SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For Quarterly Period Ended March 31, 1997, or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from __________ to __________
Commission File No. 1-500
PORTEC, Inc.
-----------------------
(Exact name of Registrant as specified in its charter)
Delaware 36-1637250
------------- -----------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Hundred Field Drive, Suite 120, Lake Forest, Illinois 60045
- --------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(847) 735-2800
----------------
(Registrant's telephone number, including area code)
Former address:
-------------------------------------------------------------
- -------------------------------(Former name, former address and former fiscal
year, if changed since last report).
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------ ------
Number of shares of Registrant's Common Stock ($1 per share par value) issued
and outstanding at May 12, 1997 - 4,375,548.
<TABLE>
PART I
------
FINANCIAL INFORMATION
---------------------
Item 1: Financial Statements
- -----------------------------
PORTEC, INC. CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1997; DECEMBER 31, 1996; AND MARCH 31, 1996
(THOUSANDS OF DOLLARS)
<CAPTION>
Unaudited Unaudited
3/31/97 12/31/96 3/31/96
---------- ---------- ----------
<S> <C> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 4,582 $ 4,979 $ 3,686
Accounts and notes receivable, 17,356 14,816 16,646
less allowances
Inventories 18,460 18,038 16,465
Deferred income tax benefits 3,286 3,286 800
Other current assets 266 981 484
---------- ---------- ----------
Total current assets 43,950 42,100 38,081
---------- ---------- ----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 220
Buildings and improvements 10,892 10,964 10,950
Machinery and equipment 23,234 23,010 21,203
---------- ---------- ----------
34,346 34,194 32,373
Less accumulated depreciation (20,093) (19,651) (18,297)
---------- ---------- ----------
Total property, plant and equipment 14,253 14,543 14,076
---------- ---------- ----------
Assets Held For Sale 2,070 2,070 2,070
---------- ---------- ----------
Intangible Assets 4,857 4,922 2,978
---------- ---------- ----------
Notes Receivable and Other Assets 2,311 2,315 2,033
---------- ---------- ----------
Total $ 67,441 $ 65,950 $ 59,238
========== ========== ==========
CURRENT LIABILITIES
Current portion of long-term debt $ 46 $ 46 $ 46
Accounts payable 7,166 7,015 7,047
Other accrued liabilities 8,284 9,058 8,407
---------- ---------- ----------
Total current liabilities 15,496 16,119 15,500
---------- ---------- ----------
LONG-TERM DEBT 12,852 10,768 11,303
---------- ---------- ----------
DEFERRED CREDITS
Pensions 1,868 1,868 1,923
Deferred income tax 1,220 1,365 -
Other 584 844 596
---------- ---------- ----------
Total deferred credits 3,672 4,077 2,519
---------- ---------- ----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,373,596,
4,373,596 and 4,333,176 shares 4,374 4,374 4,333
Additional capital 46,880 46,841 46,629
Cumulative translation adjustment (295) (99) (412)
Accumulated deficit (15,537) (15,968) (20,544)
---------- ---------- ---------
35,422 35,148 30,006
Treasury stock, 44, 16,421 and
9,562 common shares at cost (1) (162) (90)
---------- ---------- ---------
Total stockholders' equity 35,421 34,986 29,916
---------- ---------- ---------
Total $ 67,441 $ 65,950 $ 59,238
========== ========== =========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATE)
(UNAUDITED)
Three Months Ended 3/31
- -----------------------
1997 1996
---------- ----------
Revenues
Net sales $ 24,770 $ 27,284
Other income (expense) (12) (70)
---------- ----------
Total 24,758 27,214
---------- ----------
Costs and expenses
Cost of goods sold 17,644 19,616
Selling, general and administrative 5,717 5,362
Interest 206 199
---------- ----------
Total 23,567 25,177
---------- ----------
Income before income taxes 1,191 2,037
Income tax provision 410 64
---------- ----------
Net income 781 1,973
Cash dividends paid (350) -
Accumulated deficit - beginning of year (15,968) (22,517)
---------- ----------
Accumulated deficit - end of period $ (15,537) $ (20,544)
========== ==========
Earnings per common share $ .17 $ .43
========== ==========
Dividends per common share $ .08 $ -
========== ==========
Average number of shares outstanding 4,500,987 4,568,206
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1997 AND MARCH 31, 1996
(THOUSANDS OF DOLLARS)
(UNAUDITED)
3 MONTHS ENDED 3/31
--------------------------
1997 1996
--------- --------
Cash flows from Operating Activities:
Net income $ 781 $ 1,973
Adjustments to reconcile net income
to net cash used by operating
activities:
Depreciation and amortization 708 633
Increase in receivables (2,540) (3,516)
Decrease (increase) in inventories (422) 1,512
Decrease in other net assets
and deferred charges 719 642
Gain on sale of assets (1) (2)
Decrease in deferred credits (405) (78)
Decrease in accounts payable and
accruals (153) (1,412)
--------- --------
Net cash used by operating
activities (1,313) (248)
--------- --------
Cash flows from Investing Activities:
Capital expenditures (390) (494)
Acquisitions (30) -
Proceeds from disposal of property,
plant and equipment 3 5
--------- --------
Net cash used by investing
activities (417) (489)
--------- --------
Cash flows from Financing Activities:
Net borrowing on revolving credit 2,100 1,200
Payment on capitalized leases (16) (15)
Purchase of treasury stock (270) (168)
Payment of cash dividends (350) -
--------- --------
Net cash provided by financing
activities 1,464 1,017
--------- --------
Effect of exchange rate change (131) (71)
--------- --------
Net increase (decrease) in cash and
cash equivalents (397) 209
Cash and cash equivalents at
beginning of year 4,979 3,477
--------- --------
Cash and cash equivalents at
end of period $ 4,582 $ 3,686
========= ========
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - MARCH 31, 1997
(THOUSANDS OF DOLLARS)
1. Inventories at March 31, 1997; December 31, 1996; and March 31, 1996
were:
3/31/97 12/31/96 3/31/96
---------- ---------- ---------
Raw Materials and Supplies $ 6,596 $ 6,361 $ 5,436
Work-in-Process 4,682 3,468 4,705
Finished Goods 7,182 8,209 6,324
---------- ---------- ---------
$ 18,460 $ 18,038 $ 16,465
========== ========== =========
2. Financial statements for the three months ended March 31, 1997 are
subject to audit adjustments.
3. The accompanying financial statements reflect all adjustments which
were, in the opinion of management, necessary to a fair statement of the
results for the period presented, and all of these adjustments were of a
normal recurring nature. For full disclosure of significant accounting
policies, see Note 1 of the PORTEC, Inc. 1996 Annual Report.
ITEM 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Net sales for the quarter ended March 31, 1997 were $24,770,000 compared with
$27,284,000 for the same period in 1996. The decrease in net sales of 9.2
percent during the first quarter of 1997 was due to reduced sales by the
Company's Materials Handling and Railway Products segments. Significantly
lower sales volume was generated by Countec as prices for recycled commodities
continued at a level which did not justify expenditures for capital equipment.
This condition is expected to continue into the second quarter of 1997. The
shortfall in the Materials Handling segment was partially offset by an
increase in the segment's traditional product lines due mainly to work being
done on a U.S. Post Office project. In the Railway Product segment, sales of
load securement products were down due to production declines in the specialty
railcars that use our equipment. The Company also experiences lower sales
volume at Portec (U.K.) Ltd. resulting from a slow down in systems work. The
Construction Equipment segment sales were up 4.9 percent over those of last
year despite severe weather conditions at their plant early in the year.
Income before income taxes was $1,191,000 for the first quarter of 1997
compared with $2,037,000 for the quarter ended March 31, 1996. The decrease
of $846,000 reflected the lower sales volume and increased selling, general
and administrative expense. These changes were partially offset by slightly
lower other expense. While gross margins were 29 percent of sales during the
first quarter of 1997 versus 28 percent for the same period last year, the
lower sales volume resulted in less contribution to selling, general and
administrative expenses. Selling, general and administrative expense
increased $355,000 primarily due to increased medical insurance expense and
professional fees.
Net income for the quarter ended March 31, 1997 of $781,000 was below the
$1,973,000 reported for the same period last year. The Company's provision
for income taxes was $410,000 and $64,000 in the first quarter of 1997 and
1996, respectively. This significant increase was due to the utilization of
all domestic tax loss carryforwards during 1996. Domestic earnings will be
fully taxed in the future.
Current assets were $43,950,000 at March 31, 1997 compared with $36,451,000 at
December 31, 1996 and $38,081,000 at March 31, 1996. The increase in cash of
$896,000 from March 31, 1996 was due to cash generated from foreign
operations. Accounts receivable of $17,356,000 were up $2,540,000 from
December 31, 1996 due to increased sales during the first quarter of 1997
versus the fourth quarter of 1996. Inventories increased $1,995,000 from
those of March 31, 1996 due to an increased backlog of orders at several
operating divisions. Deferred income tax benefits were up $2,486,000 from the
$800,000 recorded at March 31, 1996 as a result of a reduction in the
valuation allowance and a reclassification of tax attributes. Other current
assets decreased $715,000 and $218,000 from December 31, 1996 and March 31,
1996, respectively. The decrease from December 31, 1996 was primarily due to
the collection of taxes receivable and changes in various prepaid accounts.
The reduction from March 31, 1996 resulted from the collection of a note
receivable related to the disposal of a business.
Fixed asset acquisitions were $390,000 during the first quarter of 1997 versus
$494,000 for the same period last year. Intangible assets increased
$1,879,000 from March 31, 1996 as a result of goodwill recorded as a part of
acquisitions and a fee for a license agreement entered into by the Materials
Handling segment. Normal amortization partially offset these increases.
Other assets and notes receivable were up $278,000 over those of March 31,
1996 due to the addition of long-term lease receivables.
Long-term debt was $12,852,000 at March 31, 1997 compared with $10,768,000 and
$11,303,000 at December 31, 1996 and March 31, 1996, respectively. The
increase of $2,084,000 from year end was attributable to additional working
capital needed during the first and second quarter as a result of increased
sales. The $1,549,000 in debt added since March 31, 1996 resulted from
increased working capital needs.
The increase in stockholders' equity of $435,000 from December 31, 1996 to
March 31, 1997 was attributable to earnings and the contribution of treasury
stock to the Savings and Investment Plan for company employees. These
increases were partially offset by the payment of a cash dividend of $350,000
during the first quarter of 1997 and the cumulative translation adjustment.
The $5,505,000 increase in stockholders' equity from March 31, 1996 to March
31, 1997 was due to earnings during the last three quarters of 1996 and the
first quarter of 1997, to the exercise of stock options, to the contribution
of stock to the Savings and Investment Plan for company employees and to a
decrease in the cumulative translation adjustment. This was partially offset
by the payment of cash dividends.
The Company received new orders of $33,389,000 during the first quarter of
1997 compared with $29,259,000 for the first quarter of 1996. The 14 percent
increase was attributable to higher orders in the Materials Handling and
Railway Products segments. The order backlog was $28,821,000 at March 31,
1997 compared with $20,885,000 and $23,012,000 at December 31, 1996 and March
31, 1996, respectively.
In February 1997, the FASB issued SFAS No. 128, "Earnings per Share." SFAS
No. 128 requires public companies to present basic earnings per share and, if
applicable, diluted earnings per share, instead of primary and fully diluted
earnings per share. Adoption of SFAS is required for interim and annual
periods ending after December 15, 1997 and earlier application is not
permitted. The effect of adopting SFAS 128 on the Company has not been
determined but is not anticipated to be significant.
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.<PAGE>
The Company does not have available lines of credit beyond its
existing bank agreement and is prohibited by the agreement from making other
borrowings.
The Company presently has a facility for sale or lease in Troy, New York. Due
to economic conditions and other factors, the efforts to sell this property
have not been successful. A property in Pittsburgh, Pennsylvania, has been
leased on a long-term lease with an option to buy which has been exercised.
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 2.8, 2.6 and
2.5 to 1 at March 31, 1997, December 31, 1996 and March 31, 1996,
respectively. At March 31, 1997, the Company had available $2,250,000 of
unused credit under its loan agreement, plus cash and cash equivalents of
$4,582,000. This compared with $4,350,000 and $4,075,000 of unused credit and
$$,979,999 and $3,686,000 of cash and cash equivalents at December 31, 1996
and March 31, 1996, respectively.
II - OTHER INFORMATION
----------------------
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
- -------------------------------------------------------------
The Company held its Annual Meeting of Stockholders on April 23, 1997 ("Annual
Meeting"). There were 4,373,552 shares of the Company's common stock issued
and entitled to vote at the Annual Meeting. Proxies were solicited pursuant
to the nominees of the Board of Directors of the Company.
At the Annual Meeting, Messrs. Frederick J. Mancheski and John F. McKeon were
elected directors for three year terms and the votes cast were as follows:
Total Votes For
Total Votes Which Authority To
For Election Vote Withheld
------------ ------------------
Frederick J. Mancheski 2,628,003 8,925
John F. McKeon 2,632,928 4,800
Following the election, the Company's Board of Directors consisted of the
following eight named individuals:
Name Expiration of Current Term
---- --------------------------
Albert Fried, Jr. 1998
L. L. White, Jr. 1998
Michael T. Yonker 1998
J. Grant Beadle 1999
Frank T. MacInnis 1999
Arthur McSorley, Jr. 1999
Frederick J. Mancheski 2000
John F. McKeon 2000
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
- -----------------------------------------
(a) Exhibits
--------
11 The Company's statement regarding computation of
per share earnings.
(b) Reports on Form 8-K
-------------------
During the quarter ended March 31, 1997, the Company
did not file any reports on Form 8-K.
SIGNATURE
---------
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PORTEC, Inc.
---------------------------------
Registrant
Date: May 12, 1997 By: /s/ Nancy A. Kindl
---------------------------------
Nancy A. Kindl
Vice President, Treasurer, and
Secretary and Chief Financial
Officer
EXHIBIT INDEX
-------------
Page
No.
Within
Sequential
Numbering
System of
Exhibit
-------
Exhibit Description
- ------- -----------
11 Registrant's statement regarding 12
computation of per share earnings.
Exhibit 6(a) 11
---------------
PORTEC, INC.
------------
COMPUTATION OF NET INCOME PER COMMON SHARE
------------------------------------------
THREE MONTHS
ENDED March 31,
----------------------------------------
1997 1996
----------- -----------
Average Shares Outstanding 4,500,987 4,568,206
Net Income $ 781,000 $ 1,973,000
Per Share Amount $ .17 $ .43
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-01-1997
<CASH> 4582
<SECURITIES> 0
<RECEIVABLES> 17774
<ALLOWANCES> 418
<INVENTORY> 18460
<CURRENT-ASSETS> 43950
<PP&E> 34346
<DEPRECIATION> 20093
<TOTAL-ASSETS> 67441
<CURRENT-LIABILITIES> 15496
<BONDS> 0
0
0
<COMMON> 4374
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 67441
<SALES> 24770
<TOTAL-REVENUES> 24758
<CGS> 17644
<TOTAL-COSTS> 23361
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 206
<INCOME-PRETAX> 1191
<INCOME-TAX> 410
<INCOME-CONTINUING> 781
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 781
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
