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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE
- --- ACT 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1995
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
- --- EXCHANGE OF 1934 FOR THE TRANSITION PERIOD FROM _______ to _______
Commission File No. 1-9403
PORTAGE INDUSTRIES CORPORATION
------------------------------
(Exact name of registrant as specified in its charter)
DELAWARE 39-1150850
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
1325 ADAMS STREET, PORTAGE, WI 53901
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (608) 742-7123
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange
on which registered
Common Stock, $.01 par value American Stock Exchange
- ---------------------------- -----------------------
Securities registered pursuant to Section 12(g) of the Act: None.
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 X .
---
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 twelve (12) months (or for such shorter period that
the registrant was required to file such report(s)), and (2) has been subject
to the filing requirements for the past ninety (90) days. X YES NO
--- ---
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Based on the closing price on March 27, 1996, the aggregate market value of
voting stock held by nonaffiliates of the registrant was $14,389,834
representing 2,235,314 shares assuming, solely for purposes of this
calculation, that "affiliates" includes all Directors and Executive Officers of
registrant.
On March 27, 1996, there were 2,269,100 shares of common stock issued and
outstanding.
The Exhibit Index, showing documents incorporated by reference, is located at
pages 26-28 of the registrant's annual report on form 10-K pursuant to Section
13 or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
December 31, 1995, as originally filed with the Commission on February 21,
1996.
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The undersigned Registrant hereby amends its Annual Report on Form 10-K for
the fiscal year ended December 31, 1995, to add additional disclosure required
by Items 2 and 7 of Form 10-K and to add the disclosure required by Part III of
Form 10-K.
Item 2. Properties
The Company's manufacturing facilities, warehouses, and executive offices are
all located in Portage, Wisconsin. The primary manufacturing facility is a
105,000 square foot one-story, Company owned industrial building. The executive
offices are located directly across the street in a Company owned one-story,
10,000 square foot office building. The Company leases two one-story
facilities containing a total of 66,000 square feet of which one-third is used
for manufacturing and two-thirds for storage. In the Company's primary
manufacturing facility, the Company has the ability, depending on product mix
and certain other factors, to produce approximately 60 million pounds of
product per year. During 1995, the Company operated at approximately 61%
capacity due to the development of new products and product mix. The Company's
existing facilities are believed adequate to meet the necessary capacity
requirements for the foreseeable future.
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Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations:
1995 vs. 1994
Net sales increased in 1995 by $3,596,000 or 11.2% over 1994 to
$35,569,000. This increase is primarily due to a 315 percent increase in net
sales from light gauge thermoforming and a shift in product mix within extruded
products from products which use lower cost materials, to products that use
higher priced raw materials resulting in increased sales dollars. Fourth
quarter sales of $9,752,000 were 11% higher than fourth quarter 1994 sales,
primarily due to increased sales in the food and medical packaging industries.
During the past three years, the Company has been non-cyclical in
nature due primarily to the additional business obtained in the medical and
food packaging industries.
The Company had an 18% reduction in material processed during 1995 as
compared to 1994. This decline is primarily due to the Company's continued
effort in extruded products to move from high volume markets, which typically
carry lower margins, to select niche markets, which typically carry higher
margins.
The Company's gross profit margin decreased from 13.1% in 1994 to
11.4% in 1995. This decrease is primarily due to the development costs of new
projects undertaken at the request of two customers in 1995. These projects
fall into the Company's strategic niche marketing efforts, and the Company
anticipates these projects will benefit the Company in 1996 and future years.
Gross profit for the fourth quarter 1995 was 11% versus 13.1% for the
same period 1994. The decrease was primarily due to increased sales in certain
low margin food packaging industries during the last quarter of 1995.
Selling, general and administrative expenses increased by $366,000 to
$2,979,000. This increase is primarily due to increased expenses for
uncollectable receivables, legal fees and costs associated with the Board of
Directors' review of the Company's operations and strategic alternatives,
including the retention of a financial advisor to assist the Board of Directors
in its review.
Interest and other expenses decreased $233,000 or 49% for 1995. This
decline was the result of the Company refinancing its Industrial Revenue Bond
in May of 1994 with more favorable interest rates and the reduction in the
Company's line of credit borrowing.
Net income declined $183,000 or 27.6% from $664,000 in 1994 to
$481,000 in 1995 due to the above mentioned reasons.
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1994 vs. 1993
Net sales increased in 1994 by $1,356,000, or 4.4% over 1993, to
$31,973,000. This increase is primarily attributable to increased sales of
extruded sheet and rollstock to both new and existing customers and due to the
rising price of raw materials for which the majority of the increases were
passed on to our customers except as noted below. The Company's average
selling price per pound, which fluctuates with the cost of resins, decreased in
1994 by approximately 13% even though the cost of raw material increased. The
decrease in selling price is primarily attributable to product mix and due to
the toll processing of approximately 10,000,000 pounds of customers' raw
material, of which the sales dollars reflect conversion sales only. Total
pounds of finished product produced in 1994 were 18% higher than in 1993.
Traditionally, the Company experiences a softening of sales during its
first and fourth quarters as a result of the cyclical nature of its customer
base. During 1994, the Company continued to pursue business in the
non-cyclical industries such as the medical and food packaging industries which
helped contribute to the strong fourth quarter. Fourth quarter sales of
$8,808,000 were 11% higher than fourth quarter 1993 sales.
In 1994, the Company's gross profit margin increased to 13.1% from
12.3% in 1993. This increase was the result of a better mix of higher margin
business, reduced scrap rates and improved efficiencies achieved through higher
volume production runs. Increases in the cost of resins had a negative impact
on gross margin percentage due to the short notice and frequency of the
increases. Accordingly, not all price increases could be passed on to
customers at the time the price increases went into effect. The cost of resin
continues to rise in 1995. The Company currently has been, and anticipates it
will be able to pass these increases on to its customers.
Selling, general and administrative expenses increased by $70,000 to
$2,613,000, which primarily related to commissions on increased sales during
1994. As a percentage of sales, selling, general and administrative expenses
showed a slight decrease in 1994 as compared to 1993. The Company incurred
unreimbursed product and market development expenses of $309,000 in 1994 as
compared to $322,000 in 1993.
Interest expense declined from $492,000 in 1993 to $287,000 in 1994 as
a result of lower average long-term debt outstanding, reduced utilization of
the line of credit, and by the refinancing of the Company's $3,350,000
Industrial Revenue Bond.
On May 17, 1994, the Company refinanced $3,350,000 of its 1987 Series
of Industrial Revenue Bonds. Of the $198,000 of other expenses, approximately
$157,000 represents issue costs and other expenses related to refinancing the
1987 Series Bonds.
On June 1, 1993, the Company sold equipment relating to its heavy
gauge thermoforming operations. The sale of this equipment, together with
other sales of underutilized assets, generated $583,000 in cash and $275,000 in
gains during 1993.
As a result of the Companys continued efficiencies and cost control
measures, net income rose $103,000 from $561,000 in 1993 to $664,000 in 1994.
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Liquidity and Capital Resources
The Company continues to strengthen due to its third consecutive year
of profitability. The current ratio at December 31, 1995 was 1.21 to 1.0 as
compared to 1.15 to 1.0 at December 31, 1994. The Company improved its funded
debt-to equity ratio from .51 to 1.0 at the end of 1994 to .37 to 1.0 at the
end of 1995.
Cash provided by operations was $1,733,000 in 1995, an increase of
$732,000 from 1994. As sales increased in 1995, receivables remained
consistent with 1994. Extended payment terms with certain vendors on accounts
payable were the primary reasons for the increase in cash provided by operating
activities.
Accounts receivable, which were $3,065,000 at December 31, 1995, and
$3,026,000 at December 31, 1994, represents 25 days sales outstanding in 1995
and 26 days in 1994. Sales are generally made with 30-day terms, and the
Company has stressed the importance of effective credit and collection
procedures. During 1995, inventories increased $97,000 due to mix change;
however, inventories decreased 26% in pounds compared to 1994.
The level of capital expenditures, which has been financed by cash
flow from operations, was $834,000 in 1995. During 1995, the Company purchased
its corporate office facility and certain contents for $420,000 as required by
the lease agreement relating to the facility. Capital expenditures in 1996 are
expected to be about $700,000, and are to be funded through operating cash
flows.
On May 17, 1994, the Company refinanced the remaining $3,350,000
balance of its 1987 Series of Industrial Revenue Bond obligation to take
advantage of lower interest rates and to extend the maturity schedule. The 1994
Industrial Revenue Bond holds a floating interest rate that ranged from 2.95%
to 5.75% in 1995. As of March 27, 1996, the interest rate was 3.55%. On
November 1, 1995, the revenue bond obligation was reduced by a principal amount
of $550,000, with the remaining $2,250,000 balance payable over the next four
years.
The Company has a $1.5 million working capital facility which matures
each November 1 and shall automatically extend for an aditional 12-month period
each year. The Company's borrowings under its $1.5 million line of credit was
reduced to $500,000 at December 31, 1995, from $800,000 at December 31, 1994.
As of March 1, 1996, the Company's borrowings are $600,000 with an interest
rate of 8.75%.
On January 23, 1996, the Company entered into a letter of intent with
Spartech Corporation to be acquired by Spartech for a price of $6.60 in cash
per share of the Company's common stock. The acquisition will take the form of
a cash merger between the Company and a subsidiary of Spartech. Subject to
regulatory and other approvals, the transaction is expected to close on or
about May 1, 1996.
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.)
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PART III
Item 10. Directors and Executive Officers of the Registrant
The executive officers of the Company are as follows:
Anthony J. Lisauskas. . . 56 President, Chief Executive Officer, and
Director
Mark E. Showers . . . . . 37 Controller/Corporate Secretary/Treasurer
Jerome C. Gruber. . . . . 50 Vice President - National Accounts
C. Sue Finley . . . . . . 53 Vice President - Operations
Robert L. Lestina, Jr.. . 54 Chairman of the Board & Director
Robert C. Hazzard . . . . 58 Director
Paul N. Erickson . . . . . 60 Director
Mr. Lisauskas has been President, Chief Executive Officer and a Director
since August 1991. Prior to joining the Company, Mr. Lisauskas was President
of Plastofilm Industries Inc., a multidivision custom heavy and light gauge
thermoforming manufacturer from 1990 to August 1991, and served as Vice
President/General Manager from 1982 to 1990. In prior years, Mr. Lisauskas
served as President of Form-Fit Plastics and Clear-Vu Packaging and served on
the Board of Directors for Consolidated Fibers, Inc., Plastofilm Industries
Inc., and Form-Fit Plastics. Mr. Lisauskas, a C.P.A., holds a Bachelor of
Business Administration degree from St. Mary's College, Winona, Minnesota, and
a Master of Business Administration from Keller Graduate School, Chicago,
Illinois.
Mr. Showers was appointed Corporate Treasurer in October 1993, which is in
addition to his Controller/Corporate Secretary appointment in 1992. Mr.
Showers joined the Company in July, 1991, as Accounting Manager and served in
that capacity until his promotion to Controller/Corporate Secretary. From
October 1988, to July 1991, he served as Accounting Manager for Wisconsin Brick
and Block Corporation, a multidivision manufacturer and distributor of building
products. For six years prior to his employment with Wisconsin Brick & Block
Corporation, he was Corporate Accounting Manager for Scientific Protein
Laboratories, a subsidiary of A. H. Robins, a national pharmaceutical company.
Mr. Showers holds a Bachelor of Business Administration degree in accounting
from Upper Iowa University.
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Mr. Gruber has been Vice President - National Accounts of the Company since
January 1992. Mr. Gruber joined the Company in 1982 as Vice President -
Packaging and served in that capacity until his promotion to Vice President -
Sales. From 1974 until 1982, he was Associate Director - Research and
Development for Oscar Mayer & Company, Inc., a national meat packing company.
Mr. Gruber holds a Bachelor of Science degree in chemistry from the University
of Wisconsin.
Ms. Finley was appointed Vice President of Operations in June 1995, which is
in addition to her responsibility of Sales and Human Resources. Ms. Finley
joined the Company as a management consultant during 1991 until she accepted
the position of Director of Manufacturing. Prior to this, Ms. Finley held
manufacturing management positions since 1976, most notably with Square D
Corporation, for eleven years. Ms. Finley has a Bachelor of Arts Degree in
Business Management form National Lewis University, Evanston, IL.
Mr. Lestina has been Director of Portage since 1987 and Chairman of the Board
since August 1993. He was Director of Venture Capital Division, Allstate
Insurance Company, Northbrook, Illinois from 1987 to 1994. He is also Director
of Bertucci's, Inc.
Mr. Hazzard has been Director of Portage since 1992. He is President and a
major stockholder of Continental Plastics, a custom plastic injection molding
company. He has been a Consultant to the plastics industry since January 1982.
He was President of Bell Plastics from September 1986 to September 1988. He
was Vice President of Manufacturing and Executive Vice President of the Company
from November 1971 to July 1981.
Mr. Erickson has been Director of Portage since 1995. He has been Founder
and Principal of Erickson Strategic Consulting since 1983. He was Chief
Financial Officer of Consolidated Fibers, Inc. from 1984 to 1987 and Chief
Financial Officer of Rigging International, Inc. from 1978 to 1982.
Directors are elected annually and officers serve at the discretion of the
Board.
Item 11. Summary Compensation Table
The following table sets forth certain information regarding compensation
paid during each of the Company's last three fiscal years to the Company's
Chief Executive Officer. No other officer of the Company had Salary and Bonus
exceeding $100,000 in the last fiscal year.
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<TABLE>
<CAPTION>
Name & Position Year Salary Bonus Other Compensation (1)
- ------------------- ---- -------- ----------- ----------------------
<S> <C> <C> <C> <C>
Anthony J. Lisauskas 1995 $151,923 $10,000 (2) $12,500 (2)
President and 1994 145,000 31,000 (3) 12,500 (3)
Chief Executive Officer 1993 145,000 25,000 (4) 16,250 (4)
</TABLE>
(1) Amounts indicated do not include perquisites and other personal benefits
which did not exceed the lesser of $50,000 or 10% of the officer's total
annual salary or bonus.
(2) Includes $12,500 Annuity payment and $10,000 cash bonus earned in 1995 and
paid in 1996.
(3) Includes $12,500 Annuity payment and $31,000 cash bonus earned in 1994 and
paid in 1995.
(4) Includes stock grant in the amount of $16,250 and a $25,000 cash bonus
earned in 1993 and paid in 1994.
The following table sets forth options granted to the executive officer named
in the Summary Compensation Table.
<TABLE>
<CAPTION>
Potential Realizable Value
at Assumed Annual
Rates of Stock Price
Number of Securities Options Granted Exercise Appreciation for
Underlying Options to Employees in Price Expiration Option Term
----------------
Name Granted (#) Fiscal Year ($/Share) Date (5% $) (10% $)
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Anthony J. Lisauskas... 25,000 100% $3 8/12/05 114,532 182,373
</TABLE>
No options were exercised as the following table sets forth information
regarding year-end option values for the executive officer named in the Summary
Compensation Table.
<TABLE>
<CAPTION>
Number of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options at FY-End (#) Options at FY-End (%)
Shares Acquired Value ------------------------- -------------------------
Name on Exercise (#) Realized ($) Exercisable/Unexercisable Exercisable/Unexercisable
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Anthony J. Lisauskas... 50,000/0 $87,500/0
</TABLE>
Director's Compensation
Directors received options to purchase 4,000 shares of Common Stock annually
on January 1 at the market price on the date of grant and receive $600 per
meeting plus reimbursement for out-of-pocket expenses related to meetings.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The following table sets forth, as of March 15, 1996, information to the best
knowledge of the Company with respect to (i) persons who beneficially owned in
excess of 5% of the Company's Common Stock, (ii) the number of shares of Common
Stock beneficially owned by each director and (iii) the aggregate number of
shares of Common Stock beneficially owned by the directors and executive
officers of the Company as a group.
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<TABLE>
<CAPTION>
Number of Shares
Name and Address of Beneficially Owned Percent of Class
Beneficial Owner (Includes footnote references) March 15, 1996
- ------------------- ------------------------------ --------------
<S> <C> <C>
Allstate Insurance
Company, a wholly-owned
subsidiary of Sears,
Roebuck & Co.
Sears Tower
Chicago, IL 60684 459,660 (2) 20.26%
Madison Allen Self
1440 Huntington Drive
Calumet City, IL 60409 324,500 (2) 14.30%
Spartech Corporation 784,160 (2) 34.56%
7733 Forsyth, Suite 1450
Clayton, MO 63105
Directors and Officers:
Anthony J. Lisauskas
(President and Director) 65,000 (1) 2.8%
Robert C. Hazzard
(Director) 18,667 (1) *
Robert L. Lestina, Jr.
(Director) 8,000 (1) *
Paul N. Erickson
(Director) 9,000 (1) *
All officers and directors
as a group (7 persons) 127,828 5.4%
</TABLE>
__________
* Less than one percent
(1) Includes shares of Common Stock which the named individuals and certain
executive officers have the right to acquire within 60 days upon the
exercise of stock options, as follows: Mr. Lestina, 8,000 shares; Mr.
Hazzard, 18,667 shares; Mr. Lisauskas, 50,000 shares; and Mr. Erickson,
7,000 shares; officers and directors as a group, 94,042 shares.
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(2) On January 26, 1996, Spartech Corporation entered into a Shareholder
Option Agreement with each of Allstate Insurance and Madison Allen Self,
which Agreements grant Spartech Corporation an irrevocable option for 120
days to purchase all of the shares of the Company owned by Allstate
Insurance Company and Madison Allen Self at a purchase price of $6.60 per
share.
Item 13. Certain Relationships and Related Transactions.
None.
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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 hereunto duly authorized.
PORTAGE INDUSTRIES CORPORATION
/s/ Anthony J. Lisauskas
---------------------------------
Anthony J. Lisauskas
President and Chief Executive Officer
Dated: April 5, 1996
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