<PAGE> 1
FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Quarterly Report Under Section 13 or 15(d) of the Securities Exchange Act of
1934
For Quarter ended: October 1, 1995 Commission File Number: I-9403
PORTAGE INDUSTRIES CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 39-1150850
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
1325 Adams Street, Portage, Wisconsin 53901
(Address of principal executive offices) (Zip Code)
(608)-742-7123
(Registrant's telephone number, including area code)
N/A
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 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. [x] Yes [ ] No
Indicated the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
2,269,100 Common Shares outstanding at October 1, 1995
<PAGE> 2
PORTAGE INDUSTRIES CORPORATION
INDEX
Page No.
--------
Part I Financial Information
Balance Sheet - October 1, 1995
and December 31, 1994 1 - 2
Statement of Operations - Quarter and
Nine Months Ended October 1, 1995
and October 2, 1994 3
Statement of Cash Flows - Nine
Months Ended October 1, 1995
and October 2, 1994 4
Notes to Financial Statements 5 - 6
Management's Discussion and Analysis
of Financial Condition and Results
of Operations 7 - 9
Part II Other Information
Item 4: Submission of Matters to a Vote of
Security Holders 10
Item 6: Reports on Form 8-K 10
Signatures 10
<PAGE> 3
PART I - FINANCIAL INFORMATION
PORTAGE INDUSTRIES CORPORATION
BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
October 01, December 31,
1995 1994
---------- ----------
<S> <C> <C>
ASSETS
------
Current assets
Cash and cash equivalents $ 21 $ 137
Accounts receivable, net 3,455 3,026
Inventories (Note 2) 4,718 3,359
Other current assets 352 282
------- -------
Total current assets 8,546 6,804
------- -------
Property, plant and equipment 13,128 12,352
Less accumulated depreciation 7,588 6,793
------- -------
Net property, plant and equipment 5,540 5,559
------- -------
Goodwill 4,134 4,134
Less accumulated amortization 1,283 1,205
------- -------
Net goodwill 2,851 2,929
------- -------
Other assets 92 109
------- -------
Total assets $17,029 $15,401
======= =======
</TABLE>
See notes to financial statements
Page 1
<PAGE> 4
PORTAGE INDUSTRIES CORPORATION
BALANCE SHEET
(In thousands)
<TABLE>
<CAPTION>
October 01, December 31,
1995 1994
------------ ------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current liabilities
Notes payable (Note 3) $ 500 $ 800
Current portion of long-term debt (Note 3) 550 550
Accounts payable 5,684 3,906
Accrued expenses:
Compensation 186 304
Deferred Income Taxes 203 203
Other 30 161
------- -------
Total current liabilities 7,153 5,924
Long-term debt (Note 3) 2,250 2,250
Deferred income taxes 215 215
------- -------
Total liabilities 9,618 8,389
------- -------
Stockholders' equity
Preferred stock, $.25 par value,
1,000,000 shares authorized, none issued - -
Common stock, $.01 par value,
10,000,000 shares authorized,
issued and outstanding 2,269,100
and 2,266,725 respectively 23 23
Additional paid-in capital 7,894 7,889
Accumulated deficit (506) (900)
------- -------
Total stockholders' equity 7,411 7,012
------- -------
Total liabilities
and stockholders' equity $17,029 $15,401
======= =======
</TABLE>
See notes to financial statements
Page 2
<PAGE> 5
PORTAGE INDUSTRIES CORPORATION
STATEMENT OF OPERATIONS
(Unaudited)
(in thousands, except per share data)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
Oct. 01, Oct. 02, Oct. 01, Oct. 02,
--------------------- --------------------
1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
Net sales $9,041 $7,707 $25,817 $23,164
Cost of sales 8,128 6,606 22,847 20,118
------ ------ ------- -------
Gross profit 913 1,101 2,970 3,046
Selling and administrative expenses 692 627 2,107 1,833
Interest Expense - net 54 56 174 239
Other (Income) Expense - net (10) 45 12 155
------- ------ ------- -------
Income before income taxes 177 373 677 819
Income tax provision 74 142 283 311
------ ------ ------- -------
Net income (loss) $ 103 $ 231 $ 394 $ 508
====== ====== ======= =======
Net income per common share .05 .10 .17 .22
Weighted average shares outstanding 2,269 2,267 2,269 2,267
</TABLE>
See notes to financial statements
Page 3
<PAGE> 6
PORTAGE INDUSTRIES CORPORATION
STATEMENT OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Year To Date Ended
Oct. 01, Oct. 02,
-----------------------
1995 1994
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net Income $ 394 $ 508
Adjustments to reconcile to net cash
provided by operating activities:
Depreciation 795 795
Amortization of goodwill 78 78
Gain/Loss on sale of equipment 0 6
Other 17 (14)
Effects of changes in certain
assets and liabilities:
Accounts receivable (429) (617)
Inventories (1,359) (407)
Accounts payable 1,778 197
Accrued expenses (249) (218)
Other (70) (65)
------- -------
Net cash provided by (used in)
operating activities 955 263
------- -------
Cash flows from investing activities:
Purchases of property, plant and
equipment (776) (291)
Proceeds from sale of equipment 0 25
------- -------
Net cash used provided by (used in)
investing activities (776) (266)
------- -------
Cash flows from financing activities:
Increase (decrease) in short-term
borrowings (300) (300)
Stock options exercise proceeds 5 47
------- -------
Net cash (used in) provided by
financing activities (295) (253)
------- -------
Net Increase (Decrease) (116) (256)
Cash and cash equivalents:
Beginning of year 137 274
------- -------
End Period $ 21 $ 18
======= =======
</TABLE>
Page 4
<PAGE> 7
PORTAGE INDUSTRIES CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note 1: Basis of Presentation
The financial information for the quarter and nine month period ended
October 1, 1995 and October 2, 1994 is unaudited; however, such
information reflects normal recurring adjustments which are, in the
opinion of management, necessary for a fair statement of results for
the interim periods.
The results of operations for the interim periods are not necessarily
indicative of the results to be expected for the full year.
The year-end balance sheet data was derived from audited financial
statements; but does not include all disclosures required by generally
accepted accounting principles.
Note 2: Inventories
Inventories are stated at the lower of Last-in, First-out (LIFO) cost
or market. The composition is as follows:
<TABLE>
<CAPTION>
($000 omitted)
October 01, December 31,
1995 1994
---------- ------------
<S> <C> <C>
Raw materials $ 3,256 $ 2,402
Finished goods and work in process 1,711 1,207
------- -------
Total $ 4,967 $ 3,609
Excess of current cost
over LIFO cost 250 250
------- -------
Net $ 4,717 $ 3,359
------- -------
</TABLE>
Page 5
<PAGE> 8
Note 3: Notes Payable, Long-Term Debt and Current Maturities Thereof
Notes payable represents line of credit borrowings against a
$1,500,000 demand line of credit with interest at 1/2% over the banks
reference rate (a total of 9.0% at October 1, 1995). The maximum
allowable borrowings under the line of credit may not exceed 75% of
the eligible accounts receivable.
Substantially, all assets of the Company are pledged as collateral for
its borrowings.
On May 17, 1994 the Company refinanced its $3,350,000 Industrial
Revenue Bond which now has an adjustable interest rate (4.60% at
October 1, 1995). The interest rate and interest periods are
variable. The 1994 Industrial Bond Series requires the Company to
maintain a letter of credit which includes covenants requiring, among
other financial covenants, a current ratio ranging from 0.9:1 to 1.0:1
at various dates and tangible net worth of $2,900,000 plus 70% of the
net earnings from May 17, 1994 to the date of determination.
Future scheduled maturities of long-term debts are due each November 1
as follows (in thousands):
1995 $ 550
1996 550
1997 550
1998 550
1999 600
------
$2,800
Page 6
<PAGE> 9
PORTAGE INDUSTRIES CORPORATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The following represents management's discussion and analysis of certain
significant factors which have affected the Company's financial position and
operating results during the periods included in the accompanying financial
statements.
Results of operations for the quarter and nine months ended October 1, 1995,
compared with the same period in 1994.
Net sales for the quarter ended October 1, 1995 were $9,041,000 up
$1,334,000 or 19% compared to the quarter ended October 2, 1994. The
primary reasons for the increase in net sales were the additional
business in light gauge thermoforming, change in the company's product
mix and increased raw material prices.
Net sales for the nine month period were $25,817,000, up $2,653,000 or
11% compared to the same period in 1994. The Company anticipates that
1995 will be a record setting year in sales of approximately
$35,000,000 due to the above mentioned reasons.
Gross margin for the quarter, as a percentage of net sales, was 10.1%
compared to 14.3% for 1994. The decrease is primarily due to
continued developmental costs of two new projects that came on board
in the second quarter of 1995 and a temporary build of regrind (once
processed material) that was not reintroduced back into the
manufacturing process during the third quarter. It is expected that
this regrind will be utilized fully in future quarters.
Nine month gross margin as a percentage of net sales was 11.5% in 1995
compared to 13.1% for 1994 primarily due to the above mentioned
reasons.
Selling, general and administrative expenses increased $65,000 for the
quarter and $274,000 for the nine month period in 1995 as compared to
the same periods in 1994. The increase primarily relates to
commissions on increased sales dollars, the addition of a new sales
person and the increase in the provision for uncollectable receivables
which amounts to approximately $100,000. In addition, costs are being
incurred in connection with the Board of Directors assessing the
Company's strategy for the future. The Board of Directors are
analyzing the viability of making greater investments into the present
structure, positioning of new plants, making acquisitions in related
plastics fields, and the possibility of merger transactions.
Page 7
<PAGE> 10
Interest and other expenses decreased $57,000, or 56% for the quarter
and $208,000 or 53% for the first nine months of 1995 as compared to
the same periods in 1994. This decline was primarily the result of
the company refinancing its Industrial Revenue Bond in May of 1994
with more favorable interest rates, and the reduction in our line of
credit.
Net income for the third quarter was $103,000 or five cents per share
versus $231,000 or ten cents per share for the same period in 1994.
For the nine months ended October 1, 1995, net income was $394,000 or
seventeen cents per share, compared to $508,000 or twenty two cents
per share for the same period in 1994.
Page 8
<PAGE> 11
Liquidity and Capital Resources at October 1, 1995
The Company's working capital increased $513,000 since December 31,
1994 and its current ratio has improved from 1.15 at December 31, 1994
to 1.19 at October 1, 1995. The Company has improved its funded
debt-to-equity ratio from .51 to 1.0 at the end of 1994 to .45 to 1.0
at October 1, 1995.
Accounts receivable, which were $3,455,000 at October 1, 1995 and
$3,026,000 at December 31, 1994 represents 34 days' sales outstanding
at October 1, 1995 and 26 days at December 31, 1994.
Inventory has increased $807,000 since June 30, 1995 primarily related
to a shift in product mix and a temporary build in once- processed
material that was not reintroduced back into the manufacturing process
in September.
Accounts payable have increased $1,778,000 since December 31, 1994
primarily due to the Company negotiating favorable terms with one of
our major vendors.
Capital expenditures for the first nine months of 1995 amount to
$776,000 as compared to $291,000 for the same period in 1994. The
Company has completed the purchase transaction of its corporate office
facility and certain contents for $420,000 which has been financed by
cash flow from operations.
Due to cash provided by operating activities, the Company has
decreased its borrowings on the line of credit by $400,000 since June
30, 1995.
As of October 1, 1995 the outstanding borrowings under the line of
credit were $500,000. The Company expects that the available line of
credit and operating cash flows will be adequate to meet its $550,000
Industrial Revenue Bond payment due 11/1/95 and planned capital
expenditures.
The Company's line of credit terms are described in Note 3 to the
accompanying financial statements.
The Company has not paid dividends since becoming publicly-held in
1987. At the present time, management does not expect to pay
dividends in the foreseeable future, as earnings will be reinvested in
the business. Also as discussed in Note 3 of Notes to Financial
Statements, a letter of credit agreement, to which the Company is a
party supporting the Industrial Revenue Bonds, contains certain
financial covenants which may effectively restrict the payment of
dividends. (See Note 3 of Notes to Financial Statements.)
Page 9
<PAGE> 12
PART II OTHER INFORMATION
Item 4: Submission of Matters to a Vote of Security Holders
The annual meeting of shareholders of the Company was held on June 16,
1995. Proxies were solicited by management of the Company, pursuant
to Regulation 14 under the Securities Exchange Act of 1934; there was
no solicitation in opposition of management's nominees as listed in
the proxy statement and all such nominees were elected pursuant to the
vote of shareholders. Directors elected were Robert L. Lestina, Jr.,
Robert C. Hazzard, Anthony J. Lisauskas and Paul N. Erickson.
Item 6: Exhibits and reports on Form 8-K
a) Exhibits - None
b) No current report on Form 8-K was filed during the three-month
period ended October 1, 1995.
SIGNATURES
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.
PORTAGE INDUSTRIES CORPORATION
(Registrant)
By Anthony J. Lisauskas 10/30/95
--------------------------- -------------
Anthony J. Lisauskas Date
Chief Executive Officer
and President
By Mark E. Showers 10/30/95
--------------------------- -------------
Mark E. Showers Date
Controller/Secretary/Treasurer
(Chief Financial & Accounting Officer)
Page 10
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> OCT-01-1995
<CASH> 21
<SECURITIES> 0
<RECEIVABLES> 3,455
<ALLOWANCES> 0
<INVENTORY> 4,718
<CURRENT-ASSETS> 8,546
<PP&E> 13,128
<DEPRECIATION> 7,588
<TOTAL-ASSETS> 17,029
<CURRENT-LIABILITIES> 7,153
<BONDS> 2,250
<COMMON> 23
0
0
<OTHER-SE> 7,388
<TOTAL-LIABILITY-AND-EQUITY> 17,029
<SALES> 25,817
<TOTAL-REVENUES> 25,817
<CGS> 22,847
<TOTAL-COSTS> 22,847
<OTHER-EXPENSES> 2,119
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 174
<INCOME-PRETAX> 677
<INCOME-TAX> 283
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 394
<EPS-PRIMARY> .17
<EPS-DILUTED> .17
</TABLE>
