SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For Quarterly Period Ended June 30, 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.
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(Exact name of Registrant as specified in its charter)
Delaware 36-1637250
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(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
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(Registrant's telephone number, including area code)
Former address:
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(Former name, former address and former fiscal
year, if changed since last report).
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------ ------
Number of shares of Registrant's Common Stock ($1 per share par value)
issued and outstanding at August 13, 1996 - 4,323,155.
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1: FINANCIAL STATEMENTS
-----------------------------
PORTEC, INC. CONSOLIDATED BALANCE SHEET
AS OF JUNE 30, 1996; DECEMBER 31, 1995; AND JUNE 30, 1995
(THOUSANDS OF DOLLARS)
(Unaudited) (Unaudited)
6/30/96 12/31/95 6/30/95
----------- ---------- ----------
CURRENT ASSETS
Cash and cash equivalents $ 4,605 $ 3,477 $ 3,946
Accounts and notes receivable, 16,932 13,130 15,183
less allowances
Inventories 14,700 17,977 18,037
Other current assets 1,107 1,867 1,036
--------- -------- ---------
Total current assets 37,344 36,451 38,202
--------- -------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 220
Buildings and improvements 11,212 10,824 10,287
Machinery and equipment 21,534 20,884 20,400
-------- -------- ---------
32,966 31,928 30,907
Less accumulated depreciation (18,735) (17,757) (16,973)
-------- -------- ---------
Total property, plant and equipment 14,231 14,171 13,934
-------- -------- ---------
ASSETS HELD FOR SALE 2,070 2,070 2,070
-------- -------- ---------
GOODWILL 2,389 2,283 3,556
-------- -------- ---------
OTHER ASSETS AND DEFERRED CHARGES 3,060 2,843 2,938
-------- -------- ---------
Total $ 59,094 $ 57,818 $ 60,700
======== ======== =========
CURRENT LIABILITIES
Current portion of long-term debt $ 46 $ 46 $ 2,500
Accounts payable 7,059 7,578 7,574
Other accrued liabilities 9,353 9,452 10,340
-------- -------- ---------
Total current liabilities 16,458 17,076 20,414
-------- -------- ---------
LONG-TERM DEBT 8,591 10,117 8,711
-------- -------- ---------
DEFERRED CREDITS
Pensions 1,923 1,923 1,997
Other deferred credits 637 674 471
-------- -------- ---------
Total deferred credits 2,560 2,597 2,468
-------- -------- ---------
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 (792) (359) (484)
Accumulated deficit (18,595) (22,489) (21,211)
-------- -------- ---------
31,575 28,134 29,178
Treasury stock, 10,021 at cost (90) (106) (71)
-------- -------- ---------
Total stockholders' equity 31,485 28,028 29,107
-------- -------- ---------
Total $ 59,094 $ 57,818 $ 60,700
======== ======== =========
The accompanying notes are an integral part of these financial statements.
<TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE AND SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATE)
(UNAUDITED)
<CAPTION>
Three Months Ended 6/30 Six Months Ended 6/30
---------------------------------------- ------------------------------------
1996 1995 1996 1995
------------------ ------------------ ----------------- -------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 28,592 $ 28,929 $ 55,876 $ 55,588
Other income (67) 33 (137) 289
------------------ ------------------ ------------------ -------------
Total 28,525 28,962 55,739 55,877
------------------ ------------------ ------------------ -------------
Costs and expenses
Cost of goods sold 20,309 20,760 39,925 39,548
Selling, general and administrative 5,395 5,466 10,626 11,178
Interest 270 455 600 863
------------------ ------------------ ------------------ -------------
Total 25,974 26,681 51,151 51,589
------------------ ------------------ ------------------ -------------
Income before income taxes 2,551 2,281 4,588 4,288
Income tax provision 630 24 694 112
------------------ ------------------ ------------------ -------------
Net income $ 1,921 $ 2,257 3,894 4,176
================= ==================
Accumulated deficit - beginning of year (22,489) (25,387)
Accumulated deficit - end of period $ (18,595) $ (21,211)
================== =============
Earnings per common share: $ .42 $ .49 $ .85 $ .91
================== ================== =================== =============
Average number of shares outstanding 4,582,973 4,602,726 4,575,590 4,602,924
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1996 AND JUNE 30, 1995
(THOUSANDS OF DOLLARS)
(UNAUDITED)
6 MONTHS ENDED 6/30
-------------------------
1996 1995
---- ----
Cash flows from Operating Activities:
Net income $ 3,894 $ 4,176
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,271 1,199
Increase in receivables (3,802) (1,959)
Decrease (increase) in inventories 3,277 (564)
Decrease in other net assets
and deferred charges 819 311
Gain on sale of assets (1) (268)
Increase (decrease) in deferred credits (37) 292
Decrease in accounts payable
and accruals (457) (216)
------- -------
Net cash provided by operating
activities 4,964 2,971
------- -------
Cash flows from Investing Activities:
Acquisitions (500) (400)
Capital expenditures (1,082) (1,660)
Proceeds from disposal of property,
plant and equipment 6 711
------- -------
Net cash used by
investing activities (1,576) (1,349)
------- -------
Cash flows from Financing Activities:
Net repayment of revolving credit agreement (1,500) (647)
Repayment of other long-term debt (26) (19)
Issuance of common stock 0 72
Purchase of treasury stock (168) (451)
------- -------
Net cash used by financing
activities (1,694) (1,045)
------- -------
Effect of exchange rate change (566) (29)
------- -------
Net increase in cash and
cash equivalents 1,128 548
Cash and cash equivalents at
beginning of year 3,477 3,398
------- -------
Cash and cash equivalents at
end of period $ 4,605 $ 3,946
======= =======
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - JUNE 30, 1996
(THOUSANDS OF DOLLARS)
1. Inventories at June 30, 1996; December 31, 1995; and June 30, 1995
were:
6/30/96 12/31/95 6/30/95
---------- -------- --------
Raw Materials and
Supplies $ 5,018 $ 5,923 $ 5,709
Work-in-Process 3,422 5,313 5,242
Finished Goods 6,260 6,741 7,086
-------- -------- --------
$ 14,700 $ 17,977 $ 18,037
======== ======== ========
2. Financial statements for the six months ended June 30, 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.
ITEM 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Net revenues of $28,525,000 for the quarter ended June 30, 1996, were 1.5
percent below the net revenues of $28,962,000 for the same period in 1995.
A significant increase in sales of the Railway Products segment was more
than offset by decreases in both the Construction Equipment and Materials
Handling segments. The performance of the Railway Products segment was
driven by strong market demand and market share gains for U.S. track
components. Strength in the Construction Equipment segment's traditional
crushing and screening lines was offset by significantly lower sales of the
Innovator product line. A lack of large projects involving specialty
conveyor products and a weaker market for fiber handling and sorting
systems due to extremely volatile prices for used paper and cardboard both
impacted the performance of the Materials Handling segment.
Net income of $1,921,000 for the second quarter of 1996 was 14.9 percent
below the net income of $2,257,000 for the same period in 1995. The
decrease was attributable to an increase in the provision for income taxes
of $606,000. Foreign income taxes increased due to increased
profitability. In 1995, domestic taxes were negligible as a result of a
tax loss carryforward. The remaining domestic loss carryforward will be
fully utilized during 1996. Gross margins were up at both the Construction
Equipment and Railway Products segments. Margins at Construction Equipment
increased on lower volume because of product mix. The improved Railway
Products margins reflected higher volume and the termination of an
unsuccessful steel fabrication business in the second half of 1995 at
Portec, (U.K.) Ltd. The Materials Handling segment experienced lower
margins in the second quarter of 1996 compared with 1995 due to lower
volume available to cover higher overhead costs.
Selling, general and administrative expense during the second quarter of
1996 decreased from $5,466,000 for the same period last year to $5,395,000.
The decrease reflected the elimination of certain expenses related to the
Innovator product line and Portec, (U.K.) Ltd.'s steel fabrication
business. Interest expense for the period was down $185,000 due to
decreased activity in Construction Equipment's floor plan financing and a
lower level of borrowing under the Company's revolving loan agreement.
Net revenues and corresponding net income were $55,739,000 and $3,894,000,
respectively, for the six months ended June 30, 1996, compared with net
revenues of $55,877,000 and net income of $4,176,000 for the first six
months of 1995. Net revenues were down slightly as a result of lower other
income. Included in 1995 <PAGE>
other income was a $260,000 gain on the sale of property located in
Minneapolis, Minnesota. Sales in the Materials Handling and Railway
Products segments were up from the six months ended June 30, 1995 due to
strength in the market for fiber handling and sorting systems early in 1996
and to strong market demand and market share gains in the U.S. track
components business. The Construction Equipment segment experienced lower
sales in the first six months of 1996 compared with the same period last
year as a result of lower Innovator product sales. This segment is
currently refocusing the Innovator product line.
The decrease in the net income for the six month period ended June 30, 1996
versus the same period last year reflected an increased tax provision on
both foreign and domestic earnings. The effective tax rate for the Company
in 1996 will be higher due to the utilization of the remaining domestic tax
loss carryforward during the year. Income before income taxes was up
$300,000 due to lower selling, general and administrative and interest
expense. The lower selling, general and administrative expense reflected
the elimination of costs related to Innovator and a U.K. steel fabricating
business. Interest expense for the period decreased because of lower
borrowing under the Company's revolving line of credit and to less activity
in the Construction Equipment floor plan finance program. Gross margins
were $15,951,000 for the period ending June 30, 1996 compared with
$16,040,000 for the same period last year.
Current assets were $37,344,000 at June 30, 1996 compared with $36,451,000
at December 31, 1995 and $38,202,000 at June 30, 1995. Receivables of
$16,932,000 at June 30, 1996 were up $3,802,000 from December 31, 1995 as a
result of changes in sales volume and slower collections. The $1,749,000
change from June 30, 1995 reflected an increase in days in accounts
receivable in the Construction Equipment and Materials Handling segments.
Inventories decreased $3,277,000 from December 31, 1995 and $3,337,000 from
June 30, 1995. The decrease from year end resulted mainly from reduced
Canadian inventory in anticipation of their lower seasonal sales and a
reduction in Countec inventory due to shipment of a large project. The
decrease from June 30, 1995 was due to the write-off of Innovator inventory
at year end and a focused effort to reduce inventory. Changes in prepaid
expenses caused other current assets to decrease $760,000 from December 31,
1995.
Fixed asset acquisitions were $1,082,000 during the first half of 1996
versus $1,660,000 during the same period of last year. Depreciation and
amortization expense was up $72,000 over that of last year. The change in
goodwill of $106,000 from December 31, 1995 reflected an increase due to
certain earn out provisions related to an acquisition partially offset by
amortization. The decrease of $1,167,000 from June 30, 1995 was the result
of the above changes plus the write-off of goodwill at December 31, 1995.
This write-off was related to the acquisition of Innovator in July of 1994.
At June 30, 1996, current liabilities were down $618,000 from December 31,
1995 and $3,956,000 from June 30, 1995. The change from year end resulted
from a decrease in accounts payable due to lower working capital needs.
The change from June 30, 1995 reflected the payment of a Canadian term loan
as well as reductions in trade payables and other accrued liabilities. The
Company's long-term debt at June 30, 1996 was $8,591,000, a decrease of
$1,526,000 from December 31, 1995 and $120,000 from June 30, 1995. The
debt was decreased with cash generated from operations.
The increase in stockholders' equity of $3,457,000 from December 31, 1995
to June 30, 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 $2,378,000 increase in stockholders' equity from June 30, 1995 to June
30, 1996 was due to earnings during the third quarter of 1995 and the first
two quarters of 1996 partially offset by a loss in the fourth quarter of
1995. In addition, the increase in stockholders' equity related to the
exercise of stock options offset by an increase in the cumulative
translation adjustment and by the purchase of treasury stock during the
period.
The Company received new orders of $24,104,000 during the second quarter of
1996 compared with $25,518,000 for the second quarter of 1995. The 6%
decrease was attributable to a significant reduction in bookings for
recycling equipment as well as small decreases in the Construction
Equipment and Railway Products segments' orders. The order backlog was
$17,698,000 at June 30, 1996 compared with $21,590,000 and $17,796,000 at
December 31, 1995 and June 30, 1995, respectively.
Liquidity
---------
On February 12, 1993, the Company entered into a credit agreement with a
bank which was amended at 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. The provisions also 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 2.3, 2.1 and
1.9 to 1 at June 30, 1996, December 31, 1995 and June 30, 1995,
respectively. At June 30, 1996, the Company had available $6,775,000 of
unused credit under its loan agreement, plus cash and cash equivalents of
$4,605,000. This compared with $5,274,000 and $7,706,000 of unused credit
and $3,477,000 and $3,946,000 of cash and cash equivalents at December 31,
1995 and June 30, 1995, respectively.
PART II - OTHER INFORMATION
---------------------------
ITEM 5. ACQUISITION
--------------------
On July 17, 1996, the Company acquired certain assets of Moore and Steele
Corporation, a manufacturer and marketer of lubricator equipment for the
railroad industry.<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
-----------------------------------------
(a) Exhibits:
---------
11 The Company's statement regarding computation of per share
earnings.
(b) Reports on Form 8-K
-------------------
During the quarter ended June 30, 1995, the Company did not file
any reports on Form 8-K.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Dated: August 13, 1996 By:
----------------------------------
Nancy A. Kindl
Vice President, Treasurer,
Secretary and Chief Financial
Officer
EXHIBIT INDEX
-------------
Page No.
Within
Sequential
Numbering
System of
Exhibit
-------
Exhibit Description
------- -----------
11 Registrant's statement regarding 12
computation of per share earnings.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 4605
<SECURITIES> 0
<RECEIVABLES> 17389
<ALLOWANCES> 457
<INVENTORY> 14700
<CURRENT-ASSETS> 37344
<PP&E> 32966
<DEPRECIATION> 18735
<TOTAL-ASSETS> 59094
<CURRENT-LIABILITIES> 16458
<BONDS> 0
0
0
<COMMON> 4333
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 59094
<SALES> 55876
<TOTAL-REVENUES> 55739
<CGS> 39925
<TOTAL-COSTS> 50551
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 600
<INCOME-PRETAX> 4588
<INCOME-TAX> 694
<INCOME-CONTINUING> 3894
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3894
<EPS-PRIMARY> .85
<EPS-DILUTED> .85
</TABLE>
Exhibit 6(a) 11
---------------
PORTEC, INC.
------------
COMPUTATION OF NET INCOME PER COMMON SHARE
------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30.
---------------------- ---------------------
1996 1995 1996 1995
---- ---- ---- ----
Average Shares
Outstanding 4,582,973 4,602,726 4,575,590 4,602,924
Net Income $1,921,000 $2,257,000 $3,894,000 $4,176,000
Per Share
Amount $ .42 $ .49 $ .85 $ .91<PAGE>
