SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
( X ) Annual Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 (No Fee Required)
For the fiscal year ended December 31, 1997 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 ___.
[X] 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.
As of March 25, 1998, 4,454,813 shares of Registrant's common stock were
issued and outstanding and the aggregate market value of 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 $69,050,000. For this purpose,
non-affiliates are deemed to be all stockholders other than directors and
officers of the Registrant.
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
companies 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 materials handling equipment. The Company's name was changed to PORTEC, Inc.
in 1968.
On June 2, 1997, the Company executed an amendment to its Credit Agreement
("Credit Agreement") with the American National Bank and Trust Company of
Chicago 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. For additional information on the Credit Agreement and Credit
Authorization see Note 7 of the Notes to Consolidated Financial Statements
appearing on page 34.
In November 1993, the Company acquired the assets of Nor-East Equipment, a
manufacturer of conveyor systems for solid waste recycling facilities.
On April 29, 1994, the Company acquired certain of the assets of Count
Recycling Systems, Inc. (renamed Countec). Located in Des Moines, Iowa, Countec
is a supplier of materials recovery facilities (MRF's) for the sorting and
recycling of residential and commercial solid waste.
In early 1997, the Company began a comprehensive examination of its three
then current businesses in an effort to identify strategic alternatives to
increase stockholder value. In December 1997, the Company sold the assets of
its Construction Equipment segment for cash and the assumption of substantially
all the related liabilities. The Construction Equipment segment was
headquartered in Yankton, South Dakota. A portion of the cash proceeds was used
to reduce the Company's outstanding bank debt.
Also in December 1997, the Company sold the assets of its Railroad Products
segment for cash and the assumption of substantially all the related
liabilities. The Railroad Products segment included 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. located in North Wales.
In March 1998, the Company announced an agreement to merge with MHD
Acquisition Corp. The merger is subject to stockholders approval, and a special
meeting of stockholders is scheduled to be held in the second quarter of 1998.
(b) Financial Information About Industry Segments.
Not required.
(c) Narrative Description Of Business.
(i) Description Of Business, Products And Markets. Portec's business
includes three business divisions in the materials handling industry. The
Flomaster Division and the Pathfinder Division are located in Canon City,
Colorado and the Countec Division is in Des Moines, Iowa.
The Flomaster Division produces and sells specialty belt conveyor
components such as belt power turns and spiral belt conveyors used to transport
material through turns and from one elevation to another. Markets served
include: baggage and package handling; warehousing and distribution; food and
pharmaceuticals; and printing. The products are sold direct or through
representatives to original equipment manufacturers (OEMs)and end-users.
Electronic wire guidance for lift trucks, produced and sold by the
Pathfinder Division, allows automatic steering of manned and unmanned lift
trucks. The products are sold direct and through representatives to OEMs and
end-users to the warehousing, distribution, hospital and general industries.
The Countec Division provides conveyor systems to municipal and private
materials recycling facilities for the handling and sortation of solid waste.
Sales are direct and through representatives to end-users.
(ii) Announced New Products Or Segments Of Material Importance. The
Company regularly makes improvements to its existing products and develops new
products. However, during 1997 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 1998.
(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 units 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 the Company's products is not
subject to seasonal fluctuations.
(vi) Working Capital. The Company's working capital requirements are
consistent with those of other industrial companies with which it is in
competition. The Company had current ratios of 4.2, 2.7 and 2.1 to 1 at
December 31, 1997, 1996 and 1995, respectively.
(vii) Principal Customers Of Business. The Company's business is not
dependent upon a single customer. In 1997, the Flomaster Division was a
subcontractor to Lockheed Martin on a postal project and sales to this customer
accounted for more than 10% of the Company's consolidated revenues.
(viii) Backlog Of Orders. The Company's backlog of orders for continuing
operations at December 31, 1997, was $9,325,000, compared with backlog at
December 31, 1996, of $6,413,000. The backlog at December 31, 1997, is believed
to be firm and 100% is deliverable in 1998. Orders received in 1997 were
$28,903,000, a 15% increase from $25,201,000 in orders received in 1996.
(ix) Government Contracts. The Company provides goods to various branches
or departments of the United States Government. During 1997, the Flomaster
Division was a subcontractor on a large postal project which represented more
than 10% of the Company's consolidated revenues. Other government 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. 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 $57,000, $110,000 and
$45,000 for the years 1997, 1996 and 1995, respectively. Customer-sponsored
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
1997 and are not expected to have a material effect on 1998 results.
(xiii) Number Of Employees. The number of persons employed by the Company
as of December 31, 1997, was 212 compared with 671 at December 31, 1996. The
decrease was principally attributable to the sales of the Company's Construction
Equipment and Railroad Products segments.
(d) Financial Information Exports Sales.
All of the Company's continuing operations are in domestic jurisdictions.
Export sales in 1997 were $1,595,000 as compared with $911,000 and $3,308,000 in
1996 and 1995, respectively.
Item 2. Properties.
The Company's principal operations are conducted at the designated
properties 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.
United States Properties:
Approx.
Business Sq. Ft.
Location of Bldg. Description
Lake Forest, Illinois 3,200 Principal corporate office of the
Company occupied
under lease expiring October 21, 1999.
Canon City, Colorado 61,000 Flomaster and Pathfinder Divisions'
production
facility (owned facility).
Canon City, Colorado 22,000 Flomaster Division's production
facility occupied
under lease expiring October 1998.
Canon City, Colorado 91,800 Material Handling Group's principal
office and
production facility (owned facility).
Des Moines, Iowa 5,000 Countec Division's principal offices
occupied
under lease expiring October 1999.
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 1997, there were no matters submitted to a
vote of security holders of the Company through the solicitation of proxies or
otherwise.
PART II
Item 5. Market For The Registrant'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, 1998 was 1,085.
(c) Stock Prices and Dividend Information. The information contained in
the Section entitled "Quarterly Stock & Dividend Information" appearing on page
44 presents for the years 1997 and 1996 quarterly high and low prices of the
Company's common stock. During the fourth quarter of 1996, the Company resumed
paying quarterly cash dividends at the rate of 8 cents per share of common
stock. The first quarterly dividend was paid on December 16, 1996. During
1997, cash dividends of 8 cents per common share were paid in each of the four
quarters. The closing price for shares of common stock on the Composite Tape on
March 25, 1998 was $15.50.
The Company's Credit Agreement with American National Bank and Trust
Company of Chicago 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. This
limitation has not affected the Company's quarterly cash dividend of 8 cents per
share of common stock. In addition, the Company's merger agreement with MHD
Acquisition Corp. prohibits the payment of dividends without MHD's consent
through July 31, 1998.
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Item 6. Selected Financial Data.
FIVE-YEAR SUMMARY(1)
For Years Ended December 31
1997 1996 1995 1994 1993
INCOME AND OPERATING DATA(2)
Net sales $ 25,521 $ 27,217 $ 24,755 $ 16,943 $ 12,394
Cost of products sold 14,631 17,110 15,784 9,555 6,457
Selling, general and administrative expense 7,935 5,856 5,716 6,589 6,241
Depreciation and amortization 703 606 464 390 270
Other income, net 234 130 455 1,201 62
Interest expense 635 788 8,051 527 641
Income from continuing operations before
provision for taxes 1,851 2,987 2,441 4,007 <1,153>
Income tax provision (benefit) 679 (596) 177 86 (172)
Income <Loss> from continuing operations 1,172 3,583 2,264 314 <981>
Income from discontinued operations, net of tax 2,866 3,308 634 6,511 5,677
Gain on disposal of discontinued operations,
net of tax 11,263 - - - -
Net income 15,301 6,891 2,898 6,825 4,696
FINANCIAL DATA
Working capital $ 43,702 $ 25,713 $ 19,375 $ 12,797 $ 8,554
Property, plant and equipment-net 3,918 14,543 14,171 13,372 12,129
Total assets 64,458 66,218 57,818 57,522 42,478
Long-term debt - 10,768 10,117 7,623 5,277
Stockholders' equity 49,516 34,986 28,028 24,959 17,744
Average common shares outstanding 4,376,963 4,329,761 4,296,466 4,262,728 4,059,034
Average common shares and common equivalent
shares outstanding 4,539,301 4,576,358 4,596,469 4,572,468 4,464,937
PER SHARE OF COMMON STOCK (3)
Net income
Basic $ 3.50 $ 1.59 $ .68 $ 1.60 $1.16
Diluted 3.37 1.50 .63 1.49 1.05
Stockholders' equity-end of year 11.31 8.00 6.47 5.83 4.19
Number of employees 212 671 637 779 619
Number of stockholders 1,085 1,168 1,262 1,335 1,412
(1) Dollars in thousands except per share data, number of stockholders, average number of shares outstanding and number of
employees.
(2) Adjusted to reflect continued operations.
(3) Adjusted retroactively for 10% stock dividends paid in December 1993 and 1994.
</TABLE>
Item 7. Management's Discussion And Analysis Of Financial Condition And Results
Of Operations.
Management's discussion and analysis of the Company's financial condition and
results of continuing operations consists of the Company's Consolidated
Financial Statements and notes thereto on pages 27 through 43 and the following
information:
RESULTS OF OPERATIONS
1997 COMPARED WITH 1996
In early 1997, the Company began a comprehensive examination of its three then
current businesses in an effort to identify strategic alternatives to increase
stockholder value. The company sold two of its business segments in 1997.
In March 1998, the Company announced an agreement to merge with MHD Acquisition
Corp. The merger is subject to stockholder approval, and a special meeting of
stockholders is scheduled to be held in the second quarter of 1998.
Net sales from continuing operations for the year 1997 were $25,521,000, a
decrease of 6% from sales of $27,217,000 in 1996. A significant sales increase
attributable to the traditional belt conveyor product lines and postal project
work was more than offset by lower sales in recycling conveyors and systems.
The market for recycling equipment continues to be weak due to low prices for
recycled commodities. Export sales represented 6% of total net sales.
Net income from continuing operations for 1997 was $1,172,000 compared with net
income of $3,583,000 for 1996. During 1997, the Company had an effective tax
rate of 37% compared with a significant tax benefit in 1996. Gross margins were
higher in 1997 as compared with 1996 despite lower sales volume, but higher
selling, general and administrative expense more than offset the improvement.
The costs of products sold, exclusive of depreciation and amortization, was 57%
of net sales in 1997 compared with 63% in 1996. The improvement was due
primarily to a change in product mix and operating efficiencies. Selling,
general and administrative expense of $7,935,000 in 1997 included a write off of
$427,000 for one large account receivable. During 1996, the Company experienced
a significant decrease in insurance expense due to an insurance refund and
reduced claim activity. Selling, general and administrative expense in 1996 was
$5,856,000. Depreciation and amortization increased $97,000 in 1997 compared
with 1996. Amortization of intangibles was $229,000 in 1997 compared with
$190,000 in 1996.
Interest expense of $635,000 was down 19% for the prior year due to lower
borrowings. Borrowing rates were up slightly due to an increase in the prime
interest rate.
During December 1997, the Company sold substantially all of the assets of its
Construction Equipment and Railroad Products segments. As a result of those
dispositions, cash and cash equivalents increased $51,482,000 prior to related
expenses and taxes. A portion of these funds was used to pay down long-term
debt. These segments are treated as discontinued operations in the Company's
Consolidated Financial Statements. Major fluctuations in the Consolidated
Balance Sheet from December 31, 1996 to December 31, 1997 are the result of
these transactions. Certain assets and liabilities of the Company's defined
benefit plan were transferred to the buyers of the two segments and are
reflected in the financial statements as a curtailment and settlement. Deferred
long-term gains of $1,315,000 associated with the defined benefit plan were
retained by the Company. The increase in income taxes payable reflects
liability for the gain on the sale of these operations and the elimination of
all remaining tax loss carryforward in 1996.
Capital expenditures for 1997 were $703,000 and $200,000 was paid as part of an
earnout agreement on a prior acquisition.
Inflation, which was comparable to 1996, did not adversely affect the Company in
1997.
Bookings in 1997 of $28,903,000 were up 15% from the $25,201,000 booked in 1996.
The year-end order backlog of $9,325,000 was 45% above the backlog of December
31, 1996.
1996 COMPARED WITH 1995
Net sales for the year ended December 31, 1996, were $27,217,000, an increase of
$2,462,000 from the corresponding period of 1995.
Several new products contributed to the increase in sales. Export sales were
down 72% to $911,000 as a result of less activity in Canada.
For the year ended December 31, 1996, the Company's net income from continuing
operations was $3,583,000 compared with net income of $2,264,000 for 1995.
Higher sales volume and greater efficiency resulted in this positive change.
The decrease in other income from $412,000 in 1995 to $50,000 in 1996 was
primarily due to a gain of $250,000 recognized in 1995 on the sale of assets
held for sale. Depreciation and amortization increased $142,000 in 1996
compared with 1995. Amortization of intangibles was $190,000 in 1996 compared
with $153,000 in 1995.
At December 31, 1996, a net deferred tax asset of $2,066,000 was reflected on
the balance sheet after a reduction of $3,133,000 in the valuation allowance.
The decrease in the valuation allowance for 1996 resulted from the utilization
of tax loss carryforwards and certain tax credits, the reversing of temporary
differences and a reevaluation of future taxable income potential. At December
31, 1995, the valuation allowance was decreased by $977,000 for deferred tax
assets realized through reversing temporary differences.
The decrease in current liabilities was due to lower trade accounts payable, a
reduction in customer deposits and a decrease in other accrued expenses. Long-
term debt as of December 31, 1996, was $10,768,000, an increase of $651,000 from
the prior year. These funds were used primarily for capital expenditures of
$784,000, for an earnout provision under an acquisition agreement and for a
license agreement fee.
Inflation, which was comparable to 1995, did not adversely affect the Company in
1996 nor did the impact of foreign exchange adjustments.
Bookings in 1996 of $25,201,000 were down 3% from the $25,857,000 booked in
1995. The year-end order backlog of $6,413,000 was 21% below the backlog of
December 31, 1995, due primarily to a decrease in demand for recycling conveyor
equipment in response to temporary, but significant declines in the market price
for recycled materials.
LIQUIDITY
On February 12, 1993, the Company entered into a credit agreement with the
American National Bank and Trust Company of Chicago 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 credit
agreement and is prohibited by the agreement from making other borrowings.
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 growth. The Company's working
capital ratios were 4.2, 2.7 and 2.1 to 1 at December 31, 1997, 1996 and 1995,
respectively. At December 31, 1997, the Company had available $14,749,000 of
unused credit under its loan agreement, plus cash and cash equivalents of
$46,799,000 compared with $4,350,000 of unused credit and $4,979,000 of cash and
cash equivalents at December 31, 1996.
CAPITAL RESOURCES
The Company does not have any material commitments for capital expenditures.
Management estimates that capital expenditures for 1998 will be approximately
$1,100,000.
ENVIRONMENTAL
During 1997, the Company's manufacturing facilities 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.
Item 8. Financial Statements And Supplementary Data.
The response to this item is submitted under Item 14(a)(1) of the report.
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.
Executive Officers
The following is a list of the Company's executive officers, their ages, and
their positions and offices as of March 25, 1998:
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Name of Age as of Current Position with Officer
Executive March 25, 1998 The Company Since
Albert Fried, Jr. 68 Chairman of the Board 1989
Michael T. Yonker 55 President and Chief 1988
Executive Officer and Director
Nancy A. Kindl 56 Vice President, 1982
Treasurer, Secretary,
Controller and Chief
Financial Officer
Kevin C. Rorke 49 Vice President, 1995
Group Executive of
Materials Handling Group
</TABLE>
There are no family relationships among the officers.
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 Member of Albert Fried & Company, New York, New York
(investment banking) for more than ten years and also is the Managing Member of
Buttonwood Specialists, LLC, 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 of EMCOR Group, Inc. and 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 Modine
Manufacturing Company and Woodward Governor Company.
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 Manager
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.
Directors Of The Company
The Board of Directors is divided into three classes with the term of
office of one class expiring each year. The terms of Messrs. Fried, White and
Yonker expire in 1998; the term of office of Messrs. Beadle, MacInnis and
McSorley expire in 1999; and the terms of office of Messrs. Mancheski and McKeon
expire in 2000; or, in each case until the election and qualification of their
successors. Information with respect to each director is as follows:
Albert Fried, Jr. Mr. Fried, age 68, became a director in December 1988
and the Company's Chairman of the Board in October 1989. He has been the
Managing Member of Albert Fried & Company, LLC, New York, New York (investment
banking) for more than ten years and also is the Managing Member of Buttonwood
Specialists, LLC, New York, New York (specialists on the New York Stock Ex-
change). He is a member of the New York Stock Exchange, Inc. and the New York
Futures Exchange, Inc. He is a director of EMCOR Group, Inc. and is also a
director of various civic and philanthropic organizations.
L. L. White, Jr. Mr. White, age 70, became a director in November 1988.
He presently is retired and was employed by the Company in various executive
capacities from 1967 until he retired as Senior Vice President--Commercial and
Government Relations in 1984. Thereafter, he was a private investor until he
served as the Company's Chairman of the Board from December 1988 until October
1989 and as acting Chief Executive Officer in December 1988.
Michael T. Yonker Mr. Yonker, age 55, became a director in December 1989.
He joined the Company as President and Chief Executive Officer in December 1988,
and continues to serve in that capacity. 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). He is
a director of Modine Manufacturing Company and Woodward Governor Company.
J. Grant Beadle Mr. Beadle, age 65, became a director in April 1984. He
retired in May 1991 from Union Special Corporation (manufacturer of industrial
sewing machines) after thirty years of service and was Chairman and Chief
Executive Officer of that Company from December 1984 until his retirement. For
the period of October 1991 until July 1993, he was an Associate Director of the
Institute for the Learning Sciences at Northwestern University (educational
research). He is a director of Woodward Governor Company, Batts, Inc., Oliver
Products Company, and William Blair Mutual Funds.
Frank T. MacInnis Mr. MacInnis, age 51, is Chairman and Chief Executive
Officer of EMCOR Group, Inc. (mechanical/electrical construction and facilities
management) and has held that position with that Company and its predecessor
company, JWP, Inc., since 1994. Prior to this he was Chairman of Comstock
Group, Inc. (New York-based construction group) and before that he was Chairman
and Chief Executive Officer of H.C. Price Construction (a builder of large
diameter oil and gas pipelines). He is a director of EMCOR Group, Inc. and
MAPCO, Inc.
Arthur McSorley, Jr. Mr. McSorley, age 69, became a director in March
1977. He was a director and President of Casey Co. (construction management)
and held those positions with that Company and its predecessor company, John F.
Casey Company, for more than ten years. He is retired.
Frederick J. Mancheski Mr. Mancheski, age 71, became a director in
September 1990. He retired in February 1997 from Echlin Inc., Branford,
Connecticut (manufacturer of products that improve the efficiency and safety of
motor vehicles) as Chairman of the Board and Chief Executive Officer, a position
he had held since 1969. He continues as a director of Echlin Inc. as well as
RB&W Corporation.
John F. McKeon Mr. McKeon, age 72, became a director in January 1987. He
retired in April 1989 as President of LinkBelt Construction Equipment Company
(construction equipment), a company owned 51 percent by FMC Corporation and 49
percent by Sumitomo Heavy Industries, Ltd., and held that position commencing in
1986. He also retired in April 1989 as a Group Vice President of FMC
Corporation (construction equipment) and held that position for more than ten
years. He is a director of LinkBelt Equipment Co.; LBS-Spa, an Italian company;
Dunmore Corp., and Anderson Industries.
Section 16(a) Beneficial Ownership Compliance
Based solely upon review of reports on Form 3,4 and 5 and amendments thereto
filed pursuant to Section 16 of the Securities Exchange Act of 1934, as
amended, and written representations from certain directors and executive
officers that no Forms 5 were required to be filed by them, the Company
believes that during 1997 all filing requirements applicable to its directors,
executive officers and greater than ten percent benefical owners were complied
with, except that the following shares allocated under the Company's Savings
and Investment Plan for 1997 were reported on late-filed Forms 5 in February
1997 for the following individuals: Mr. Fried, 1,315 shares; Mr. Yonker, 608;
Ms. Kindl, 1,500 shares; and Mr.Rorke, 1,716 shares.
Item 11. Executive Compensation.
The following Summary Compensation Table sets forth the total compensation
paid or accrued by the Company and its subsidiaries for the three completed
years ended December 31, 1997, for each of the executive officers of the Company
whose salary and bonus exceeded $100,000 in 1997.
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SUMMARY COMPENSATION TABLE
Long-Term
Compensation
Annual Compensation Awards
Securities
Other Underlying
Annual Options/ All Other
Name and Salary Bonus Compensation SARs Compensation
Principal Position Year $(a) $ $(b) (Shares) $(c)
Michael T. Yonker 1997 $259,110 $192,288 - 0 $ 3,280
President and Chief 1996 251,556 87,579 - 10,000 8,142
Executive Officer 1995 247,836 0 - 15,000 7,090
Albert Fried, Jr. 1997 $147,384 $ 45,810 - 0 $ 8,140
Chairman of the 1996 140,790 20,852 - 10,000 11,729
Board 1995 139,020 0 - 15,000 11,950
Nancy A. Kindl 1997 $131,651 $ 59,048 - 0 $ 3,161
Vice President, 1996 127,805 26,699 - 3,000 7,222
Secretary, Treasurer 1995 125,878 0 - 5,000 6,401
and Controller
Kevin C. Rorke 1997 $144,152 $ 63,734 - 0 $ 2,414
Vice President 1996 137,282 41,184 - 3,000 6,555
and General Manager 1995 125,571 60,180 - 5,000 6,134
of the Flomaster
Division
John S. Cooper(d) 1997 $125,836 $ 79,896 - 0 $ 2,891
Sr. Vice President 1996 129,684 14,395 - 12,000 8,703
and General Manager 1995 125,896 13,181 - 2,000 8,169
of the Railway
Maintenance
Products Division
(a) Includes amounts deferred under the Company's Savings and Investment Plan and Directors Fees for Mr. Fried as follows: 1997--
$24,000, 1996--$21,000, 1995--$21,000.
(b) The dollar value of perquisites and other personal benefits for each of the above named executive officers was less than the
established SEC reporting threshold.
(c) The total amounts shown in this column for the last fiscal year consist of the following: (i) Mr. Yonker: $1,840--Company
contribution to the Savings and Investment Plan, $1,440--Benefit attributed to Company owned life insurance policy; (ii) Mr.
Fried: $1,840--Company contribution to the Savings and Investment Plan, $6,300--Benefit attributed to Company owned life
insurance policy; (iii) Ms. Kindl: $1,840--Company contribution to Savings and Investment Plan, $1,321--Benefit attributed to
Company owned life insurance policy; (iv) Mr. Rorke: $1,840--Company contribution to the Saving and Investment Plan, $574--
Benefit attributed to Company owned life insurance policy; and Mr. Cooper: $815--Company contribution to the Savings and
Investment Plan, $2,016--Benefit attributed to Company owned life insurance policy.
(d) Mr. Cooper terminated his employment with the Company in December 1997.
Options
There were no options granted to any employees (including the individuals named in the Summary Compensation Table) during
1997.
The following table shows for the individuals named in the Summary Compensation Table information with respect to options
exercised during 1997 and the value of unexercised options at December 31, 1997.
AGGREGATED OPTIONS EXERCISED DURING 1997
AND VALUE OF OPTIONS AT DECEMBER 31, 1997
Number of Securities Value of Exercised
Underlying Unexercised In-The-Money
Shares Options at Options
Acquired Value December 31, 1997 at December 31, 1997
Name on Exercise Realized (a) Exercisable/Unexercisable Exercisable/Unexercisable(b)
Michael T. Yonker 6,500 $ 69,129 138,550/5,000 $1,349,770/0
Albert Fried, Jr. 21,600 $217,572 165,980/5,000 $1,663,787/0
Nancy A. Kindl -- -- 31,414/1,666 $257,259/0
Kevin C. Rorke -- -- 25,870/1,666 $187,760/0
John S. Cooper 3,025 $18,516 13,830/6,000 $57,097/0
(a) Based on the closing price of the Common Stock on the Composite Tape on the date the options were exercised, less the
applicable exercise price.
(b) Based on the closing price of the Common Stock on December 31, 1997, less the applicable exercise price.
</TABLE>
Executive Officer Agreements
Mr. Yonker, President and Chief Executive Officer of the Company, entered
into an agreement with the Company in December 1988, which was amended and
restated in February 1989 and further amended in December 1989, July 1997, and
February 1998, that sets forth the terms of his employment with the Company.
His current annual compensation rate is $262,944 and he participates in the
employee benefit plans as generally provided to executive officers of the
Company. He has agreed not to voluntarily terminate his employment with the
Company without giving 60 days prior written notice. The agreement also
provides termination benefits if his employment terminates (for any reason other
than death, disability, or certain specified causes) after a "change of control
event" whereby the Company is acquired or 22 percent of its outstanding Common
Stock is acquired by a party who does not obtain the approval of the Company's
Board of Directors prior to the transaction and prior to acquiring as much as 17
percent of the Company's Common Stock. The agreement provides that the "22
percent" figure is changed to "27 percent" as applicable to the acquisition of
voting securities of the Company by Albert Fried & Company, The Fried
Foundation, and Albert Fried, Jr. (collectively called "Mr. Fried"). An event
also includes the situation when during any period of 24 consecutive months the
individuals who at the beginning of such period constitute the members of the
Board of Directors of the Company, plus all other members of such Board whose
election or appointment to such Board or nomination for election to such Board
was approved by the vote of at least a majority of the directors then still in
office who either were directors of the Company at the beginning of the period
or whose election or appointment or nomination for such election was previously
so approved, cease for any reason to constitute at least 75 percent of the
members of such Board. If Mr. Yonker elects to exercise his right of
termination of his employment because of an event, this must be done within
ninety (90) days following the event. If the Company terminates the agreement
for reasons other than good cause or Mr. Yonker terminates the agreement because
of the Company's breach or an event, for a period of two years from the date of
such termination or until his death, whichever is the shorter period, the
Company shall (i) pay to him, in monthly installments, a cash amount equal to
his monthly salary from the Company in effect immediately prior to such
termination, and (ii) provide him with health, disability and life insurance
coverage in amounts substantially equal to those he was receiving at the time of
termination. In the event his employment is terminated as a result of an event,
Mr. Yonker may elect to receive a lump sum cash settlement of the cash payments
due.
Ms. Kindl, Vice President, Treasurer and Secretary of the Company, entered
into an agreement with the Company in November 1989, which was amended in
December 1990 and July 1997, and sets forth the terms of her employment with the
Company. Her current annual compensation rate is $133,104 and she participates
in the employee benefit plans as generally provided to executive officers of the
Company. Ms Kindl's agreement includes substantially the same "change in
control" provisions as described above with respect to Mr. Yonker, except that
the figure "22 percent" referred to in said paragraph is changed to "20
percent", and the "20 percent" figure is changed to "27 percent" as applicable
to the acquisition of voting securities of the Company by Mr. Fried. If she
elects to exercise her right of termination of her employment because of an
event, this must be done within ninety (90) days following the event. In the
event of a termination of the agreement by the Company for reasons other than
good cause or Ms. Kindl terminates the agreement because of the Company's breach
or an event, for a period of one year from the date of such termination or until
her death, whichever is the shorter period, the Company shall (i) pay to her, in
monthly installments, a cash amount equal to her monthly salary from the Company
in effect immediately prior to such termination, and (ii) provide her with
health, disability and life insurance coverage in amounts substantially equal to
those she was receiving at the time of termination. In the event her employment
is terminated as a result of an event, Ms. Kindl may elect to receive a lump sum
cash settlement of the cash payments due.<PAGE>
PENSION PLANS
Substantially all of the Company's employees, including executive officers,
are participants in the Company's Employees' Retirement Program. Also,
officers and certain other managerial employees of the Company may be
participants in the Company's Supplemental Non-Qualified Retirement Income Plan.
Gross wages used in calculating pension benefits under the two plans are capped
at $350,000.
The following table shows the estimated annual pension benefits from the
above program and plan based on a straight life annuity that a participant will
receive if he or she retires at age 65, the normal retirement age:
<TABLE>
<S><C>
PENSION PLAN TABLE
HIGHEST CONSECUTIVE
FIVE-YEAR AVERAGE
EARNINGS DURING
FINAL YEARS OF CREDITED SERVICE
10 YEARS OF SERVICE 5 10 15 20 25 30 35
$100,000 $ 8,248 $16,496 $24,743 $ 32,991 $ 41,239 $ 49,487 $ 57,735
150,000 12,748 25,496 38,243 50,991 63,739 76,487 89,235
200,000 17,248 34,496 51,743 68,991 86,239 103,487 120,735
250,000 21,748 43,496 65,243 86,991 108,739 130,487 152,235
300,000 26,248 52,496 78,743 104,991 131,239 157,487 183,735
350,000 30,748 61,496 92,243 122,991 153,739 184,487 215,235
</TABLE>
For purposes of this program and plan, "earnings" means the amounts paid to
the employee by the Company as reported to the Internal Revenue Service on Form
W-2 plus the amount of compensation deferred by the employee pursuant to the
Company's benefit plans. Earnings for the individuals who are participants
under this program and plan and named in the above Summary Compensation Table
are included in the amounts set forth in said table.
At December 31, 1997, the individuals named in the Summary Compensation Table
had the indicated years of credited service under the aforementioned program and
plan: Mr. Yonker--9 years, Mr. Fried--8.2 years, Ms. Kindl--22.8 years, Mr.
Cooper--18.4 years, and Mr. Rorke--10.9 years.
Pension benefits as above described are for the employee's life and are not
subject to any reduction for Social Security benefits or other offset amounts.
The Internal Revenue Code places certain limitations on pensions which may be
paid under the Employees' Retirement Program as qualified under the Internal
Revenue Code.
DIRECTOR'S COMPENSATION
Directors of the Company, other than Mr. Yonker, are paid quarterly retainer
fees and fees for attendance at Board and Board committee meetings. The 1997
quarterly retainer, Board meeting and committee meeting attendance fees were
$3,500, $1,000, and $1,000, respectively. Additionally, the Chairman of each of
the Audit, Nominating, and Stock Option and Compensation Committees is
compensated at the annual rate of $2,600.
In addition to the foregoing cash compensation, each non-employee director is
granted a stock option to purchase 7,000 shares of Common Stock of the Company
upon election to the Board. Additionally, each year at the time of the Annual
Meeting each non-employee director is granted a stock option to purchase 2,000
shares of Common Stock of the Company. The option exercise prices of all such
stock options are set in accordance with the Company's 1988 Employees' Stock
Benefit Plan. The exercise price of all options granted must be equal to the
fair market value of the stock on the grant date.
Item 12. Security Ownership Of Certain Beneficial Owners And Management.
STOCK OWNERSHIP
<TABLE>
<S><C>
The following table contains information relative to persons known to the management of the Company to be beneficial owners
of more than five percent of the Company's Common Stock.
NAME AND ADDRESS OF AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(A)
BENEFICIAL OWNER NUMBER PERCENTAGE
Albert Fried, Jr. and Albert Fried & Company, LLC 1,191,308(b) 25.8%
40 Exchange Place
New York, New York 10005
Gabelli Funds, Inc. 946,390(c) 21.3%
One Corporate Center
Rye, New York 10580-1434
Heartland Advisors, Inc. 339,300(d) 7.6%
790 North Milwaukee Street
Milwaukee, Wisconsin 53202
The TCW Group, Inc. 341,829(e) 7.0%
865 South Figueroa Street
Los Angeles, California 90017
Dimensional Fund Advisors, Inc. 270,496(f) 6.1%
11th Floor
1299 Ocean Avenue
Santa Monica, California 90401
(a) The figures shown are as of February 28, 1998, except as otherwise indicated below. The information relating to directors
and officers of the Company and other persons in this Section is based on information furnished to the Company by such
persons and SEC reports.
(b) Included in these shares are 170,980 shares related to stock options granted to Mr. Fried which are exercisable within 60
days of February 28 1998, and 9,550 shares held for his account by the Company's Savings and Investment Plan. Albert Fried &
Company, LLC, of which Mr. Fried is a managing member, has sole voting and dispositive power with regard to 1,010,778 of
these shares.
(c) Gabelli Funds, Inc. has sole voting and dispositive power with regard to these shares. Figures presented are as of March 2,
1998.
(d) Heartland Advisors, Inc. has sole dispositive power with regard to these shares and sole voting power with regard to all
shares.
(e) The TCW Group, Inc. has sole voting and dispositive power with regard to these shares.
(f) Dimensional Fund Advisors Inc. ("Dimensional"), a registered investment advisor, is deemed to have beneficial ownership of
270,496 shares of PORTEC, Inc. stock as of December 31, 1997, all of which shares are held in portfolios of DFA Investment
Dimensions Group Inc., a registered open-end investment company, or in series of the DFA Investment Trust Company, a Delaware
business trust, or the DFA Group Trust and DFA Participation Group Trust, investment vehicles for qualified employee benefit
plans, all of which Dimensional Fund Advisors Inc. serves as investment manager. Dimensional disclaims beneficial ownership
of all such shares.
The following table contains information, as of February 28, 1998, relative to each director, Mr. Cooper (whose employment
with Company terminated in December 1997), and the two non-director executive officers of the Company named in the Summary
Compensation Table shown on Page 15, and all directors and executive officers as a group as to their beneficial ownership of the
Company's Common Stock.
NAME OF INDIVIDUAL
OR NUMBER OF AMOUNT AND NATURE OF BENEFICIAL OWNERSHIP(A)
PERSONS IN GROUP NUMBER PERCENTAGE
J.Grant Beadle 17,560(c) (b)
Frank T. MacInnis 9,000(c) (b)
Frederick J. Mancheski 26,805(c) (b)
John F. McKeon 20,421(c) (b)
Arthur McSorley, Jr. 17,702(c) (b)
L. L. White, Jr. 61,022(d) 1.4%
Albert Fried, Jr. 1,191,308(c)(e) 25.8%
Michael T. Yonker 169,191(c)(e) 3.7%
Nancy A. Kindl 45,551(c)(e) 1.0%
Kevin C. Rorke 34,287(c)(e) (b)
John S. Cooper 27,194(c)(e) (b)
All Directors and Executive Officers as a Group 1,620,041(f) 32.8%
(a) All beneficial ownership is direct and arises from sole voting and dispositive power, except as otherwise indicated below.
(b) Less than one percent.
(c) Included in the shares listed are the following shares related to stock options which are exercisable within 60 days of March
11, 1998; Mr. Beadle, 14,100 shares; Mr. MacInnis, 9,000 shares; Mr. Mancheski, 14,100 shares; Mr. McKeon, 14,100 shares; Mr.
McSorley, 14,100 shares; Mr. White, 14,100 shares; Mr. Fried, 170,980 shares; Mr. Yonker, 143,550 shares; Mr. Cooper, 16,830
shares; Ms. Kindl, 33,080 shares; Mr. Rorke, 27,536 shares; and all directors and exeuctive officers as a group, 391,976
shares.
(d) Mr. White has sole voting and dispositive power with respect to 46,069 of these shares and his wife has sole voting and
dispositive power with respect to 853 of these shares.
(e) Included in the shares listed are the following shares held for the officers' accounts by Portec's Savings and Investment
Plan: Mr. Yonker, 6,141 shares; Mr. Fried, 9,550 shares; Mr. Cooper (whose employment with Portec terminated in December
1997 upon the sale of the Railroad Products business), 7,364 shares; Ms. Kindl, 11,195 shares; Mr. Rorke, 4,001 shares;
and all directors and executive officers as a group, 38,251 shares.
(f) Included in these shares for all directors and executive officers as a group are 454,646 shares covered by stock options
which are exercisable within 60 days of February 28, 1998. Also, 38,251 shares are held for the accounts of officers by the
Company's Savings and Investment Plan.
</TABLE>
Item 13. Certain Relationships and Related Transactions.
None.
PART IV
Item 14. Exhibits, Financial Statement Schedules And Reports On Form 8-K.
(a)(1) and (2) The following consolidated financial statements of the Company
are included on pages 26 to 43.
o Report of Independent Accountants
o Consolidated Statements of Income for the Years Ended December 31, 1997, 1996
and 1995
o Consolidated Balance Sheet at December 31, 1997 and 1996
o Consolidated Statements of Cash Flows or the Years Ended December 31, 1997,
1996 and 1995
o Notes to Consolidated Financial Statements (including Unaudited Quarterly
Financial Information)
o Schedule II - Valuation and Qualifying Accounts and Reserves for years ended
December 31, 1997, 1996 and 1995
All other schedules are omitted, because they are not applicable or the
required information is shown in the financial statements or notes thereto.
(3) The exhibits filed with this Form 10-K are listed in the Exhibit Index. All
management contracts and compensatory plans or arrangements set forth in such
list are marked with an (x).
(b) Reports on Form 8-K:
The Company filed one (1) Form 8-K Report during the last quarter of 1997 and
one (1) Form 8-K Report during the first quarter of 1998.
(1) The Company issued a Form 8-K Report dated December 12, 1997, covering the
disposition of the assets of its Construction Equipment and Railroad Products
segments.
(2) The Company issued a Form 8-K Report dated March 11, 1998, announcing that
it had entered into an Agreement and Plan of Merger with MHD Acquisition Corp.,
an affiliate of J Richard Industries, L. P.
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. Kindl
Nancy A. Kindl
Vice President -
Finance, Treasurer,
Controller, and Secretary
(Chief Financial and
Accounting Officer)
March 26, 1998
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/ Michael T. Yonker President and March 26, 1998
Michael T. Yonker Chief Executive Officer & Director
/S/ Nancy A. Kindl Vice President, March 26, 1998
Nancy A. Kindl Finance, Treasurer
Controller and Secretary
(Chief Financial and Accounting Officer)
/S/ Albert Fried, Jr. Chairman March 26, 1998
Albert Fried, Jr. of the Board
/S/ J. Grant Beadle Director March 26, 1998 J.
Grant Beadle
/S/ Frank T. MacInnis Director March 26, 1998
Frank T. MacInnis
/S/ Frederick J. Mancheski Director March 26, 1998
Frederick J. Mancheski
/S/ John F. McKeon Director March 26, 1998
John F. McKeon
/S/ Arthur McSorley, Jr. Director March 26, 1998
Arthur McSorley, Jr.
/S/ Michael T. Yonker Director March 26, 1998
Michael T. Yonker
/S/ L. L. White, Jr. Director March 26, 1998 L.
L. White, Jr.
REPORT OF INDEPENDENT ACCOUNTANTS
To The Board of Directors
of PORTEC, Inc.
In our opinion, the consolidated financial statements listed in the index
appearing under Item 14(a) (1) and (2) on page 22 present fairly, in all
material respects, the financial position of PORTEC, Inc. and
its subsidaries at December 31, 1997, and 1996, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1997, 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
March 11, 1998
<TABLE>
<S><C>
CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31
(Dollars in thousands except per share data) 1997 1996 1995
REVENUES
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 25,521 $ 27,217 $ 24,755
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 273 80 43
Other income (expense) . . . . . . . . . . . . . . . . . . . . . . . . . . (39) 50 412
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25,755 27,347 25,210
COSTS AND EXPENSES
Cost of products sold (exclusive of depreciation
and amortization) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14,631 17,110 15,784
Selling, general and administrative . . . . . . . . . . . . . . . . . . . 7,935 5,856 5,716
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . 703 606 464
Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 635 788 805
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23,904 24,360 22,769
Income from continuing operations before provisions for income tax . . . . 1,851 2,987 2,441
Income tax (benefit)provision . . . . . . . . . . . . . . . . . . . . . . 679 (596) 177
Income from continuing operations . . . . . . . . . . . . . . . . . . . . 1,172 3,583 2,264
DISCONTINUED OPERATIONS
Income from discontinued operations, net of taxes . . . . . . . . . . . . 2,866 3,308 634
Gain on disposal of discontinued operations, net of taxes . . . . . . . . 11,263 - -
Income from discontinued operations . . . . . . . . . . . . . . . . . . . 14,129 3,308 634
NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,301 $ 6,891 $ 2,898
EARNINGS PER SHARE
BASIC
Income from continuing operations . . . . . . . . . . . . . . . . . . . . $ .27 $ .83 $ .53
Income from discontinued operations . . . . . . . . . . . . . . . . . . . 3.23 .76 .15
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.50 $ 1.59 $ .68
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . 4,376,963 4,329,761 4,296,466
DILUTED
Income from continuing operations . . . . . . . . . . . . . . . . . . . . $ .26 $ .78 $ .49
Income from discontinued operations . . . . . . . . . . . . . . . . . . . 3.11 .72 .14
Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.37 $ 1.50 $ .63
Weighted average shares outstanding . . . . . . . . . . . . . . . . . . . 4,539,301 4,576,358 4,596,469
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED BALANCE SHEETS
December 31
(Dollars in thousands) 1997 1996
ASSETS
CURRENT ASSETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 46,799 $ 4,979
Accounts and notes receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6,070 14,816
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,488 18,038
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 280 981
Deferred income tax benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 745 3,286
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57,382 42,100
PROPERTY, PLANT AND EQUIPMENT
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43 220
Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,997 10,964
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,737 23,010
7,777 34,194
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,859) (19,651)
Total property, plant and equipment . . . . . . . . . . . . . . . . . . . . . . . . . 3,918 14,543
ASSETS HELD FOR SALE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 2,070
INTANGIBLE ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,673 4,922
NOTES RECEIVABLE AND OTHER ASSETS . . . . . . . . . . . . . . . . . . . . . . . . . . . 303 2,583
DEFERRED INCOME TAX BENEFIT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182 -
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,458 $ 66,218
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,300 $ 46
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,335 7,015
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,132 9,077
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,913 249
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,680 16,387
LONG-TERM DEBT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 10,768
OTHER LONG-TERM LIABILITIES
Pensions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,060 1,868
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 1,365
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 202 844
Total other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . 1,262 4,077
COMMITMENTS AND CONTINGENT LIABILITIES (NOTE 13)
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized - 10,000,000
shares; issued - 4,428,108 and 4,373,596 shares, respectively . . . . . . . . . . . 4,428 4,374
Additional capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47,260 46,841
Cumulative translation adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . - (99)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,070) (15,968)
49,618 35,148
Treasury stock, 9,544 and 16,421 shares, respectively, at cost . . . . . . . . . . . . (102) (162)
Total stockholders' equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 49,516 34,986
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 64,458 $ 66,218
The accompanying notes are an integral part of these financial statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31<PAGE>
(Dollars in thousands) 1997 1996 1995
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,301 $ 6,891 $ 2,898
Income from discontinued operations . . . . . . . . . . . . . . . . . . 14,129 3,308 634
Income from continuing operations . . . . . . . . . . . . . . . . . . . . 1,172 3,583 2,264
Adjustments to reconcile net income from continuing operations
to net cash provided (used) by operating activities:
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 703 589 454
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . 1,139 (1,346) 48
Changes in other balance sheet accounts:
Increase in receivables . . . . . . . . . . . . . . . . . . . . . . (254) (131) (632)
Increase in inventories . . . . . . . . . . . . . . . . . . . . . . (636) (253) (1,291)
Decrease (increase) in other current assets . . . . . . . . . . . . . 170 83 (33)
Increase (decrease)in accounts payable and accruals . . . . . . . . 4,428 (3,124) 1,684
Decrease (increase) in other assets net of other liabilities . . . . 339 (203) 87
Net cash provided (used) by operating activities of continuing operations 7,061 (802) 2,581
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (200) (800) (400)
Capital expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . (703) (784) (1,653)
Net cash provided (used) by investing activities of continuing operations (903) (1,584) (2,053)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from (repayment of) revolving credit agreement . . . . . . . . . (8,700) 700 4,832
Principal payments of term debt . . . . . . . . . . . . . . . . . . . . . - - (3,591)
Proceeds from other long-term debt . . . . . . . . . . . . . . . . . . . . - 300 -
Issuance of common stock . . . . . . . . . . . . . . . . . . . . . . . . . 279 233 181
Purchase of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . (371) (241) (486)
Cash dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,403) (350) -
Net cash provided (used) by financing activities of continuing operations (10,195) 642 936
CASH FROM DISCONTINUED OPERATIONS, INCLUDING DESPOSITIONS . . . . . . . . . . 45,857 3,246 (1,385)
NET INCREASE IN CASH AND CASH EQUIVALENTS . . . . . . 41,820 1,502 79
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR . . . . . . . . . . . . . . . 4,979 3,477 3,398
CASH AND CASH EQUIVALENTS AT END OF YEAR . . . . . . . . . . . . . . . . . . $ 46,799 $ 4,979 $ 3,477
SUPPLEMENTAL DISCLOSURES:
Interest paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 654 $ 770 $ 789
Income taxes paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,373 631 431
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 leading manufacturer of quality engineered products. The
Company's principal line of business is the production and sale of materials
handling equipment. The principal market for such products is North America.
(See Note 2 regarding discontinued operations.)
The preparation of financial statements in conformity with generally accepted
accounting principles 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. Certain prior year amounts
have been reclassified to conform to the current year presentation.
PRINCIPLES OF 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 consolidation.
CASH EQUIVALENTS
Short-term and highly liquid investments with a an original maturity of three
months or less at the date of purchase are considered to be cash equivalents.
ACCOUNTS RECEIVABLE AND CONCENTRATION OF CREDIT RISK
The Company does not require collateral for most of its credit sales which are
typically due within 30 days. Sales to one customer accounted for
approximately 25% of revenues during 1997.
INVENTORIES
Inventories are stated at the lower of cost or market. Cost is determined on
the last-in, first-out (LIFO) method for all 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. If the carrying
value of an asset, including associated intangibles, exceeds the sum of
estimated undiscounted future cash flows, then an impairment loss is recognized
for the difference between estimated fair value and carrying value.
INTANGIBLE ASSETS
Goodwill in the amount of $2,131,000 at December 31, 1997, and $3,631,000 at
December 31, 1996, is amortized on a straight-line basis over fifteen years and
is recorded net of accumulated amortization of $602,000 and $543,000 for 1997
and 1996, 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 expense on intangible assets of continuing
operations was $229,000 for 1997, $190,000 for 1996 and $153,000 for 1995.
RESEARCH EXPENDITURES
Expenditures for research and development are charged to expense as incurred
and, for continuing operations, amounted to approximately $57,000 for 1997,
$110,000 for 1996 and $45,000 for 1995.
EARNINGS PER SHARE
During 1997, the Company adopted FAS No. 128, "Earnings per share," which
requires the presentation of basic and diluted earnings per share. Basic
earnings per share excludes dilution and is computed by dividing income by the
weighted average number of common shares outstanding during each period.
Diluted earnings per share reflects the potential dilution that could occur if
common stock options are exercised and is computed by dividing income by the
weighted average number of common shares outstanding, including common stock
equivalent shares, issuable upon exercise of outstanding stock options, to the
extent that they would have a dilutive effect on the per share amounts.
The potential dilutive effect of the Company's stock options for the periods
presented is as follows: 162,338 shares in 1997; 246,597 shares in 1996;
and 300,003 shares in 1995.
Options to purchase 29,700 shares of common stock at $14.77 per share were
outstanding during the entire period but were not included in the computation of
diluted earnings per share because the option exercise price was greater than
the average market price of the common shares. The options expire on October
25, 2005.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amounts of cash and cash equivalents, accounts and notes
receivable, accounts payable and borrowings approximated their fair values at
December 31, 1997, and 1996, because of the short maturity of those instruments
or their insignificance.<PAGE>
NOTE 2. DISCONTINUED OPERATIONS
On December 3, 1997, the Company announced that it had completed the sale of
substantially all of the assets of its Construction Equipment segment for cash
and the assumption of all significant related liabilities. The Company further
announced on December 11, 1997, that all of the assets of the Railroad Products
segment were sold for cash and the assumption of all significant liabilities.
Proceeds from the sale of the assets of the two segments amounted to
$51,482,000. The gain on the sale of these segments was $11,263,000 after tax
expense of $6,124,000. Revenues from the discontinued operations in 1997, 1996
and 1995, were $71,607,000, $70,121,000 and $72,317,000, respectively. The
Consolidated Statements of Income and the Consolidated Statements of Cash Flow
have been restated to include the Company's former Construction Equipment and
Railroad Products segments as discontinued operations. Significant fluctuations
in Consolidated Balance Sheet data, unless otherwise addressed, were due to the
disposal of the above two segments.
NOTE 3. ACCOUNTS AND NOTES RECEIVABLE
The components of accounts and notes receivable at December 31, 1997, and 1996,
were as follows:
<TABLE>
<S><C>
(Dollars in thousands) 1997 1996
Trade receivables net of allowance for doubtful
accounts of $0 and $357, respectively . . . . . . . . . . . . . . . . . . . . $ 4,088 $ 14,724
Other current receivables . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,982 -
Current portion of notes receivable . . . . . . . . . . . . . . . . . . . . . . - 92
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,070 $ 14,816
Other current receivables totalling $1,733,000 for 1997 relate to the sale of
the discontinued operations.
Notes receivable and other assets include notes receivable totalling $1,076,000
for 1996 related to the sale of property in Minneapolis, Minnesota. These notes
receivable were sold as part of the discontinued operations.
NOTE 4. INVENTORIES
The difference between LIFO value and approximate replacement cost of the LIFO
inventories was $685,000 and $7,927,000 at December 31, 1997, and 1996,
respectively.
The components of inventories at December 31, 1997, and 1996, were as follows:
(Dollars in thousands) 1997 1996
Raw material and supplies . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,648 $ 6,361
Work-in-process . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,288 3,468
Finished goods . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 552 8,209
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,488 $ 18,038
NOTE 5. INCOME TAXES
Pre-tax income from continuing operations of $1,851,000, $2,987,000 and $2,441,000 for 1997, 1996 and 1995, respectively, was
taxed under domestic jurisdictions.
The provision for income taxes charged to continuing operations was as follows:
(Dollars in thousands) 1997 1996 1995
Current expense:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,752 $ 709 $ 122
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 66 41 7
Total Current . . . . . . . . . . . . . . . . . . . . . . . . 1,818 750 129
Deferred tax expense (benefit):
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,108) (1,339) -
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (31) (7) 48
Total Deferred . . . . . . . . . . . . . . . . . . . . . . . . (1,139) (1,346) 48
Total provision (benefit) . . . . . . . . . . . . . . . . . . . . $ 679 $ (596) $ 177
The total income tax provision (benefit) for discontinued operations was $6,749,000, $657,000 and $(163,000) for 1997, 1996 and
1995, respectively.
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. Deferred tax liabilities (assets) at December 31, 1997, and 1996,
include the following:
(Dollars in thousands) 1997 1996
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 272 $ 1,760
Plant closing costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - 983
Gross deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . 272 2,743
Accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (308) (946)
Inventory . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (51) (801)
Employee benefits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (463) (794)
Product liability and warranty . . . . . . . . . . . . . . . . . . . . . . . . . . (377) (854)
Tax credit carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (937)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . - (477)
Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,199) (4,809)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (927) (2,066)
In determining the amount of any valuation allowance required to offset deferred tax assets, the Company assesses the likelihood
of realizing those assets based on anticipated future taxable income. Management determined that no valuation allowance was
necessary as of December 31, 1997, and 1996.
The difference between the statutory federal income tax rate and the effective income tax rate for continuing operations was as
follows:
1997 1996 1995
Statutory federal income tax rate . . . . . . . . . . . . . . . . 34.0% 34.0% 34.0%
Difference resulting from:
Realization of deferred tax assets not previously recognized . . - (58.4) (30.5)
State income taxes, net . . . . . . . . . . . . . . . . . . . . 2.0 2.7 3.8
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 1.7 -
36.7% (20.0)% 7.3%
The Company's effective tax rate for discontinued operations was 32.3%, 16.6% and (34.6)% for 1997, 1996 and 1995, respectively.
The income tax provision for discontinued operations is not at the statutory rate due to the realization of deferred tax assets
not previously recognized and to state and foreign taxes.
NOTE 6. OTHER ACCRUED LIABILITIES
Other accrued liabilities at December 31, 1997, and 1996, were as follows:
(Dollars in thousands) 1997 1996
Accrual for estimated product liabilities . . . . . . . . . . . . . . . . . . . . $ 1,027 1,318
Accrued salaries and wages . . . . . . . . . . . . . . . . . . . . . . . . . . . . 118 1,012
Customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,450 962
Accrued pension . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 912 564
Other accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,625 5,221
Total other accrued liabilities $ 5,132 $ 9,077
NOTE 7. DEBT
The components of debt at December 31, 1997, and 1996, were as follows:
(Dollars in thousands) 1997 1996
Revolving loan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,000 $ 10,700
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 300 114
2,300 10,814
Less current maturities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,300 46
Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ - $ 10,768
On February 12, 1993, the Company entered into a three-year unsecured credit agreement with a bank which was amended on June 2,
1997. Under the amended agreement, the Company can borrow up to $17,000,000 in cash or under letters of credit on a revolving
line of credit through April, 2000. The interest rate currently applicable to the revolving line of credit is the bank's prime
interest rate or, at the Company's election, 1.125% over the London Interbank Offered Rate (LIBOR). At December 31, 1997, all
borrowings of $2,000,000 were at prime of 8.5%. 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.
NOTE 8. PENSION PLANS
The Company has one noncontributory defined benefit plan 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 plans in 1997, 1996 and 1995 is summarized as follows:
(Dollars in thousands) 1997 1996 1995
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 824 $ 811 $ 503
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . 1,179 1,222 1,112
Actual return on assets . . . . . . . . . . . . . . . . . . . . . (2,832) (2,585) (3,951)
Net amortization and deferral . . . . . . . . . . . . . . . . . . 1,462 1,311 2,925
Net pension cost . . . . . . . . . . . . . . . . . . . . . . . . . $ 633 $ 759 $ 589
Net pension costs of $421,000, $487,000 and $367,000 were allocated to discontinued operations for 1997, 1996 and 1995,
respectively.
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 plan and amounts recognized in the Company's consolidated balance sheets at December 31, 1997,
and 1996.
The assumptions used in 1997 and 1996 to develop the periodic pension costs were as follows: the unit credit cost actuarial
method; a discount rate of 7.25% for 1997 and 7.5% for 1996; the expected long-term rate of return on assets of 8.0%; and the rate
of increase in compensation levels of 4.5%.
(Dollars in thousands)
Current Plan Assets
Exceed Accumulated
Benefit Obligation
1997 1996
Actuarial present value of benefit obligation:
Vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,752 $ 16,205
Non-vested benefit obligation . . . . . . . . . . . . . . . . . . . . . . . 153 245
Accumulated benefit obligation . . . . . . . . . . . . . . . . . . . . . . . 3,905 16,450
Excess of projected benefit obligation
over accumulated benefit obligation . . . . . . . . . . . . . . . . . . . 1,223 2,174
Projected benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . 5,128 18,624
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . 4,895 19,282
Projected benefit obligation
(in excess of) less than plan assets . . . . . . . . . . . . . . . . . . . (233) 658
Unrecognized deferred gain . . . . . . . . . . . . . . . . . . . . . . . . . (1,078) (2,764)
Unrecognized prior service cost . . . . . . . . . . . . . . . . . . . . . . 12 28
Unrecognized net asset . . . . . . . . . . . . . . . . . . . . . . . . . . . (16) (112)
Unfunded accrued pension cost . . . . . . . . . . . . . . . . . . . . . . . $ (1,315) $ (2,190)
In 1997, the Company incurred a curtailment and a settlement of a portion of the noncontributory defined benefit plan as a result
of transferring assets and liabilities for discontinued operations to other pension trusts. The result was an aggregate gain
of $1,530,000, which was recorded as part of the gain on the sale of discontinued operations.
The Company has an unfunded supplemental pension plan for certain designated employees. Liability of $912,000 and $540,000 was
recorded as of December 31, 1997, and 1996, respectively, for this plan which is expected to be settled in 1998. Continuing
operations expensed $309,000, $39,000 and $73,000 in 1997, 1996 and 1995, respectively, related to the supplemental pension plan.
Discontinued operations was charged $63,000 in 1997 for this plan.
NOTE 9. SAVINGS AND INVESTMENT PLAN
Under the Company's Savings and Investment Plan, qualified under Section 401(k) of the Internal Revenue Code, generally all
salaried and hourly employees, including officers, 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 $81,000, $152,000 and $46,000 were made for eligible employees of continuing operations for the years ended December 31, 1997,
1996 and 1995, respectively, representing 40%, 80% and 30% of eligible employees' contributions. The plan permits the Company's
contribution to be made in shares of the Company's common stock. In 1997, 1996 and 1995, contributions of $173,000, $332,000 and
$119,000, respectively, were made for eligible employees of discontinued operations.
NOTE 10. 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, 1997, and 1996:
(Dollars in thousands) 1997 1996
Accumulated post-retirement benefit obligation (APBO):
Retirees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 264 $ 1,062
Actives . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63 255
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 327 1,317
Plan assets at fair value . . . . . . . . . . . . . . . . . . . . . . . . . . . . - -
APBO in excess of plan assets . . . . . . . . . . . . . . . . . . . . . . . . . . (327) (1,317)
Unrecognized transition obligation . . . . . . . . . . . . . . . . . . . . . . . . 160 602
Unrecognized prior service costs . . . . . . . . . . . . . . . . . . . . . . . . . - -
Unrecognized actuarial loss . . . . . . . . . . . . . . . . . . . . . . . . . . . 94 494
Accrued post-retirement benefit costs . . . . . . . . . . . . . . . . . . . . . . $ (73) $ (221)
Net periodic post-retirement benefit expense for 1997, 1996 and 1995, of continuing operations, included the following components:
(Dollars in thousands) 1997 1996 1995
Service cost . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 4 $ 7 $ 51
Interest cost . . . . . . . . . . . . . . . . . . . . . . . . . . 24 31 54
Amortization of transition obligation over 20 years . . . . . . . 11 11 21
Gain . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7 10 14
Net periodic post-retirement benefit expense . . . . . . . . . . . $ 46 $ 59 $ 140
Net periodic post-retirement benefit expense of $101,000, $124,000 and $247,000 for 1997, 1996 and 1995, respectively, was
included in discontinued operations.
For measurement purposes, the assumed trend rate for post-retirement medical benefits during 1997 and 1996 was 10.2% and 11.0%,
respectively, for employees less than age-65 and 8.8% and 9.5%, 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. However, the Company's cap on future net costs has mitigated the effect future
medical inflation will have on the plan. The Company maintains a sick pay plan for certain hourly individuals whereby the
employee can accumulate unused benefits. In 1997, expense of $125,000 was recorded as part of continuing operations.
The discount rate used in determining the accumulated post-retirement benefit obligation was 7.5% at December 31, 1997, and at
December 31, 1996.
In 1997, the Company incurred a curtailment and settlement for the defined benefit post-retirement medical and life insurance
plans as a result of transferring the liabilities for discontinued operations to the buyers of these operations. A gain of
$175,000 was recorded as part of the gain on the sale of discontinued operations.
NOTE 11. STOCKHOLDERS' EQUITY
Changes in components of stockholders' equity for the years 1995 through 1997 follow:
(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, 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
Net income - - - 6,891 - -
Cash dividends ($.08 per share) - - - (350) - -
Purchase of Treasury Stock - - (241) - - -
Company's 1995 Investment
Plan contribution - - 185 (20) - -
Exercise of stock options 41 192 - - - 40,420
Current year translation adjustment - - - - 260 -
Balance at
December 31, 1996 $ 4,374 $ 46,841 $ (162) $(15,968) $ (99) 4,373,596
Net income - - - 15,301 - -
Cash dividends ($.32 per share) - - - (1,403) - -
Purchase of Treasury Stock - - 371) - - -
Company's 1996 Investment
Plan contribution - 39 431 - -
Exercise of stock options 54 380 - - - 54,512
Current year translation adjustment - - - - 99 -
Balance at
December 31, 1997 $ 4,428 $ 47,260 $ (102) $ (2,070) $ - 4,428,108
In the fourth quarter of 1996, the Company resumed the payment of quarterly cash
dividends. In 1997, the accumulated deficit was charged $1,403,000 for the four
quarterly dividends of 8 cents per share.
</TABLE>
The Company has 1,000,000 authorized, but unissued, shares of no par preferred
stock.
NOTE 12. INCENTIVE PROGRAM
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 allow an annual grant of 1,000 shares
to non-employee directors. 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 certain stock
options and SARs 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 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. All options become exercisable commencing on a date no earlier than six
months nor later than three years from the date of grant. By prior agreement,
all 125,700 outstanding SARs under this plan are exercisable only at the
discretion of the Company. There were 740,703 shares reserved for issuance
under this plan at December 31, 1997, after adjustment for 10% stock dividends
in 1992, 1993 and 1994.
<TABLE>
<S><C>
1997 1996 1995
Option Average Option Average Option Average
Shares Option Price Shares Option Price Shares Option Price
STOCK OPTIONS:
Outstanding beginning of year . . 690,256 $ 7.21 651,276 $ 6.92 598,291 $ 5.87
Granted . . . . . . . . . . . . . 12,000 10.41 81,500 9.93 104,000 11.50
Exercised . . . . . . . . . . . . (54,512) 5.13 (40,420) 3.26 (49,915) 3.64
Forfeited . . . . . . . . . . . . (58,100) 10.18 (2,100) 13.34 (1,100) 14.77
Outstanding end of year . . . . . 589,644 7.17 690,256 $ 7.21 651,276 $ 6.92
Exercisable end of year . . . . . 570,312 7.07 609,089 $ 7.02 601,275 $ 6.65
Available for grant . . . . . . . 92,959 - 104,959 - 186,459 -
</TABLE>
The Company applies APB Opinion 25 and related interpretations in accounting for
its plan. The exercise price of all options granted in 1997 and 1996 was equal
to the fair market value of the stock on the grant date. Accordingly, no
compensation cost has been recognized for its fixed stock option plan. Had
compensation cost for the Company's compensation plan been determined based on
the fair value at the grant dates for awards under the plan consistent with the
method of FASB Statement 123, the compensation cost for employees from
continuing operations and non-employee directors would have been $186,000,
$521,000 and $335,000 in 1997, 1996 and 1995, respectively. The compensation
cost related to discontinued operations was $543,000, $74,000 and $7,000 in
1997, 1996 and 1995, respectively. Net income and earnings per share would have
been reduced to the pro forma amounts indicated below:
<TABLE>
<S><C>
(Dollars in thousands) 1997 1996 1995
Income from continuing operations
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,172 $ 3,583 $ 2,264
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,054 3,358 1,929
Income from discontinued operations
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . 14,129 3,308 634
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,785 3,276 627
Net income
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . $ 15,301 $ 6,891 $ 2,898
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . 15,039 6,634 2,556
Earnings per share
Income from continuing operations
Basic
As reported . . . . . . . . . . . . . . . . . . . . . . . . . $ .27 $ .83 $ .53
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . .24 .78 .45
Diluted
As reported . . . . . . . . . . . . . . . . . . . . . . . . . .26 .78 .49
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . .23 .73 .42
Income from discontinued operations
Basic
As reported . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.23 $ .76 $ .15
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . 3.15 .75 .14
Diluted
As reported . . . . . . . . . . . . . . . . . . . . . . . . . 3.11 .72 .14
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . 3.04 .72 .14
Net income
BASIC
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.50 $ 1.59 .68
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.39 1.53 .59
DILUTED
As reported . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3.37 $ 1.50 .63
Pro forma . . . . . . . . . . . . . . . . . . . . . . . . . . . 3.27 1.45 .56
</TABLE>
The weighted-average grant-date fair value of options granted during the years
1997, 1996 and 1995 was $4.21, $4.02 and $4.91, respectively. The fair value of
each option granted was estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for
grants in 1997, 1996 and 1995, respectively: expected volatility 40% for 1997
and 44% for 1996 and 1995; expected lives of seven years for all years; dividend
yield of 2.7% for 1997 and 1995 and 3.3% for 1996; and risk-free interest rate
of 6.7%, 6.7% and 6.6%, respectively. The pro forma net income and earnings per
share are not indicative of the effects on reported net income for future years
when all outstanding, nonvested awards will be included.
Options for 82,500 shares of stock granted in 1994 at $12.33 were repriced for
$10.09, the fair market value on December 17, 1996, the date they were repriced.
These options were recorded as though cancelled and reissued. No other changes
were made to the option terms. The exercise period for employees of
discontinued operations holding options was extended from 90 days to one year in
1997.
The following table summarizes additional information about stock options
outstanding at December 31, 1997:
<TABLE>
<S><C>
Options Outstanding Options Exercisable
Range of Outstanding Remaining Weighted-Average Exercisable Weighted-Average
Exercise Prices at 12/31/97 Contractual Life Exercise Price at 12/31/97
Exercise Price
$$ 2.90 - $ 4.50 286,514 1.9 years $ 3.09 286,514 $ 3.09
$ 8.40 - $14.80 303,130 7.9 years $ 11.03 283,798 $11.09
</TABLE>
NOTE 13. 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 corporate headquarters in Lake Forest, Illinois, several
other properties and various transportation and data processing equipment.
Future minimum rent payments for major operating leases as of December 31, 1997,
which expire on or after December 31, 1998, are as follows:
(Dollars in thousands)
Year ending December 31,
1998 . . . . . . . . . . . . . . . . . . . . . . . . . $132
1999 . . . . . . . . . . . . . . . . . . . . . . . . . 80
2000 . . . . . . . . . . . . . . . . . . . . . . . . . 10
Net rent expense related to continuing operations of $159,000, $222,000 and
$236,000 was recorded in 1997, 1996 and 1995, respectively.
NOTE 14. UNAUDITED QUARTERLY FINANCIAL INFORMATION
The 1996 interim results of operations were impacted by the effect of reducing
the valuation allowance against deferred tax assets based on management's
judgement about the Company's ability to realize such assets in the future.
<TABLE>
<S><C>
(Dollars in thousands except per share data)
March 31 June 30 September 30 December 31
1997
Net sales . . . . . . . . . . . . . . . . . . . . . . . $ 6,053 $ 6,112 $ 7,096 $ 6,260
Gross margin . . . . . . . . . . . . . . . . . . . . . . 2,633 2,582 2,801 2,472
Net income from continuing operations . . . . . . . . . 86 268 355 463
Income from discontinued operations . . . . . . . . . . 695 1,274 842 11,318
Net income . . . . . . . . . . . . . . . . . . . . . . . 781 1,542 1,197 11,781
BASIC INCOME PER COMMON SHARE
Income from continuing operations . . . . . . . . . . .02 .06 .08 .11
Income from discontinued operations . . . . . . . . . .12 .33 .19 2.59
Net income . . . . . . . . . . . . . . . . . . . . .14 .39 .27 2.70
DILUTED INCOME PER COMMON SHARE
Income from continuing operations . . . . . . . . . . .02 .06 .08 .10
Income from discontinued operations . . . . . . . . . .12 .32 .18 2.49
Net income . . . . . . . . . . . . . . . . . . . . $ .14 $ .38 $ .26 $ 2.59
(Dollars in thousands except per share data)
March 31 June 30 September 30 December 31
1996
Net sales . . . . . . . . . . . . . . . . . . . . . . . $ 7,588 $ 6,770 $ 5,617 $ 7,242
Gross margin . . . . . . . . . . . . . . . . . . . . . . 2,671 2,480 2,294 3,090
Income from continuing operations . . . . . . . . . . . 504 197 387 2,495
Income (loss) from discontinued operations . . . . . . . 1,469 1,724 621 (506)
Net income . . . . . . . . . . . . . . . . . . . . . . . 1,973 1,921 1,008 1,989
BASIC INCOME (LOSS) PER COMMON SHARE
Income from continuing operations . . . . . . . . . . .11 .05 .09 .58
Income (loss) from discontinued operations . . . . . .34 .40 .14 (.12)
Net income . . . . . . . . . . . . . . . . . . . . .45 .45 .23 .46
DILUTED INCOME (LOSS) PER COMMON SHARE
Income from continuing operations . . . . . . . . . . .11 .05 .08 .54
Income (loss) from discontinued operations . . . . . .32 .37 .14 (.11)
Net income . . . . . . . . . . . . . . . . . . . . $ .43 $ .42 $ .22 $ .43
</TABLE>
NOTE 15. ACQUISITIONS
In April 1994, the Company acquired substantially all of the assets of Count
Recycling Systems, Inc. (renamed Countec), a supplier of materials recovery
facilities in the sorting and recycling of residential and commercial solid
waste. This business was acquired for cash and earnouts to be based upon the
future profitability of the business. During 1997, 1996 and 1995, $200,000,
$200,000 and $400,000, respectively, were paid under the earnout agreement and
goodwill was increased by these amounts. No further earnout payments are due
under the agreement.
NOTE 16. SUBSEQUENT EVENTS
On March 11, 1998, the Company announced that it had signed a definitive
agreement to be acquired by an affiliate of J Richard Industries, L.P. The
transaction is structured as a merger with Portec, Inc. as the surviving
company. In the merger, each share of Company common stock will be converted
into the right to receive $16.00 per share in cash for a total transaction value
of approximately $76,000,000. Upon completion of the merger, Portec will no
longer be a public company and its shares will not trade on the New York Stock
Exchange.
The transaction is subject to completion of due diligence, obtaining
shareholder approval and completion of acceptable financing arrangements.
In addition, the transaction is subject to other customary conditions.
In connection with the acquisition, there will be certain termination
liabilities which will be assumed by the acquiror.
<TABLE>
<S><C>
PORTEC, Inc. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
For the Years Ended December 31, 1997, 1996, 1995
($000's omitted)
Additions
Charged Deductions
Balance to Costs from Balance
Beginning and at at End
of Year Expenses Reserve(1) of Year
1997 Allowance for doubtful accounts $ 357 $ 36 $ (393) $ 0
1996 Allowance for doubtful accounts 463 233 339 357
1995 Allowance for doubtful accounts 403 152 92 463
(1) Write offs, net of recoveries. 1997 includes the effects of the disposal of certain segments.
Balance Reversal Balance
Beginning of Timing Revaluation at End
of Year Differences of Reserve of Year
1997 Deferred tax assets valuation allow. $ 0 $ 0 $ 0 $ 0
1996 Deferred tax assets valuation allow. 3,133 (1,668) (1,465) 0
1995 Deferred tax assets valuation allow. 4,110 (977) 0 3,133
QUARTERLY STOCK & DIVIDEND INFORMATION
First Second Third Fourth
Common Stock Prices(1) Quarter Quarter Quarter Quarter
1997 Common Stock Prices
High . . . . . . . . . . . . . . . . . . . . . . . . . . $ 12.13 $ 11.88 $ 13.25 $ 15.00
Low . . . . . . . . . . . . . . . . . . . . . . . . . . 9.50 9.88 11.25 12.81
Cash dividends per share . . . . . . . . . . . . . . . . .08 .08 .08 .08
1996 Common Stock Prices
High . . . . . . . . . . . . . . . . . . . . . . . . . . $ 10.00 $ 11.13 $ 10.50 $ 10.88
Low . . . . . . . . . . . . . . . . . . . . . . . . . . 8.88 9.25 9.25 9.50
Cash dividends per share . . . . . . . . . . . . . . . . - - - .08
(1) The high and low prices are based on prices as reported on the Composite Tape.
The transaction is subject to completion of due diligence and obtaining acceptable financing arrangements. In addition, the
transaction is subject to other customary conditions.
</TABLE>
EXHIBIT INDEX
Page No.
Within
Sequential
Numbering
System of
Exhibit
Exhibit Description
2(a) The Agreement and Plan of Merger dated as of March 11,
1998 with MHD Acquisition Corp., an affiliate of J.
Richard Industries, L. P., a copy of which was included
as Exhibit (99)(c) of the Company's 8-K Report dated
March 11, 1998.*
2(b) The Asset Purchase Agreement between Astec Industries,
Inc. and Portec, Inc. dated October 16, 1997, as
amended on December 2, 1997, a copy of which was
included as Exhibit (2)(a) of the Company's 8-K Report
dated December 12, 1997.
2(c) The Asset Purchase Agreement between Rail Products
Acquisition Corp. and Portec, Inc. dated November 6,
1997., a copy of which was included as Exhibit (2)(b)
of the Company's 8-K Report dated December 12, 1997.*
3(a) The Company's Certificate of Incorporation, as amended
to April 29, 1987, a copy of which was included as
Exhibit (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 Exhibit 3(a) 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 Exhibit (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 Exhibit 4(b) 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, a
copy of which was included as Exhibit 4(c) of the
Company's Form 10-K Report for the year ended December
31, 1995.*
4(d) Third amendment to Credit Agreement dated as of June 2,
1997 by and between American National Bank and Trust
Company of Chicago and the Company.
10(a) The Division Management Incentive Compensation
Plan effective January 1, 1997.(x)
10(b) 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 Exhibit 10(c) of the Company's Form 10-K
Report for the year ended December 31, 1994.*(x)
10(c) The 1988 PORTEC, Inc. Employees' Stock Benefit Plan, as
amended effective April 26, 1994, a copy of which was
included as Exhibit 10(e) of the Company's Form 10-K
Report for the year ended December 31, 1994.*(x)
10(d) Amendment to The 1988 PORTEC, Inc. Employees' Stock
Benefit Plan, effective as of April 25, 1995 a copy of
which was included as Exhibit 10(f) of the Company's
Form 10-K Report for the year ended December 31,
1995.*(x)
10(e) Amended and Restated Agreement dated February 28, 1989,
between the Company and M. T. Yonker, a copy of which
was included as Exhibit 10(o) of the Company's Form 10-
K Report for the year ended December 31, 1988.*(x)
10(f) 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 Exhibit 10(o)
of the Company's Form 10-K Report for the year ended
December 31, 1989.*(x)
10(g) Letter Agreement dated July 9, 1997, between the
Company and M. T. Yonker which amended the agreement
dated February 28, 1989.(x)
10(h) Letter Agreement dated February 26, 1998, between the
Company and M. T. Yonker which amended the agreement
dated February 28, 1989.(x)
10(i) Letter Agreement dated July 17, 1997, between the
Company and M. T. Yonker.(x)
10(j) Letter Agreement dated February 25, 1998, between the
Company and M. T. Yonker which amended the agreement
dated July 17, 1997.(x)
10(k) Employment Agreement dated November 16, 1989, between
the Company and N. A. Dedert-Kindl, a copy of which was
included as Exhibit 10(r) of the Company's Form 10-K
Report for the year ended December 31, 1989.*(x)
10(l) Letter Agreement dated July 9, 1997, between the
Company and N. A. Kindl which amended the agreement
dated November 16, 1989, between the Company and N. A.
Kindl.(x)
10(m) Letter Agreement dated July 17, 1997, between the
Company and N. A. Kindl.(x)
10(n) Letter Agreement dated February 25, 1998, between the
Company and N. A. Kindl which amended the agreement
dated July 17, 1997.(x)
10(o) Letter Agreement dated July 17, 1997, between the
Company and K. C. Rorke.(x)
10(p) Letter Agreement dated February 25, 1998, between the
Company and K. C. Rorke which amended the agreement
dated July 17, 1997.(x)
11 The Company's statement regarding computations
of per share earnings.
21 List of the Company's subsidiaries.
23 Consent of Independent Accountants.
27 Financial Data Schedule.
99(a) 11-K Report for 1997 for the PORTEC, Inc. Savings and
Investment Plan.(x)
99(b) Important Factors and Assumptions Regarding Forward-
Looking Statements, a copy of which was included as
Exhibit 99(b) of the Company's Form 10-K Report for the
year ended December 31, 1996.*
* Incorporated herein by reference.
(X) Management contract or compensatory plan or arrangement.
Exhibit 4(d)
THIRD AMENDMENT TO CREDIT AGREEMENT
This Third Amendment to Credit Agreement ("Third Amendment"), dated as of
June 2, 1997, by and between PORTEC, INC., a Delaware corporation (the
"Company"), and American National Bank and Trust Company of Chicago, a national
banking association, successor by assignment from 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.
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 "Commitment" contained in Section 1.1 of the
Credit Agreement is hereby amended to delete reference to the number
"$15,300,000" and to insert the number "$17,000,000" in place thereof.
(b) The definition of "Indebtedness" contained in Section 1.1 is
amended to insert the phrase "and Rate Hedging Obligations" after the word
"money" on the second line thereof.
(c) The definition of "Termination Date" contained in Section 1.1 is
amended by deleting reference to the date "April 30, 1998" and replacing said
reference with the date "April 30, 2000".
(d) The following new definitions of "Lease Line Facility",
"Negotiated Rate", "Negotiated Rate Interest Period", "Negotiated Rate Loan",
and "Rate Hedging Obligations" are inserted in the appropriate alphabetical
locations in Section 1.1 as follows:
"LEASE LINE FACILITY" SHALL MEAN THE AUTHORIZATION BY THE BANK OR
ITS AFFILIATE TO ENTER INTO CONDITIONAL SALE CONTRACTS FOR THE
PURCHASE OF EQUIPMENT OR TRUE EQUIPMENT LEASES WITH THE COMPANY IN A
CAPITALIZED PRINCIPAL AMOUNT OF UP TO $1,500,000.
"NEGOTIATED RATE" SHALL MEAN, WITH RESPECT TO ANY NEGOTIATED RATE
LOAN, THE RATE PER ANNUM AT THE TIME SUCH NEGOTIATED RATE LOAN IS
MADE, AGREED UPON BETWEEN THE BANK AND THE COMPANY.
"NEGOTIATED RATE INTEREST PERIOD" SHALL MEAN, WITH RESPECT TO ANY
NEGOTIATED RATE LOAN, THE PERIOD COMMENCING ON THE DAY SUCH NEGOTIATED
RATE LOAN IS MADE OR CONVERTED TO A NEGOTIATED RATE LOAN AND ENDING ON
THE DATE (WHICH MUST BE A BUSINESS DAY) AGREED UPON BETWEEN THE
COMPANY AND THE BANK AT THE TIME SUCH NEGOTIATED RATE LOAN IS MADE,
AND EACH SUBSEQUENT PERIOD COMMENCING ON THE LAST DAY OF THE
IMMEDIATELY PRECEDING NEGOTIATED RATE INTEREST PERIOD AND ENDING ON
THE DATE AGREED UPON BETWEEN THE COMPANY AND THE BANK AT THE TIME SUCH
NEGOTIATED RATE LOAN IS ELECTED TO BE CONTINUED AS A NEGOTIATED RATE
LOAN BY THE COMPANY UNDER SECTION 2.7, PROVIDED, HOWEVER, THAT NO
NEGOTIATED RATE INTEREST PERIOD WHICH WOULD END AFTER THE TERMINATION
DATE SHALL BE PERMITTED.
"NEGOTIATED RATE LOAN" SHALL MEAN ANY LOAN WHICH BEARS INTEREST
AT THE NEGOTIATED RATE.
"RATE HEDGING OBLIGATIONS" OF A PERSON MEANS ANY AND ALL
OBLIGATIONS OF SUCH PERSON, WHETHER ABSOLUTE, CONTINGENT AND HOWSOEVER
AND WHENSOEVER CREATED, ARISING, EVIDENCED OR ACQUIRED (INCLUDING ALL
RENEWALS, EXTENSIONS AND MODIFICATIONS THEREOF AND SUBSTITUTIONS
THEREFOR), UNDER (I) ANY AND ALL AGREEMENTS, DEVICES OR ARRANGEMENTS
DESIGNED TO PROTECT AT LEAST ONE OF THE PARTIES THERETO FROM THE
FLUCTUATIONS OF INTEREST RATES, EXCHANGE RATES OR FORWARD RATES
APPLICABLE TO SUCH PARTY'S ASSETS, LIABILITIES OR EXCHANGE
TRANSACTIONS, INCLUDING, BUT NOT LIMITED TO, DOLLAR-DENOMINATED OR
CROSS-CURRENCY RATE EXCHANGE AGREEMENTS, FORWARD CURRENCY EXCHANGE
AGREEMENTS, INTEREST RATE CAP OR COLLAR PROTECTION AGREEMENTS, FORWARD
RATE CURRENCY OR INTEREST RATE OPTIONS, PUTS AND WARRANTS, AND (II)
ANY AND ALL CANCELLATIONS, BUY BACKS, REVERSALS, TERMINATIONS OR
ASSIGNMENTS OF ANY OF THE FOREGOING.
(e) The definition of "Overdue Rate" contained in Section 1.1 of the
Credit Agreement is deleted in its entirety and replaced as follows:
"OVERDUE RATE" SHALL MEAN (A) IN RESPECT OF PRINCIPAL OF FLOATING
RATE LOANS, A RATE PER ANNUM THAT IS EQUAL TO THE SUM OF THREE PERCENT
(3%) PER ANNUM PLUS THE FLOATING RATE, (B) IN RESPECT OF PRINCIPAL OF
EURODOLLAR RATE LOANS, A RATE PER ANNUM THAT IS EQUAL TO THE SUM OF
THREE PERCENT (3%) PER ANNUM PLUS THE PER ANNUM RATE IN EFFECT THEREON
UNTIL THE END OF THE THEN CURRENT INTEREST PERIOD FOR SUCH EURODOLLAR
RATE LOAN AND, THEREAFTER AT A RATE PER ANNUM THAT IS EQUAL TO THE SUM
OF THREE PERCENT (3%) PER ANNUM PLUS THE FLOATING RATE, (C) IN RESPECT
OF PRINCIPAL OF NEGOTIATED RATE LOANS, A RATE PER ANNUM THAT IS EQUAL
TO THE SUM OF THREE PERCENT (3%) PER ANNUM PLUS THE PER ANNUM RATE IN
EFFECT THEREON UNTIL THE END OF THE THEN CURRENT NEGOTIATED RATE
INTEREST PERIOD FOR SUCH NEGOTIATED RATE LOAN AND, THEREAFTER, AT A
RATE PER ANNUM THAT IS EQUAL TO THE SUM OF THREE PERCENT (3%) PER
ANNUM PLUS THE FLOATING RATE AND (D) IN RESPECT OF ALL OTHER AMOUNTS
PAYABLE BY THE COMPANY HEREUNDER (OTHER THAN INTEREST), A RATE PER
ANNUM THAT IS EQUAL TO THE SUM OF THREE PERCENT (3%) PER ANNUM PLUS
THE FLOATING RATE.
(f) The first sentence of Section 2.4(a) of the Credit Agreement is
deleted in its entirety and replaced as follows:
(A) THE COMPANY SHALL GIVE THE BANK NOTICE OF ITS REQUEST FOR
EACH ADVANCE IN SUBSTANTIALLY THE FORM OF EXHIBIT B HERETO NOT LATER
THAN 10:00 A.M. CHICAGO, ILLINOIS TIME (I) THREE EURODOLLAR BUSINESS
DAYS PRIOR TO THE DATE SUCH LOAN IS REQUESTED TO BE MADE IF SUCH LOAN
IS TO BE MADE AS A EURODOLLAR RATE LOAN, (II) FIVE BUSINESS DAYS PRIOR
TO THE DATE ANY LETTER OF CREDIT ADVANCE IS REQUESTED TO BE MADE,
(III) ON THE DATE SUCH LOAN IS REQUESTED TO BE MADE IF SUCH LOAN IS TO
BE MADE AS A FLOATING RATE LOAN, (IV) TWO BUSINESS DAYS PRIOR TO THE
DATE SUCH LOAN IS REQUESTED TO BE MADE IF SUCH LOAN IS TO BE MADE AS A
NEGOTIATED RATE LOAN, WHICH NOTICE SHALL SPECIFY WHETHER A EURODOLLAR
RATE LOAN, FLOATING RATE LOAN, LETTER OF CREDIT ADVANCE OR NEGOTIATED
RATE LOAN IS REQUESTED AND, IN THE CASE OF EACH REQUESTED EURODOLLAR
RATE LOAN OR NEGOTIATED RATE LOAN, THE INTEREST PERIOD OR NEGOTIATED
RATE INTEREST PERIOD, AS APPLICABLE, TO BE INITIALLY APPLICABLE TO
SUCH LOAN AND, IN THE CASE OF EACH LETTER OF CREDIT ADVANCE, SUCH
INFORMATION AS MAY BE NECESSARY FOR THE ISSUANCE THEREOF BY THE BANK.
(g) Section 2.7 of the Credit Agreement is deleted in its entirety
and replaced as follows:
2.7 SUBSEQUENT ELECTIONS AS TO LOANS THE COMPANY MAY
ELECT (A) TO CONTINUE ANY LOAN (WHETHER EURODOLLAR RATE, NEGOTIATED
RATE OR FLOATING RATE) UPON THE SAME BASIS, (B) TO CONVERT A
EURODOLLAR RATE LOAN TO A FLOATING RATE LOAN OR A NEGOTIATED RATE
LOAN, (C) TO CONVERT A FLOATING RATE LOAN TO A EURODOLLAR RATE LOAN OR
NEGOTIATED RATE LOAN, OR (D) TO CONVERT A NEGOTIATED RATE LOAN TO THE
FLOATING RATE LOAN OR A EURODOLLAR RATE LOAN, IN EACH CASE BY GIVING
NOTICE THEREOF TO THE BANK IN SUBSTANTIALLY THE FORM OF EXHIBIT B
HERETO NOT LATER THAN 10:00 A.M. CHICAGO TIME THREE EURODOLLAR
BUSINESS DAYS PRIOR TO THE DATE OF SUCH CONTINUATION OF OR CONVERSION
TO A EURODOLLAR RATE LOAN IS TO BE EFFECTIVE, NOT LATER THAN 10:00
A.M. CHICAGO TIME TWO BUSINESS DAYS PRIOR TO THE DATE ANY SUCH
CONTINUATION OF OR CONVERSION TO A NEGOTIATED RATE LOAN IS TO BE
EFFECTIVE, AND NOT LATER THAN 10:00 A.M. CHICAGO TIME THE SAME
BUSINESS DAY OF THE DATE OF SUCH CONTINUATION OR CONVERSION IS TO BE
EFFECTIVE IN ALL OTHER CASES, PROVIDED THAT AN OUTSTANDING EURODOLLAR
RATE LOAN OR NEGOTIATED RATE LOAN MAY ONLY BE CONVERTED ON THE LAST
DAY OF THE THEN CURRENT INTEREST PERIOD OR NEGOTIATED RATE INTEREST
PERIOD, AS APPLICABLE, AND PROVIDED FURTHER IF A CONTINUATION OF A
LOAN AS, OR A CONVERSION OF A LOAN TO A EURODOLLAR RATE LOAN OR
NEGOTIATED RATE LOAN IS REQUESTED, SUCH NOTICE SHALL ALSO SPECIFY THE
INTEREST PERIOD OR NEGOTIATED RATE INTEREST PERIOD, AS APPLICABLE,
UPON SUCH CONTINUATION OR CONVERSION, AND PROVIDED FURTHER THAT IF THE
COMPANY FAILS TO MAKE AN ELECTION WITH RESPECT TO THE CONTINUATION OR
CONVERSION OF ANY EURODOLLAR RATE LOAN OR NEGOTIATED RATE LOAN AT THE
END OF ANY APPLICABLE INTEREST PERIOD OR NEGOTIATED RATE INTEREST
PERIOD, SUCH EURODOLLAR RATE LOAN OR NEGOTIATED RATE LOAN, AS
APPLICABLE, SHALL BE DEEMED TO BE CONVERTED TO A FLOATING RATE LOAN AS
OF THE END OF THE APPLICABLE INTEREST PERIOD OR NEGOTIATED RATE
INTEREST PERIOD.
(h) Section 2.9 of the Credit Agreement is hereby amended to insert
the phrase "or Negotiated Rate Loan" after the phrase "Eurodollar Rate Loan"
contained on the third line thereof.
(i) Section 3.1(c) of the Credit Agreement is hereby amended to add
the following sentence at the conclusion thereof:
SHOULD ANY NEGOTIATED RATE LOAN BE PREPAID ON A DATE OTHER THAN THE
LAST DAY OF THE RELEVANT NEGOTIATED RATE INTEREST PERIOD, THEN THE
COMPANY SHALL PAY AN ADDITIONAL AMOUNT NECESSARY TO COMPENSATE THE
BANK FOR ANY LOSS INCURRED AS A RESULT OF SUCH PREPAYMENT, AS MORE
PARTICULARLY DESCRIBED IN SECTION 3.9 HEREOF.
(j) Section 3.2(a) of the Credit Agreement is hereby amended to
delete the final subparagraph therein (which commences with the phrase "Such
interest payments...") and to insert in its place the following provisions:
DURING SUCH PERIODS THAT SUCH LOAN IS A NEGOTIATED RATE
LOAN, THE NEGOTIATED RATE APPLICABLE TO SUCH LOAN FOR EACH RELATED
NEGOTIATED RATE INTEREST PERIOD.
SUCH INTEREST PAYMENTS SHALL BE MADE (I) WITH RESPECT TO
FLOATING RATE LOANS, ON THE LAST BUSINESS DAY OF EACH MARCH, JUNE,
SEPTEMBER AND DECEMBER, AND AT MATURITY (WHETHER AT STATED MATURITY,
BY ACCELERATION, OR OTHERWISE), (II) WITH RESPECT TO EURODOLLAR RATE
LOANS, ON THE EARLIER OF THE LAST DAY OF THE INTEREST PERIOD
APPLICABLE THERETO OR THE NEXT SCHEDULED INTEREST PAYMENT DUE DATE FOR
FLOATING RATE LOANS AND AT MATURITY (WHETHER AT STATED MATURITY, BY
ACCELERATION OR OTHERWISE), AND (III) WITH RESPECT TO NEGOTIATED RATE
LOANS, ON THE EARLIER OF THE LAST DAY OF THE NEGOTIATED RATE INTEREST
PERIOD OR THE NEXT SCHEDULED INTEREST PAYMENT DUE DATE FOR FLOATING
RATE LOANS APPLICABLE THERETO AND AT MATURITY (WHETHER AT STATED
MATURITY, BY ACCELERATION OR OTHERWISE).
(k) Section 3.9 of the Credit Agreement is hereby amended to insert
the letter "(a)" at the commencement thereof and to add the following subsection
(b) at the conclusion thereof:
(B) IF THE COMPANY MAKES ANY PAYMENT OF PRINCIPAL WITH
RESPECT TO ANY NEGOTIATED RATE LOAN ON ANY OTHER DATE THAN THE LAST
DAY OF AN INTEREST PERIOD APPLICABLE THERETO (WHETHER PURSUANT TO ANY
OF SECTIONS 3.1(C), 3.7, 3.8, 6.2 OR OTHERWISE), THE COMPANY SHALL PAY
THE BANK, AT THE TIME OF SUCH PREPAYMENT, A PREPAYMENT PREMIUM EQUAL
TO THE CURRENT VALUE OF (I) THE INTEREST RATE THAT WOULD HAVE ACCRUED
ON THE AMOUNT PREPAID AT THE NEGOTIATED RATE, MINUS (II) THE INTEREST
RATE THAT WOULD ACCRUE ON THE AMOUNT PREPAID AT THE TREASURY RATE. IN
EACH CASE, INTEREST WILL BE CALCULATED FROM THE PREPAYMENT DATE TO
EACH REMAINING SCHEDULED INSTALLMENT OF PRINCIPAL IN ITS INVERSE ORDER
OF MATURITY. AS USED HEREIN, "TREASURY RATE" SHALL MEAN THE YIELD, AS
OF THE DATE OF PREPAYMENT, ON UNITED STATES TREASURY BILLS, NOTES OR
BONDS, SELECTED BY THE BANK IN ITS REASONABLE DISCRETION IN ACCORDANCE
WITH PAST PRACTICES, HAVING MATURITIES COMPARABLE TO THE SCHEDULED
MATURITIES OF THE INSTALLMENTS BEING PREPAID. AS USED HEREIN,
"CURRENT VALUE" MEANS THE DOLLAR AMOUNT OF INTEREST TO BE EARNED,
DISCOUNTED AT THE TREASURY RATE. THE COMPANY ACKNOWLEDGES AND AGREES
THAT THIS PREPAYMENT PREMIUM IS A REASONABLE ESTIMATE OF THE BANK'S
LOSSES IN THE EVENT OF THE PREPAYMENT OF A NEGOTIATED RATE LOAN AND
NOT A PENALTY AND IS PAYABLE AS A BARGAINED-FOR INDUCEMENT FOR THE
BANK TO EXTEND CREDIT TO THE COMPANY AT THE NEGOTIATED RATE.
(l) Section 5.2(b) of the Credit Agreement is hereby amended by
deleting the number "$23,5000,000" and inserting the number "$32,000,000" in
place thereof and to insert the following clause at the end of said Section
5.2(b):
;PROVIDED, HOWEVER, THAT SOLELY FOR PURPOSES OF THIS SECTION
5.2(B), THE CALCULATION OF TANGIBLE NET WORTH SHALL INCLUDE ADDITIONAL
GOODWILL OF UP TO $5,000,000 COMING INTO EXISTENCE AS A RESULT OF
PERMITTED MERGERS OR ACQUISITIONS CONSUMMATED AFTER APRIL 30, 1997.
(m) Section 5.2(e) of the Credit Agreement is hereby amended to
delete the word "and" appearing at the end of paragraph (vi) thereof, to delete
the period at the end of paragraph (vii) thereof and to insert in its place a
semicolon followed by the word "and" and to add the following subsection (viii):
(VIII) INDEBTEDNESS FOR RATE HEDGING OBLIGATIONS OWING TO
THE BANK OR ITS AFFILIATE AND INDEBTEDNESS UNDER THE LEASE LINE.
(n) Section 5.2(f) of the Credit Agreement is amended to delete
paragraph (viii) thereto and to add a new subsection (viii) as follows:
(VIII) LIENS SECURING THE LEASE LINE FACILITY.
(o) Section 7.2(a) is hereby amended to deleted the text commencing
with the number "122" appearing on the fourth line thereof through and including
the number "708-240-1705" appearing on the seventh line thereof and to insert in
its place the following:
ONE HUNDRED FIELD DRIVE, SUITE 120, LAKE FOREST, ILLINOIS 60045,
ATTENTION: MICHAEL T. YONKER, PRESIDENT, FACSIMILE NO. (847) 735-
2828, AND TO THE BANK AT 33 NORTH LASALLE STREET, CHICAGO, ILLINOIS
60690, ATTENTION: GEORGY ANN PELUCHIWSKI, FACSIMILE NO. (312) 648-
5739.
2. Exhibit A-1 to the Credit Agreement is hereby deleted in its entirety
and replaced by a new Exhibit A-1 appearing in the form of Schedule 1 to this
Third Amendment and Exhibit B to the Credit Agreement is hereby deleted in its
entirety and replaced by a new Exhibit B appearing in the form of Schedule 2 to
this Third Amendment. All references to the "Revolving Credit Note" or terms of
like import contained in the Credit Agreement and the Security Documents shall
mean and be references to the Amended and Restated Revolving Credit Note
contained on Schedule 1 to this Third Amendment. 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 Agreement as
amended hereby. From and after the effective date hereof, all references in the
Credit Agreement and the Security Documents to "NBD Bank" or terms of like
import shall mean and be references to "American National Bank and Trust Company
of Chicago, a national banking association".
3. This Third 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 Third 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 Third 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 June 13, 1995, 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 Schedule 1 hereto.
4. The Company represents and warrants to the Bank that:
(a) The execution, delivery and performance of this Third Amendment
by the Company and the affirmation hereof by the Guarantor 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 or the Guarantor 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 or the
Guarantor is required on the part of the Company or the Guarantor, in connection
with the execution, delivery and performance of this Third Amendment or
transactions contemplated hereby and thereby;
(c) The Credit Agreement, as amended hereby, is the legal, valid and
binding obligation of the Company, enforceable against it in accordance with the
terms thereof and the Guaranty is the legal, valid and binding obligation of the
Guarantor, enforceable against it in accordance with the terms thereof and the
Guaranty continues to extend to all the Indebtedness evidenced by the Credit
Agreement including without limitation Indebtedness evidenced by the Revolving
Credit Note;
(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 and
its subsidiaries 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 Third
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 Third Amendment and any related documents.
6. The capitalized terms used but not defined herein shall have the
respective meaning ascribed thereto in the Credit Agreement. 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 Third Amendment shall be governed by and construed in accordance
with the internal laws of the State of Illinois.
8. The Third 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 Third Amendment to
be duly executed and delivered as of the day and year first above written.
AMERICAN NATIONAL BANK AND TRUST
COMPANY OF CHICAGO
By:
Its:
PORTEC, INC.
By:
Its:
Exhibit 10 (a)
The following Plan is to be in effect for the calendar year 1998. 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.
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
performance 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
circumstances.
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 re-
mained 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.
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 deter-
mined 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 losses on the disposition of fixed assets will be excluded
except for those realized in the ordinary course of business.
Incentive compensation 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
December) 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, AND
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, AND
ENGINEERING(1) 20%
ALL OTHER PARTICIPANTS 15%
NOTES:
(1) ALSO INCLUDES PLANT MANAGERS OF MAJOR REMOTELY LOCATED MANUFACTURING
FACILITIES.
<TABLE>
<S><C>
EXHIBIT B
1998 BONUS PERFORMANCE OBJECTIVES
DIVISION:
CATEGORY WEIGHT THRESHOLD TARGET MAXIMUM
PRE-TAX PROFITS $ $ $
WORKING CAPITAL
TO SALES
TOTAL 100%
</TABLE>
DISTRIBUTED ONLY TO THE
APPLICABLE DIVISION
<TABLE>
<S><C>
Exhibit 10 (g)
July 9, 1997
Mr. Michael T. Yonker
1266 Loch Lane
Lake Forest, Illinois 60045
Dear Mr. Yonker:
The purpose of this letter is to confirm that your employment agreement with Portec, Inc. (the "Company"), in
letter form and dated December 28, 1988, as amended and restated on February 23, 1989, and on December 12, 1989 (the "Agreement"),
is hereby amended as follows:
1. Section 1(e) of the Agreement is amended to permit you to also terminate your employment under that Section due
to any breach by the Company which will occur in the event that your work location is relocated beyond a fifty (50) mile radius
from the current Lake Forest, Illinois address of the Company, or in the event that your total remuneration level is reduced from
its current level, in either case without your written consent.
2. Section 2(a)(ii) of the Agreement is amended so that "22.0%" in each place it appears in the original version of
the text of that Section is changed to "27.0%" as applicable to the acquisition of voting securities of the Corporation by Albert
Fried Company, Fried Foundation and/or Albert Fried, Jr.
3. Section 5 of the Agreement is amended to read in its entirety as follows:
"In the event of a termination of your employment which constitutes a Covered Termination, you, by giving written
notice of termination, may elect to receive a lump sum cash settlement of all cash payments due you pursuant to this Agreement on
account of the termination, without any discount ("present value" or otherwise) or reduction from the total due, but subject to
any withholding on account of federal and state taxes legally required to be withheld from such payment by the Company."
4. Section 6(f) of the Agreement is amended to change the reference therein from "The Continental Illinois National
Bank and Trust Company of Chicago" to "American National Bank and Trust Company of Chicago".
If this letter correctly sets forth our agreement to amend the Agreement, kindly sign the original and the
enclosed copy of this letter at the place provided below and return the enclosed copy so signed, retaining the original for
yourself, and the original and the copy will then constitute executed counterparts of this our amendment of the Agreement.
Sincerely,
PORTEC, INC.
By:
Albert Fried, Jr.
Chairman
Agreed to and accepted:
Michael T. Yonker
</TABLE>
<TABLE>
<S><C>
Exhibit 10(h)
February 26, 1998
Mr. M. T. Yonker
Portec, Inc.
One Hundred Field Drive, Suite 120
Lake Forest, Illinois 60045
Dear Tim:
The purpose of this letter is to confirm that your employment agreement with Portec, Inc. (the "Company"), in letter form and
dated December 28, 1988, as amended and restated on February 23, 1989, on December 12, 1989, and on July 9, 1997 (the
"Agreement"), is hereby amended as follows:
Section 3(b)iii is added as:
After the two year period of section 3(b)ii, the Company will, if you desire, provide health insurance as provided by the Company
for its salaried employees or executive personnel generally, for you and your current wife, Ingrid F. Yonker, for the additional
period until such time as both of you qualify for Medicare coverage, provided, however, that such insurance coverage benefits
shall be reduced to the extent similar insurance coverage benefits are actually provided for you and your dependents by another
employer during such additional period or any part of such period, and provided further that you shall be required to continue
making payments for coverage of dependents similar to payments required of the Company's salaried employees or executive personnel
generally under the Company's health plan. If such coverage cannot by the terms of such health plan, be provided thereunder, then
the Company will provide equivalent insurance coverage for you for such additional period under specially obtained policies of
insurance, provided however, that such insurance coverage benefits shall be reduced to the extent similar insurance coverage
benefits are actually provided for you and your dependents by another employer during such period or any part of such period, and
provided further that you shall be required to continue making payments for coverage of dependents similar to payments required of
salaried employees or executive personnel under the Company's health plan.
Yours truly,
Albert Fried, Jr.
Chairman of the Board
</TABLE>
Exhibit 10(i)
July 17, 1997
Mr. Michael T. Yonker
1266 Loch Lane
Lake Forest, IL 60045
Dear Tim:
On June 24, 1997, PORTEC, Inc.'s Board of Directors authorized
Wasserstein Perella & Co. to examine ways to maximize values for PORTEC's
shareholders and report the results to the Board for its decision. This will
include the investigation of a possible sale of all or a portion of PORTEC.
In connection with the above activity, I spoke with you concerning
special compensatory arrangements for you. The intended objective of such
arrangements is to provide an incentive for you, as a key member of PORTEC's
management team, to stay in your present position while ways to maximize values
for PORTEC's shareholders are being examined and carried out and to be
positively motivated during that period.
This letter will serve as the formal confirmation of the special
compensatory arrangement for you, consisting of a "success bonus" arrangement
which has been promised to you by PORTEC, as follows:
1. The "success bonus" will consist of a cash payment of $78,883, being
30% of your present annual salary. This amount will be increased to
reflect your base salary at the time of a possible sale, in the event
you receive a regular merit increase during the interim.
2. The foregoing "success bonus" will be due only if PORTEC, or a part of
PORTEC which includes the business unit with which you are employed,
is acquired by another party in a transaction negotiated with PORTEC
or otherwise approved by its Board of Directors (or, in the case of an
acquisition by tender offer, its Board of Directors does not recommend
rejection of such offer), with such transaction to include one in
which PORTEC continues in existence but with the acquiring party
having acquired control.
3. The"success bonus" due you under this arrangement will be paid to you
promptly at the time of the closing of the acquisition.
4. The "success bonus" arrangement will expire if the "maximize value"
effort does not produce an acquisition of PORTEC or the business unit
with which you are employed which closes by March 31, 1998. Also, if
the "maximize value" effort is completed or terminated by the Board of
Directors of PORTEC before March 31, 1998, without such an acquisition
having occurred, the "success bonus" arrangement will terminate at
that time. It is expected that the "maximize value" effort will be
completed well before March 31, 1998, but if for any reason that
proves not to be the case, an appropriate extension of time for the
"success bonus" arrangement will be considered at that time and you
would be formally notified in writing on any such extension of time.
5. You understand, of course, that PORTEC will have the right at all
times to terminate your employment for "cause" or failure to render
adequate performance of your employment duties. Any such termination
would be subject to PORTEC's regular severance policy, rather that the
"success bonus" arrangement.
If you have any questions about the foregoing, please do not hesitate
to raise them with me. However, any variation from the foregoing terms --
including any interpretation that enlarges or changes the foregoing -- will be
binding only if agreed to by PORTEC in writing.
Please acknowledge receipt of this letter and your agreement with the
preceding terms at the place provided on the enclosed copy, and return such copy
to me for PORTEC's files.
Yours very truly,
Albert Fried Jr., Chairman
:mec
Receipt of the foregoing agreement with the
foregoing terms are hereby acknowledged on
this day of , 1997.
<TABLE>
<S><C>
Exhibit 10(j)
February 25, 1998
Mr. Michael T. Yonker
Portec, Inc.
One Hundred Field Drive, Suite 120
Lake Forest, Illinois 60045
Dear Tim:
On July 17, 1997, I sent you a letter covering a success bonus arrangement which expires on March 31, 1998. It now appears that a
possible closing on the last segment of Portec's business would not occur prior to March 31, 1998. Accordingly, as indicated in
Section 4 of the letter, I am hereby extending the expiration date of the success bonus from March 31, 1998, to July 31, 1998.
Please acknowledge receipt of this letter and your agreement with the preceding terms at the place provided on the enclosed copy
and return such copy to me for Portec's files.
Yours truly,
Albert Fried Jr., Chairman
Receipt and agreement acknowledged
on this day of , 1998
</TABLE>
<TABLE>
<S><C>
Exhibit 10(l)
July 9, 1997
Ms. Nancy A. Kindl
2743 Parkshire Drive
Racine, Wisconsin 53406
Dear Ms. Kindl:
The purpose of this letter is to confirm that your employment agreement with Portec, Inc. (the "Company"), in
letter form and dated November 10, 1989, as heretofore amended (the "Agreement"), is hereby amended as follows:
1. All provisions in the Agreement (including Schedule A thereto) referring or relating to your positions with the
Company are changed to refer or relate to your present positions as Vice President, Secretary, Treasurer and Controller of the
Company (in place of the positions which you held on November 10, 1989 when the Agreement was entered into or any other positions
no longer held which you may have held prior to the date of this amendment).
2. Section 1(e) of the Agreement is amended to permit you to also terminate your employment under that Section due
to any breach by the Company which will occur in the event that your work location is relocated beyond a five mile radius from the
current Lake Forest, Illinois address of the Company, or in the event that your total remuneration level is reduced from its
current level, in either case without your written consent.
3. Section 2(a)(ii) of the Agreement is amended so that "20.0%" in each place is appears in the original version of
the text of that Section is changed to "27.0%" as applicable to the acquisition of voting securities of the Corporation by Albert
Fried & Company, Fried Foundation and/or Albert Fried, Jr.
4. Section 5 of the Agreement is amended to read in its entirety as follows:
"In the event of a termination of your employment which constitutes a Covered Termination, you, by giving written
notice of termination, may elect to receive a lump sum cash settlement of all cash payments due you pursuant to this Agreement on
account of the termination, without any discount ("present value" or otherwise) or reduction from the total due, but subject to
any withholding on account of federal and state taxes legally required to be withheld from such payment by the Company."
5. Section 6(f) of the Agreement is amended to change the reference therein from "The Continental Illinois National
Bank and Trust Company of Chicago" to "American National Bank and Trust Company of Chicago".
If this letter correctly sets forth our agreement to amend the Agreement, kindly sign the original and the
enclosed copy of this letter at the place provided below and return the enclosed copy so signed, retaining the original for
yourself, and the original and the copy will then constitute executed counterparts of this our amendment of the Agreement.
Sincerely,
PORTEC, INC.
By:
Albert Fried, Jr.
Chairman
Agreed to and accepted:
Nancy A Kindl
</TABLE>
<TABLE>
<S><C>
Exhibit 10(m)
July 17, 1997
Ms. Nancy A. Kindl
2743 Parkshire Drive
Racine, WI 53406
Dear Nancy:
On June 24, 1997, PORTEC, Inc.'s Board of Directors authorized Wasserstein Perella & Co. to examine ways to
maximize values for PORTEC's shareholders and report the results to the Board for its decision. This will include the
investigation of a possible sale of all or a portion of PORTEC.
In connection with the above activity, I spoke with you concerning special compensatory arrangements for you.
The intended objective of such arrangements is to provide an incentive for you, as a key member of PORTEC's management team, to
stay in your present position while ways to maximize values for PORTEC's shareholders are being examined and carried out and to be
positively motivated during that period.
This letter will serve as the formal confirmation of the special compensatory arrangement for you, consisting of
a "success bonus" arrangement which has been promised to you by PORTEC, as follows:
1. The "success bonus" will consist of a cash payment of $39,931, being 30% of your present annual salary. This
amount will be increased to reflect your base salary at the time of a possible sale, in the event you receive a
regular merit increase during the interim.
2. The foregoing "success bonus" will be due only if PORTEC, or a part of PORTEC which includes the business unit
with which you are employed, is acquired by another party in a transaction negotiated with PORTEC or otherwise
approved by its Board of Directors (or, in the case of an acquisition by tender offer, its Board of Directors
does not recommend rejection of such offer), with such transaction to include one in which PORTEC continues in
existence but with the acquiring party having acquired control.
3. The"success bonus" due you under this arrangement will be paid to you promptly at the time of the closing of the
acquisition.
4. The "success bonus" arrangement will expire if the "maximize value" effort does not produce an acquisition of
PORTEC or the business unit with which you are employed which closes by March 31, 1998. Also, if the "maximize
value" effort is completed or terminated by the Board of Directors of PORTEC before March 31, 1998, without such
an acquisition having occurred, the "success bonus" arrangement will terminate at that time. It is expected that
the "maximize value" effort will be completed well before March 31, 1998, but if for any reason that proves not
to be the case, an appropriate extension of time for the "success bonus" arrangement will be considered at that
time and you would be formally notified in writing on any such extension of time.
5. You understand, of course, that PORTEC will have the right at all times to terminate your employment for "cause"
or failure to render adequate performance of your employment duties. Any such termination would be subject to
PORTEC's regular severance policy, rather that the "success bonus" arrangement.
If you have any questions about the foregoing, please do not hesitate to raise them with me. However, any
variation from the foregoing terms -- including any interpretation that enlarges or changes the foregoing -- will be binding only
if agreed to by PORTEC in writing.
Please acknowledge receipt of this letter and your agreement with the preceding terms at the place provided on
the enclosed copy, and return such copy to me for PORTEC's files.
Yours very truly,
Albert Fried Jr., Chairman
:mec
Receipt of the foregoing agreement with the
foregoing terms are hereby acknowledged on
this day of , 1997.
</TABLE>
<TABLE>
<S><C>
Exhibit 10(n)
February 25, 1998
Ms. Nancy A. Kindl
Portec, Inc.
One Hundred Field Drive, Suite 120
Lake Forest, Illinois 60045
Dear Nancy:
On July 17, 1997, I sent you a letter covering a success bonus arrangement which expires on March 31, 1998. It now appears that a
possible closing on the last segment of Portec's business would not occur prior to March 31, 1998. Accordingly, as indicated in
Section 4 of the letter, I am hereby extending the expiration date of the success bonus from March 31, 1998, to July 31, 1998.
Please acknowledge receipt of this letter and your agreement with the preceding terms at the place provided on the enclosed copy
and return such copy to me for Portec's files.
Yours truly,
M. T. Yonker
President & CEO
Receipt and agreement acknowledged
on this day of , 1998
</TABLE>
<TABLE>
<S><C>
Exhibit 10(o)
July 17, 1997
Mr. Kevin C. Rorke
4525 Star Ranch Rd.
Colorado Springs, CO 80906
Dear Kevin:
On June 24, 1997, PORTEC, Inc.'s Board of Directors authorized Wasserstein Perella & Co. to examine ways to
maximize values for PORTEC's shareholders and report the results to the Board for its decision. This will include the
investigation of a possible sale of all or a portion of PORTEC.
In connection with the above activity, I spoke with you concerning special compensatory arrangements for you.
The intended objective of such arrangements is to provide an incentive for you, as a key member of PORTEC's management team, to
stay in your present position while ways to maximize values for PORTEC's shareholders are being examined and carried out and to be
positively motivated during that period.
This letter will serve as the formal confirmation of the special compensatory arrangement for you, consisting of
a "success bonus" arrangement which has been promised to you by PORTEC, as follows:
1. The "success bonus" will consist of a cash payment of $42,977, being 30% of your present annual salary. This
amount will be increased to reflect your base salary at the time of a possible sale, in the event you receive a
regular merit increase during the interim.
2. The foregoing "success bonus" will be due only if PORTEC, or a part of PORTEC which includes the business unit
with which you are employed, is acquired by another party in a transaction negotiated with PORTEC or otherwise
approved by its Board of Directors (or, in the case of an acquisition by tender offer, its Board of Directors
does not recommend rejection of such offer), with such transaction to include one in which PORTEC continues in
existence but with the acquiring party having acquired control.
3. The"success bonus" due you under this arrangement will be paid to you promptly at the time of the closing of the
acquisition.
4. The "success bonus" arrangement will expire if the "maximize value" effort does not produce an acquisition of
PORTEC or the business unit with which you are employed which closes by March 31, 1998. Also, if the "maximize
value" effort is completed or terminated by the Board of Directors of PORTEC before March 31, 1998, without such
an acquisition having occurred, the "success bonus" arrangement will terminate at that time. It is expected that
the "maximize value" effort will be completed well before March 31, 1998, but if for any reason that proves not
to be the case, an appropriate extension of time for the "success bonus" arrangement will be considered at that
time and you would be formally notified in writing on any such extension of time.
5. You understand, of course, that PORTEC will have the right at all times to terminate your employment for "cause"
or failure to render adequate performance of your employment duties. Any such termination would be subject to
PORTEC's regular severance policy, rather that the "success bonus" arrangement.
If you have any questions about the foregoing, please do not hesitate to raise them with me. However, any
variation from the foregoing terms -- including any interpretation that enlarges or changes the foregoing -- will be binding only
if agreed to by PORTEC in writing.
Please acknowledge receipt of this letter and your agreement with the preceding terms at the place provided on
the enclosed copy, and return such copy to me for PORTEC's files.
Yours very truly,
Albert Fried Jr., Chairman
:mec
Receipt of the foregoing agreement with the
foregoing terms are hereby acknowledged on
this day of , 1997.
</TABLE>
<TABLE>
<S><C>
Exhibit 10(p)
February 25, 1998
Mr. Kevin C. Rorke
4525 Star Ranch Rd.
Colorado Spring, CO 80906
Dear Kevin:
On July 17, 1997, I sent you a letter covering a success bonus arrangement which expires on March 31, 1998. It now appears that a
possible closing on the last segment of Portec's business would not occur prior to March 31, 1998. Accordingly, as indicated in
Section 4 of the letter, I am hereby extending the expiration date of the success bonus from March 31, 1998, to July 31, 1998.
Please acknowledge receipt of this letter and your agreement with the preceding terms at the place provided on the enclosed copy
and return such copy to me for Portec's files.
Yours truly,
M. T. Yonker
President & CEO
Receipt and agreement acknowledged
on this day of , 1998
</TABLE>
<TABLE>
<S><C>
Exhibit 11
PORTEC, Inc.
COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
Computations for Statements of Income 1997 1996 1995
Basic earnings per share:
Income from continuing operations $ 1,172,000 $3,583,000 $2,264,000
Income from discontinued operations 2,866,000 3,308,000 634,000
Gain on disposal of discontinued operations 11,263,000 - -
Net income $15,301,000 $6,891,000 $2,898,000
Average shares of common stock outstanding 4,376,963 4,329,761 4,296,466
Basic earnings per share:
Income from continuing operations $0.27 $0.83 $0.53
Income from discontinued operations 3.23 0.76 0.15
Basic earnings per share $3.50 $1.59 $0.67
Diluted earnings per share:
Average shares of common stock outstanding 4,376,963 4,329,761 4,296,466
Incremental common shares applicable to stock
options based on the average market price
during the period 162,338 246,597 300,003
Average common shares assuming full dilution 4,539,301 4,576,358 4,596,469
Diluted earnings per share:
Income from continuing operations $0.26 $0.78 $0.49
Income from discontinued operations 3.11 0.72 0.14
Basic earnings per share $3.37 $1.50 $0.63
</TABLE>
<TABLE>
<S><C>
Exhibit 21
SUBSIDIARIES
PERCENTAGE OF
VOTING STOCK OWNED
PLACE OF BY PORTEC, INC. AND
NAME INCORPORATION SUBSIDIARIES
Active (1)
PORTEC Overseas, Inc. Delaware 100%
PORTEC International, U.S. Virgin Islands 100%
Inc.
PORTEC B.V. Netherlands 100%
1. This list does not include non-operating subsidiaries,
maintained for the purpose of name protection only.
</TABLE>
<TABLE>
<S><C>
Exhibit 23
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 2-76476, 2-79004, and 33-
32700) of PORTEC, Inc. of our report dated March 11, 1998, appearing on page 26 of this Form 10-K.
PRICE WATERHOUSE LLP
Chicago, Illinois
March 30, 1998
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
1997 10-K and is qualified in its entirety by reference to such 10-K.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 46799
<SECURITIES> 0
<RECEIVABLES> 6070
<ALLOWANCES> 0
<INVENTORY> 3488
<CURRENT-ASSETS> 57382
<PP&E> 7777
<DEPRECIATION> 3859
<TOTAL-ASSETS> 64458
<CURRENT-LIABILITIES> 13680
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 64458
<SALES> 25521
<TOTAL-REVENUES> 25755
<CGS> 14631
<TOTAL-COSTS> 23269
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 635
<INCOME-PRETAX> 1851
<INCOME-TAX> 679
<INCOME-CONTINUING> 1172
<DISCONTINUED> 14129
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15301
<EPS-PRIMARY> 3.50
<EPS-DILUTED> 3.37
</TABLE>
Exhibit 99 (a)
PORTEC, INC.
SAVINGS AND INVESTMENT PLAN
FINANCIAL REPORT
DECEMBER 31, 1997
C O N T E N T S
INDEPENDENT AUDITOR'S REPORT 1
FINANCIAL STATEMENTS
Statements of net assets available for benefits
(with fund information) 2 - 5
Statements of changes in net assets available for benefits
(with fund information) 6 - 9
Notes to financial statements 10 - 13
SUPPLEMENTAL SCHEDULES
Item 27(a) - Schedule of assets held for investment
purposes 14
Item 27(d) - Schedule of reportable transactions15
INDEPENDENT AUDITOR'S REPORT
To the Board of Directors,
Board of Trustees and Administrative Committee
Portec, Inc. Savings and Investment Plan
Lake Forest, Illinois
We have audited the accompanying statements of net assets available for benefits
of Portec, Inc. Savings and Investment Plan (the Plan) as of December 31, 1997
and 1996, and the related statements of changes in net assets available for
benefits for the years 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 audits.
We conducted our audits 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 audits provide a reasonable basis for our opinion.
In our opinion, the 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, 1997 and 1996, and the changes in
net assets available for benefits for the years then ended in conformity with
generally accepted accounting principles.
Our audits were 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, 1997, 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 statements of net assets available for
benefits and the statements 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.
Lincolnshire, Illinois
March 13, 1998
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
DECEMBER 31, 1997
<TABLE>
<S><C>
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec,Inc. New Prime Short-Term
Common Horizons Reserve Bond
ASSETS Stock Fund Fund Fund Fund
Investments, at fair value:
Shares of registered investment $ - $ 2,505,699 $ 1,139,786 $ 841,658
companies
Common stock 3,846,540 - - -
Participants notes receivable - - - -
3,846,540 2,505,699 1,139,786 841,658
Receivables:
Employer's contribution 257,574 - - -
Participants' contributions 4,378 6,120 3,536 1,588
Accrued interest - - - -
Due from other funds 669 433 82 109
262,621 6,553 3,618 1,697
TOTAL ASSETS 4,109,161 2,512,252 1,143,404 843,355
LIABILITIES
Due to other funds - - - -
NET ASSETS AVAILABLE
FOR BENEFITS $ 4,109,161 $ 2,512,252 $ 1,143,404 $ 843,355
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
$ 5,779,227 $ 546,240 $ 391,386 $ - $ 11,203,996
- - - - 3,846,540
- - - 250,604 250,604
5,779,227 546,240 391,386 250,604 15,301,140
- - - - 257,574
10,795 2,714 4,009 - 33,140
- - - 342 342
804 77 243 - -
11,599 2,791 4,252 342 291,056
5,790,826 549,031 395,638 250,946 15,592,196
- - - 2,417 -
$ 5,790,826 $ 549,031 $ 395,638 $ 248,529 $ 15,592,196
STATEMENT OF NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
DECEMBER 31, 1996
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec,Inc. New Prime Short-Term
Common Horizons Reserve Bond
ASSETS Stock Fund Fund Fund Fund
Investments, at fair value:
Shares of registered investment $ - $ 2,133,598 $ 969,520 $ 715,489
companies
Common stock 2,276,786 - - -
Participants notes receivable - - - -
2,276,786 2,133,598 969,520 715,489
Receivables:
Employer's contribution 483,944 - - -
Participants' contributions 3,889 8,861 3,337 3,207
Accrued interest - - - -
Due from other funds 1,823 831 677 374
489,656 9,692 4,014 3,581
TOTAL ASSETS 2,766,442 2,143,290 973,534 719,070
LIABILITIES
Due to other funds - - - -
NET ASSETS AVAILABLE
FOR BENEFITS $ 2,766,442 $ 2,143,290 $ 973,534 $ 719,070
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
$ 4,746,100 $ 357,193 $ 357,349 $ - $ 9,279,249
- - - - 2,276,786
- - - 286,744 286,744
4,746,100 357,193 357,349 286,744 11,842,779
- - - - 483,944
15,800 5,017 4,737 - 44,848
- - - 940 940
1,817 195 490 - -
17,617 5,212 5,227 940 529,732
4,763,717 362,405 362,576 287,684 12,372,511
- - - 6,207 -
$ 4,763,717 $ 362,405 $ 362,576 $ 281,477 $ 12,372,511
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
YEAR ENDED DECEMBER 31, 1997
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec,Inc. New Prime Short-Term
Common Horizons Reserve Bond
Stock Fund Fund Fund Fund
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments: $ 1,168,532 $ 164,608 $ - $ 1,258
Interest and dividends 84,463 60,813 52,677 40,707
1,252,995 225,421 52,677 41,965
Contributions:
Employer's match 257,574 - - -
Participants' 66,757 191,562 78,320 68,068
324,331 191,562 78,320 68,068
Total additions 1,577,326 416,983 130,997 110,033
Deductions from net assets attributed to
benefits paid directly to participants 243,168 93,910 134,834 107,360
NET INCREASE (DECREASE) PRIOR
TO
INTERFUND TRANSFERS 1,334,158 323,073 (3,837) 2,673
Interfund transfers 8,561 45,889 173,707 121,612
Net increase (decrease) 1,342,719 368,962 169,870 124,285
Net assets available for benefits:
Beginning of year 2,766,442 2,143,290 973,534 719,070
END OF YEAR $ 4,109,161 $ 2,512,252 $ 1,143,404 $ 843,355
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
$ 728,905 $ 80,828 $ (15,588) $ - $ 2,128,543
578,559 34,712 20,710 22,431 895,072
1,307,464 115,540 5,122 22,431 3,023,615
- - - - 257,574
327,422 104,702 101,824 - 938,655
327,422 104,702 101,824 - 1,196,229
1,634,886 220,242 106,946 22,431 4,219,844
373,677 15,990 14,248 16,972 1,000,159
1,261,209 204,252 92,698 5,459 3,219,685
(234,100) (17,626) (59,636) (38,407) -
1,027,109 186,626 33,062 (32,948) 3,219,685
4,763,717 362,405 362,576 281,477 12,372,511
$ 5,790,826 $ 549,031 $ 395,638 $ 248,529 $ 15,592,196
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
(WITH FUND INFORMATION)
YEAR ENDED DECEMBER 31, 1996
T-Rowe T-Rowe T-Rowe
Price Price Price
Associates Associates Associates
Portec,Inc. New Prime Short-Term
Common Horizons Reserve Bond
Stock Fund Fund Fund Fund
Additions to net assets attributed to:
Investment income:
Net appreciation (depreciation) in
fair value of investments: $ 66,778 $ 117,985 $ - $ (14,474)
Interest and dividends 17,724 194,421 54,119 41,605
84,502 312,406 54,119 27,131
Contributions:
Employer's match 483,859 - - -
Participants' 63,557 160,220 84,387 69,061
547,416 160,220 84,387 69,061
Total additions 631,918 472,626 138,506 96,192
Deductions from net assets attributed to
benefits paid directly to participants 122,829 53,651 326,097 34,318
NET INCREASE (DECREASE) PRIOR
TO
INTERFUND TRANSFERS 509,089 418,975 (187,591) 61,874
Interfund transfers (4,769) (115,829) 55,565 (28,206)
Net increase (decrease) 504,320 303,146 (132,026) 33,668
Net assets available for benefits:
Beginning of year 2,262,122 1,840,144 1,105,560 685,402
END OF YEAR $ 2,766,442 $ 2,143,290 $ 973,534 $ 719,070
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
$ 495,368 $ 42,554 $ 33,405 $ - $ 741,616
297,595 17,862 9,234 17,700 650,260
792,963 60,416 42,639 17,700 1,391,876
- - - - 483,859
283,411 83,082 74,637 - 818,355
283,411 83,082 74,637 - 1,302,214
1,076,374 143,498 117,276 17,700 2,694,090
142,275 6,041 6,362 6,166 697,739
934,099 137,457 110,914 11,534 1,996,351
(7,560) 17,202 24,944 58,653 -
926,539 154,659 135,858 70,187 1,996,351
3,837,178 207,746 226,718 211,290 10,376,160
$ 4,763,717 $ 362,405 $ 362,576 $ 281,477 $ 12,372,511
</TABLE>
Significant Accounting Policies
Investment valuation and income recognition: The Portec, Inc. Savings and
Investment Plan's (the Plan) investments are stated at fair value. Investments
in shares of registered investment companies 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 Employer) 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.
Accounting estimates: The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.
Plan Description
The following description of 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, as amended, is a defined contribution plan covering all
salaried and hourly employees of the Employer and its affiliates. Employees are
eligible to participate on the first day of the calendar month following
employment. The Plan is subject to the provisions of the Employee Retirement
Income Security Act of 1974 (ERISA) and has been amended to comply with the Tax
Reform Act of 1986 and subsequent revenue acts.
Contributions: Each year, participants may contribute from 1 percent up to 15
percent, in whole percentages, of annual compensation, as defined in the plan.
The Employer contributes a percent of the first 6 percent of eligible
compensation that a participant contributes to the plan, as defined. The
Employer receives a federal tax deduction for amounts contributed to the Plan
subject to certain limitations. The Employer's matching percentage ranges from
30 percent to 100 percent depending on the ratio of the Employer's consolidated
net income for the Plan year to its consolidated net sales for the Plan year, as
defined in the Plan document. For a ratio up to 3.8 percent, the Employer
contribution is 30 percent. The contribution gradually increases to 100 percent
as the ratio increases to 8.6 percent. For the plan years ended December 31,
1997 and 1996, the ratio was 3.9 percent and 7.1 percent, respectively. The
corresponding match on the first 6 percent of the participant's eligible
compensation that a participant contributed for December 31, 1997 and 1996, was
40 percent and 80 percent, respectively, as defined. The Plan permits the
Employer 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 Employer's Board of Directors. Contributions are subject to certain
limitations.
NOTE 2.PLAN DESCRIPTION (CONTINUED)
Participant accounts: Each participant's account is credited with participant
contributions, the Employer's matching contribution, if any, and 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 59.5, subject to certain
limitations as defined, the participant may make withdrawals from his account of
the amounts attributable to pretax contributions and Employer 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.
Investment options: Upon enrollment in the Plan, a participant may direct
contributions in any of seven investment options. At December 31, 1997 and
1996, there were 509 and 453 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 Employer match
is invested 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.
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.
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.
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.
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.
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.
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
9.25 percent. Principal and interest is paid through payroll deductions.
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 Employer.
Certain other administrative expenses are paid by the Employer on behalf of the
Plan. The amount of these expenses is not significant to the financial
statements.
As of December 31, 1997 and 1996, the Plan held 265,279 and 230,561 shares,
respectively, of Portec, Inc. common stock with a cost of $2,712,027 and
$1,706,562, respectively, and a fair value of $3,846,540 and $2,276,786,
respectively.
During the year ended December 31, 1997, 62,539 shares of Portec, Inc. common
stock were purchased at values ranging from $14.75 to $9.50 for a total of
$683,682. In 1997, 27,821 shares of Portec, Inc. common stock were sold at
values ranging from $14.375 to $9.50 for a total of $282,460.
During the year ended December 31, 1996, 39,848 shares of Portec, Inc. common
stock were purchased at values ranging from $8.875 to $11.125 for a total of
$297,026. In 1996, 20,117 shares of Portec, Inc. common stock were sold at
values ranging from $8.875 to $11.125 for a total of $177,765.
Shares of the Company's common stock are either funded by the Company's
authorized but not issued and outstanding shares or acquired through T. Rowe
Price Financial Center, the Plan's broker.
The fair values of the Portec, Inc. common stock are determined by and all
purchases and sales of the stock are transacted on the New York Stock Exchange.
Sale of Corporate Divisions
In the fourth quarter of 1997 Portec, Inc. signed definitive agreements to sell
the Railway Maintenance Products Division, the Shipping Systems Division, and
the Construction Equipment Division. Plan participants of the Railway
Maintenance Products Division, and Shipping Systems Division, were given the
opportunity to take distributions from the plan at the time the divisions were
sold. The method of payment, either cash or stock, is subject to certain
conditions and elections as defined in the Plan document. Account balances of
Plan participants of the Construction Equipment Division were transferred
directly to a successor trustee of the purchasing employer.
Plan Termination
Although it has not expressed any intent to do, the Employer has the right under
the Plan to discontinue its contributions at any time and to terminate the Plan
subject to the provisions of ERISA.
Tax Status
The Internal Revenue Service has determined and informed the Employer 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 has been amended since receipt of the Internal Revenue Service
determination letter, to comply with changes in law and operation of the plan.
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.
Subsequent Event
On March 11, 1998 Portec, Inc. signed a definitive agreement to be acquired by
another company. The transaction is structured as a merger with Portec, Inc. as
the surviving company. In the merger, each share of Portec common stock will be
converted into the right to receive $16 per share in cash. No changes with
respect to operation of the plan are anticipated at this time.
ITEM 27(A) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1997
<TABLE>
<S><C>
(a) Identity of Issue/Description of Investment Cost Fair Value
* Portec, Inc. Common Stock $ 2,718,028 $ 3,846,540
Shares held with registered investment company:
T-Rowe Price Associates:
* New Horizons Fund 2,348,202 2,505,699
* Prime Reserve Fund 1,139,786 1,139,786
* Short-Term Bond Fund 840,008 841,658
* Equity Income Fund 5,112,302 5,779,227
* Small-Cap Value Fund 477,711 546,240
* International Stock Fund 407,823 391,386
13,043,86 15,050,536
Participant Notes Receivable (interest rates range
from 9.25 percent to 9.50 percent) 250,604 250,604
$ 13,294,46 $ 15,301,140
* Identifies a party known to be a party-in-interest.
ITEM 27(D) - SCHEDULE OF REPORTABLE TRANSACTIONS
YEAR ENDED DECEMBER 31, 1997
Purchases Sales
Total Total
Identity of Party Involved/ Number of Total Number of Total Total Total
Description of Asset Purchases Price Sales Cost Proceeds Gains
SERIES OF TRANSACTIONS
Shares of registered investment companies
T-Rowe Price Associates
Prime Reserve Fund 45 $ 497,261 47 $ 326,995 $ 326,995 $ -
Equity Income Fund 53 1,054,798 43 539,852 750,576 210,724
Portec, Inc. Common Stock 34 683,682 53 189,059 282,460 93,401
</TABLE>
