief Financial
Officer
Exhibit 6(a) 11
PORTEC, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
THREE MONTHS
ENDED SEPTEMBER 30,
1995 1994
Average Shares Outstanding 4,599,347 4,605,386*
Net Income $954,000 $1,422,000
Per Share Amount $ .21 $ .31*
* Adjusted retroactively for 10% stock dividend paid in December
1994.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec Inc.
1995 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
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