SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For Quarterly Period Ended June 30, 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
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Hundred Field Drive, Suite 120, Lake Forest, Illinois 60045
- ------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(847) 735-2800
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(Registrant's telephone number, including area code)
Former address:
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(Former name, former address and former fiscal year, if changed since
last report).
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
------ ------
Number of shares of Registrant's Common Stock ($1 per share par value) issued
and outstanding at August 13, 1997 - 4,369,074.
PART I
------
FINANCIAL INFORMATION
---------------------
ITEM 1: FINANCIAL STATEMENTS
- -----------------------------
PORTEC, INC. CONSOLIDATED BALANCE SHEETS
AS OF JUNE 30, 1997; DECEMBER 31, 1996; AND JUNE 30, 1996
(THOUSANDS OF DOLLARS)
(Unaudited) (Unaudited)
6/30/97 12/31/96 6/30/96
----------- ----------- -----------
CURRENT ASSETS
Cash and cash equivalents $ 5,586 $ 4,979 $ 4,605
Accounts and notes receivable, 16,699 14,816 16,932
less allowances
Inventories 16,514 18,038 14,700
Deferred income tax benefits 3,286 3,286 900
Other current assets 284 981 207
----------- ----------- -----------
Total current assets 42,369 42,100 37,344
----------- ----------- -----------
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 220
Buildings and improvements 11,052 10,964 11,212
Machinery and equipment 23,720 23,010 21,534
----------- ----------- -----------
34,992 34,194 32,966
Less accumulated depreciation (20,688) (19,651) (18,735)
----------- ----------- -----------
Total property, plant and equipment 14,304 14,543 14,231
----------- ----------- -----------
ASSETS HELD FOR SALE 2,070 2,070 2,070
----------- ----------- -----------
INTANGIBLE ASSETS - NET 5,019 4,922 3,413
----------- ----------- -----------
NOTES RECEIVABLE AND OTHER ASSETS 2,302 2,315 2,036
----------- ----------- -----------
Total $ 66,064 $ 65,950 $ 59,094
=========== =========== ===========
CURRENT LIABILITIES
Current portion of long-term debt $ 2,142 $ 3,246 $ 1,046
Accounts payable 6,064 7,015 7,059
Other accrued liabilities 10,338 9,058 9,353
----------- ----------- -----------
Total current liabilities 18,544 19,319 17,458
----------- ----------- -----------
LONG-TERM DEBT 7,544 7,568 7,591
----------- ----------- -----------
DEFERRED CREDITS
Pensions 1,868 1,868 1,923
Deferred income tax 1,220 1,365 -
Other 628 844 637
----------- ----------- -----------
Total deferred credits 3,716 4,077 2,560
----------- ----------- -----------
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,378,618
4,373,596 and 4,333,176 shares,
respectively 4,379 4,374 4,333
Additional capital 46,908 46,841 46,629
Cumulative translation adjustment (227) (99) (764)
Accumulated deficit (14,698) (15,968) (18,623)
----------- ----------- -----------
36,362 35,148 31,575
Treasury stock, 9,544, 16,421 and
10,021, respectively, common shares
at cost (102) (162) (90)
----------- ----------- -----------
Total stockholders' equity 36,260 34,986 31,485
----------- ----------- -----------
Total $ 66,064 $ 65,950 $ 59,094
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
<TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THREE AND SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
(UNAUDITED)
<CAPTION>
Three Months Ended 6/30 Six Months Ended 6/30
--------------------------- -------------------------
1997 1996 1997 1996
------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
Revenues
Net sales $ 28,661 $ 28,592 $ 53,431 $ 55,876
Other income (expense) (21) (67) (33) (137)
------------ ------------ ----------- -----------
Total 28,640 28,525 53,398 55,739
------------ ------------ ----------- -----------
Costs and expenses
Cost of goods sold 20,436 20,309 38,080 39,925
Selling, general and administrative 5,665 5,467 11,382 10,829
Interest 188 198 394 397
------------ ------------ ----------- -----------
Total 26,289 25,974 49,856 51,151
------------ ------------ ----------- -----------
Income before income taxes 2,351 2,551 3,542 4,588
Income tax provision 809 630 1,219 694
------------ ------------ ----------- -----------
Net income $ 1,542 $ 1,921 2,323 3,894
============ ============
Cash dividends paid or declared (1,053) -
Accumulated deficit - beginning of year (15,968) (22,517)
----------- -----------
Accumulated deficit - end of period $ (14,698) (18,623)
Earnings per common share: $ .34 $ .42 $ .51 $ .85
============ ============ =========== ===========
Average number of shares outstanding 4,534,251 4,582,973 4,517,682 4,575,590
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
PORTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 1997 AND JUNE 30, 1996
(THOUSANDS OF DOLLARS)
(UNAUDITED)
6 MONTHS ENDED 6/30
---------------------
1997 1996
--------- ----------
Cash flows from Operating Activities:
Net income $ 2,323 $ 3,894
Adjustments to reconcile net income
to net cash provided by operating
activities:
Depreciation and amortization 1,424 1,271
Increase in receivables (1,807) (3,802)
Decrease in inventories 1,590 3,277
Decrease in other net assets
and deferred charges 687 819
Loss (gain) on sale of assets 8 (1)
Decrease in deferred credits (361) (37)
Increase (decrease) in accounts payable
and accruals 499 (457)
--------- ---------
Net cash provided by operating
activities 4,363 4,964
--------- ---------
Cash flows from Investing Activities:
Capital expenditures (1,046) (1,082)
Acquisitions (436) (500)
Proceeds from disposal of property,
plant and equipment 14 6
--------- ---------
Net cash used by investing
activities (1,468) (1,576)
--------- ---------
Cash flows from Financing Activities:
Net borrowing on revolving credit (1,100) (1,500)
Payment on capitalized leases (28) (26)
Issuance of common stock 19 -
Purchase of treasury stock (371) (168)
Payment of cash dividends (700) -
--------- ---------
Net cash used by financing
activities (2,180) (1,694)
--------- ---------
Effect of exchange rate change (108) (566)
--------- ---------
Net increase in cash and
cash equivalents 607 1,128
Cash and cash equivalents at
beginning of year 4,979 3,477
--------- ---------
Cash and cash equivalents at
end of period $ 5,586 $ 4,605
========= =========
Interest paid $ 388 $ 385
Income taxes paid $ 514 $ 359
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENTS - JUNE 30, 1997
(THOUSANDS OF DOLLARS)
1. Inventories at June 30, 1997; December 31, 1996; and June 30, 1996 were:
(Unaudited) (Unaudited)
6/30/97 12/31/96 6/30/96
----------- ---------- -----------
Raw Materials and Supplies $ 6,204 $ 6,361 $ 5,018
Work-in-Process 3,489 3,468 3,422
Finished Goods 6,821 8,209 6,260
----------- ---------- -----------
$ 16,514 $ 18,038 $ 14,700
=========== ========== ===========
2. Financial statements for the six months ended June 30, 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.
4. Certain amounts in the Consolidated Balance Sheets as of December 31, 1996
and June 30, 1996 have been reclassified to conform to those of June 30,
1997.
ITEM 2. Management's Discussion and Analysis of Financial
-------------------------------------------------
Condition and Results of Operations
-----------------------------------
Results of Operation
- --------------------
Second Quarter of 1997 Compared with
Second Quarter of 1996
Net sales of $28,661,000 for the quarter ended June 30, 1997 were virtually
the same as the net sales of $28,592,000 for the same period in 1996. The
Construction Equipment segment saw increased sales primarily due to a greater
demand for sand washing equipment. Net sales of the Railway Products segment
were up slightly as a result of improved volume in various track components.
These increases were partially offset by a decrease in the Materials Handling
segment resulting from the reduced number of capital investment projects in
the recycling industry. Activity in specialty conveyors, including a large
order for the U.S. Post Office, helped to cover some of the shortfall in the
Materials Handling segment.
Net income of $1,542,000 for the second quarter of 1997 was 19.7 percent below
the net income of $1,921,000 for the same period in 1996. The operating
profit of the Materials Handling and Railway Products segments were only
slightly below that of last year due to changes in product mix or volume. The
Construction Equipment segment experienced lower operating profits in the
second quarter compared with 1996 due to increased manufacturing overhead
spending related to labor and other payroll expenses. In addition, selling,
general and administrative expenses at the Construction Equipment segment were
up as a result of an increase in group insurance and bad debt expense. The
provision for income tax was $179,000 greater in the second quarter of 1997
compared with the same period last year as the Company no longer has a
domestic tax loss carryforward to be used.<PAGE>
Selling, general and administrative
expenses during the second quarter of 1997 increased from $5,467,000 for the
same period last year to $5,665,000. The primary reason for the increase
was an increase in the Company's group insurance expense as well as bad debt
expense.
Results of Operations
- ---------------------
First Six Months of 1997 Compared with
First Six Months of 1996
Net sales and corresponding net income were $53,431,000 and $2,323,000,
respectively, for the six months ended June 30, 1997, compared with net sales
of $55,876,000 and net income of $3,894,000 for the first six months of 1996.
The Materials Handling and Railway Products segments both experienced lower
net sales during the first half of 1997. In the Materials Handling segment,
the shortfall in sales of recycling equipment was partially offset by
increased activity in specialty conveyors. The decreased demand for heavy-
duty tie-down equipment continued to effect the Railway Products segment.
Increased sales in the traditional Kolberg and Pioneer product lines of the
Construction Equipment segment more than offset a decrease in sales of
environmental and Innovator products.
The decrease in the net income for the six month period ended June 30, 1997
versus the same period last year reflected the decreased volume and the higher
selling, general and administrative expense in addition to an increase in the
tax provision of $525,000. The change in the tax provision reflected taxes on
all domestic earnings in 1997 versus the recognition of tax loss carryforward
benefits for a portion of 1996 domestic earnings.
Current assets were $42,369,000 at June 30, 1997 compared with $42,100,000 at
December 31, 1996 and $37,344,000 as June 30, 1996. The increase in cash of
$607,000 and $981,000 from December 31, 1996 and June 30, 1996, respectively,
was due to cash generated from operations. Accounts receivable increased
$1,883,000 from December 31, 1996 due to increased sales during the second
quarter of 1997 versus the fourth quarter of 1996. Inventories were down from
December 31, 1996 by $1,524,000 primarily due to reduced Canadian inventory in
anticipation of their lower seasonal sales. The $1,814,000 increase in
inventory from June 30, 1996 reflected the increased backlog of orders at June
30, 1997. Deferred income tax benefits were up $2,386,000 from the $900,000
recorded at June 30, 1996 as a result of a reduction in the valuation
allowance and a reclassification of tax attributes. The decrease of $697,000
in other current assets related to the collection of taxes receivable and
changes in various prepaid accounts.
Fixed asset expenditures were $1,046,000 during the first half of 1997 versus
$1,082,000 during the same period last year. Depreciation and amortization
was up $153,000 over that of last year. Intangible assets increased
$1,606,000 from June 30, 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.
Notes receivable and other assets were up $266,000 over those of June 30, 1996
due to the addition of long-term lease receivables.
The increase in the current portion of long-term debt of $1,096,000 from June
30, 1996 and the decrease in the same of $1,104,000 from December 31, 1996
reflected the change in working capital needs. Long-term debt was
reclassified in the Consolidated Balance Sheets of December 31, 1996 and June
30, 1996 to conform to the classification of the Consolidated Balance Sheet of
June 30, 1997. Accounts payable were down from both December 31, 1996 and
June 30, 1996 as a result of lower inventory purchases. Other current
liabilities were up $1,280,000 and $985,000 from December 31, 1996 and June
30, 1996, respectively, due to increased income taxes payable and dividends
payable.
The increase in stockholders' equity of $1,274,000 from December 31, 1996 to
June 30, 1997 was attributable to earnings during the first half of 1997, to
the exercise of stock options, and to the contribution of stock to the Savings
and Investment Plan for company employees. These increases were partially
offset by the payment of cash dividends and the change in cumulative
translation adjustment. The $4,775,000 increase in stockholders' equity from
June 30, 1996 to June 30, 1997 was due to earnings during the last half of
1996 and the first half of 1997, to the exercise of stock options, to the
contribution of stock to the Savings and Investment Plan for company employees
and to the change in cumulative translation adjustment. These increases were
partially offset by the payment of cash dividends and the purchase of treasury
stock.
The Company received new orders of $23,442,000 during the second quarter of
1997 compared with $24,104,000 for the second quarter of 1996. The 3 percent
decrease was attributable to significant reductions in bookings for recycling
equipment and load securement equipment as well as construction equipment.
The order backlog was $22,876,000 at June 30, 1997 compared with $20,885,000
and $17,698,000 at December 31, 1996 and June 30, 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 Company has determined that the effect of adopting SFAS 128
will not be significant.
Liquidity
- ---------
On February 12, 1993, the Company entered into a credit agreement with a bank
which was amended on April 26, 1994, June 13, 1995 and June 2, 1997. The
amended agreement provides up to $17,000,000 of credit available as either
cash or letters of credit. The provisions of the agreement include
restrictive covenants relating to minimum net worth, interest coverage, net
working capital and leverage ratio requirements and limit cash dividend
payments and additional indebtedness.
The Company does not have available lines of credit beyond its existing bank
agreement and is prohibited by the agreement from making other borrowings.
The Company presently has a facility for sale or lease in Troy, New York. Due
to economic conditions and other factors, the efforts to sell this property
have not been successful. A property in Pittsburgh, Pennsylvania, has been
leased on a long-term lease with an option to buy 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 2.3, 2.2 and
2.1 to 1 at June 30, 1997, December 31, 1996 and June 30, 1996, respectively.
At June 30, 1997, the Company had available $7,150,000 of unused credit under
the loan agreement, plus cash and cash equivalents of $5,586,000. This
compared with $4,350,000 and $6,775,000 of unused credit and $4,979,000 and
$4,605,000 of cash and cash equivalents at December 31, 1996 and June 30,
1996, respectively.
PART II - OTHER INFORMATION
---------------------------
ITEM 5. ACQUISITION
- --------------------
In April, 1997, PORTEC (U.K.) Ltd., a wholly-owned United Kingdom subsidiary
of the Company, acquired the assets of Whitehough Engineering Limited (WECO),
a small United Kingdom manufacturer and marketer of lubricator equipment for
the railroad industry, for approximately $175. The acquisition was accounted
for as a purchase.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
---------
11 The Company's statement regarding computation of per share
earnings.
(b) Reports on Form 8-K
-------------------
During the quarter ended June 30, 1997, the Company did not file any
reports on Form 8-K.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PORTEC, Inc.
------------------------------
Registrant
Dated: August 13, 1997 By: /s/ Nancy A. Kindl
--------------------------
Nancy A. Kindl
Vice President, Treasurer,
Secretary and Chief Financial
Officer
EXHIBIT INDEX
-------------
Page No.
Within
Sequential
Numbering
System of
Exhibit Description Exhibit
- ------- ----------- -------
11 Registrant's statement regarding
computation of per share earnings. 12
Exhibit 6(a) 11
---------------
PORTEC, INC.
------------
COMPUTATION OF NET INCOME PER COMMON SHARE
------------------------------------------
Three Months Six Months
Ended June 30, Ended June 30,
------------------- -------------------
1997 1996 1997 1996
------ ------ ------ ------
Average Shares
Outstanding 4,534,251 4,582,973 4,517,682 4,575,590
Net Income $1,542,000 $1,921,000 $2,323,000 $3,894,000
Per Share
Amount $ .34 $ .42 $ .51 $ .85
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 5586
<SECURITIES> 0
<RECEIVABLES> 17228
<ALLOWANCES> 529
<INVENTORY> 16514
<CURRENT-ASSETS> 42369
<PP&E> 34992
<DEPRECIATION> 20688
<TOTAL-ASSETS> 66064
<CURRENT-LIABILITIES> 18544
<BONDS> 0
0
0
<COMMON> 4379
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 66064
<SALES> 53431
<TOTAL-REVENUES> 53398
<CGS> 38080
<TOTAL-COSTS> 49462
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 394
<INCOME-PRETAX> 3542
<INCOME-TAX> 1219
<INCOME-CONTINUING> 2323
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2323
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
