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, 1995, 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)
(708) 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 require-
ments for the past 90 days.
YES X NO
Number of shares of Registrant's Common Stock ($1 per share par value) issued
and outstanding at May 9, 1995 - 4,290,454.
PART I
FINANCIAL INFORMATION
Item 1: Financial Statements
PORTEC, INC. CONSOLIDATED BALANCE SHEET
As of March 31, 1995; December 31, 1994; and March 31, 1994
(Thousands of Dollars)
(Unaudited)
3/31/95 12/31/94 3/31/94
CURRENT ASSETS
Cash and cash equivalents $ 3,823 $ 3,398 $ 4,509
Accounts and notes receivable, 16,307 13,224 16,955
less allowances
Inventories 18,482 17,473 10,902
Other current assets 1,243 1,466 950
Total current assets 39,855 35,561 33,316
PROPERTY, PLANT AND EQUIPMENT, AT COST
Land 220 220 295
Buildings and improvements 9,523 9,437 9,807
Machinery and equipment 19,942 19,805 17,413
29,685 29,462 27,515
Less accumulated depreciation (16,562) (16,090) (15,435)
Total property, plant and equipment 13,123 13,372 12,080
Assets Held For Sale 2,093 2,269 2,070
Goodwill 3,012 3,212 173
Other Assets and Deferred Charges 3,103 3,108 2,164
Total $ 61,186 $ 57,522 $ 49,803
CURRENT LIABILITIES
Current portion of long-term debt $ 3,889 $ 4,253 $ 1,263
Accounts payable 12,398 11,248 12,096
Other accrued liabilities 7,380 7,263 7,771
Total current liabilities 23,667 22,764 21,130
LONG-TERM DEBT 8,617 7,623 7,122
DEFERRED CREDITS
Pensions 1,997 1,997 1,696
Other deferred credits 105 179 263
Total deferred credits 2,102 2,176 1,959
STOCKHOLDERS' EQUITY
Common stock, $1 par value; authorized
10,000,000 shares; issued 4,297,176
4,283,260 and 3,870,243 shares 4,297 4,283 3,870
Additional capital 46,576 46,518 41,144
Cumulative translation adjustment (572) (455) (732)
Accumulated deficit (23,468) (25,387) (24,690)
26,833 24,959 19,592
Treasury stock, 2,722, 0 and 0
common shares at cost 33 - -
Total stockholders' equity 26,800 24,959 19,592
Total $ 61,186 $ 57,522 $ 49,803
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF INCOME AND ACCUMULATED DEFICIT
FOR THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
(THOUSANDS OF DOLLARS EXCEPT PER SHARE DATE)
(UNAUDITED)
Three Months Ended 3/31
1995 1994
Revenues
Net sales $ 26,659 $ 25,500
Other income 256 -
Total 26,915 25,500
Costs and Expenses
Cost of goods sold 18,788 17,157
Selling, general and administrative 5,712 5,908
Interest 408 121
Total 24,908 23,186
Income before income taxes 2,007 2,314
Income tax provision 88 500
Net Income 1,919 1,814
Accumulated deficit - beginning of year (25,387) (26,504)
Accumulated deficit - end of period
$ (23,468) $ (24,690)
Earnings per common share $ .42 $ .40*
Average number of shares outstanding 4,603,084 4,552,345*
*Adjusted retroactively for 10% stock dividend paid in December 1994.
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND MARCH 31, 1994
(THOUSANDS OF DOLLARS)
(UNAUDITED)
3 MONTHS ENDED 3/31
1995 1994
Cash flows from Operating Activities:
Net income $ 1,919 $ 1,814
Adjustments to reconcile net income
to net cash used by operating
activities:
Depreciation and amortization 609 511
Increase in receivables (3,083) (7,705)
Increase in inventories (1,009) (817)
Decrease in other net assets
and deferred charges 137 368
Gain on sale of assets (263) (7)
Decrease in deferred credits (74) (131)
Increase in accounts payable
and accruals 1,640 3,793
Net cash used by operating
activities (124) (2,174)
Cash flows from Investing Activities:
Proceeds from disposal of property,
plant and equipment 706 97
Capital expenditures (336) (541)
Net cash provided (used) by
investing activities 370 (444)
Cash flows from Financing Activities:
Net borrowing on revolving credit
and term loan 643 1,849
Payment on capitalized leases (14) (34)
Issuance of common stock 72 322
Purchase of Treasury Stock (405) -
Net cash provided by financing
activities 296 2,137
Effect of exchange rate change (117) (289)
Net increase (decrease) in cash
and cash equivalents 425 (770)
Cash and cash equivalents at
beginning of year 3,398 5,279
Cash and cash equivalents at
end of period $ 3,823 $ 4,509
The accompanying notes are an integral part of these financial statements.
PORTEC, INC.
NOTES TO FINANCIAL STATEMENT - MARCH 31, 1995
(THOUSANDS OF DOLLARS)
1. Inventories at March 31, 1995; December 31, 1994; and March 31, 1994 were:
3/31/95 12/31/94 3/31/94
Raw Materials and Supplies $ 5,235 $ 5,297 $ 4,035
Work-in-Process 5,539 5,058 3,497
Finished Goods 7,708 7,118 3,370
$ 18,482 $ 17,473 $ 10,902
2. Financial statements for the three months ended March 31, 1995 are subject
to audit adjustments.
3. The accompanying financial statements reflect all adjustments which were, in
the opinion of management, necessary to a fair statement of the results for
the period presented.
ITEM 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Net sales for the quarter ended March 31, 1995 were $26,659,000 compared with
$25,500,000 for the same period in 1994. The increase in net sales of 4.5
percent during the first quarter of 1995 was due to higher sales by the Company-
's Materials Handling segment. Sales of the traditional specialty belt conveyor
products and wire guidance systems were greater than prior year and the sales of
products for solid waste recycling were strong. This performance was partially
offset by a small sales decline in the Company's Construction Equipment segment
and decreases in sales of the Railroad segment. The decrease in Construction
Equipment sales was due to the disposition of the chemical processing product
line in July of 1994. Railroad sales were down due to difficult conditions in
the Canadian railroad industry and lower volume in load securement products.
Net income was $1,919,000 for the first quarter of 1995 compared with $1,814,000
for the quarter ended March 31, 1994. The increase of $105,000 in first quarter
1995 net income from the prior year's results reflected higher net sales and
other income with lower selling, general and administrative expense and income
tax expense. These were partially offset by lower gross margins and higher
interest expense. Gross margins were $18,788,000 compared with $17,157,000 for
the same period in 1994. The gross margin percentage decreased due to the lower
volume in the Construction Equipment and Railroad segments and to disruptions
caused by the transfer of production of green waste grinders and screens to the
Construction Equipment plant following the acquisition of these products in July
of 1994.
Selling, general and administrative expense decreased from $5,908,000 in the
first quarter of 1994 to $5,712,000 in the same quarter of 1995. This decrease
was due to reductions in professional fees and closed plant expense. Other
income of $256,000 reflected the sale of a property site located in Minneapolis,
Minnesota which had been included in Assets Held For Sale. Interest expense was
$408,000 compared with prior year's interest expense for the same period of
$121,000. The increase in interest expense was due to higher short and long-
term debt and higher interest rates for the quarter ended March 31, 1995. The
reduction in the income tax provision for the first quarter of 1995 was the
result of lower foreign earnings.
Current assets were $39,855,000 at March 31, 1995 compared with $35,561,000 at
December 31, 1994 and $33,316,000 as March 31, 1994. Receivables of $16,307,000
at March 31, 1995 were up $3,083,000 from December 31, 1994 due to increased
sales. Inventory increased $7,580,000 from March 31, 1994 partially as a result
of the acquisition of Count Recycling Systems and the Innovator product line in
April and July of 1994. In addition, finished goods increased due to a stocking
program at the Construction Equipment segment. Other current assets decreased
$223,000 from December 31, 1995 due to changes in prepaid insurance and in-
creased $293,000 from March 31, 1994 due mainly to the acquisition of Count
Recycling Systems and Innovator Holdings.
Fixed asset acquisitions were $336,000 during the first quarter of 1995 versus
$541,000 during the same period of last year. Assets Held For Sale decreased
$176,000 with the sale of a property site in Minneapolis, Minnesota for cash.
Goodwill increased $2,839,000, after amortization, from March 31, 1994 due to
the acquisition of Count Recycling Systems and Innovator Holdings in April and
July of 1994. Other Assets and Deferred Charges were $3,103,000 at March 31,
1995 compared with $2,164,000 at March 31, 1994 as a result of the addition of
patents related to acquisitions mentioned above.
At March 31, 1995, current liabilities were up $903,000 from December 31, 1994
and $2,537,000 from those of March 31, 1994. The increase from the year end was
due to additional purchases made to support higher sales. The change from March
31, 1994 was the result of the assumption of the current portion of long-term
debt associated with the acquisition of Innovator Holdings which was used to
finance working capital needs. The Company's long-term debt at March 31, 1995
was $8,617,000, an increase of $994,000 from December 31, 1994 and $1,495,000
from March 31, 1994. Both increases were due to working capital needs.
The increase in stockholders' equity of $1,841,000 from December 31, 1994 to
March 31, 1995 was attributable to earnings and to the exercise of stock
options. These were partially offset by an increase in cumulative translation
adjustment and to the purchase of treasury stock. The $7,208,000 increase in
stockholders' equity from March 31, 1994 to March 31, 1995 was due to earnings
during the last three quarters of 1994 and the first quarter of 1995, to the
exercise of stock options and to a decrease in cumulative translation adjust-
ment. These were partially offset by the purchase of treasury stock during the
first quarter of 1995.
The Company received new orders of $24,210,000 during the first quarter of 1995
compared with $26,125,000 for the first quarter of 1994. The 7 percent decrease
was attributable to lower orders in the Construction Equipment and Railroad
segments. The order backlog was $21,206,000 at March 31, 1995 compared with
$24,339,000 and $21,377,000 at December 31, 1994 and March 31, 1994, respective-
ly.
Liquidity
On February 12, 1993, the Company entered into a credit agreement with a bank
which was amended on April 26, 1994. The agreement provides for a term loan of
$6,000,000 and up to $12,000,000 of credit available as either cash or letters
of credit. The provisions of the agreement include minimum net worth, interest
coverage, net working capital and leverage ratio requirements and limit cash
dividend payments and additional indebtedness.
On July 15, 1994, Portec, Ltd., a wholly-owned subsidiary of the Company,
entered into an unsecured agreement with a bank for a term loan of $4,000,000.
The provisions of the loan are similar to those of the above agreement.
The Company does not have available lines of credit beyond its existing bank
agreements and is prohibited by these agreements from making other borrowings.
The Company presently has a facility for sale or lease in Troy, New York. Due
to economic conditions and other factors, the efforts to sell this property have
not been successful. A remaining property site in Minneapolis, Minnesota was
sold in April, 1995. Property in Pittsburgh, Pennsylvania has been leased on a
long-term lease with an option to buy. The proceeds from the sale and lease of
these properties are expected to improve the Company's liquidity position.
Due to the seasonal fluctuation in the Company's working capital needs and the
limitations on borrowing, the Company will need to exert careful cash controls.
However, management believes its existing line of credit and anticipated
operating results will provide the Company with sufficient funds for working
capital, capital expenditures and acquisitions to support anticipated growth.
The Company's working capital ratios were 1.7, 1.6 and 1.6 to 1 at March 31,
1995, December 31, 1994 and March 31, 1994, respectively. At March 31, 1995,
the Company had available $6,118,000 of unused credit under its loan agreement,
plus cash and cash equivalents of $3,823,000. This compared with $7,061,000 and
$7,909,000 of unused credit and $3,398,000 and $4,509,000 of cash and cash
equivalents at December 31, 1994 and March 31, 1994, respectively.
II - OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The Company held its Annual Meeting of Stockholders on April 25, 1995 ("Annual
Meeting"). There were 4,262,891 shares of the Company's common stock issued and
entitled to vote at the Annual Meeting. Proxies were solicited pursuant to
Regulation 14A and there were no solicitations in opposition to the nominees of
the Board of Directors of the Company.
At the Annual Meeting, Messrs. Albert Fried, Jr., L. L. White, Jr. and Michael
T. Yonker were elected directors for three-year terms and the votes cast were as
follows:
Total Votes For
Total Votes Which Authority To
For Election Vote Withheld
Albert Fried, Jr. 3,459,321 244,400
L. L. White, Jr. 3,458,738 244,983
Michael T. Yonker 3,459,059 244,662
Following the election, the Company's Board of Directors consisted of the
following eight named individuals:
Name Expiration of Current Term
J. Grant Beadle 1996
Arthur McSorley, Jr. 1996
Robert D. Musgjerd 1996
Frederick J. Mancheski 1997
John F. McKeon 1997
Albert Fried, Jr. 1998
L. L. White, Jr. 1998
Michael T. Yonker 1998
At the Annual Meeting, the Company's stockholders amended the 1988 PORTEC, Inc.
Employees' Stock Benefit Plan to allow all stock options and stock appreciation
rights granted under the Plan to be exercised within five years following
termination of employment or service of the optionee if such termination is due
to death, disability, or retirement in accordance with the Company's retirement
policy, or until the option expires, whichever first occurs. In addition, the
amendment authorized a one-time grant to each non-employee director of a stock
option of 7,000 shares of Common Stock of the Company and increased the annual
grant of stock options to each non-employee director to 2,000 shares of Common
Stock of the Company. The votes cast for this matter were as follows:
Total Votes Total Votes Total Votes
For Against Abstaining
3,121,402 550,471 31,848
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, 1995, the Company did not file any reports on
Form 8-K.
SIGNATURE
8
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
Date: May 11, 1995 By: /s/ Nancy A. Kindl
Nancy A. Kindl
Vice President, Treasurer, and
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.