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 March 31, 1996, 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)
(847) 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 April 25, 1996 - 4,323,155.
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements
PORTEC, INC. CONSOLIDATED BALANCE SHEET
As of March 31, 1996; December 31, 1995; and March 31, 1995
(Thousands of Dollars)
<TABLE>
<S><C>
Unaudited Unaudited
3/31/96 12/31/95 3/31/95
CURRENT ASSETS
Cash and cash equivalents $ 3,686 $ 3,477 $ 3,823
Accounts and notes receivable, 16,646 13,130 16,307
less allowances
Inventories 16,465 17,977 18,482
Other current assets 1,284
1,867 1,243
Total current assets 38,081 36,451 39,855
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 220
Buildings and improvements 10,950 10,824 9,523
Machinery and equipment 21,203 20,884 19,942
32,373 31,928 29,685
Less accumulated depreciation (18,297) (17,757) (16,562)
Total property, plant and equipment 14,076 14,171 13,123
Assets Held For Sale 2,070 2,070 2,093
Goodwill 2,240 2,283 3,012
Other Assets and Deferred Charges 2,771 2,843 3,103
Total $ 59,238 $ 57,818 $ 61,186
CURRENT LIABILITIES
Current portion of long-term debt $ 46 $ 46 $ 3,889
Accounts payable 7,047 7,578 12,398
Other accrued liabilities 8,407 9,452 7,380
Total current liabilities 15,500 17,076 23,667
LONG-TERM DEBT 11,303 10,117 8,617
DEFERRED CREDITS
Pensions 1,923 1,923 1,997
Other deferred credits 596 674 105
Total deferred credits 2,519 2,597 2,102
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,333,176
4,333,176 and 4,297,176 shares 4,333 4,333 4,297
Additional capital 46,629 46,649 46,576
Cumulative translation adjustment (412) (359) (572)
Accumulated deficit (20,544) (22,489) (23,468)
30,006 28,134 26,833
Treasury stock, 10,021, 9,562 and 2,722
common shares at cost (90) (106) (33)
Total stockholders' equity 29,916 28,028 26,800
Total $ 59,238 $ 57,818 $ 61,186
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATE)
(UNAUDITED)
Three Months Ended 3/31
1996 1995
Revenues
Net sales $ 27,284 $ 26,659
Other income (expense)
(70)
256
Total 27,214 26,915
Costs and Expenses
Cost of goods sold 19,616 18,788
Selling, general and administrative 5,231 5,712
Interest 330 408
Total 25,177 24,908
Income before income taxes 2,037 2,007
Income tax provision
64 88
Net Income 1,973 1,919
Accumulated deficit - beginning of year
$ (22,517) $ (25,387)
Accumulated deficit - end of period $ (20,544) $ (23,468)
Earnings per common share $ .43 $ .42
Average number of shares outstanding 4,568,206 4,603,084
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1996 AND MARCH 31, 1995
(THOUSANDS OF DOLLARS)
(UNAUDITED)
3 MONTHS ENDED 3/31
1996 1995
Cash flows from Operating Activities:
Net income $ 1,973 $ 1,919
Adjustments to reconcile net income
to net cash used by operating
activities:
Depreciation and amortization 633 609
Increase in receivables (3,516) (3,083)
Decrease (increase) in inventories 1,512 (1,009)
Decrease in other net assets
and deferred charges 642 137
Gain on sale of assets (2) (263)
Decrease in deferred credits (78) (74)
Increase (decrease) in accounts payable
and accruals (1,412) 1,640
Net cash used by operating
activities (248) (124)
Cash flows from Investing Activities:
Capital expenditures (494) (336)
Proceeds from disposal of property,
plant and equipment 5 706
Net cash provided (used) by
investing activities (489) 370
Cash flows from Financing Activities:
Net borrowing on revolving credit
and term loan 1,200 643
Payment on capitalized leases (15) (14)
Issuance of common stock 0 72
Purchase of Treasury Stock (168) (405)
Net cash provided by financing
activities 1,017 296
Effect of exchange rate change (71) (117)
Net increase in cash and
cash equivalents 209 425
Cash and cash equivalents at
beginning of year 3,477 3,398
Cash and cash equivalents at
end of period $ 3,686 $ 3,823
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - MARCH 31, 1996
(THOUSANDS OF DOLLARS)
1. Inventories at March 31, 1996; December 31, 1995; and March 31, 1995 were:
3/31/96 12/31/95 3/31/95
Raw Materials and Supplies $ 5,436 $ 5,923 $ 5,235
Work-in-Process 4,705 5,313 5,539
Finished Goods 6,324 6,741 7,708
$ 16,465 $ 17,977 $ 18,482
2. Financial statements for the three months ended March 31, 1996 are subject to audit adjustments.
3. The accompanying financial statements reflect all adjustments which were, in the opinion of
management, necessary to a fair statement of the results for the period presented, 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. 1995 Annual Report.
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net sales for the quarter ended March 31, 1996 were $27,284,000 compared with
$26,659,000 for the same period in 1995. The increase in net sales of 2.3
percent during the first quarter of 1996 was due to higher sales by the
Company's Materials Handling segment. Sales of recycling conveyors and systems
were up significantly over the same period last year. This performance was
partially offset by sales declines in the Construction Equipment and Railway
Products segments. The decrease in Construction Equipment sales resulted from
slightly lower sales of aggregate processing equipment and a substantial decline
in sales of green waste processing equipment. The sales efforts in the green
waste processing equipment product line are being refocused. Sales of the
Railway Products segment were down from the first quarter of 1995 due to lower
sales in both the Canadian and United Kingdom. The Canadian rail industry
continues to experience difficult economic conditions. Sales of domestic rail
products were up over those of the same period last year.
Net income was $1,973,000 for the first quarter of 1996 compared with $1,919,000
for the quarter ended March 31, 1995. The increase of $54,000 in the first
quarter 1996 net income from the prior year's results reflected higher new sales
and lower selling, general and administrative expense, interest expense and
income tax expense. These positive factors were partially offset by lower gross
margins and higher other expense. Gross margins were $7,661,000 compared with
$7,871,000 for the same period in 1995. The gross margin decreased due to lower
manufacturing volume in the Construction Equipment segment and to a change in
the product mix in the Materials Handling segment.
Selling, general and administrative expense decreased from $5,712,000 in the
first quarter of 1995 to $5,231,000 in the same quarter of 1996. The lower
expense resulted from a company wide cost control effort. Other expense was
higher in the first quarter of 1996 due to increased royalty expense. Other
income in 1995 included a $256,000 gain on the sale of a property site located
in Minneapolis, Minnesota. Interest expense was $330,000 compared with prior
year's interest expense for the same period of $408,000. The decreased interest
expense resulted from reduced borrowing and lower interest rates. Foreign
income tax increased during the first quarter of 1996 as compared with that of
1995. However, this was offset by lower domestic income tax resulting from a
revaluation of deferred tax assets.
Current assets were $38,081,000 at March 31, 1996 compared with $36,451,000 at
December 31, 1995 and $39,855,000 at March 31, 1995. Receivables of $16,646,000
at March 31, 1996 were up $3,516,000 from December 31, 1995 due to increased
sales. Inventory decreased $2,017,000 from March 31, 1995 as a result of the
$1,156,000 write down of Innovator inventory at December 31, 1995 and a focused
effort to reduce inventory where possible. Other current assets decreased
$583,000 from December 31, 1995 due mainly to changes in prepaid insurance.
Fixed asset acquisitions were $494,000 during the first quarter of 1996 versus
$336,000 during the same period of last year. Assets Held For Sale decreased
$23,000 with the sale of a property site in Minneapolis, Minnesota in exchange
for a note receivable. Goodwill decreased by $772,000 from March 31, 1995 which
resulted from the write-off of the Innovator goodwill at December 31, 1995 and
normal amortization partially offset by the recording of $400,000 additional
goodwill related to an earnout provision for a business acquired in 1994. Other
Assets and Deferred Charges were $2,771,000 at March 31, 1996 compared with
$3,103,000 at March 31, 1995 as a result of a decrease in long-term notes
receivable and deferred charges.
At March 31, 1996, current liabilities were down $1,576,000 from December 31,
1995 and $8,167,000 from those of March 31, 1995. The decrease from the year
end was due to lower customer deposits and reduced trade payables. The change
from March 31, 1995 reflected the payment of $1,200,000 of a domestic term loan
and $3,046,000 on a Canadian term loan as will as reductions in trade payables
and accrued expenses. The Company's long-term debt at March 31, 1996 was
$11,303,000, an increase of $1,186,000 and $2,686,000 over that of December 31,
1995 and March 31, 1995, respectively. The increase from December 31, 1995 was
due to working capital needs. The change from March 31, 1995 resulted from
using long-term debt to pay off current term debt of $4,246,000.
The increase in stockholders' equity of $1,888,000 from December 31, 1995 to
March 31, 1996 was attributable to earnings and the contribution of treasury
stock to the Savings and Investment Plan for Company employees partially offset
by an increase in the cumulative translation adjustment. The $3,116,000
increase in stockholders' equity from March 31, 1995 to March 31, 1996 was due
to earnings during the last three quarters of 1995 and the first quarter of
1996, to the exercise of stock options and to a decrease in the cumulative
translation adjustment. These were partially offset by the purchase of treasury
stock during the period.
The Company received new orders of $29,259,000 during the first quarter of 1996
compared with $24,210,000 for the first quarter of 1995. The 21% increase was
attributable to higher orders in the Construction Equipment and Materials
Handling segments and a slight decrease in the rail segment. The order backlog
was $23,012,000 at March 31, 1995 compared with $21,590,000 and $21,206,000 at
December 31, 1995 and March 31, 1995, respectively.
Liquidity
On February 12, 1993, the Company entered into a credit agreement with a bank
which was amended on April 26, 1994, and June 13, 1995. The amended agreement
provides up to $15,300,000 of credit available as either cash or letters of
credit. The provisions of the agreement include restrictive covenants relating
to minimum net worth, interest coverage, net working capital and leverage ratio
requirements and limit cash dividend payments and additional indebtedness.
The Company does not have available lines of credit beyond its existing bank
agreement and is prohibited by the 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. A property in Pittsburgh, Pennsylvania, has been leased on
a long-term lease with an option to buy.
Due to the seasonal fluctuation in the Company's working capital needs and the
limitations on borrowing, the Company continues 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 2.5, 2.1 and 1.7 to 1 at March 31,
1996, December 31, 1995 and March 31, 1995, respectively. At March 31, 1996,
the Company had available $4,075,000 of unused credit under its loan agreement,
plus cash and cash equivalents of $3,686,000. This compared with $5,274,000 and
$7,061,000 of unused credit and $3,477,000 and $3,823,000 of cash and cash
equivalents at December 31, 1995 and March 31, 1995, respectively.
II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on April 23, 1996 ("Annual
Meeting."). There were 4,304,913 shares of the Company's common stock issued
and entitled to vote at the Annual Meeting. Proxies were solicited pursuant to
the nominees of the Board of Directors of the Company.
At the Annual Meeting, Messrs. J. Grant Beadle, Frank T. MacInnis and Arthur
McSorley, Jr. were elected directors for three-year terms and the votes cast
were as follows:
Total Votes For
Total Votes Which Authority To
For Election Vote Withheld
J. Grant Beadle 3,371,662 10,977
Frank T. MacInnis 3,370,544 12,095
Arthur McSorley 3,371,662 10,977
Following the election, the Company's Board of Directors consisted of the
following eight named individuals:
Name
Expiration of Current Term
Frederick J. Mancheski 1997
John F. McKeon 1997
Albert Fried, Jr. 1998
L. L. White, Jr. 1998
Michael T. Yonker 1998
J. Grant Beadle 1999
Frank T. MacInnis 1999
Arthur McSorley, Jr. 1999
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 March 31, 1996, the Company did not
file any reports on Form 8-K.
SIGNATURE
Pursuant to the requirements of the Securities and 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.
Registrant
By:
Date: April 26, 1996 Nancy A. Kindl
Vice President, Treasurer, and
Secretary and Chief Financial
Officer
EXHIBIT INDEX
Page No.
Within
Sequential
Numbering
System of
Exhibit
Exhibit Description
11 Registrant's statement regarding 12
computation of per share earnings.
Exhibit 6(a) 11
PORTEC, INC.
COMPUTATION OF NET INCOME PER COMMON SHARE
THREE MONTHS
ENDED MARCH 31,
1996 1995
Average Shares Outstanding 4,568,206 4,603,084
Net Income $1,973,000 $1,919,000
Per Share Amount $ .43 $ .42
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
1996 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
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<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<CASH> 3686
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<RECEIVABLES> 17131
<ALLOWANCES> 485
<INVENTORY> 16465
<CURRENT-ASSETS> 38081
<PP&E> 32373
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<TOTAL-ASSETS> 59238
<CURRENT-LIABILITIES> 15500
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0
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</TABLE>
