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, 1995 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, Suite 120, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 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 25, 1996, 4,304,913 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 $32,394,000. For this
purpose, non-affiliates are deemed to be all stockholders other than directors
and officers of the Registrant.
Portions of Registrant's 1995 Annual Report to Stockholders (Parts I, II
and IV of Form 10-K) and portions of PORTEC, Inc.'s Proxy Statement for its 1996
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 com-
ponents, 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 1995 Annual Report to Stockholders ("1995
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 June 13, 1995
("Credit Agreement") with the NBD Bank which provides the Company with 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 provided for a term loan of $4,000,000 on an
unsecured basis. This term loan was paid in full during 1995. For additional
information on the Credit Agreement and Credit Authorization see Note 6 of the
Notes to Consolidated Financial Statements appearing on page 24 of the 1995
Annual Report.
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. In July 1995, Portec (U.K.) Ltd. sold the
assets of PVH Engineering after transferring several of PVH's proprietary
materials handling product lines to the Portec (U.K.) Ltd. manufacturing
facility.
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, was 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. During the fourth quarter of 1995, a Canadian research and
development facility acquired as a part of Innovator Holdings was closed. For
additional information on the closing of Innovator Holdings see Note 15 of the
Notes to Consolidated Financial Statements appearing on page 31 of the 1995
Annual Report.
(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 "Business
Segments", appearing on page 10 of the 1995 Annual Report. Note 15 of the
Notes to Consolidated Financial Statements appearing on page 31 of the 1995
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 1995 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
Equipment, 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 1995 these activities did not require the investment
of a material amount of the assets of the Company and this practice is expected
to continue in 1996.
(iii) Sources And Availability Of Materials. Steel and steel fabrications
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 competi-
tion. As pointed out in the immediately preceding paragraph (v), the demand for
certain of the Company's products is subject to seasonal fluctuations. These
fluctuations result in a need for increased working capital during the first six
months of a year. The Company had current ratios of 2.1, 1.6 and 1.5 to 1 at
December 31, 1995, 1994 and 1993, respectively.
(vii) Principal Customers Of Business Segments. No segment of the Company-
'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 1995, no single customer accounted for 10 percent or more
of the Company's consolidated revenues.
(viii) Backlog Of Orders. The Company's backlog of orders at December 31,
1995, was $21,590,000, compared with backlog at December 31, 1994, of $24,339,0-
00. The backlog at December 31, 1995, is believed to be firm and 100% is
deliverable in 1996. Orders received in 1995 were $95,848,000, a 5% decrease
from $100,687,000 in orders received in 1994.
(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 expenditures
for continuing operations related to the development
of new products and improvements of existing products were $900,000, $510,000
and $475,000 for the years 1995, 1994 and 1993, 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
1995 and are not expected to have a material effect on 1996 results. In regard
to environmental matters, see the Subsection entitled "Environmental" of the
Section entitled "Management's Discussion And Analysis" appearing on page 16 of
the 1995 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, 1995, was 637 compared with 779 at December 31, 1994.
(d) Financial Information About Foreign And Domestic Operations And Exports
Sales.
The Section entitled "Geographic Areas" appearing on page 11 of the 1995
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 1995, 1994 and
1993. The Company's Canadian operation, Portec, Ltd., is a supplier to the two
major Canadian railroads. Both of these railroads are currently undergoing
significant restructuring which has had a negative impact on the performance of
Portec, Ltd. The Company anticipates that negative impact to effect performance
into the future.
Item 2. Properties.
The Company's principal operations are conducted at the designated proper-
ties 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)
Divisions' production facility.
Canon City, Colorado 91,800 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.
Oak Brook, Illinois 5,200 Principal offices of the (b)
Shipping Systems Division
occupied under lease expiring
November 1997.
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 former -
office occupied under lease
expiring March 1, 1998. (f)
Ruabon, Wrexham
Clwyd, Wales 23,600 Portec (U.K.) Ltd.'s principal (b)
office and production facility.
Montreal, Canada 6,300 Portec, Ltd.'s principal (b)
office - occupied under lease
expiring April 30, 1996.
Saint-Jean, Canada 35,000 Portec, Ltd.'s principal (b)
production facility
St. Thomas, Canada 4,000 Innovator Holdings former -
principal office occupied
under lease expiring
November 11, 1997. (f)
(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.
(f) Presently unoccupied.
</TABLE>
Item 3. Legal Proceedings.
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.
Item 4. Submission Of Matters To A Vote Of Security Holders.
During the fourth quarter of 1995, 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 25, 1996:
Name of Age as of Current Position with Officer
Executive March 25, 1996 The Company Since
Albert Fried, Jr. 66 Chairman of the Board 1989
Michael T. Yonker 53 President and Chief 1988
Executive Officer and Director
John S. Cooper 61 Senior Vice President, 1983
Group Executive of the
Railroad Group and
General Manager of the
Railway Maintenance
Products Division
Nancy A. Kindl 54 Vice President, 1982
Treasurer, Secretary,
Controller and Chief
Financial Officer
Kevin C. Rorke 47 Vice President, 1995
Group Executive of
Materials Handling Group
Family Relationships And Agreements
There are no family relationships among the officers. Each executive officer
except Mr. Fried and Mr. Rorke 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 through 15
of the Company's 1996 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 a director of EMCOR Group, Inc. He 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.
Ms. Nancy A. 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.
Mr. Kevin C. Rorke was employed by the Company in February 1987, as Managr
of Project Management of the Automated Systems Division, became General Manager
of the Automated Systems Division in June 1988 and Group Executive of the
Materials Handling Group in November 1988. In June 1995, he assumed the
position of Vice President and Group Executive of the Materials Handling Group.
For the period 1978 until February 1987, he was Project Manager of AGVS and
Towline Systems for FMC Corporation's Material Handling Systems Division.
Other
There have been no events under any bankruptcy act, no criminal proceedings
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 25, 1996 was 1,245.
(c) Stock Prices and Dividend Information. The information contained in
the Section entitled "Quarterly Stock & Dividend Information" appearing on page
36 of the 1995 Annual Report presents for the years 1995 and 1994 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 1995 or 1994;
however, a 10 percent stock dividend was paid on the shares of common stock on
December 15, 1994. The closing price for shares of common stock on the Compos-
ite Tape on March 25, 1996 was $9.75.
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 in the preceding fiscal year
of the Company.
Item 6. Selected Financial Data.
The Section entitled "Five-Year Summary" appearing on page 1 of the 1995
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 1995 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 1995 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
1995 Annual Report, is incorporated herein by reference.
Item 8. Financial Statements And Supplementary Data.
The Consolidated Financial Statements, and Notes thereto appearing on pages
17 through 32 in the 1995 Annual Report, together with the report thereon of
Price Waterhouse LLP dated February 15, 1996, appearing on page 33 in the 1995
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 1997", and "Directors Whose Term Continue Until 1998"
appearing on pages 2 through 5, of the Company's 1996 Proxy Statement contain
information relating to directors and nominees for directors and are incorporat-
ed 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 1996 Proxy Statement,
the Section entitled "Employment, Termination, and Change-in-Control Agreements"
appearing on pages 13 through 15 of the 1996 Proxy Statement, the Subsection
entitled "Compensation" of the Section entitled "Board of Director's Matters"
appearing on page 6 of the 1996 Proxy Statement, the Section entitled "Compensa-
tion Committee Interlocks and Insider Participation" appearing on page 7 of the
1996 Proxy Statement, the Section entitled "Report Of The Stock Option and
Compensation Committee Of The Board of Directors" appearing on pages 15 through
17 of the 1996 Proxy Statement and the Section entitled "Performance Graph"
appearing on page 18 of the 1996 Proxy Statement are incorporated herein by
reference and contain certain information relating to past and prospective
remuneration matters applicable to directors and executive officers of the
Company and said Sections and Subsections are incorporated 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 1996 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
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K.
(a)(1) Consolidated Financial Statements of PORTEC, Inc.:
Page In 1995
Annual Report
Consolidated Statements of Income For the
Years Ended December 31, 1995, 1994 and 1993............... 17
Consolidated Balance Sheets at December 31, 1995 and 1994... 18
Consolidated Statements Of Cash Flows For the Years
Ended December 31, 1995, 1994 and 1993..................... 19
Notes to Consolidated Financial Statements (including Unaud-
ited Quarterly Financial Information)...................... 20
Report of Independent Accountants........................... 33
(2) Financial Statement Schedules:
Page In
This Report
Report of Independent Accountants on Financial Statement
Schedules................................................... 16
Valuation and Qualifying Accounts and Reserves (Schedule
VIII)....................................................... 17
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, a copy of which was included as Item
14(a)(3)4(b) of Part IV of the Company's Form 10-K Report for the year
ended December 31, 1994.*
4(c) Second amendment to Credit Agreement dated as of June 13, 1995 by and
between NBD Bank and the Company.
10(a) The Division Management Incentive Compensation Plan effective January 1,
1996.(x)
10(b) The Key Management Incentive Compensation Plan effective January 1,
1996.(x)
10(c) The Company's Supplemental Non-Qualified Retirement Income Plan For
Designated Executive Employees as amended effective January 1, 1994, a
copy of which was included as Item 14(a)(3)10(c) of Part IV of the
Company's Form 10-K Report for the year ended December 31, 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, a copy of which was included as Item 14(a)(3)10(e)
of Part IV of the Company's Form 10-K Report for the year ended December
31, 1994.*(x)
10(f) Amendment to The 1988 PORTEC, Inc. Employees' Stock Benefit Plan,
effective as of April 25, 1995.(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. 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 1995 Annual Report to Stockholders.**
21 List of the Company's subsidiaries.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
99 11-K Report for 1995 for the PORTEC, Inc. Savings and Investment
Plan.(x)
* 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 arrange- ment.
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed by the Registrant during the fourth
quarter of 1995.
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 incorporated
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 jurisdiction 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 Biard of Directors
of PORTEC, Inc.
Our audits of the consolidated financial statements referred to in our report
dated February 15, 1996 appearing on page 33 of the 1995 Annual Report to
Stockholders of PORTEC, Inc.(which report and consolidated financial statements
are incorporated by reference in this Annual Report on Form 10-K) also included
an audit of the Financial Statement Schedule listed in Item 14(a) of this Form
10-K. In our opinion, this Financial Statement Schedule presents 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 15, 1996
<TABLE>
<S><C>
Schedule VIII
PORTEC, Inc. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Years Ended December 31, 1995, 1994, 1993
($000's omitted)
Additions
Charged
Balance to Costs Balance
Beginning and Deductions at End
of Year Expenses from Reserve of Year
1995 Allowance for doubtful accounts $ 403 $ 152 $ 92 $ 463
1994 Allowance for doubtful accounts 337 154 88 403
1993 Allowance for doubtful accounts 226 165 54 337
</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 25, 1996
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 25, 1996
Albert Fried, Jr. of the Board
/S/ J. Grant Beadle Director March 22, 1996
J. Grant Beadle
/S/ Frederick J. Mancheski Director March 25, 1996
Frederick J. Mancheski
/S/ John F. McKeon Director March 21, 1996
John F. McKeon
/S/ Arthur McSorley, Jr. Director March 22, 1996
Arthur McSorley, Jr.
Robert D. Musgjerd Director
/S/ Michael T. Yonker Director March 25, 1996
Michael T. Yonker
/S/ L. L. White, Jr. Director March 25, 1996
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, a copy of which was included as
Item 14(a)(3)4(b) of Part IV of the Company's
Form 10-K Report for the year ended December 31,
1994.*
4(c) Second amendment to Credit Agreement dated as of
June 13, 1995 by and between NBD Bank and the
Company.
10(a) The Division Management Incentive Compensation Plan
effective January 1, 1996.(x)
10(b) The Key Management Incentive Compensation Plan effective
January 1, 1996.(x)
10(c) The Company's Supplemental Non-Qualified Retirement
Income Plan For Designated Executive Employees as
amended effective January 1, 1994, a copy of which
was included as Item 14(a)(3)10(c) of Part IV of
the Company's Form 10-K Report for the year ended
December 31, 1994.*(x)
10(d) The 1982 PORTEC, Inc. Employees' Stock Benefit
Plan, as amended effective 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 effective April 26, 1994, a copy of which
was included as Item 14(a)(3)10(e) of Part IV of the
Company's Form 10-K Report for the year ended
December 31, 1994.*(x)
10(f) Amendment to The 1988 PORTEC, Inc. Employees' Stock Benefit
Plan, effective as of April 25, 1995.(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.
99 11-K Report for 1995 for the PORTEC, Inc. Savings and
Investment Plan.(x)
* Incorporated herein by reference.
(x) Management contract or compensatory plan or arrangement.
SECOND AMENDMENT TO CREDIT AGREEMENT
This Second Amendment to Credit Agreement ("Second Amendment"), dated as of
June 13, 1995, 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 (as
amended, extended, modified or supplemented from time to time, 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 definition of "Applicable Margin: contained in Section 1.1 of
the Credit Agreement is deleted in its entirety and replaced as follows:
"APPLICABLE MARGIN: SHALL MEAN, WITH RESPECT TO
REVOLVING CREDIT LOANS, THE APPLICABLE ANNUAL
PERCENTAGE SET FORTH IN THE TABLES BELOW AS
ADJUSTED ON THE DATE ON WHICH THE FINANCIAL
STATEMENTS AND COMPLIANCE CERTIFICATES REQUIRED
PURSUANT TO SECTION 3.2(C) ARE DELIVERED TO THE
BANK AND SHALL REMAIN IN EFFECT UNTIL THE NEXT
CHANGE TO BE EFFECTED PURSUANT TO THIS DEFINITION.
WITH RESPECT TO EURODOLLAR RATE LOANS, THE
APPLICABLE MARGIN SHALL BE AS FOLLOWS:
LEVERAGE RATIO
INTEREST COVERAGE RATIO
GREATER THAN 3.0 3.0 OR LESS
LESS THAN 1.0 1.125% 1.375%
1.0 TO 1.499 1.375% 1.675%
1.5 OR GREATER 1.675% 1.875%
WITH RESPECT TO FLOATING RATE LOANS, THE
APPLICABLE MARGIN SHALL BE AS FOLLOWS:
LEVERAGE RATIO INTEREST COVERAGE RATIO
GREATER THAN 3.0 3.0 OR LESS
LESS THAN 1.0 0.00% 0.00%
1.0 TO 1.499 0.00% 0.00%
1.5 OR GREATER 0.00% .25%
(b) The definition of "Commitment" contained in Section 1.1 of the
Credit Agreement is hereby amended to delete reference to the number
"$12,000,000" and to insert the number "$15,300,000" in place thereof.
(c) The definition of "Eurodollar Interest Period" contained in
Section 1.1 of the Credit Agreement is hereby amended to delete the phrase "or
the Maturity Date with respect to the Term Loan" contained on the twelfth and
thirteenth lines thereof.
(d) The definition of "Loan" contained in Section 1.1 of the Credit
Agreement is deleted in its entirety and replaced as follows:
"LOAN" SHALL MEAN ANY REVOLVING CREDIT LOAN AND
"LOANS" SHALL MEAN THE REVOLVING CREDIT LOANS.
(e) The definitions of "Maturity Date", "Term Loan", and "Term Note"
contained in Section 1.1 of the Credit Agreement are hereby deleted in their
entirety.
(f) The definition of "Note" contained in Section 1.1 of the Credit
Agreement is deleted in its entirety and replaced as follows:
"NOTE" OR "NOTES" SHALL MEAN THE REVOLVING CREDIT
NOTE.
(g) The definition of "Termination Date" contained in Section 1.1 of
the Credit Agreement is hereby amended by deleting the date "April 30, 1997"
therefrom and inserting the date "April 30, 1998" in place thereof.
(h) Section 2.1(a) of the Credit Agreement is hereby amended by
deleting the number "$1,000,000" in the last line thereof and inserting the
number "$1,500,000" in place thereof.
(i) Section 2.1(b) of the Credit Agreement is hereby deleted in its
entirety.
(j) Section 2.4(b) of the Credit Agreement is hereby amended to
delete the phrase "and the Term Loan made under this Section 2.4 shall be
evidenced by the Term Note" beginning on the second line thereof; to delete the
phrase "and Term Note" on the fifth line thereof; to delete the phrase "and the
Term Loan" on the fifteenth line thereof and to delete the phrase "but not the
Term Loan" on the sixteenth line thereof.
(k) Section 2.9 of the Credit Agreement is hereby amended to delete
in its entirety the last sentence thereof.
(l) Section 3.1 of the Credit Agreement is hereby amended to delete
subsections (b) and (e) thereof in their entirety and, in each case, the phrase
"intentionally deleted" is substituted in said subsections (b) and (e).
(m) Section 3.4(b) of the Credit Agreement is hereby amended to
delete the phrase ", and then to the Term Loan" at the end of the second
sentence thereof.
(n) Section 5.2(b) of the Credit Agreement is hereby amended by
deleting the number "$15,300,000" and inserting the number "$23,500,000" in
place thereof.
(o) Section 5.2(i) of the Credit Agreement is hereby amended to
delete the phrase "after the Effective Date" contained on the ninth and tenth
lines thereof and replace such reference with the phrase "in the preceding
fiscal year of the Company,".
(p) Exhibit A-1 to the Credit Agreement is hereby deleted in its
entirety and replaced by Exhibit A-1 to this Second Amendment and Exhibit A-2 to
the Credit Agreement is deleted in its entirety. All references to the
"Revolving Credit Note" or terms of like import contained in the Credit
Agreement shall mean and be references to the Amended and Restated Revolving
Credit Note contained on Exhibit A-1 to this Second Amendment.
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 Agreements as amended hereby.
3. This Second 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
corporate existence of the Company;
(b) The Company and the Bank shall have each executed and delivered
this Second Amendment;
(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 Second Amendment, together with a certificate of the Secretary
of the Company certifying the officers of the Company, including the original
signature of each such officer and stating that there has been no amendment to
the Company's bylaws or certificate of incorporation since February 12, 1993, or
if any such amendment has occurred, attaching a copy of same and certifying the
accuracy thereof; and
(d) the Company shall have entered into the Amended and Restated
Revolving Credit note in the form attached as Exhibit A-1 hereto.
4. The Company represents and warrants to the Bank that:
(a) The execution, delivery and performance of this Second Amendment
by the Company have been duly authorized by all necessary corporate 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 Second Amendment or transactions contemplated hereby and
thereby;
(c) The Credit Agreement, as amended hereby, 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.
5. 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 Second
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 Second Amendment and any related documents.
6. The capitalized terms used but not defined herein shall have the
respective meanings ascribed thereto in the Credit Agreement. Upon the
Company's execution and delivery to the Bank of the Amended and Restated
Revolving Credit Note contained on Exhibit A-1 hereto, the Company's obligations
to the Bank under the Term Note and the Revolving Credit Note, dated February
12, 1993, shall be in all respects collectively re-evidenced and restated by
said Amended and Restated Revolving Credit Note. 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.
7. This Second Amendment shall be governed by and construed in accordance
with the internal laws of the State of Illinois.
8. The Second Amendment may be executed in one or more counterparts, each
of which together shall constitute the same agreement. One or more counterparts
of this Second Amendment may be delivered by facsimile, with the intention that
such delivery shall have the same effect as delivery of an original counterpart
thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Second Amendment to
be duly executed and delivered as of the day and year first above written.
NBD BANK
By: /S/ Peter K. Gillespie
Peter K. Gillespie
Its: Vice President
PORTEC, INC.
By: /S/ Nancy A. Kindl
Nancy A. Kindl
Its: Vice President & CFO
SUBJECT: Division Management Incentive Compensation Plan
The following Plan is to be in effect for the calendar year 1996. 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 perfor-
mance 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 circum-
stances.
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 compen-
sation 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 Decem-
ber) 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 A
TARGET BONUS SCHEDULE
MATERIALS HANDLING GROUP
TARGET BONUS
POSITION AS % OF SALARY
VICE PRESIDENT &
GENERAL MANAGER 30%
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
1996 BONUS PERFORMANCE OBJECTIVES
DIVISION:
CATEGORY WEIGHT THRESHOLD TARGET MAXIMUM
PRE-TAX PROFITS
$ $ $
WORKING CAPITAL
TO SALES
TOTAL 100%
DISTRIBUTED ONLY TO THE
APPLICABLE DIVISION
SUBJECT: 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 designe-
e, 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 de-
scribed in the following paragraphs.
3. A predetermined percent of the Corporate Bonus Percentage shall be deter-
mined 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 deter-
mined 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 there-
of, 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 deter-
mined 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 oc-
curred 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 discre-
tionary 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. Incen-
tive 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 partici-
pating 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
1996 BONUS PERFORMANCE OBJECTIVES
CATEGORY WEIGHT THRESHOLD TARGET MAXIMUM
PRE-TAX PROFITS
75 $ $ $
WORKING CAPITAL
TO SALES
25
NON-FINANCIAL
0
TOTAL 100%
SECOND AMENDMENT
TO
1988 PORTEC, INC. EMPLOYEES' STOCK BENEFIT PLAN
WHEREAS, Portec, Inc. (the "Company"), adopted the 1988 Portec, Inc.
Employees' Stock Benefit Plan ("Plan") for the purpose of granting awards
related to common stock of the Company to officers and executive personnel of
the Company and its subsidiaries, so as to provide an incentive for such persons
to join or remain with the Company and its subsidiaries, and to continue to
promote the best interest and enhance the long term performance thereof; and
WHEREAS, the Company amended the Plan, effective December 16, 1993, to (1)
provide for automatic grants of Non-qualified Stock Options to non-employee
members of the Board of Directors of the Company, and (2) to increase the total
number of performance units and shares of common stock of the Company, with
respect to which awards may be granted under the Plan; and
WHEREAS, pursuant to Section 12(e), the Company reserved the right, subject
to certain limited exceptions, to amend the Plan in any respect that the Board
of Directors of the Company deems to be in the best interest of the Company;
NOW THEREFORE, BE IT RESOLVED, that the Plan is hereby amended as follows:
1. Paragraph (a) of Section 4A is amended to read as follows:
(a) Grants. Each non-employee director shall automatically be
granted a Non-Qualified Stock Option to purchase 2,000 shares of Common
Stock on the date and as of the time on such date of each annual meeting of
the Board held after February 20, 1995 while he is a member of the Board
and while the Plan is in existence.
Each non-employee director who is a member of the Board on February
20, 1995, shall automatically be granted a Non-qualified Stock Option to
purchase 7,000 shares of Common Stock as of such date. Each individual who
becomes a non-employee director of the Company at any time after February
20, 1995 shall automatically be granted a Non-qualified Stock Option to
purchase 7,000 shares of Common Stock as of the date such individual
becomes a non-employee director. The per share exercise price of each Non-
qualified Stock Option granted to a non-employee director pursuant to this
subparagraph 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. The
Non-qualified Stock Options granted pursuant to this subparagraph shall be
in addition to those Non-qualified Stock Options automatically granted to
non-employee directors pursuant to the preceding subparagraph of this
paragraph, and such Non-qualified Stock Options granted pursuant to this
subparagraph shall be subject to all of the other provisions of the Plan,
including without limitation the provisions of this Section 4A, applicable
to Non-qualified Stock Options granted to non-employee directors.
2. Paragraph (e) of Section 4A is amended to read as follows:
(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,
including without limitation retirement or disability, 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 five years after the
date his service ceases; and (2) the date 10 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 five years 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
his death, shall have the right to 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 five years after the date his service
ceases; and (2) the date 10 years from the date of grant of the applicable
Non-qualified Stock Option.
3. The first sentence of paragraph (b) of Section 11 is deleted and the
following is inserted in lieu thereof:
A former employee of the Company or one of its subsidiaries who holds
Options or Rights under the Plan, and whose employment ceases prior to
death due to retirement pursuant to a retirement plan of the Company or one
of its subsidiaries, or due to disability as defined under the long-term
disability plan then maintained by the Company or one of its subsidiaries,
may exercise his Option or Right at any time during the period ending on
the first to occur of (1) the date five years 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. A former employee of the
Company or one of its subsidiaries who holds Options or Rights under the
Plan, and whose employment ceases prior to death for any reason other than
retirement or disability as set forth in the preceding sentence, may
exercise his Option or Right at any time during 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.
4. Paragraph (c) of Section 11 is amended to read as follows:
(c) Death of a Grantee. If a Grantee of an Option or Right dies
while in the employ of the Company or one of its subsidiaries, or within
five years after the cessation of his employment due to retirement or
disability as set forth in the first sentence of paragraph (b) of this
Section 11, 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 or Rights at any time during the period ending on the
first to occur of (1) the date five years 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 the Options or Rights were
exercisable on the date of his cessation of employment. If a Grantee of an
Option or Right who is a former employee of the Company or one of its
subsidiaries dies within three months after the cessation of his employment
as set forth in the second sentence of paragraph (b) of this Section 11,
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 during the period ending on the first to
occur of (1) the date one year 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 the Options or Rights were exercisable on
the date of his cessation of employment. In any event described in the
preceding two sentences, unless such Options or Rights are exercised during
the applicable period set forth in the preceding two sentences, the Options
and Rights shall terminate at the expiration of said applicable period.
5. This amendment shall be effective on February 20, 1995, the date it
was adopted by the Board, subject to the approval of the amendment by holders of
a majority of the shares of Common Stock of the Company, present or represented
at the 1995 Annual Meeting of Stockholders of the Company and entitled to vote;
provided that if such approval is not obtained, this amendment shall be null and
void and of no effect, each Option granted pursuant to Section 1 of this
amendment shall, notwithstanding the preceding provisions of this amendment, be
null and void and of no effect, and the provisions of Sections 2, 3 and 4 of
this amendment affecting any Option or Right granted pursuant to the Plan shall
be null and void and of no effect. If such approval of the stockholders of the
Company of this amendment is not obtained, the Plan as in existence prior to the
effective date of this amendment shall continue in full force and effect
pursuant to the provisions hereof. The provisions of this amendment set forth
in Sections 2 through 4 shall apply to each Option or Right granted hereunder,
on, before or after February 20, 1995.
Exhibit 11
PORTEC, Inc.
COMPUTATION OF NET INCOME PER COMMON SHARE
Year Ended December 31,
1995 1994 1993
Average shares outstanding 4,596,469 4,572,468 4,464,877*
Net income $2,898,000 $6,825,000 $4,696,000
Per share amount $ .63 $ 1.49 $ 1.05*
* Adjusted retroactively for 10% stock dividend paid in December 1994.
COMPANY 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. 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>
<S><C>
MAJOR PRODUCTS APPLICATIONS
CONSTRUCTION EQUIPMENT
o Aggregate Equipment o Produce and recycle crushed
stone, sand and gravel-
the primary components
of asphalt and concrete.
(Pie Chart Depicting 38% of Sales)
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
o Specialty Belt Conveyors o Automate handling of
baggage, packages, food
and pharmaceutical
products, newspapers, etc.
to lower material handling
costs.
(Pie Chart Depicting 26% of Sales)
o Recycling Conveyors and o Separate glass, plastics
Systems and metals from municipal
solid waste for recycling,
also reducing landfill
RAILROAD PRODUCTS requirements.
o Track Components o Fasten rails to rails and
rails to ties in railroad
and mass transit track
systems worlwide.
(Pie Chart Depicting 36% of Sales)
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
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) 1995 1994 1993 1992 1991
INCOME AND OPERATING DATA
Net sales $ 97,072 $ 96,474 $ 76,324 $ 68,638 $ 65,027
Cost of products sold 68,539 65,681 51,387 46,232 45,262
Selling, general and administrative expense 19,974 21,718 18,309 13,854 16,052
Depreciation and amortization 2,173 2,012 1,478 1,376 1,493
Loss on impaired assets 2,372 - - - -
Other income, net 578 1,091 559 378 1,054
Interest expense 1,680 829 750 1,220 1,665
Income before income taxes and
extraordinary credit 2,912 7,325 4,959 6,334 1,609
Income tax provision 14 500 263 821 1,064
Income before extraordinary credit 2,898 6,825 4,696 5,513 545
Extraordinary credit - tax loss carryforward - - - - 262
Net income 2,898 6,825 4,696 5,513 807
FINANCIAL DATA
Working capital $ 19,375 $ 12,797 $ 8,554 $ 7,924 $ 4,543
Property, plant and equipment-net 14,171 13,372 12,129 9,671 10,053
Total assets 57,818 57,522 42,478 38,045 38,707
Long-term debt 10,117 7,623 5,277 8,094 10,408
Stockholders' equity 28,028 24,959 17,744 12,309 7,912
(2)
PER SHARE OF COMMON STOCK
Income before extraordinary credit .63 1.49 1.05 1.37 .14
Extraordinary credit - tax loss carryforward - - - - .06
Net income .63 1.49 1.05 1.37 .20
Stockholders' equity-end of year 6.47 5.83 4.19 3.03 1.97
Average shares outstanding 4,596,469 4,572,468 4,464,877 4,034,571 3,994,365
Number of employees 637 779 619 518 499
Number of stockholders 1,262 1,335 1,412 1,473 1,527
(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.
</TABLE>
(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.)
(Bar Graph Depicting Last Five Years of Net Worth as itemized in above table.)
TO OUR STOCKHOLDERS AND EMPLOYEES:
The year 1995 was one of both successes and disappointments for Portec. Our
Materials Handling segment and our U.S. railroad products business produced
excellent results despite the fact that the general economy was weaker in 1995
than in 1994. However, several other businesses, including our Construction
Equipment segment, did not perform as anticipated.
SALES UP, NON-RECURRING CHARGE TAKEN
Sales in 1995 reached $97.1 million. This was up slightly from $96.5 million in
1994.
PORTEC, Inc. 1995 Annual Report
Net income in 1995 was $2.9 million, down from $6.8 million in 1994. A major
factor contributing to the decline was a $2.4 million non-recurring charge taken
in the fourth quarter of 1995. This special charge resulted from the write down
of certain inventories and goodwill related to the 1994 acquisition of Innovator
Manufacturing. Income before the non-recurring charge was $5.3 million.
Stockholders' equity at year-end 1995 reached $28.0 million. This represents a
12% increase over the year earlier level of $25.0 million and continues the
favorable trend of recent years.
SEGMENT RESULTS MIXED
Sales volume of our Construction Equipment segment fell 5% to $36.9 million,
from 1994's $38.8 million. The over-riding challenge for the business in 1995
was the assimilation of Innovator Manufacturing, Inc. which we acquired in the
third quarter of 1994. Sales of Innovator products were approximately half of
our forecast for the year and profitability was negative. In addition, our
traditional Construction Equipment business, which had produced excellent
results in 1994, suffered from the attentions directed to the Innovator start-
up.
Assessing the situation at the end of the year, we decided that $1.2 million of
inventory acquired with Innovator, and $1.2 million of goodwill associated with
the purchase transaction should be written off, resulting in a special non-
recurring charge of $2.4 million. As a result of this charge, the Construction
Equipment segment produced a $1.0 million operating loss in 1995, compared to a
$2.9 million profit in the prior year.
The sales volume of our Railroad Products segment in 1995 declined to $35.4
million from 1994's $40.7 million, a 13% decrease. Volume declines at Shipping
Systems, Portec, Ltd. and Portec (U.K.) Ltd. more than offset the volume
improvement at Railway Maintenance Products. Impacted by the lower volume,
segment operating profit declined from $3.0 million in 1994 to $1.5 million in
1995.
The three businesses in our Materials Handling segment; Flomaster, Pathfinder
and Count Recycling, all had impressive results in 1995. Each business showed
sales and earnings improvements over the prior year. In total, the Materials
Handling segment had sales volume of $24.8 million, a 46% increase over 1994
sales of $16.9 million. Operating income for the segment increased by more than
60%, to $4.0 million, compared with $2.5 million in 1994.
THE YEAR IN PERSPECTIVE
Although the overall 1995 results were below our expectations, we are not
discouraged. We have made a commitment to expand the Company's sales and
earnings through both internal growth and acquisitions. We did this
successfully in the period from 1991 to 1994, raising our sales levels nearly
50% following a major restructuring.
We are aware that growth through acquisitions presents certain risks, and our
1995 results were negatively affected by the purchase of Innovator, which did
not go as well as expected. The Count Recycling acquisition has been very
successful, however, and has helped our 1995 performance.
While we are very mindful that our stock declined approximately 25% during 1995,
we are more committed than ever to increasing shareholder value. Towards this
end, we intend to continue pursuing increased sales and profitability. The
major elements of our growth strategy have not changed, and they are:
1) to introduce five to ten new products each year. In 1995, our
expenditures for research and development exceeded $900,000, nearly
twice the level of recent years,
2) to seek acquisitions in related businesses,
3) to emphasize continuous cost reduction,productivity improvement and
quality improvement. In 1995, our expenditures on new plants and
equipment were $3.1 million, more than 50% higher than our current
depreciation charges, and
4) to increase our sales to international markets. In 1995, our exports
from the U.S. were $12.8 million, down slightly from $13.1 million in
1994. The decline was attributable to a decrease in our sales to Mexico,
where the market for construction equipment was very weak. Excluding
Mexico, our export sales were up 5% from 1994. Overall, our shipments
to foreign markets have grown by more than 90% since the beginning of
the decade.
OUTLOOK
We are looking for better performance in the coming year. Our Railroad Products
segment should benefit from strength in the U.S. railroad industry. Railroad
freight traffic continues to set new records each year, reflecting advantages in
fuel efficiency, lower pollution and public safety. Consolidations now
occurring within the industry should improve the efficiency of rail carriers and
the service levels for railroad customers. Return on investment for major
railroads also set records in 1995, and we expect to see increases in investment
and maintenance expense on the track system in 1996. This should allow
continued growth in our track components business.
At both Portec, Ltd. and Railway Maintenance Products, we are pushing ahead with
cost reduction programs to improve our manufacturing efficiency and profit
margins. In the United Kingdom, we are aggressively pursuing any rail products
business which is available. We are also seeking new opportunities for material
handling equipment in the U.K. and European markets.
In the Construction Equipment segment, we expect 1996 to show relatively modest
growth in residential construction and infrastructure spending, and above
average growth in commercial/industrial construction. Overall, this produces a
growth forecast of approximately 3.5% in aggregate production, an important
indicator of market strength for our traditional rock crushing, screening and
conveying products. In addition, we expect continued diversion of materials
such as used asphalt and concrete, demolition material and green waste away from
landfills and into useful byproducts. This should produce above average growth
in the markets for our recycle crushers and screens, as well as for Innovator
products.
Internally, 1996 will be a rebuilding year for our Construction Equipment
business. The Innovator acquisition drained resources from our traditional
product lines in 1995, and we intend to regain the positive momentum on these
products that was evident in 1993 and 1994. Specific efforts include design
improvements to increase field performance, introduction of new models to fill
out certain product lines and improvements in our manufacturing process to lower
cost and shorten lead times.
We expect our Materials Handling segment to grow in 1996, although probably at a
lower rate than in 1995. The above average growth of airline passenger seat
miles worldwide will continue to create needs for Flomaster conveyors in baggage
PORTEC, Inc. 1995 Annual Report
handling applications. In addition, intense pressure to reduce costs will drive
automation of material handling operations in most businesses which manufacture
or handle a physical product, creating demand for both Pathfinder and Flomaster
products. Finally, the broad trend toward recycling materials - rather than
landfilling them - is continuing. We expect Count Recycling to see additional
growth in 1996. We are also actively looking for acquisitions which are logical
additions to this segment.
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
(3 photographs of equipment as described by captions)
A Pioneer
jaw
crusher,
screens and
conveyors
producing
aggregate
in a
Minnesota
quarry.
This Kolberg sand classifying
system utilizes a new PC-based
Spec-Select control.
An
Innovator
1042 Tumble
Grinder
processing
heavy yard
waste.
CONSTRUCTION EQUIPMENT SEGMENT
Portec's Construction Equipment Division is headquartered in Yankton, South
Dakota, and accounted for 38% of total Company sales in 1995. 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
added which have applications in environmental markets, primarily soil
remediation, sludge treatment and green waste processing.
1995 FINANCIAL PERFORMANCE
During 1995, the Construction Equipment segment had sales of $36.9 million, a 5%
decline from $38.8 million in 1994. The $1.9 million sales decline includes the
loss of $2.3 million in sales of chemical processing products, a business which
was divested in late 1994. Sales were increased by a full year's sales of
Innovator products in 1995 but were offset by declines in conveying equipment
and in screens and pugmills for soil remediation. The segment experienced an
operating loss of $1.0 million due to lower volume and a $2.4 million non-
recurring write down associated with the acquisition of Innovator Manufacturing,
Inc. in July of 1994.
INNOVATOR UPDATE
In 1995, we devoted a great deal of effort to assimilating the Innovator product
lines into our Construction Equipment Division. Early in the year, production
was transferred to our Yankton manufacturing plant, and sales responsibility was
added to our existing Construction Equipment dealers.
Unfortunately, in both manufacturing and in the market, we found that we had
underestimated the challenge. In the plant, it took longer than expected to
integrate the Innovator products. Even after we had achieved full production,
we found that manufacturing costs were higher than anticipated, lowering margins
and profitability.
In the market, we found it difficult to gain wide acceptance for the unique
Innovator designs. We also determined that many of our existing dealers were
not able to provide the necessary sales support for these complex, application
sensitive, machines. At the end of the year, Innovator volume totalled
approximately half of the $8 million which we had budgeted for the year, and
profitability was negative.
We still believe there is a large market for green waste grinders with above
average growth. We also believe that there are distinct efficiency and safety
advantages to the patented Innovator Tumble Grinder. In 1996, we will institute
design changes to broaden the range of applications for grinders, introduce a
new lower cost rotary screen, realign our dealer network and focus on specific
applications.
AGGREGATE/RECYCLE PRODUCTS
Sales of our traditional crushers, screens, washing equipment and conveyors were
down approximately 8% from their strong showing in 1994. This decline reflects
both a slowing of the overall market, and the distractions of the Innovator
start-up. Despite lower volume, a number of achievements were realized which
should help us in future years. A small portable jaw crusher was added to our
product line to allow contractors to process waste material, such as bricks and
concrete blocks, on site for use as fill, rather than trucking these materials
to a disposal facility. We also introduced an improved solid state control
system called Spec-Select for sand classifying systems improving control of
product gradation while reducing cost per ton of production. Additionally, we
redesigned our most popular portable screening plant, allowing it to handle a
broader variety of materials.
<TABLE>
<S><C>
LINE PRODUCTS APPLICATION MARKET SALES CHANNELS
Pioneer o Crushers o Production, sizing,cleaning Construction Direct & through dealers
& o Conveyors & stackers & handling of bulk materials Mining to end-users
Kolberg o Screens & feeders o Soil remediation Roadbuilding
o Washers & classifiers o Sludge treatment Recycling
o Pugmills Environmental remediation
Innovator o Tumble grinders o Size reduction for green waste, o Recycling Direct & through dealers
o Tub grinders wood waste & demolition debris o Composting to end-users
o Trommel screens o Sizing & cleaning of
sticky materials
</TABLE>
(3 photographs of equipment as described by captions)
This
Flomaster
Spiral Lift
operates as
a drying
station in
a book
binding
process.
Pathfinder introduced this pallet
truck to operate in unmanned ADS systems.
This Count Recycling
McMRF 500 sorts up to 50
tons of aluminum, steel,
plastic and glass
containers per shift.
PORTEC, Inc. 1995 Annual Report
MATERIALS HANDLING SEGMENT
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 1995, this segment
accounted for 26% of total Portec sales. Product lines include specialty belt
conveyor components, electronic wire guidance packages for lift trucks and
conveyor systems for solid waste recycling.
1995 FINANCIAL PERFORMANCE
Our Materials Handling segment sales increased 46% in 1995, rising to $24.8
million compared with the year earlier level of $16.9 million. Although each of
the three divisions in this segment contributed to the increase, more than two-
thirds of the gain came from Count Recycling, which experienced strong growth in
1995, and whose results were included for 12 months in 1995 compared to 8 months
in 1994. Operating profit in 1995 reached $4.0 million, a 60% increase over the
$2.5 million reported for 1994. As with sales, all operations contributed to
the profit gain.
1995 HIGHLIGHTS
Flomaster's line of specialty belt conveyors continued to grow as a broad
variety of manufacturers, retailers, package handlers and others seek to reduce
their costs and increase their productivity through automated materials
handling. Strong sales of conveyors for baggage handling at new or upgraded
airports in the U.S. and in the Pacific Rim also contributed to the division's
success.
During the year, Flomaster completed a 30,000 square foot plant expansion,
allowing us to maintain high service levels to our customers, despite increasing
volume levels. Also in 1995, we received ISO 9002 quality registration and
installed the first elements of a new business system which will improve product
cost accuracy and production/inventory control functions. Finally, Flomaster
introduced a cost reduced power turn to compete in the economy segment of the
market.
Sales of our Pathfinder automatic steering devices for industrial lift trucks
were up more than 50% in 1995. This increase reflects overall strength in the
lift truck market, as well as the successful launch of a new lift truck design
by one of our major OEM customers. During the year, we started full production
on Pathfinder II, an upgraded steering unit with greater reliability and easier
OEM installation.
In 1995, Pathfinder obtained five new installations for their ADS unmanned truck
system, which automatically delivers material along a predetermined path. The
sales focus was shifted directly to end users from our initial approach through
lift truck dealers.
Count Recycling is a supplier of systems for the receiving, sorting and
processing of post-consumer recyclables. Count Recycling was acquired by Portec
in the second quarter of 1994. During 1995, Count Recycling more than doubled
its sales volume and is now the leading supplier of recycling systems for glass,
plastic, steel and aluminum containers. In addition, Count Recycling is now a
significant supplier of sorting and handling equipment for recycled fibers such
as paper and cardboard. Many of the fiber conveyors for Count Recycling systems
are manufactured in our Flomaster facility.
During 1995, Count Recycling introduced a new roller chain belt conveyor and a
new model of our eddy current aluminum separator. We also installed our largest
system to date, a McMRF 1000 capable of handling up to 10 tons per hour of
commingled recyclables.
<TABLE>
<S><C>
UNIT PRODUCTS APPLICATION MARKET SALES CHANNELS
Flomaster o Belt power turns o Transportation 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 Printing OEM's & end-users
o Food & pharmaceutical
Pathfinder o Electronic wire guidance o 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 o Direct & through
of solid waste recycling facilities representatives to end-
users
</TABLE>
(3 photographs of equipment as described by captions)
Portec
bonded rail
joints are
used in
high
tonnage
welded rail
systems.
PORTEC, Inc. 1995 Annual Report
This Centrac solid stick lubricator
reduces wheel to rail wear and
unwanted noise on transit cars.
Shipping
Systems
supplied
the chain
hold-down
system for
the
Department
of Defense
flatcars.
RAILROAD PRODUCTS SEGMENT
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 1995, Railroad
Products accounted for 36% of total Portec sales. 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.
1995 FINANCIAL PERFORMANCE
Sales of our Railroad Products segment totalled $35.4 million in 1995, a 13%
decline from $40.7 million reported in 1994. Operating profit declined from
$3.0 million in 1994, to $1.5 million in 1995, due mainly to lower volume and to
a lesser degree, losses from Portec (U.K.)'s PVH operation which was divested
during the third quarter.
1995 HIGHLIGHTS
Most of the volume decline in 1995 occurred in our Shipping Systems Division
which supplies securement systems for fastening a wide variety of loads to
railcars. Shipping Systems enjoyed a large volume of business in 1994 related
to locking devices for container railcars. In 1995, production of these
container cars dropped significantly, and the volume of our container locks
declined accordingly. Shipping Systems offset some of the weakness in container
lock business by emphasizing other applications. During the year, we saw
significant orders for constant tension winches for log cars and for chain and
winch tie downs for military flat cars. However, Shipping Systems will continue
to show year to year volatility as new car designs are developed, put into
production, peak and then taper off.
The Canadian railroad industry is experiencing a difficult period. The Canadian
National Railroad, a former crown agency is being privatized while the other
major railroad, Canadian Pacific, is going through a major restructuring.
Reflecting the generally poor financial results of the industry, sales of rail
anchors by our Canadian subsidiary, Portec, Ltd., were down slightly from 1994
and pricing pressure was intense. During the year, we installed a new forming
press in our anchor manufacturing plant and refined our anchor design in order
to reduce unit costs. Further cost reduction and greater penetration of rail
anchor markets outside Canada will be the major objective in 1996.
In the United Kingdom, the impending privatization of British Rail created a
soft market for the rail lubrication products supplied by Portec (U.K.) Ltd.
Also, during the third quarter, Portec (U.K.) Ltd. exited the general steel
fabrication business by closing its PVH Industries plant. Concurrently, several
of PVH's proprietary materials handling product lines were transferred to the
Portec (U.K.) Ltd. manufacturing facility.
The bright spot in our Railroad Products segment in 1995 was the U.S. track
components business served by our Railway Maintenance Products Division. Sales
and operating profit of this business were up approximately 15%, reflecting a
record freight volume carried by U.S. railroads, and market share gains in some
product lines.
A major factor for success in the track components business is cost leadership.
We improved our cost position dramatically during the late 1980's by
consolidating three production facilities into our current manufacturing plant
in Huntington, West Virginia. During 1995, we continued the search for lower
costs through the purchase of new CNC drilling equipment and the initiation of
an automation project for our joint bar processing line. In addition, our
business system will be upgraded with new hardware and software in early 1996,
further strengthening our competitive advantage.
<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
PORTEC, Inc. 1995 Annual Report
(Dollars in thousands) 1995 1994 1993 1992 1991
NET SALES
Construction equipment $ 36,947 $ 38,806 $ 29,922 $ 25,203 $ 25,393
Materials handling 24,755 16,943 12,394 12,979 11,235
Railroad 35,370 40,725 34,008 30,456 28,399
Total $ 97,072 $ 96,474 $ 76,324 $ 68,638 $ 65,027
OPERATING PROFIT (LOSS)
Construction equipment $ (1,015) $ 2,942 $ 1,256 $ 73 $ (305)
Materials handling 4,019 2,472 1,703 2,451 2,194
Railroad 1,458 3,033 3,051 2,118 1,209
Total 4,462 8,447 6,010 4,642 3,098
General corporate and litigation expenses (448) (1,384) (860) 2,534 (878)
Interest expense (1,680) (829) (750) (1,220) (1,665)
Other income 578 1,091 559 378 1,054
Income before income taxes
and extraordinary credit $ 2,912 $ 7,325 $ 4,959 $ 6,334 $ 1,609
IDENTIFIABLE ASSETS AT DECEMBER 31
Construction equipment $ 22,016 $ 26,251 $ 14,257 $ 13,274 $ 14,105
Materials handling 12,108 7,101 4,198 5,289 4,946
Railroad 18,186 16,881 17,348 11,894 12,094
Corporate 5,508 7,289 6,675 7,588 7,562
Total $ 57,818 $ 57,522 $ 42,478 $ 38,045 $ 38,707
GEOGRAPHIC AREAS
(Dollars in thousands) 1995 1994 1993 1992 1991
Net Sales
United States $ 84,762 $ 81,852 $ 65,372 $ 55,593 $ 53,570
International (1) 12,310 14,622 10,952 13,045 11,457
Total $ 97,072 $ 96,474 $ 76,324 $ 68,838 $ 65,027
Export Sales $ 12,781 $ 13,121 $ 7,787 $ 8,592 $ 7,000
Operating Profit (Loss)
United States $ 6,696 $ 7,801 $ 4,448 $ 2,808 $ 1,847
International (1) (2,234) 646 1,562 1,834 1,251
Total 4,462 8,447 6,010 4,642 3,098
General corporate and litigation
expenses (448) (1,384) (860) 2,534 (878)
Interest expense (1,680) (829) (750) (1,220) (1,665)
Other income 578 1,091 559 378 1,054
Income before income taxes
and extraordinary credit $ 2,912 $ 7,325 $ 4,959 $ 6,334 $ 1,609
IDENTIFIABLE ASSETS AT DECEMBER 31
United States $ 46,500 $ 44,962 $ 32,497 $ 31,892 $ 32,812
International (1) 11,318 12,560 9,981 6,153 5,895
Total $ 57,818 $ 57,522 $ 42,478 $ 38,045 $ 38,707
(1) Sales in Canada were $5,892,000, $6,570,000, $7,789,000, $8,475,000 and $8,274,000 for 1995, 1994, 1993, 1992 and
1991, respectively. Sales in Canada were greater than 10% of total sales for 1993, 1992 and 1991. Operating profits
(loss) in Canada were $(1,623,000), $361,000, $1,251,000, $1,345,000 and $1,169,000 for the respective years. The
Canadian operating profits do not include the Corporate allocations. Identifiable assets in Canada were $6,782,000,
$7,885,000, $5,842,000, $4,135,000 and $3,470,000 for 1995, 1994, 1993, 1992 and 1991, 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 and Geographic Areas
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
1995 COMPARED WITH 1994
Net sales for 1995 were $97,072,000, an increase of 1% from sales of $96,474,000
in 1994. Construction Equipment sales of $36,947,000 were 5% below those of the
prior year due to weaker industry conditions in the market for aggregate and
green waste processing equipment. Materials Handling net sales increased 46% to
$24,755,000, reflecting the impact of an acquisition and stronger market
conditions for both our traditional belt conveyor products and our automatic
steering products for lift trucks. Railway Products sales of $35,370,000 were
13% below those of last year. The lower sales were the result of decreased
demand for load securement systems for intermodal railcars and declines in our
Canadian and U.K. rail business. Both the Canadian and British railroads are
going through major restructuring programs. These were partially offset by a
successful year in our railroad track components business. Export sales were
down 3% to $12,781,000 as a result of decreased construction activity in Mexico.
Net income for 1995 was $2,898,000 compared with net income of $6,825,000 for
1994. The net income for 1995 included a non-recurring charge of $2,372,000
associated with the 1994 acquisition of Innovator Manufacturing, Inc. During
the fourth quarter of 1995, management evaluated the progress of its Innovator
product line and a related research and development operation in Canada. The
overall market for grinding equipment was below our expectations and gaining
wide market acceptance for the Innovator designs was more difficult than
anticipated.
Based on these facts, a decision was made to close the research and development
operation, curtail certain other activities and revalue finished goods inventory
acquired in the initial transaction. Accordingly, unamortized goodwill of
$1,216,000 was written off and the inventory was written down by $1,156,000 to
net realizable value. Excluding these charges, net income in 1995 decreased by
$1,555,000 due to lower gross margins and higher interest expense.
The Construction Equipment segment reported an operating loss in 1995 of
$1,015,000 compared with operating profit of $2,942,000 in 1994. This decrease
was due to the above Innovator charges and to lower margins resulting from the
start up of manufacturing of the Innovator product line and a change in product
mix. The operating profit of the Materials Handling segment increased from
$2,472,000 in 1994 to $4,019,000 in 1995. The improved performance resulted
from higher volume. The Railroad Products segment had operating profit of
$1,458,000 in 1995 compared with $3,033,000 in 1994. The decline in operating
profit reflected the lower sales volume and decreased margins resulting from
pricing pressure.
Net other income decreased $513,000 in 1995. Net other income in 1994 included
$1,102,000 in interest income resulting from the settlement of a legal case.
During 1995, a gain of $250,000 was recorded on the sale of a portion of assets
held for sale.
The cost of products sold, exclusive of depreciation and amortization, was 71%
of sales in 1995 and 68% of sales in 1994. This reflected the lower margins of
the Construction Equipment and Railway Product segments. Selling, general and
administrative expense decreased $1,061,000 in 1995 due to lower professional
fees and insurance expense. This was 21% of sales compared with 22% in 1994.
Interest expense of $1,680,000 in 1995 was $851,000 above the prior year due to
additional floor plan financing and to the increase in the Company's borrowings.
Borrowings were up as a result of two acquisitions made in 1994. Interest rates
granted by a bank under the Company's credit agreement decreased during the
year.
At December 31, 1994, a net deferred asset of $700,000 was reflected on the
balance sheet after recording a valuation reserve of $4,110,000. At December
31, 1995, the valuation reserve was decreased $977,000 for deferred tax assets
realized through reversing temporary differences. Based on management's
estimation of future taxable income considering budgeted operating results and
the uncertainty in the general economic outlook, no additional change was made
to the valuation reserve.
PORTEC, Inc. 1995 Annual Report
Current assets at December 31, 1995, were up $890,000 due partially to an
increase in other current assets. The change in other current assets resulted
from a higher income tax receivable related to foreign operations.
The reduction in assets held for sale reflected the sale of the remaining
property in Minneapolis, Minnesota. Goodwill was decreased by $929,000 which
resulted from the write-off of the Innovator goodwill and normal amortization
partially offset by the recording of $400,000 additional goodwill related to an
earnout provision for a business acquired in 1994.
Current liabilities decreased from $22,764,000 at December 31, 1994, to
$17,076,000 at December 31, 1995. The decrease reflected the payment of
$1,200,000 on a domestic term loan and $3,046,000 on a Canadian term loan.
Accounts payable decreased $1,422,000 due to reduced inventory purchases.
Long-term debt at December 31, 1995, was $10,117,000, an increase of $2,494,000
over the prior year. Current term debt of $4,246,000 and long-term debt of
$2,400,000 was paid during 1995 using a long term revolving credit facility.
These payments were partially offset by operating cash flow.
Total stockholders' equity increased $3,069,000 from December 31, 1994, to
December 31, 1995, primarily due to earnings and to the issuance of stock upon
the exercise of stock options. Treasury stock, purchased at a cost of $486,000
under the Company's stock repurchase program, was partially used for the
Company's contribution to the Savings and Investment Plan for Company employees.
The remaining treasury stock reduced stockholders' equity by $106,000.
Inflation, which was comparable to 1994, did not adversely affect the Company in
1995.
Bookings in 1995 were $95,848,000, a decrease of 5% from those of 1994. Both
the Construction Equipment and Railroad Products segments experienced lower
bookings in 1995 while the Materials Handling segment had a significant increase
in orders. The year-end order backlog of $21,590,000 was 11% below the backlog
at December 31, 1994.
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 in 1993. 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
foreign markets.
The Company's net income for the year ended December 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 acquisition of 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 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 1993. Amortization of $168,000 in 1994
related to goodwill from acquisitions. Depreciation expense 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 of 1993 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 $3,032,000 was due to the acquisition of Count Recycling Systems,
Inc. and Innovator Manufacturing, Inc. Other assets and deferred charges
increased by $931,000, primarily because of patents associated with the
Innovator 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
PORTEC, Inc. 1995 Annual Report
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.
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.
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 term loan was paid in full during 1995.
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 portion of property located in Minneapolis, Minnesota,
was sold in March for cash. The remaining portion was sold in April. The
Company accepted cash, a note receivable for $310,000 and deferred a gain on the
same of $323,000. The property in Pittsburgh, Pennsylvania, has been leased on
a long-term lease with an option to buy. The proceeds of these properties
improved the Company's liquidity position.
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 2.1, 1.6 and 1.5 to 1 at December 31,
1995, 1994 and 1993, respectively. At December 31, 1995, the Company had
available $5,274,000 of unused credit under its loan agreement, plus cash and
cash equivalents of $3,477,000 compared with $7,061,000 of unused credit and
$3,398,000 of cash and cash equivalents at December 31, 1994.
CAPITAL RESOURCES
The Company does not have any material commitments for capital expenditures.
Management estimates that capital expenditures for 1996 will be $3,600,000.
ENVIRONMENTAL
During 1989, each of the Company's domestic manufacturing facilities, including
those former manufacturing facilities included in the balance sheet 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. We continue 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 1995. The
Company is cooperating with the Pennsylvania Department of Environmental
Resources and is currently monitoring groundwater quality at the site. Remedial
actions may be required at some time in the future. 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 llinois 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. 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) 1995 1994 1993
REVENUES
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 97,072 $ 96,474 $ 76,324
Other income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . 578 1,091 559
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 97,650 97,565 76,883
COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation
and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . 68,539 65,681 51,387
Selling, general and administrative . . . . . . . . . . . . . . . . . . . 19,974 21,035 17,786
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 2,173 2,012 1,478
Loss on impaired assets . . . . . . . . . . . . . . . . . . . . . . . . . 2,372 - -
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,680 829 750
Other expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 683 523
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 94,738 90,240 71,924
INCOME BEFORE INCOME TAXES . . . . . . . . . . . . . . . . . . . . . . . . . 2,912 7,325 4,959
INCOME TAX PROVISION . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 500 263
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,898 $ 6,825 $ 4,696
EARNINGS PER COMMON SHARE (1)
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ .63 $ 1.49 $ 1.05
The accompanying notes are an integral part of these financial statements.
(1) 1993 earnings per common share were adjusted retroactively for 10% stock dividends paid in December 1993 and 1994.
CONSOLIDATED BALANCE SHEETS
December 31
(Dollars in Thousands) 1995 1994
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,477 $ 3,398
Accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,130 13,224
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,977 17,473
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,867 1,466
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36,451 35,561
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 220 220
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,824 9,437
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20,884 19,805
31,928 29,462
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (17,757) (16,090)
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 14,171 13,372
ASSETS HELD FOR SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,070 2,269
GOODWILL . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,283 3,212
OTHER ASSETS AND DEFERRED CHARGES . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,843 3,108
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,818 $ 57,522
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46 $ 4,253
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,578 9,000
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9,452 9,511
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17,076 22,764
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,117 7,623
DEFERRED CREDITS
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,923 1,997
Other 674 179
Total deferred credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,597 2,176
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 12)
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized - 10,000,000
shares; issued - 4,333,176 and 4,283,260 shares . . . . . . . . . . . . . . . . . . 4,333 4,283
Additional capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46,649 46,518
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . (359) (455)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (22,489) (25,387)
28,134 24,959
Treasury stock, 9,562 at cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . (106) -
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,028 24,959
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57,818 $ 57,522
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31
PORTEC, Inc. 1995 Annual Report
(Dollars in thousands) 1995 1994 1993
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,898 $ 6,825 $ 4,696
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 2,173 2,012 1,478
Loss on impaired assets . . . . . . . . . . . . . . . . . . . . . . . 2,372 - -
(Gain) loss on sales of property, plant and equipment
and assets held for sale . . . . . . . . . . . . . . . . . . . . . . (334) (25) 5
Changes in other balance sheet accounts:
Decrease (increase) in receivables . . . . . . . . . . . . . . . . . 94 (3,974) 861
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . (1,660) (1,573) (3,773)
Decrease (increase) in other current assets . . . . . . . . . . . . . (162) (124) 495
Increase (decrease) in accounts payable and accruals . . . . . . . . (1,101) (333) 2,424
Decrease in other assets and liabilities . . . . . . . . . . . . . . 379 845 408
Net cash provided by operating activities . . . . . . . . . . . . . 4,659 3,653 6,594
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (400) (3,908) (1,828)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,059) (3,601) (2,130)
Proceeds from disposal of property, plant and equipment
and assets held for sale . . . . . . . . . . . . . . . . . . . . . . . . 801 168 18
Net cash used by investing activities . . . . . . . . . . . . . . . . (2,658) (7,341) (3,940)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) revolving credit agreement . . . . . . . . . 4,832 3,550 (1,520)
Principal payments of term debt . . . . . . . . . . . . . . . . . . . . . (6,645) (2,060) (1,200)
Proceeds from (repayment of) other long-term debt . . . . . . . . . . . . . 100 (73) (145)
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 181 401 611
(Purchase) sale of treasury stock . . . . . . . . . . . . . . . . . . . . . (486) - 66
Net cash provided (used) by financing activities . . . . . . . . . . . . (2,018) 1,818 (2,188)
EFFECT OF EXCHANGE RATE CHANGE . . . . . . . . . . . . . . . . . . . . . . . 96 (11) 62
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS . . . . . . . . . . . . 79 (1,881) 528
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . 3,398 5,279 4,751
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . . $ 3,477 $ 3,398 $ 5,279
SUPPLEMENTAL DISCLOSURES:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,623 $ 792 $ 788
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 482 952 585
Non-cash transaction-10% stock dividend . . . . . . . . . . . . . . . . . . - 5,708 3,258
The accompanying notes are an integral part of these financial statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SIGNIFICANT ACCOUNTING POLICIES
Portec, Inc. is a manufacturer of quality engineered products. The Company's
principal lines of business are construction equipment, materials handling
equipment and railroad products. Currently, the principal market for all
product lines is North America.
The preparation of financial statements in conformity with generally accepted
accounting principals requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
CONSOLIDATION
The consolidated financial statements include the accounts of Portec, Inc. and
all of its 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 three months or less
are considered to be cash equivalents.
ACCOUNTS RECEIVABLE
As of December 31, 1995, 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 84%
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 $330,000 and $168,000 for 1995 and
1994, 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 $57,000 for 1995, $41,000 for 1994 and $32,000 for
1993. The Company assesses the value of intangible assets using undiscounted
cash flows.
RESEARCH EXPENDITURES
Expenditures for research and development are charged to expense as incurred and
amounted to approximately $900,000 for 1995, $510,000 for 1994 and $475,000 in
1993.
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, and December 14, 1993, as if paid on January 1, 1993.
1995 1994 1993
AVERAGE SHARES OF COMMON STOCK AND EQUIVALENTS OUTSTANDING
Primary . . . . . . . . . . . . . . . 4,596,469 4,572,468 4,464,877
NOTE 2. ACCOUNTS AND NOTES RECEIVABLE
The components of accounts and notes receivable at December 31, 1995, and 1994,
were as follows:
(Dollars in thousands) 1995 1994
Trade receivables net of allowance for doubtful
accounts of $463 and $403, respectively . . $ 13,026 $ 13,100
Current portion of notes receivable . . . . . 104 124
Total . . . . . . . . . . . . . . . . . . . $ 13,130 $ 13,224
Other assets and deferred charges include notes receivable totalling $1,126,000
related to the sale of property in Minneapolis, Minnesota. The notes require
monthly payments of principal and interest at rates ranging from 9% to 11% with
maturities in the years 2007 and 2010.
NOTE 3. INVENTORIES
The difference between LIFO value and approximate replacement cost of the LIFO
inventories was $7,685,000 and $7,213,000 at December 31, 1995, and 1994,
respectively.
The components of inventories at December 31, 1995, and 1994, were as follows:
(Dollars in thousands) 1995 1994
Raw material and supplies . . . . . . . . . . $5,923 $5,297
Work-in-process . . . . . . . . . . . . . . . 5,313 5,058
Finished goods . . . . . . . . . . . . . . . . 6,741 7,118
Total . . . . . . . . . . . . . . . . . . . $17,977 $17,473
Inventories, at LIFO value, are net of lower of cost or market reserves of
$1,339,000 in 1995 and $1,203,000 in 1994.
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.
The provision for income taxes charged to operations was as follows:
(Dollars in thousands) 1995 1994 1993
Current expense:
Federal . . . . . . . . . . . . . . $ 80 $ 309 $ -
State and Foreign . . . . . . . . . (114) 331 663
Total Current . . . . . . . . . . (34) 640 663
Deferred tax expense:
Federal . . . . . . . . . . . . . . - (196) (392)
State and Foreign . . . . . . . . . 48 56 (8)
Total Deferred . . . . . . . . . . 48 (140) (400)
Total provision . . . . . . . . . . . $ 14 $ 500 $ 263
Deferred tax liabilities (assets) at December 31, 1995, and 1994, include the
following:
(Dollars in thousands) 1995 1994
Depreciation . . . . . . . . . . . . . . . . . . $1,747 $1,734
Plant closing costs . . . . . . . . . . . . . . 955 853
Gross deferred tax liabilities . . . . . . . . 2,702 2,587
Net operating loss carryforward . . . . . . . . (719) (2,077)
Accrued liabilities . . . . . . . . . . . . . . (923) (988)
Inventory . . . . . . . . . . . . . . . . . . . (1,195) (1,103)
Employee benefits . . . . . . . . . . . . . . . (938) (1,041)
Product liability and warranty . . . . . . . . . (1,070) (1,178)
Tax credit carryforwards . . . . . . . . . . . . (1,163) (618)
Other . . . . . . . . . . . . . . . . . . . . . (527) (392)
Gross deferred tax assets . . . . . . . . . . (6,535) (7,397)
Net deferred tax as assets before valuation allowance (3,833)(4,810)
Deferred tax assets valuation allowance . . . . 3,133 4,110
Net deferred tax assets . . . . . . . . . . . . $ (700) $ (700)
Realization of the benefit of $1,998,000 in domestic loss carryforwards expiring
in 2005-2007, $5,416,000 in temporary differences, $673,000 in tax credit
carryforwards with expiration ranging from 1999-2009 and $490,000 in AMT credits
is dependent on generating sufficient future federal taxable income. The
Company has recorded a deferred tax asset of $700,000 at December 31, 1995. A
valuation reserve of $3,133,000 has been established based on management's
estimate of future taxable income considering budgeted operating results, the
cyclical nature of the Company's business and the uncertainty in the general
economic outlook. 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. Foreign
tax losses carryforward of $1,178,000 expiring in 2001-2002 are available to
offset future taxable income for foreign income tax purposes.
PORTEC, Inc. 1995 Annual Report
Pre-tax income was taxed under the following jurisdictions:
(Dollars in thousands)
1995 1994 1993
Domestic . . . . . . . . . . . . . . . $4,909 $6,999 $2,983
Foreign . . . . . . . . . . . . . . . (1,997) 326 1,976
Total . . . . . . . . . . . . . . . $2,912 $7,325 $4,959
The difference between the statutory federal income tax rate and the effective
income tax rate was as follows:
1995 1994 1993
Statutory federal income tax rate . . 34.0% 34.0% 34.0%
Difference resulting from:
Realization of deferred tax assets
not previously recognized . . . . . . (54.6) (30.9) (28.5)
Foreign operations . . . . . . . . . 17.3 3.6 (.3)
State income taxes, net . . . . . . 3.8 .1 .1
0.5% 6.8% 5.3%
NOTE 5. ACCOUNTS PAYABLE AND OTHER ACCRUED LIABILITIES
Accounts payable and other accrued liabilities at December 31, 1995, and 1994,
were as follows:
(Dollars in thousands) 1995 1994
Accounts payable . . . . . . . . . . . . . . . . $7,578 $9,000
Customer deposits . . . . . . . . . . . . . . . 1,884 1,041
Accrued salaries and wages . . . . . . . . . . . 884 1,004
Other accrued liabilities . . . . . . . . . . . 6,684 7,466
Total accounts payable and other accrued liabilities $ 17,030 $18,511
NOTE 6. DEBT
The components of debt at December 31, 1995, and 1994, were as follows:
(Dollars in thousands) 1995 1994
Revolving loan . . . . . . . . . . . . . . . . . $ 10,000 $5,159
Domestic term loan . . . . . . . . . . . . . . . - 3,600
Canadian term loan . . . . . . . . . . . . . . . - 3,046
Other . . . . . . . . . . . . . . . . . . . . . 163 71
10,163 11,876
Less current maturities . . . . . . . . . . . . 46 4,253
Total long-term debt . . . . . . . . . . . . . $ 10,117 $7,623
On February 12, 1993, the Company entered into a three-year unsecured credit
agreement with a bank which was amended on April 26, 1994, and June 13, 1995.
Under the amended agreement, the Company can borrow up to $15,300,000 in cash or
under letters of credit on a revolving line of credit through April, 1998. The
interest rate currently applicable to the revolving line of credit is the bank's
prime interest rate or, at the Company's election, 1.375% over the London
Interbank Offered Rate (LIBOR). The interest rate can vary from prime to .25%
over the bank's prime interest rate or, at the Company's election, from 1.125 to
1.875% over LIBOR depending on the Company's performance. 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 which was due June 30, 1995. The term loan was paid in full
during 1995. At Decem- ber 31, 1994, a total of $3,046,000 at a 9.5% interest
rate remained outstanding on this loan.
NOTE 7. 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 1995,
1994 and 1993 is summarized as follows:
(Dollars in thousands) 1995 1994 1993
Service cost . . . . . . . . . . . . . $ 560 $ 609 $ 450
Interest cost . . . . . . . . . . . . 1,128 1,148 1,091
Expected return on assets . . . . . . (3,951) (515) (1,039)
Net amortization and deferral . . . . 2,925 (614) (148)
Net pension cost . . . . . . . . . . . $ 662 $ 628 $ 354
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, 1995, and 1994. As a result of the restructuring of the Railway
Maintenance Products Division (Note 19), 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 1994 to develop the periodic pension costs were as
follows: the unit credit cost actuarial method; a discount rate of 8.0%; the
expected long-term rate of return on assets of 8.0%; and the rate of increase in
compensation levels of 4.5%. In 1995, the discount rate was decreased to 7.5%.
(Dollars in thousands)
<TABLE>
<S><C>
Accumulated Benefit
Current Plan Assets Obligations
Exceed Accumulated Exceed Current
Benefit Obligation Plan Assets
1995 1994 1995 1994
Actuarial present value of benefit obligation:
Vested benefit obligation . . . . . . . . . . . $ 15,610 $ 12,793 $ 566 $ 571
Non-vested benefit obligation . . . . . . . . . 190 453 - -
Accumulated benefit obligation . . . . . . . . . 15,800 13,246 566 571
Excess of projected benefit obligation
over accumulated benefit obligation . . . . . 2,050 1,641 - -
Projected benefit obligation . . . . . . . . . . 17,850 14,887 566 571
Plan assets at fair value . . . . . . . . . . . 17,300 13,960 - -
Projected benefit obligation
(in excess of) less than plan assets . . . . . (550) (927) (566) (571)
Unrecognized net loss . . . . . . . . . . . . . (1,622) (869) - -
Unrecognized prior service cost . . . . . . . . 30 34 - -
Unrecognized net (asset) obligation . . . . . . (170) (293) - 13
Unfunded accrued pension cost . . . . . . . . . $ (2,312) $ (2,055) $ (566) $ (558)
</TABLE>
NOTE 8. 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 $164,000, $371,000 and $321,000 were made for the years ended December 31,
1995, 1994 and 1993, respectively, representing 30%, 80% and 70% of eligible
employees' contributions. The plan permits the Company's contribution to be
made in shares of the Company's common stock.
NOTE 9. 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.
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, 1995, and 1994:
(Dollars in thousands) 1995 1994
Accumulated post-retirement benefit obligation (APBO):
Retirees . . . . . . . . . . . . . . . . . . . $1,554 $1,074
Actives . . . . . . . . . . . . . . . . . . . 1,017 597
Total . . . . . . . . . . . . . . . . . . . 2,571 1,671
Plan assets at fair value . . . . . . . . . . . - -
APBO in excess of plan assets . . . . . . . . . (2,571) (1,671)
Unrecognized transition obligation . . . . . . . 1,258 1,692
Unrecognized prior service costs . . . . . . . . 104 (356)
Unrecognized actuarial loss . . . . . . . . . . 983 269
Accrued post-retirement benefit costs . . . . . $ (226) $ (66)
Net periodic post-retirement benefit expense for 1995, 1994 and 1993 included
the following components:
(Dollars in thousands) 1995 1994 1993
Service cost . . . . . . . . . . . . . $ 89 $ 58 $ 41
Interest cost . . . . . . . . . . . . 178 123 127
Amortization of transition obligation over 20 years 78 100 99
Unrecognized prior service cost . . . - (43) (50)
Gain/(loss) . . . . . . . . . . . . . 42 - -
Net periodic post-retirement benefit expense $ 387 $ 238 $ 217
For measurement purposes, the assumed trend rate for post-retirement medical
benefits during 1995 and 1994 was 11.8% and 12.6%, respectively, for employees
less than age-65 and 10.2% and 10.9%, 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,
1995, and 1994, by approximately $324,000 and $139,000, respectively, and the
aggregate of the service and interest cost components of net periodic post-
retirement benefit cost for 1995 by approximately $44,000 and for 1994 by
approximately $25,000.
The discount rate used in determining the accumulated post-retirement benefit
obligation was 7.5% at December 31. 1995, and 8.0% at December 31, 1994.
NOTE 10. INCENTIVE PROGRAM
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. There were no options, SAR's, restricted stock awards or
performance units outstanding under the plan at December 31, 1995. No
additional awards could be made under this plan, and there were no shares
reserved for issuance under this plan at December 31, 1995.
The 1988 PORTEC, Inc. Employees' Stock Benefit Plan was adopted by stockholders
in 1988 and amended in 1994 and 1995. This plan provides 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. 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. Options
and related SARs 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. 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. The plan was amended again in 1995 to increase the annual
grant to non-employee directors to 2,000 shares, to grant a one-time option for
7,000 shares to non-employee directors and to allow all stock options and SAR's
to be exercised within five years of termination of employment or service if
such is by death, disability or retirement or until the option expires,
whichever first occurs. Options may be granted at prices not less than the
PORTEC, Inc. 1995 Annual Report
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 137,700 outstanding SAR's under this plan are
exercisable only at the discretion of the Company. There were 839,282 shares
reserved for issuance under this plan at December 31, 1995, after adjustment for
10% stock dividends in 1992, 1993 and 1994.
1995 1994
Option Average Option Average
Shares Option Price Shares Option Price
STOCK OPTIONS:
Outstanding beginning of year 598,290 $5.87 474,683 $3.55
Granted . . . . . . . . . 104,000 11.50 149,600 12.73
Exercised . . . . . . . . (49,915) 3.64 (25,993) 3.04
Cancelled or expired . . . (1,100) 14.77 - -
Outstanding end of year . 651,275 $6.92 598,290 $5.87
Exercisable end of year . 601,275 $6.65 565,290 $5.35
Available for grant . . . 186,460 - 290,460 -
In October 1995, the FASB issued SFAS No. 123, "Accounting for Stock-Based
Compensation." SFAS No. 123 establishes a fair value based method of accounting
for stock-based compensation plans but allows companies to continue to apply the
intrinsic value based method provided pro forma disclosures of net income and
earnings per share are made using the fair value based method of accounting.
Adoption of SFAS No. 123 is required no later than 1996. The Company has
decided to adopt SFAS No. 123 through disclosure only.
NOTE 11. STOCKHOLDERS EQUITY
Changes in components of stockholders' equity for the years 1993 through 1995
follow:
<TABLE>
<S><C>
(Dollars in thousands except share data)
Cumulative No. of Shares
Common Additional Treasury Accum. Translation Common Stock
Stock Capital Stock Deficit Adjustment Issued
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 sold - - 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
Net income - - - 2,898 - -
Purchase of Treasury Stock - - (486) - - -
Company's 1994 Investment
Plan contribution - - 380 - - -
Exercise of stock options 50 131 - - - 49,916
Current year translation adjustment - - - - 96 -
Balance at
December 31, 1995 $ 4,333 $ 46,649 $ (106) $ (22,489) $ (359) 4,333,176
</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.
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.
The Company has 1,000,000 authorized, but unissued, shares of no par preferred
stock.
NOTE 12. 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, 1995,
which expire on or after December 31, 1996, are as follows:
(Dollars in thousands)
Year ending December 31,
1996 . . . . . . . . . . . . . . . . . . . . . . . . . $ 420
1997 . . . . . . . . . . . . . . . . . . . . . . . . . 354
1998 . . . . . . . . . . . . . . . . . . . . . . . . . 231
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 178
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 10
Net rent expense of $538,000, $618,000 and $412,000 was recorded in 1995, 1994
and 1993, respectively.
NOTE 13. OTHER EXPENSE
Other expense reflects legal and other related expenses associated with a case
entitled Northern Engineering Industries plc, Parsons Pebbles Electric Products
PORTEC, Inc. 1995 Annual Report
Inc. and NEI Cranes, Ltd. vs. Portec, Inc. (RMC Division) which was finalized in
1994.
NOTE 14. UNAUDITED QUARTERLY FINANCIAL INFORMATION
The results of operations for the three months ended December 31, 1995, include
an expense of $1,156,000 for inventory revaluation and a write-off of $1,216,000
of goodwill. Both adjustments relate to assets purchased in the acquisition of
Innovator Manufacturing, Inc. in July of 1994.
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)
First Second Third Fourth
Quarter Quarter Quarter Quarter
1995
Net Sales . . . . . . . . . . . $26,659 $28,929 $21,918 $19,566
Gross Margin . . . . . . . . . . 7,810 8,230 6,470 3,605
Income before income taxes . . . 2,007 2,281 982 (2,358)
Income tax provision . . . . . . 88 24 28 (126)
Net Income . . . . . . . . . . . 1,919 2,257 954 (2,232)
Earnings per common share . . . $ .42 $ .49 $ .21 $ (.49)
(Dollars in thousands except per share data)
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
(1)
Earnings per common share . . $ .40 $ .48 $ .31 $.30
(1) 1994 earnings per common share were adjusted retroactively for a 10% stock
dividend paid in December 1994.
NOTE 15. IMPAIRED ASSETS
During the fourth quarter of 1995, the Company decided to close a Canadian
research and development facility acquired as a part of Innovator Holdings due
to the overall market for grinders being below expectations and to difficulty
gaining market acceptance for the Innovator design. The Company also severed
employment agreements with two former principals of Innovator and cancelled
their related earnout agreements. Unamortized goodwill of $1,216,000 related to
this acquisition was determined to be permanently impaired due to the lack of
future cash flows and, accordingly, was charged to operations.
The realizable value of finished goods inventory initially acquired from
Innovator was below the recorded value of $1,939,000 due to the age of the
equipment, design changes required and logged demonstration hours. The Company
analyzed realizable value by individual unit and determined that a write-down of
$1,156,000 was required. Both the goodwill write-off and the inventory write-
down are recorded as Loss on Impaired Assets in the Consolidated Statement of
Income and are charged against the Construction Equipment segment.
NOTE 16. 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 1991 through
1995.
The following table summarizes additional financial information by business
segments for the years 1995, 1994 and 1993:
(Dollars in thousands) 1995 1994 1993
DEPRECIATION AND AMORTIZATION
Construction Equipment . . . . . . . . . $1,118 $1,022 $ 817
Materials Handling . . . . . . . . . . . 449 337 247
Railroad . . . . . . . . . . . . . . . . 586 601 359
Corporate . . . . . . . . . . . . . . . 20 52 55
Total . . . . . . . . . . . . . . . . $2,173 $2,012 $1,478
CAPITAL EXPENDITURES
Construction Equipment . . . . . . . . . $ 608 $2,231 $ 681
Materials Handling . . . . . . . . . . . 1,699 397 283
Railroad . . . . . . . . . . . . . . . . 745 938 859
Corporate . . . . . . . . . . . . . . . 7 35 307
Total . . . . . . . . . . . . . . . . $3,059 $3,601 $2,130
NOTE 17. LITIGATION SETTLEMENT
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 18. ACQUISITIONS
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 were payable annually for a period of three
years. During 1995, $400,000 was paid under an earnout agreement and goodwill
was increased by this amount. The second earnout agreement was cancelled in the
fourth quarter of 1995.
PORTEC, Inc. 1995 Annual Report
All of the acquisitions in 1994 were 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. Goodwill acquired,
aggregating $3,663,000, less an impaired write-off of $1,216,000, will be
amortized over no more than thirteen years using the straight-line method.
NOTE 19. ASSETS HELD FOR SALE
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 $868,000 and $957,000 is reflected in the balance sheet as a
part of Other Assets and Deferred Charges at December 31, 1995, and 1994,
respectively. The Company expensed $190,000 in 1993 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, 1995, and 1994, and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1995, 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 15, 1996
CORPORATE INFORMATION
BOARD OF DIRECTORS
J. GRANT BEADLE, 63, 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. Prior
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., 66, 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
and fleecewear. He is a director of EMCOR Group, Inc., a worldwide leader in
mechanical/electrical construction and facilities management. He is also a
director of various civic and philanthropic organizations. o
FREDERICK J. MANCHESKI, 69, 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, 70, 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., 67, 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, 72, 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., 68, 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, 53, 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
KEVIN C. RORKE
Vice President
GENERAL MANAGERS
JOHN S. COOPER
General Manager
Railway Maintenance Products Division
900 Freeport Road
Pittsburgh, Pennsylvania 15238
(412) 782-6000
(412) 782-1037-Fax
JERRY L. DEEL
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
STOCHOLDERS' INFORMATION
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 100
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
44-1-978-820820
44-1-978-821439-Fax
Stockholder's Information
STOCK TRANSFER AGENT AND COUNSEL
REGISTRAR Schiff Hardin & Waite
Chicago, Illinois
(Communications concerning:
o stock transfer,
o dividend disbursement, STOCK LISTING
change of address, New York Stock Exchange
loss of a stock certificate, or Chicago Stock Exchange
nonreceipt or loss of a dividend check Trading Symbol: POR
should be directed to:)
Harris Trust and Savings Bank EXECUTIVE OFFICES
Coporate Trust and Savings Bank PORTEC, Inc.
311 W. Monroe St. One Hundred Field Drive, Suite 120
Chicago, Illinois 60606 Lake Forest, Illinois 60045
(312) 461-6838 (847) 735-2800
(847) 735-2828-Fax
INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
Chicago, Illinois FORM 10-K
A copy of Form 10-K for 1995, as
filed with the Securities and
ANNUAL MEETING Exchange Commission will be
The Annual Meeting will be held available to stockholders at no
at 10:00 A.M. on charge (except for exhibits)
Tuesday, April 23, 1996, in the after March 31, 1996, by writing
Adams Room of the to the:
Midland Hotel, 172 West Adams, Secretary, PORTEC, Inc., One
Chicago, Illinois. Hundred Field Drive,
Suite 120, Lake Forest,
Illinois 60045.
QUARTERLY STOCK & DIVIDEND INFORMATION
First Second Third Fourth
Common Stock Prices(1) Quarter Quarter Quarter Quarter
1995 Common Stock Prices
High . . . . . . . . . . . . . $14.00 $13.75 $12.88 $11.88
Low . . . . . . . . . . . . . 11.63 10.88 11.50 9.50
1994 Common Stock Prices
High . . . . . . . . . . . . . $13.63 $14.75 $15.50 $16.88
Low . . . . . . . . . . . . . 10.25 12.25 12.50 11.75
(1) The high and low prices are based on prices
as reported on the Composite Tape. A stock
dividend of 10% was paid in December 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 15,
1996 appearing on page 33 of the 1995 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 Schedule,
which appears on page 16 of this Form 10-K.
Price Waterhouse LLP
Chicago, Illinois
March 27, 1996
CONSENT OF INDEPENDENT ACCOUNTS
We consent to the incorporation by reference in the Registration Statement of
Portec, Inc. on Form S-8 of our report, dated March 6, 1996, on the financial
statements of the Portec, Inc. Savings and Investment Plan for the year ended
December 31, 1995, appearing in this Annual Report on Form 10-K of Portec, Inc.
for the year ending December 31, 1995.
McGladrey & Pullen, LLP
Schaumburg, Illinois
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
1995 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-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 3477
<SECURITIES> 0
<RECEIVABLES> 13593
<ALLOWANCES> 463
<INVENTORY> 17977
<CURRENT-ASSETS> 36451
<PP&E> 31928
<DEPRECIATION> 17757
<TOTAL-ASSETS> 57818
<CURRENT-LIABILITIES> 17076
<BONDS> 0
<COMMON> 4333
0
0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 57818
<SALES> 97072
<TOTAL-REVENUES> 97650
<CGS> 68539
<TOTAL-COSTS> 90686
<OTHER-EXPENSES> 2372
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1680
<INCOME-PRETAX> 2912
<INCOME-TAX> 14
<INCOME-CONTINUING> 2898
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2898
<EPS-PRIMARY> .63
<EPS-DILUTED> .63
</TABLE>
PORTEC, INC.
SAVINGS AND INVESTMENT PLAN
FINANCIAL REPORT
DECEMBER 31, 1995
C O N T E N T S
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statement of net assets available for benefits
(with fund information) 2 - 5
Statement of changes in net assets available for benefits
(with fund information) 6 - 9
Notes to financial statements 10 - 12
SUPPLEMENTAL SCHEDULES
I - Item 27(a) Schedule of assets held for investment
purposes 13
VI- Item 27(d) - Schedule of reportable transactions 14
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors and Administrative Committee
Portec, Inc. Savings and Investment Plan
Oak Brook, Illinois
We have audited the accompanying statement of net assets available for benefits
of Portec, Inc. Savings and Investment Plan (the "Plan") as of December 31,
1995, and the related statement of changes in net assets available for benefits
for the year then ended. These financial statements are the responsibility of
the Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audit. The financial statements of Portec,
Inc. Savings and Investment Plan for the year ended December 31, 1994, were
audited by other auditors whose report, dated March, 10 1995, expressed on
unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the 1995 financial statements referred to above present fairly,
in all material respects, the net assets available for benefits of the Portec,
Inc. Savings and Investment Plan as of December 31, 1995, and the changes in net
assets available for benefits for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The supplemental schedules of assets held for
investment purposes and reportable transactions as of or for the year ended
December 31, 1995, are presented for purposes of additional analysis and are not
a required part of the basic financial statements, but are supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The Fund Information in the statement of net assets available for
benefits and the statement of changes in net assets available for benefits is
presented for purposes of additional analysis rather than to present the net
assets available for benefits and changes in net assets available for benefits
for each fund. The supplemental schedules and fund information have been
subjected to the auditing procedures applied in the audit of the basic financial
statements and, in our opinion, are fairly stated in all material respects in
relation to the basic financial statements taken as a whole.
McGladrey & Pullen, LLP
Lincolnshire, Illinois
March 6, 1996
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
DECEMBER 31, 1995
<TABLE>
<S><C>
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec, New Prime Short-Term
Inc.
Common Horizons Reserve Bond
ASSETS Stock Fund Fund Fund Fund
Investments, at fair value:
Shares of registered investment $ - $ 1,834,067 $ 1,101,305 $ 682,209
company
Common stock 2,090,747 - - -
Participants notes receivable - - - -
2,090,747 1,834,067 1,101,305 682,209
Receivables:
Employer's contribution 164,172 - - -
Participants' contributions 5,517 5,687 3,683 2,864
Accrued interest - - - -
Due from other funds 1,686 390 572 329
171,375 6,077 4,255 3,193
TOTAL ASSETS 2,262,122 1,840,144 1,105,560 685,402
LIABILITIES
Due to other funds - - - -
NET ASSETS AVAILABLE
FOR BENEFITS $ 2,262,122 $ 1,840,144 $ 1,105,560 $ 685,402
See Notes to Financial Statements.
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Equity Small-Cap International Participant
Income Value Stock Notes
Fund Fund Fund Receivable Total
$ 3,825,511 $ 204,410 $ 222,791 $ - $ 7,870,293
- - - - 2,090,747
- - - 215,383 215,383
3,825,511 204,410 222,791 215,383 10,176,423
- - - - 164,172
10,484 3,189 3,528 - 34,952
- - - 613 613
1,183 147 399 - 4,706
11,667 3,336 3,927 613 204,443
3,837,178 207,746 226,718 215,996 10,380,866
- - - 4,706 4,706
$ 3,837,178 $ 207,746 $ 226,718 $ 211,290 $ 10,376,160
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
DECEMBER 31, 1994
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec, New Prime Short-Term
Inc.
Common Horizons Reserve Bond
ASSETS Stock Fund Fund Fund Fund
Investments, at fair value:
Shares of registered investment $ - $ 1,326,323 $ 1,108,038 $ 655,831
company
Common stock 2,831,317 - - -
Participants notes receivable - - - -
2,831,317 1,326,323 1,108,038 655,831
Receivables:
Employer's contribution 371,352 - - -
Participants' contributions 4,451 7,972 5,710 3,908
375,803 7,972 5,710 3,908
TOTAL ASSETS 3,207,120 1,334,295 1,113,748 659,739
LIABILITIES
Due to other funds - - - -
NET ASSETS AVAILABLE
FOR BENEFITS $ 3,207,120 $ 1,334,295 $ 1,113,748 $ 659,739
See Notes to Financial Statements.
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Equity Small-Cap International Participant
Income Value Stock Notes
Fund Fund Fund Receivable Total
$ 3,382,959 $ 73,903 $ 93,822 $ - $ 6,640,876
- - - - 2,831,317
- - - 194,501 194,501
3,382,959 73,903 93,822 194,501 9,666,694
- - - - 371,352
15,319 4,786 5,382 - 47,528
15,319 4,786 5,382 - 418,880
3,398,278 78,689 99,204 194,501 10,085,574
- - - - -
$ 3,398,278 $ 78,689 $ 99,204 $ 194,501 $ 10,085,574
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
YEAR ENDED DECEMBER 31, 1995
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec, New Prime Short-Term
Inc.
Common Horizons Reserve Bond
Stock Fund Fund Fund Fund
Investment income:
Net appreciation (depreciation) in
fair
value of investments $ (745,421) $ 536,820 $ - $ 20,472
Interest and dividends - 191,707 58,591 43,621
(745,421) 728,527 58,591 64,093
Contributions:
Employer match 173,255 - - -
Employee deferral 73,244 141,676 80,919 68,209
246,499 141,676 80,919 68,209
Total additions (498,922) 870,203 139,510 132,302
Benefits paid directly to participants (392,826) (361,869) (176,908) (41,077)
NET INCREASE (DECREASE) PRIOR
TO
INTERFUND TRANSFERS (891,748) 508,334 (37,398) 91,225
Interfund transfers (53,250) (2,485) 29,210 (65,562)
Net increase (decrease) (944,998) 505,849 (8,188) 25,663
Net assets available for benefits:
Beginning of year 3,207,120 1,334,295 1,113,748 659,739
END OF YEAR $ 2,262,122 $ 1,840,144 $ 1,105,560 $ 685,402
See Notes to Financial Statements.
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Equity Small-Cap International Participant
Income Value Stock Notes
Fund Fund Fund Receivable Total
$ 827,397 $ 24,815 $ 12,398 $ - $ 676,481
234,376 9,321 6,714 14,456 558,786
1,061,773 34,136 19,112 14,456 1,235,267
- - - - 173,255
246,217 71,665 74,564 - 756,494
246,217 71,665 74,564 - 929,749
1,307,990 105,801 93,676 14,456 2,165,016
(884,506) (2,331) (5,873) (9,040) (1,874,430)
423,484 103,470 87,803 5,416 290,586
15,416 25,587 39,711 11,373 -
438,900 129,057 127,514 16,789 290,586
3,398,278 78,689 99,204 194,501 10,085,574
$ 3,837,178 $ 207,746 $ 226,718 $ 211,290 $ 10,376,160
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
YEAR ENDED DECEMBER 31, 1994
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec, New Prime Short-Term
Inc.
Common Horizons Reserve Bond
Stock Fund Fund Fund Fund
Investment income:
Net appreciation (depreciation) in
fair
value of investments $ 802,163 $ (111,521) $ - $ (57,554)
Interest and dividends - 117,457 42,260 38,009
802,163 5,936 42,260 (19,545)
Contributions:
Employer match 404,928 - - -
Employee deferral 70,517 130,724 80,856 63,732
475,445 130,724 80,856 63,732
Total additions 1,277,608 136,660 123,116 44,187
Benefits paid directly to participants (706,167) (59,404) (37,509) (21,603)
NET INCREASE PRIOR TO
INTERFUND TRANSFERS 571,441 77,256 85,607 22,584
Interfund transfers 160,237 (14,100) (304,239) (34,487)
NET INCREASE (DECREASE) 731,678 63,156 (218,632) (11,903)
Net assets available for benefits:
Beginning of year 2,475,442 1,271,139 1,332,380 671,642
END OF YEAR $ 3,207,120 $ 1,334,295 $ 1,113,748 $ 659,739
See Notes to Financial Statements.
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Equity Small-Cap International Participant
Income Value Stock Notes
Fund Fund Fund Receivable Total
$ (136,175) $ (6,360) $ (7,493) $ - $ 483,060
273,710 5,411 5,753 11,044 493,644
137,535 (949) (1,740) 11,044 976,704
- - - - 404,928
222,153 52,810 58,716 - 679,508
222,153 52,810 58,716 - 1,084,436
359,688 51,861 56,976 11,044 2,061,140
(126,329) - (443) - (951,455)
233,359 51,861 56,533 11,044 1,109,685
93,288 26,828 42,671 29,802 -
326,647 78,689 99,204 40,846 1,109,685
3,071,631 - - 153,655 8,975,889
$ 3,398,278 $ 78,689 $ 99,204 $ 194,501 $ 10,085,574
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I. Significant Accounting Policies
Investment valuation: Investments in shares of registered investment company
are valued at quoted market prices which represent the net asset value of shares
held by the Plan at year-end. Investments in the Portec, Inc. (the "Company")
common stock are valued at its quoted market price. Participant notes
receivable are valued at face value, which approximates fair value. Purchases
and sales of securities are recorded on trade-date basis. Interest income is
recorded on the accrual basis. Dividends are recorded on the ex-dividend date.
Payment of benefits: Benefits are recorded when paid.
II. PLAN DESCRIPTION
The following description of the Portec, Inc. Savings and Investment Plan (the
"Plan") provides only general information. Participants should refer to the
Plan agreement for a more complete description of the Plan's provisions.
General: The Plan, formerly the Portec, Inc. Salaried Employees' Investment
Plan, as amended, is a defined contribution plan covering all full-time salaried
and hourly employees of the Company and its affiliates. Employees are eligible
to participate on the first day of the calendar month following the attainment
of age 21 years of age. The Plan is subject to the provisions of the Employee
Retirement Income Security Act of 1974 ("ERISA").
Participant accounts: Each participant's account is credited with (a)
participant contributions, (b) the Company's contribution and (c) an allocation
of investment earnings. The allocation is based on the participant's account
balance, as defined. The benefit to which a participant is entitled is the
benefit that can be provided from the participant's account.
Vesting: Participants' and employer's contributions and earnings thereon are
immediately vested.
Payment of benefits: Generally, upon termination of service for any reason, a
participant may elect to receive a lump-sum amount equal to the value of the
participant's account. At the attainment of age 591/2, subject to certain
limitations as defined, the participant may make withdrawals from his account of
the amounts attributable to pretax contributions and Company contributions,
increased by any gains and earnings and decreased by any losses attributable
thereto and distributions made therefrom. The method of payment, whether in
cash or stock, is subject to certain conditions and elections as defined in the
Plan document. Distributions from the Plan are subject to federal income tax
rules and regulations.
NOTE 2.PLAN DESCRIPTION (CONTINUED)
Contributions: Each year, participants may contribute from 1 percent up to 15
percent, in whole percentages, of pretax annual compensation, as defined in the
plan. The Company contributes a percent of the first 6 percent of eligible
compensation that a participant contributes to the plan, as defined. The
Company receives a federal tax deduction for amounts contributed to the Plan
subject to certain limitations. The Company matching percentage ranges from 30%
to 100% depending on the ratio of the Company's consolidated net income for the
Plan year to its consolidated net sales for the Plan year, as defined. For a
ratio up to 3.8%, the contribution is 30%. The contribution gradually increases
to 100% as the ratio increases to 8.6%. For the plan years ended December 31,
1995 and 1994, the ratio was 3.0 percent and 7.6 percent, respectively. The
corresponding match on the first 6 percent of eligible compensation that a
participant contributes for December 31, 1995 and 1994, was 30 percent and 80
percent, respectively, as defined. The Plan permits the Company to modify this
formula provided it is amended prior to December 15 of the preceding Plan year.
Additional amounts may be contributed at the option of the Company's Board of
Directors. Contributions are subject to certain limitations.
Investment options: Upon enrollment in the Plan, a participant may direct
contributions in any of seven investment options. At December 31, 1995 and
1994, there were 420 and 369 employees, respectively, participating in the Plan.
The funds are invested in shares of a registered investment company except for
the Portec, Inc. Stock Fund which is invested in common stock of the Company.
Portec, Inc. Common Stock Fund - Invests in common stock of Portec, Inc. and
temporarily in short-term money market instruments. All of the Company match is
invested in this fund. At December 31, 1995 and 1994, there were 371 and 333,
respectively, participants in this fund.
T-Rowe Price Associates New Horizons Fund - Invests in common stock of small,
rapidly growing companies in a broad range of industries. At December 31,
1995 and 1994, there were 270 and 237, respectively, participants in this fund.
T-Rowe Price Associates Prime Reserve Fund - Invests in high-quality domestic
and foreign money market securities, including U.S. Treasury bills and
certificates of deposit that have an average maturity of 90 or fewer days. At
December 31, 1995 and 1994, there were 181 and 170, respectively, participants
in this fund.
T-Rowe Price Associates Short-Term Bond Fund - Invests primarily in short-term
U.S. Treasury notes and corporate bonds that have an average maturity of three
or fewer years. At December 31, 1995 and 1994, there were 179 and 162,
respectively, participants in this fund.
T-Rowe Price Associates Equity Income Fund - Invests in a portfolio of common
stocks of established companies that pay above-average dividends and have
prospects of future dividend increases. At December 31, 1995 and 1994, there
were 317 and 291, respectively, participants in this fund.
T-Rowe Price Associates Small-Cap Value Fund - Invests primarily in common
stocks of small companies which are believed to be undervalued at the time of
purchase and to have potential for capital appreciation. At December 31, 1995
and 1994, there were 108 and 76, respectively, participants in this fund.
NOTE 2.PLAN DESCRIPTION (CONTINUED)
T-Rowe Price Associates International Stock Fund - Invests in common stocks of
large, established non-U.S. companies that are broadly diversified in Europe,
the Far East, Australia, Canada, and other areas. At December 31, 1995 and
1994, there were 118 and 92, respectively, participants in this fund.
Participants may change their deferral elections once per month and investment
elections at any time.
Participant notes receivable: Participants may borrow from their fund accounts
a minimum of $200 up to a maximum equal to the lesser of $50,000 or 50 percent
of their account balance. Loan transactions are treated as a transfer to (from)
the investment fund from (to) the Participant Notes Receivable Fund. Loan terms
range from 1-5 years or up to 10 years for the purchase of a primary residence.
The loans are collateralized by the balance in the participant's account and
bear interest at a rate commensurate with local prevailing rates as determined
by the Plan administrator. Interest rates currently range from 6.25 percent to
8 percent. Principal and interest is paid through payroll deductions.
III. RELATED PARTY TRANSACTIONS
Certain Plan investments are shares of registered investment companies managed
by T-Rowe Price Associates. T-Rowe Price Trust Company is the trustee, as
defined by the Plan, and, therefore, these transactions qualify as party-in-
interest. Furthermore, T-Rowe Price Retirement Plan Service, Inc. is providing
plan administration services to the Plan. Fees are paid by the Company.
Certain other administrative expenses are paid by the Company on behalf of the
Plan. The amount of these expenses is not significant to the financial
statements.
IV. PLAN TERMINATION
Although it has not expressed any intent to do, the Company has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA.
V. TAX STATUS
The Internal Revenue Service has determined and informed the Company by a letter
dated October 25, 1995, that the Plan and related trust are designed in
accordance with applicable sections of the Internal Revenue Code ("IRC"). The
Plan administrator and the Plan's tax counsel believe that the Plan is currently
being operated in compliance with the applicable requirements of the IRC.
<TABLE>
<S><C>
ITEM 27(A) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1995 SCHEDULE I
Number of Fair
(a) Identity of Issue/Description of Investment Shares Cost Value
* Portec, Inc. Common Stock 217,220 $ 1,550,964 $ 2,090,747
Shares held with registered investment company:
T-Rowe Price Associates:
* New Horizons Fund 89,467 1,379,785 1,834,067
* Prime Reserve Fund 1,101,305 1,101,305 1,101,305
* Short-Term Bond Fund 143,021 706,932 682,209
* Equity Income Fund 191,180 2,966,017 3,825,511
* Small-Cap Value Fund 12,366 186,412 204,410
* International Stock Fund 18,217 218,135 222,791
Participant Notes Receivable (interest rates range
from 6.25 percent to 8 percent) 215,383 215,383
$ 8,324,933 $ 10,176,423
*Identifies a party known to be a party-in-interest.
ITEM 27(D) - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1995 SCHEDULE VI
Purchases Sales
Total Total Total Total Total Total
Identity of Party Involved/ Number of Purchase Number of Sales Sales Sales
Description of Asset Purchases Cost Sales Cost Proceeds Gain
Portec, Inc. common stock 330 $ 494,631 $ 332 $ 489,780 $ 675,307 $ 185,527
Shares of registered
investment
companies:
T-Rowe Price Associates:
New Horizon Fund 187 379,509 116 408,585 526,875 118,290
Prime Reserve Fund 199 237,167 109 243,900 243,900 -
Equity Income Fund 203 567,578 141 952,422 1,143,301 190,879
</TABLE>
