<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 33-77728
PENDA CORPORATION
(Exact name of registrant as specified in its charter)
FLORIDA 65-0463658
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2344 WEST WISCONSIN STREET, PORTAGE, WISCONSIN 53901-0449
(Address of principal executive offices) (Zip Code)
(Registrant's telephone number, including area code)
(608) 742-5301
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 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 X No __
At November 1, 1996, the Registrant had 998,042 shares of $0.01 par value
common stock outstanding.
<PAGE> 2
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENDA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, 1996 December 31, 1995
(Unaudited)
------------------- -----------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 591 $ 467
Accounts receivable, net 10,865 8,514
Inventories, net 6,984 6,175
Other 608 1,747
--------- ---------
Total current assets 19,048 16,903
Property, plant and equipment, net 22,763 23,688
Intangible assets, net 95,637 97,895
Other 719 651
--------- ---------
Total assets $ 138,167 $ 139,137
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 2,886 $ 3,440
Accrued liabilities 2,472 5,227
Current portion of long-term debt 314 125
--------- ---------
Total current liabilities 5,672 8,792
Long-term debt 86,595 92,015
Deferred income taxes 5,159 3,591
--------- ---------
Total liabilities 97,426 104,398
--------- ---------
Shareholders' equity:
Common stock 10 10
Additional paid-in capital 24,851 24,970
Retained earnings 15,764 9,706
Foreign currency translation adjustment 116 53
--------- ---------
Total shareholders' equity 40,741 34,739
--------- ---------
Total liabilities and shareholders' equity $ 138,167 $ 139,137
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
2
<PAGE> 3
PENDA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
(Unaudited) (Unaudited)
------------------ --------------------
1996 1995 1996 1995
--------- ------- -------- --------
(In thousands, except for share and per share data)
<S> <C> <C> <C> <C>
Net sales $ 20,435 $ 20,134 $ 68,257 $ 56,453
Cost of sales 13,456 13,121 41,786 35,802
-------- -------- -------- --------
Gross profit 6,979 7,013 26,471 20,651
Selling expenses 1,006 872 3,278 2,724
General and administrative expenses 1,366 1,312 4,205 3,595
Amortization 760 644 2,258 2,021
-------- -------- -------- --------
Operating income 3,847 4,185 16,730 12,311
Other income (expenses) :
Interest expense (2,317) (2,505) (7,204) (7,078)
Other income 156 - 520 -
-------- -------- -------- --------
Income before provision for income taxes 1,686 1,680 10,046 5,233
Provision for income taxes 706 660 3,986 2,055
-------- -------- -------- --------
Net income $ 980 $ 1,020 $ 6,060 $ 3,178
======== ======== ======== ========
Net income per common share $ 0.98 $ 1.02 $ 6.07 $ 3.18
Weighted average common shares outstanding 998 1,000 999 1,000
-------- -------- -------- --------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
3
<PAGE> 4
PENDA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
(Unaudited)
-------------------
1996 1995
--------- --------
(In thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,060 $ 3,178
Non-cash adjustments to net income:
Depreciation 2,299 1,437
Amortization 2,258 2,021
Deferred income tax provision 1,568 664
Net change in other assets and liabilities (4,778) (4,552)
-------- --------
Net cash provided by operating activities 7,407 2,748
-------- --------
Cash flows from investing activities:
Purchases of property, plant and equipment (1,374) (6,182)
Payment of contingent acquisition consideration (1,000) (1,000)
Purchase of net business assets - (8,381)
Proceeds from insurance settlements 520 -
-------- --------
Net cash used in investing activities (1,854) (15,563)
-------- --------
Cash flows from financing activities:
Proceeds from sale lease back of equipment 1,940 -
Payments on notes payable (271) -
Purchase of common stock (198) (21)
Net changes in revolving credit borrowings (6,900) 13,300
-------- --------
Net cash provided by (used in) financing activities (5,429) 13,279
-------- --------
Net change in cash 124 464
Cash and cash equivalents:
Beginning of period 467 120
-------- --------
End of period $ 591 $ 584
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Penda Corporation (the "Company"), manufactures and distributes
accessories for pickup trucks, vans and other sport utility vehicles, and
sleeper cabs for heavy duty trucks. Plastic pickup truck bedliners account for
approximately 80% of the Company's sales. The Company's sales are principally
in the United States and Canada. The Company also distributes pickup truck
accessories manufactured by other companies through its original equipment
manufacturer and aftermarket distribution systems. The Company operates in one
business segment, light truck accessory products.
These financial statements have been prepared by the Company pursuant
to the rules and regulations of the Securities and Exchange Commission (the
"SEC") and, in the opinion of the Company, include all adjustments (all of
which are normal and recurring in nature) necessary to present fairly the
financial position, results of operations and cash flows of the Company for
the interim periods presented. These financial statements include the accounts
of the Company's wholly-owned subsidiaries, and all significant intercompany
transactions have been eliminated. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. These unaudited consolidated financial
statements should be read in conjunction with the annual consolidated financial
statements and notes thereto contained in the Company's Annual Report on Form
10-K for the year ended December 31, 1995 as filed with the SEC.
2. INVENTORIES
Inventories at September 30, 1996 consist of the following (in
thousands):
<TABLE>
<S> <C>
Finished goods $ 4,152
Work in process 577
Raw materials and supplies 2,255
-------
$ 6,984
=======
</TABLE>
3. LONG-TERM DEBT
In January 1996, the Company entered into a five year sale-lease back
agreement in the principal amount of $1.9 million for certain production
equipment. The Company is required to make monthly principal and interest
payments of $29,000, with a final payment of $805,000. The transaction resulted
in no gain or loss being recognized.
4. COMMON STOCK
In June 1996, pursuant to the Company's Subscription and Shareholders'
Agreement ("Shareholders' Agreement"), the Company was required to purchase
1,689 shares of common stock from two former employees at an aggregate cost of
$119,000. The common stock shares were canceled. In addition, one of the
former employees exercised options to purchase 821 shares of common stock at an
exercise price of $25.0 per share. Compensation expense of $58,000 associated
with the exercise of the options is reflected in the accompanying statements of
income. Under the Shareholders' Agreement, the Company was required to
immediately purchase the 821 shares of common stock from the former employee at
an aggregate cost of $79,000. The common stock shares were canceled.
5
<PAGE> 6
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
The following discussion should be read in conjunction with
Management's Discussion and Analysis of Financial Condition and Results of
Operations included as Item 7 of Part II of the Company's Annual Report on Form
10-K for the year ended December 31, 1995.
RESULTS OF OPERATIONS
Comparison of Quarters Ended September 30, 1995 and 1996
Net sales increased $0.3 million or 1.5% as compared to the third
quarter of 1995, primarily due to higher unit sales of bedliners, hard tonneau
covers and vantops. The Company has continued to differentiate its products
from its competition by taking advantage of its product quality, customer
service, and production techniques.
Gross profit dollars were comparable to the same period last year while
gross profit as a percentage of sales declined slightly compared to the third
quarter of 1995 due to sales mix offset by certain manufacturing efficiencies.
Third quarter 1996 selling, general and administrative ("SG&A")
expenses were 11.6% of sales, compared to 10.8% of sales in 1995. Selling
expenses were higher due to the addition of sales staff.
Interest expense was lower as average revolving credit borrowings
outstanding were lower in 1996.
Comparison of Nine Months Ended September 30, 1995 and 1996
Net sales increased $11.8 million, or 20.9% as compared to the first
nine months of 1995. Tri-Glas Corporation, acquired in July 1995, contributed
to $7.7 million of the increased sales. Sales of bedliners and other
accessories increased $4.1 million on increased unit volumes.
The increase in sales during the first nine months of the year, along
with certain manufacturing efficiencies, and lower raw material prices resulted
in higher gross profit as a percentage of sales.
SG&A expenses were 11.0% of sales, compared to 11.2% of sales in the
first nine months of 1995, due to higher sales without comparable increases in
SG&A expenses.
Amortization was higher in the first nine months of 1996 as compared to
1995 due to additional intangible assets recorded as a result of acquiring
Tri-Glas Corporation in July 1995.
Interest expense increased as average revolving credit borrowings
outstanding were higher in 1996, due to the acquisition of Tri-Glas
Corporation, partially offset by a lower weighted average interest rate.
Recent Events
The Company has been advised by Ford Motor Company that it will cease
purchasing bedliners from the Company effective February 1997. Ford accounted
for approximately 17% and 20% of the Company's net sales in 1995 and the nine
months ended September 30, 1996, respectively.
6
<PAGE> 7
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements for its operations are
working capital (principally accounts receivable and inventories) and capital
expenditures. The Company's capital needs have historically been provided by
internally generated cash and through utilization of the Company's revolving
credit facility. Working capital at September 30, 1996 was $13.4 million
compared to $8.1 million at December 31, 1995. The change in working capital
resulted from increased sales in the third quarter of 1996 versus the fourth
quarter of 1995.
At September 30, 1996, the Company had approximately $86.9 million of
outstanding debt, including $80.0 million of senior notes payable, $3.0 million
under its revolving credit facility and $3.9 million in various notes payable.
The Company generated sufficient cash flow in 1996 to reduce borrowings
outstanding under its revolving credit facility by $6.9 million from December
31, 1995.
Cash generated in operating activities totaled $7.4 million for the
nine months ended September 30, 1996 compared to $2.7 million for the same
period in 1995 due principally to the increase in net income. The Company's
consolidated debt-to-equity ratio improved to 2.13:1 at September 30, 1996
versus 2.65:1 at December 31, 1995. As of September 30, 1996, the Company had
approximately $16.5 million of availability under its revolving credit facility
which is based on eligible collateral.
Management believes that funds generated from operations and funds
available under the revolving credit facility will be sufficient to satisfy the
Company's debt service obligations, working capital requirements and
commitments for capital expenditures into 1997. To the extent available,
excess funds will be used to reduce outstanding borrowings under the revolving
credit facility.
On a longer term basis, the Company has significant future debt service
obligations. The Company's ability to satisfy these obligations and to secure
adequate capital resources in the future are dependent on its ability to
generate adequate cash flows. The Company expects that its cash flows from
operations, available borrowings and access to the capital markets will be
sufficient to fund future debt service. This will be dependent on its overall
operating performance and be subject to general business, financial and other
factors affecting the Company and the light truck industry, certain of which
are beyond the control of the Company.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
From time to time, the Company is subject to legal proceedings and
other claims arising in the ordinary course of its business. The Company
maintains insurance coverage against claims in an amount which it believes to
be adequate. The Company believes that it is not presently a party to any
litigation the outcome of which would have a material adverse effect on its
financial condition or results of operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
27 Financial Data Schedule (for SEC use only)
7
<PAGE> 8
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.
PENDA CORPORATION
Date: November 14, 1996 By: /s/ Daniel E. Braun
-----------------------------
Daniel E. Braun, President and
Chief Executive Officer
(Principal Executive Officer)
Date: November 14, 1996 By: /s/ Mark J. Blume
-----------------------------
Mark J. Blume, Vice President and
Chief Financial Officer
(Principal Financial and Accounting Officer)
8
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<CASH> 591
<SECURITIES> 0
<RECEIVABLES> 11,053
<ALLOWANCES> 188
<INVENTORY> 6,984
<CURRENT-ASSETS> 19,048
<PP&E> 27,675
<DEPRECIATION> 4,912
<TOTAL-ASSETS> 138,167
<CURRENT-LIABILITIES> 5,672
<BONDS> 86,595
0
0
<COMMON> 10
<OTHER-SE> 40,741
<TOTAL-LIABILITY-AND-EQUITY> 138,167
<SALES> 68,257
<TOTAL-REVENUES> 68,257
<CGS> 41,786
<TOTAL-COSTS> 41,786
<OTHER-EXPENSES> 6,463
<LOSS-PROVISION> 66
<INTEREST-EXPENSE> 7,204
<INCOME-PRETAX> 10,046
<INCOME-TAX> 3,986
<INCOME-CONTINUING> 6,060
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,060
<EPS-PRIMARY> 6.07
<EPS-DILUTED> 6.07
</TABLE>
