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, 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
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(Address of principal executive offices) (Zip Code)
(847) 735-2800
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(Registrant's telephone number, including area code)
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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 November 11, 1996 - 4,335,596.
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1: FINANCIAL STATEMENTS
-----------------------------
PORTEC, INC. CONSOLIDATED BALANCE SHEET
AS OF SEPTEMBER 30, 1996; DECEMBER 31, 1995; AND SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS)
(Unaudited) (Unaudited)
9/30/96 12/31/95 9/30/95
------------- ------------- ---------
CURRENT ASSETS
Cash and cash equivalents $ 5,400 $ 3,477 $ 3,956
Accounts and notes receivable, 16,468 13,130 13,080
less allowances
Inventories 15,361 17,977 17,809
Other current assets 1,901 1,867 1,754
--------- --------- ---------
Total current assets 39,130 36,451 36,599
--------- --------- ---------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 220
Buildings and improvements 11,333 10,824 10,609
Machinery and equipment 22,080 20,884 20,505
--------- --------- ---------
33,633 31,928 31,334
Less accumulated depreciation (19,353) (17,757) (17,487)
--------- --------- ---------
Total property, plant and equipment 14,280 14,171 13,847
--------- --------- ---------
ASSETS HELD FOR SALE 2,070 2,070 2,070
--------- --------- ---------
GOODWILL 3,687 2,283 3,546
--------- --------- ---------
OTHER ASSETS AND DEFERRED CHARGES 3,038 2,843 2,910
--------- --------- ---------
Total $ 62,205 $ 57,818 $ 58,972
========= ========= =========
CURRENT LIABILITIES
Current portion of long-term debt $ 46 $ 46 $ 0
Accounts payable 5,583 7,578 5,987
Other accrued liabilities 7,964 9,452 10,602
--------- --------- --------
Total current liabilities 13,593 17,076 16,589
--------- --------- --------
LONG-TERM DEBT 13,080 10,117 9,752
--------- --------- --------
DEFERRED CREDITS
Pensions 1,923 1,923 1,997
Other deferred credits 677 674 511
--------- --------- --------
Total deferred credits 2,600 2,597 2,508
--------- --------- --------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,335,596
4,333,176 and 4,317,675 shares 4,336 4,333 4,318
Additional capital 46,642 46,649 46,618
Cumulative translation adjustment (369) (359) (485)
Accumulated deficit (17,587) (22,489) (20,257)
--------- --------- --------
33,022 28,134 30,194
Treasury stock, 10,021, 9,562 and
5,962 common shares at cost (90) (106) (71)
--------- --------- --------
Total stockholders' equity 32,932 28,028 30,123
--------- --------- --------
Total $ 62,205 $ 57,818 $ 58,972
========= ========= ========
The accompanying notes are an integral part of these financial statements.
<TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE AND NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Three Months Ended 9/30 Nine Months Ended 9/30
----------------------------------- -------------------------------
1996 1995 1996 1995
-------------- --------------- -------------- -------------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 21,006 $ 21,918 $ 76,882 $ 77,506
Other income 60 181 (77) 470
-------------- --------------- -------------- -------------
Total 21,066 22,099 76,805 77,976
-------------- --------------- -------------- -------------
Costs and expenses
Cost of goods sold 15,118 15,448 55,043 54,996
Selling, general and administrative 4,864 5,245 15,490 16,423
Interest 267 424 867 1,287
-------------- --------------- -------------- -------------
Total 20,249 21,117 71,400 72,706
-------------- --------------- -------------- -------------
Income before income taxes 817 982 5,405 5,270
Income tax provision (191) 28 503 140
-------------- --------------- -------------- -------------
Net income 1,008 954 4,902 5,130
Accumulated deficit - beginning of period (18,595) (21,211) (22,489) (25,357)
-------------- --------------- -------------- -------------
Accumulated deficit - end of period (17,587) (20,257) (17,587) $ (20,257)
============== =============== ============== =============
Earnings per common share: $ .22 $ .21 $ 1.07 $ 1.11
============== =============== ================ =============
Average number of shares outstanding 4,574,739 4,599,347 4,575,311 4,601,749
The accompanying notes are an integral part of these financial statements.
</TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND SEPTEMBER 30, 1995
(THOUSANDS OF DOLLARS)
(UNAUDITED)
9 MONTHS ENDED 9/30
-------------------------
1996 1995
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Cash flows from Operating Activities:
Net income $ 4,902 $ 5,130
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,945 1,816
Decrease (increase) in receivables (3,338) 144
Decrease (increase) in inventories 3,315 (336)
Decrease (increase) in other net assets
and deferred charges 35 (187)
Gain on sale of assets (1) (334)
Increase in deferred credits 40 332
Decrease in accounts payable
and accruals (3,356) (1,542)
-------- --------
Net cash provided by operating
activities 3,542 5,023
-------- --------
Cash flows from Investing Activities:
Acquisitions (2,600) (400)
Capital expenditures (1,675) (2,349)
Proceeds from disposal of property,
plant and equipment 6 754
-------- --------
Net cash used by
investing activities (4,269) (1,995)
-------- --------
Cash flows from Financing Activities:
Net borrowing (repayment) of revolving credit
agreement 3,000 (2,105)
Repayment of other long-term debt (37) (19)
Issuance of common stock 16 135
Purchase of treasury stock (168) (451)
-------- --------
Net cash provided (used) by financing
activities 2,811 (2,440)
-------- --------
Effect of exchange rate change (161) (30)
-------- --------
Net increase in cash and
cash equivalents 1,923 558
Cash and cash equivalents at
beginning of year 3,477 3,398
-------- --------
Cash and cash equivalents at
end of period $ 5,400 $ 3,956
======== ========
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - SEPTEMBER 30, 1996
(THOUSANDS OF DOLLARS)
1. Inventories at September 30, 1996; December 31, 1995; and September 30,
1995 were:
9/30/96 12/31/95 9/30/95
---------- ---------- ---------
Raw Materials and Supplies $ 5,131 $ 5,923 $ 4,840
Work-in-Process 3,601 5,313 5,556
Finished Goods 6,629 6,741 7,413
--------- ---------- ---------
$ 15,361 $ 17,977 $ 17,809
========= ========== =========
2. Financial statements for the nine months ended September 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
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Condition and Results of Operations
-----------------------------------
Net revenues were $21,066,000 for the quarter ended September 30, 1996 or 5
percent below the net revenues of $22,099,000 for the quarter ended September
30, 1995. The decrease was due to reduced sales in the Construction Equipment
and Railroad segments. The Construction Equipment segment experienced weaker
market demand compared with last year for environmental and aggregate crushing
equipment. The Railroad segment had a decline in sales due to lower
production of specialty railcars that use our load securement products and to
lack of demand for rail products in the United Kingdom market. The Materials
Handling segment had an increase in sales due to strong market demand for the
traditional power turn products.
Net income of $1,008,000 for the third quarter of 1996 was $54,000 above the
prior year's net income of $954,000. The 1996 net income included a reversal
of $221,000 in foreign income tax which had been recorded during the first
half of the year. This reversal was due to availability of a Canadian tax
loss carryforward. All segments experienced lower operating income in the
third quarter of 1996 compared with the same period last year. The
Construction Equipment segment's results were impacted by lower volume and
accompanying price pressure. The operating income of the Materials Handling
segment was below that of the third quarter of 1995 due to increased overhead
spending and lower volume at the Company's Countec operation. Lower sales
volume resulted in lower operating income for the Railroad segment.
For the third quarter of 1996, the gross margin was 28 percent compared with
30 percent for the third quarter of 1995. Selling, general and administrative
expense was 23 percent of net sales for the three months ended September 30,
1996 versus 24 percent for the same period in 1995. The decrease reflected a
reduction in professional fees and certain insurance costs. Other income in
the third quarter of 1996 was $121,000 below that of the same period in 1995
which included a gain on the sale of assets of the PVH business in the United
Kingdom. Interest expense decreased $157,000 during the three months ended
September 30, 1996 compared with the same period last year as a result of
decreased activity in Construction Equipment's floor plan financing. The
income tax provision in the third quarter of 1996 included a $200,000
reduction in the valuation reserve for deferred taxes.
Net revenues and the corresponding net income for the nine months ended
September 30, 1996 were $76,805,000 and $4,902,000, respectively, compared
with net revenues of $77,976,000 and net income of $5,130,000 for the first
nine months of 1995. Sales for the period were 1 percent below the prior year
due to a decline in the sale of green waste processing equipment supplied by
our Construction Equipment segment. The 4 percent decrease in net income in
the first nine months of 1996 reflected lower gross margins of 28 percent
versus 29 percent in 1995. This decrease was offset by lower selling, general
and administrative expense of $933,000 and reduced interest expense of
$420,000 resulting in a 3 percent increase in income before tax. A higher
effective tax rate impacted net income for the first nine months of 1996.
This increase was due to the utilization of the remaining domestic tax loss
carryforward.
Current assets were $39,130,000 at September 30, 1996 compared with
$36,451,000 at December 31, 1995 and $36,599,000 at September 30, 1995. Cash
increased $1,923,000 and $1,444,000 from December 31, 1995 and September 30,
1995, respectively. Receivables of $16,468,000 at September 30, 1996 were up
$3,338,000 from December 31, 1995 as a result of changes in sales volume and
slower collections. The $3,388,000 change from September 30, 1995 reflected
an increase in days in accounts receivable in the Construction Equipment and
Railroad segments. Inventories decreased $2,616,000 from December 31, 1995
and $2,448,000 from September 30, 1995. The decrease from year end resulted
from reduced Canadian inventory in anticipation of lower seasonal sales and a
focused effort to reduce inventory at the Construction Equipment segment. The
decrease from September 30, 1995 was due to the write-off of Innovator
inventory at year end and to a continuing effort to reduce inventory.
Fixed asset acquisitions were $1,675,000 during the first nine months of 1996
versus $2,349,000 during the same period of last year. Depreciation and
amortization of $1,945,000 was up $129,000 over that of last year. The
increase in goodwill of $1,404,000 from December 31, 1995 resulted from the
acquisition of Moore & Steele, a producer of railroad track lubrication
products, in July and payment on certain earn out provisions related to an
acquisition. These changes were partially offset by amortization. The net
increase in goodwill of $141,000 from September 30, 1995 to September 30, 1996
was the result of the above mentioned goodwill additions partially offset by a
write-off of goodwill related to the Innovator acquisition at December 31,
1995 and amortization.
At September 30, 1996, current liabilities were down $3,483,000 from December
31, 1995 and $2,996,000 from September 30, 1995. The change from year end
resulted from a decrease in accounts payable due to lower working capital
needs and to lower customer deposits. A decrease in customer deposits,
accrued expenses and other current liabilities resulted in the change from
September 30, 1995.
Long-term debt of $13,080,000 was $2,963,000 and $3,328,000 higher than that
of December 31, 1995 and September 30, 1995, respectively. The increases were
due to the acquisition of Moore & Steele and to a large pension payment
made in September of 1996.
The increase in stockholders' equity of $4,904,000 from December 31, 1995 to
September 30, 1996 was attributable to net income and the exercise of stock
options. These were partially offset by an increase in the cumulative
translation adjustment. The $2,809,000 increase in stockholders' equity from
September 30, 1995 to September 30, 1996 was due to a loss during the fourth
quarter of 1995 and net income during the first three quarters of 1996 and the
exercise of stock options. The increase in cumulative translation loss also
impacted the result. The Company declared an 8 cent cash dividend on common
stock for the fourth quarter of 1996. This is the first cash dividend
declared by the Company since 1986.
The Company received new orders of $19,992,000 during the third quarter of
1996 compared with $23,701,000 for the third quarter of 1995. The 16 percent
decrease was attributable to a significant reduction in bookings for the
Construction Equipment and Materials Handling segments while the Railroad
segment experienced increased bookings. The order backlog was $18,069,000 at
September 30, 1996 compared with $21,590,000 and $19,527,000 at December 31,
1995 and September 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 2.9, 2.1 and
2.2 to 1 at September 30, 1996, December 31, 1995 and September 30, 1995,
respectively. At September 30, 1996, the Company had available $2,050,000 of
unused credit under its loan agreement, plus cash and cash equivalents of
$5,400,000. This compared with $5,274,000 and $4,866,000 of unused credit and
$3,477,000 and $3,956,000 of cash and cash equivalents at December 31, 1995
and September 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. This acquisition gives the Company the broadest rail
lubrication product line on a worldwide basis.
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.
-------------------------
Registrant
Dated: November 11, 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JUL-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 5400
<SECURITIES> 0
<RECEIVABLES> 16790
<ALLOWANCES> 322
<INVENTORY> 15361
<CURRENT-ASSETS> 39130
<PP&E> 33633
<DEPRECIATION> 19353
<TOTAL-ASSETS> 62205
<CURRENT-LIABILITIES> 13593
<BONDS> 0
0
0
<COMMON> 4336
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 62205
<SALES> 76882
<TOTAL-REVENUES> 76805
<CGS> 55043
<TOTAL-COSTS> 70533
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 867
<INCOME-PRETAX> 5405
<INCOME-TAX> 503
<INCOME-CONTINUING> 4902
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4902
<EPS-PRIMARY> 1.07
<EPS-DILUTED> 1.07
</TABLE>
Exhibit 6 (a) 11
PORTEC, INC.
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COMPUTATION OF NET INCOME PER COMMON SHARE
------------------------------------------
Three Months Nine Months
Ended September 30 Ended September 30
---------------------- ----------------------
1996 1995 1996 1995
---- ---- ---- ----
Average Shares
Outstanding 4,574,739 4,599,347 4,575,311 4,601,749
Net Income $1,008,000 $ 954,000 $4,902,000 $5,130,000
Per Share
Amount $ .22 $ .21 $ 1.07 $ 1.11
