SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
( X ) QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934.
For Quarterly Period Ended March 31, 1998, or
( ) Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
For the transition period from __________ to __________
Commission File No. 1-500
PORTEC, Inc.
(Exact name of Registrant as specified in its charter)
Delaware 36-1637250
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Hundred Field Drive, Suite 120, Lake Forest, Illinois 60045
(Address of principal executive offices) (Zip Code)
(847) 735-2800
(Registrant's telephone number, including area code)
Former address:
(Former name, former address and former fiscal year, if changed
since last report).
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES NO X
Number of shares of Registrant's Common Stock ($1 per share par value) issued
and outstanding at May 12, 1998 - 4,455,954.
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PART I
FINANCIAL INFORMATION
Item 1: Financial Statements
PORTEC, INC. CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1998; DECEMBER 31, 1997; AND MARCH 31, 1997
(THOUSANDS OF DOLLARS)
Unaudited Unaudited
3/31/98 12/31/97 3/31/97
CURRENT ASSETS
Cash and cash equivalents
$47,168 $46,799 $ 4,582
Accounts and notes receivable, 5,187 6,070 17,356
Inventories 3,064 3,488 18,460
Other current assets 172 280 266
Deferred income tax benefits 745 745 3,286
Total current assets 56,336 57,382 43,950
PROPERTY, PLANT AND EQUIPMENT
Land 43 43 220
Buildings and improvements 2,996 2,997 10,892
Machinery and equipment 4,774 4,737 23,234
7,813 7,777 34,346
Less accumulated depreciation (4,004) (3,859) (20,093)
Total property, plant and equip. 3,809 3,918 14,253
Assets Held For Sale - - 2,070
Intangible Assets 2,615 2,673 4,857
Notes Receivable and Other Assets 200 303 2,311
Deferred Income Tax Benefit 182 182 -
Total $ 63,142 $ 64,458 $ 67,441
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current portion of long-term debt$2,300 $ 2,300 $ 46
Accounts payable 1,275 1,335 7,166
Other accrued liabilities 4,114 5,132 7,770
Income taxes payable 469 4,913 514
Total current liabilities 8,158 13,680 15,496
LONG-TERM DEBT 3,500 - 12,852
OTHER LONG-TERM LIABILITIES
Pensions 1,060 1,060 1,868
Deferred income tax - - 1,220
Other - 202 584
Total
other long-term liabilities 1,060 1,262 3,672
STOCKHOLDERS' EQUITY
Common stock, $1 par value;
authorized - 10,000,000 shares;
issued - 4,455,954, 4,428,108
and 4,373,596 shares, respectively 4,456 4,428 4,374
Additional capital 47,508 47,260 46,880
Cumulative translation adjustment - - (295)
Accumulated deficit (1,540) (2,070) (15,537)
50,424 49,618 35,422
Treasury stock - 0, 9,544 and 44 shares,
respectively, at cost - (102) (1)
Total stockholders' equity 50,424 49,516 35,421
Total $63,142 $ 64,458 $67,441
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENTS OF INCOME AND ACCUMULATED DEFICIT
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATA)
(UNAUDITED)
Three Months Ended 3/31
1998 1997
Revenues
Net sales $ 8,250 $ 6,053
Other income (expense) 635 22
Total 8,885 6,075
Costs and expenses
Cost of goods sold 5,079 3,420
Selling, general and administrative 2,282 2,299
Interest 46 203
Total 7,407 5,922
Income from continuing operations before
provision for income taxes 1,478 153
Income tax provision 591 67
Income from continuing operations 887 86
Income from discontinued operations,
net of taxes - 695
Net income 887 781
Cash dividends paid (357) (350)
Accumulated deficit - beginning of year (2,070) (15,968)
Accumulated deficit - end of period $ (1,540)$ (15,537)
Dividends per common share $0.08 $0.08
Earnings per share
Basic
Income from continuing operations $0.20 $0.02
Income from discontinued operations - $0.12
Net income $0.20 $0.14
Weighted average shares outstanding 4,438,648 4,350,806
Diluted
Income from continuing operations $0.19 $0.02
Income from discontinued operations - $0.12
Net income $0.19 $0.14
Weighted average shares outstanding 4,612,618 4,500,987
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1998 AND MARCH 31, 1997
(THOUSANDS OF DOLLARS)
(UNAUDITED)
3 MONTHS ENDED 3/31
1998 1997
Cash flows from Operating Activities:
Net income $ 887 $ 781
Income from discontinued operations - 695
Income from continuing operations 887 86
Adjustments to reconcile net income from
continuing operations to net cash used
by operating activities:
Depreciation and amortization 204 179
Changes in other balance sheet accounts:
Decrease (increase) in receivables 883 (189)
Decrease (increase) in inventories 424 (762)
Decrease in other current assets 108 195
Increase (decrease) in accounts payable
and accruals (5,772) 296
Decrease (increase) in other assets net of
other liabilities 305 (55)
Net cash used by operating
activities of continuing operations (2,961) (250)
Cash Flows from Investing Activities:
Capital Expenditures (36) (209)
Net cash used by investing activities
of continuing operations (36) (209)
Cash Flows from Financing Activities:
Proceeds from revolving
credit agreement 3,500 2,100
Issuance of common stock 223 -
Purchase of treasury stock - (270)
Payment of cash dividends (357) (350)
Net cash provided by financing activities
of continuing operations 3,366 1,480
Cash Flows from Discontinued Operations - (624)
Net Increase in Cash and Cash Equivalents 369 397
Cash and Cash Equivalents at Beginning of Year 46,799 4,679
Cash and Cash Equivalents at End of Year 47,168 5,076
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - MARCH 31, 1998
(THOUSANDS OF DOLLARS)
1. Financial statements for the three months ended March 31, 1998 are subject
to audit adjustments.
2. Inventories at March 31, 1998; December 31, 1997; and March 31, 1997 were:
3/31/98 12/31/97 3/31/97
Raw Materials and Supplies $1,591 1,648 $ 6,596
Work-in-Process 933 1,288 4,682
Finished Goods 540 552 7,182
$ 3,064 $ 3,488 $ 18,460
3. The accompanying financial statements reflect all adjustments which were,
in the opinion of
management, necessary for a fair statement of the results for the period
presented, and all
of these adjustments were of a normal recurring nature. For full
disclosure of significant
accounting policies, see Note 1 of the PORTEC, Inc. 1997 Annual Report.
</TABLE>
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
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 on May 28, 1998 to vote on the proposed
transaction.
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.
The Consolidated Statements of Income and the Consolidated Statements of Cash
Flow for the quarter ended March 31, 1997 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 from March 31, 1997 to March 31, 1998, unless otherwise addressed, were due
to the disposal of the above two segments.
Net sales for the quarter ended March 31, 1998 were $8,250,000 compared with
$6,053,000 for the same period in 1997. The increase in net sales of 36.3
percent during the first quarter of 1998 was due to significant increases in
shipments of a U.S. Postal project,<PAGE>
traditional power turns and recycling
conveyors and systems.
Income from continuing operations before tax was $1,478,000 for the first
quarter of 1998 compared with $153,000 for the quarter ended March 31, 1997.
The increase of $1,325,000 reflected the higher sales volume, greater other
income and reduced interest expense. The significant change in gross margin
from the first quarter of 1997 to the first quarter of 1998 was the result of a
shift in product mix. Other income included $661,000 in interest income while
interest expense was down $157,000. The change in net interest was due to the
investment of proceeds from the sale of discontinued operations. Discontinued
operations contributed income net of taxes of $695,000 during the first quarter
of 1997.
Net income for the quarter ended March 31, 1998 of $887,000 was 13.6 percent
above the $781,000 reported for the same period last year.
Accounts receivable decreased $883,000 from December 31, 1997 to March 31, 1998
as a result of the collection of receivables owed to the Company from the
purchasers of the two discontinued business segments. Inventories decreased
$424,000 during the same quarter due to the shipment of a large recycling
system. Fixed asset acquisitions were $36,000 during the first quarter of 1998
versus $209,000 for the same period last year.
Other accrued liabilities decreased $1,018,000 primarily as a result of a
reduction in customer deposits and the contribution by the Company to the
Savings and Investment Plan for company employees. Income tax payable was
reduced by the payment of estimated taxes on the gain recognized on the sale of
the discontinued operations. The increase in long-term debt of $3,500,000 from
year end was used to pay taxes.
The increase in stockholders' equity of $908,000 from December 31, 1997 to March
31, 1998 was attributable to earnings and the contribution of treasury stock to
the Savings and Investment Plan for company employees. These increases were
partially offset by the payment of a cash dividend of $357,000 during the first
quarter of 1998.
The Company received new orders of $5,804,000 during the first quarter of 1998
compared with $11,650,000 for the first quarter of 1997. During the period
ended March 31, 1997, the Company received a large order for a U.S. Postal
project and a recycling system. The order backlog was $6,804,000 at March 31,
1998 compared with $9,325,000 and $11,979,000 at December 31, 1997 and March 31,
1997, respectively.
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 and
capital expenditures in the normal course of business. The Company's working
capital ratios were 6.9, 4.2 and 2.8 to 1 at March 31, 1998, December 31, 1997
and March 31, 1997, respectively. At March 31, 1998, the Company had available
$10,949,000 of unused credit under its loan agreement, plus cash and cash
equivalents of $47,168,000 compared with $14,749,000 of unused credit and
$46,799,000 of cash and cash equivalents at December 31, 1997.
PART II - OTHER INFORMATION
ITEM 6 EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
11 The Company's statement regarding computation of
per share earnings.
(b) Reports on Form 8-K
During the quarter ended March 31, 1998, 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.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
PORTEC, Inc.
Registrant
Dated: May 14, 1998 By:
Nancy A. Kindl
Vice President, Treasurer,
Secretary and Chief
Financial Officer
EXHIBIT INDEX
Page No.
Within
Sequential
Numbering
System of
Exhibit
Exhibit Description
11 Registrant's statement regarding
computation of per share earnings 11
Exhibit 6(a) 11
PORTEC, Inc.
COMPUTATION OF NEW INCOME PER COMMON SHARE
THREE MONTHS
ENDED MARCH 31,
1998 1997
Income from continuing operations $ 887,000 $ 86,000
Income from discontinued operations - 695,000
Net income 887,000 781,000
Basic
Weighted Average Shares Outstanding 4,438,648 4,350,805
Income from continuing operations $ .20 $ .02
Income from discontinued operations - .12
Net income .20 .14
Diluted
Weighted Average Shares Outstanding 4,612,618 4,500,987
Income from continuing operations $ .19 $ .02
Income from discontinued
operations - .12
Net income .19 .14
Exhibit 6(a) 11
PORTEC, Inc.
COMPUTATION OF NEW INCOME PER COMMON SHARE
THREE MONTHS
ENDED MARCH 31,
1998 1997
Income from continuing operations $ 887,000 $ 86,000
Income from discontinued operations - 695,000
Net income 887,000 781,000
Basic
Weighted Average Shares Outstanding 4,438,648 4,350,805
Income from continuing operations $ .20 $ .02
Income from discontinued operations - .12
Net income .20 .14
Diluted
Weighted Average Shares Outstanding 4,612,618 4,500,987
Income from continuing operations $ .19 $ .02
Income from
discontinued operations - .12
Net income .19 .14
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<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from Portec, Inc.
1998 10-Q and is qualified in its entirety by reference to such 10-Q.
</LEGEND>
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<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> MAR-31-1998
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</TABLE>
