<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 JUNE 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 65-463658
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
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 August 1, 1996, the Registrant had 998,019 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>
JUNE 30, 1996 DECEMBER 31,
(UNAUDITED) 1995
------------- -------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 1,681 $ 467
Accounts receivable, net 13,147 8,514
Inventories, net 6,483 6,175
Other 835 1,747
------------- -------------
Total current assets 22,146 16,903
Property, plant and equipment, net 23,036 23,688
Intangible assets, net 96,387 97,885
Other 689 661
------------- -------------
Total assets $ 142,258 $ 139,137
============= =============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,579 $ 3,440
Accrued liabilities 5,201 5,227
Current portion of long-term debt 364 125
------------- -------------
Total current liabilities 9,144 8,792
Long-term debt 88,494 92,015
Deferred income taxes 4,903 3,591
------------- -------------
Total liabilities 102,541 104,398
------------- -------------
Shareholders' equity:
Common stock 10 10
Additional paid-in capital 24,851 24,970
Retained earnings 14,786 9,706
Foreign currency translation adjustment 70 53
------------- -------------
Total shareholders' equity 39,717 34,739
------------- -------------
Total liabilities and shareholders' equity $ 142,258 $ 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 SIX MONTHS ENDED
JUNE 30, JUNE 30,
(UNAUDITED) (UNAUDITED)
-------------------- ---------------------------
1996 1995 1996 1995
--------- --------- ------------ -----------
(In thousands, except for per share data)
<S> <C> <C> <C> <C>
Net sales $25,728 $ 18,440 $ 47,822 $ 36,319
Cost of sales 14,745 11,785 28,330 22,681
--------- ---------- ------------ -----------
Gross profit 10,983 6,655 19,492 13,638
Selling expenses 1,162 839 2,272 1,852
General and administrative
expenses 1,718 1,051 2,839 2,283
Amortization 749 734 1,498 1,377
--------- ---------- ------------ -----------
Operating income 7,354 4,031 12,883 8,126
Other income (expenses):
Interest expense (2,460) (2,320) (4,887) (4,573)
Other income 309 - 364 -
--------- ---------- ------------ -----------
Income before provision for
income taxes 5,203 1,711 8,360 3,553
Provision for income taxes 2,027 665 3,280 1,395
--------- ---------- ------------ -----------
Net income $ 3,176 $ 1,046 $ 5,080 $ 2,158
========= ========== ============ ===========
Net income per common share $ 3.18 $ 1.05 $ 5.08 $ 2.16
========= ========== ============ ===========
Weighted average common shares
outstanding 1,000 1,000 1,000 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>
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
--------------------------------------------
1996 1995
--------------------- ---------------------
(IN THOUSANDS)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 5,080 $ 2,158
Non-cash adjustments to net income:
Depreciation 1,522 944
Amortization 1,498 1,377
Deferred income tax provision 1,312 303
Net change in other assets and liabilities (3,212) (2,335)
--------------------- ---------------------
Net cash provided by operating activities 6,200 2,447
--------------------- ---------------------
Cash flows from investing activities:
Purchases of property, plant and equipment (870) (5,433)
Payment of contingent acquisition consideration (1,000) (1,000)
Proceeds of insurance settlements 364 -
--------------------- ---------------------
Net cash used in investing activities (1,506) (6,433)
--------------------- ---------------------
Cash flows from financing activities:
Proceeds of sale lease back of equipment 1,940 -
Payments on notes payable (222) -
Purchases of common stock (198) -
Net changes in revolving credit borrowings (5,000) 4,500
--------------------- ---------------------
Net cash provided by (used in) financing
activities (3,480) 4,500
--------------------- ---------------------
Net change in cash 1,214 514
Cash and cash equivalents:
Beginning of period 467 120
--------------------- ---------------------
End of period $ 1,681 $ 634
===================== =====================
</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 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 light 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 June 30, 1996 consist of the following (in thousands):
<TABLE>
<S> <C>
Finished goods $ 3,976
Work in process 560
Raw materials and supplies 1,947
--------
$ 6,483
========
</TABLE>
3. LONG-TERM DEBT
In January 1996, the Company entered into a five year sale-lease back
agreement in the principle 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 $25.00 per share. Compensation expense of $58,000 associated
with the exercise of the options is reflected in the accompanying statement 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
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, CONTINUED
(UNAUDITED)
5. INCOME TAXES
The Company estimates that annual income taxes will be incurred, thus the
allocation of income tax to interim periods is required. The Company recorded
an income tax provision by estimating the annual effective income tax rate and
applied that rate to pretax income.
The effective income tax rate for the Company varies from the Federal
statutory tax rate due to state and foreign income taxes.
6
<PAGE> 7
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 June 30, 1996 and 1995
Net sales increased $7.3 million or 39.5% as compared to the second
quarter of 1995. The Company's newly acquired (July, 1995) subsidiary, Tri-Glas
Corporation, contributed $4.1 million of new sales in the second quarter of
1996. Sales of pickup truck bedliners and other light truck accessories
increased $3.2 million due to increased volume and increased market
penetration. The Company has continued to differentiate itself from its
competition by taking advantage of its product quality, customer service and
production techniques.
Consistent with results of the first quarter of 1996, the increase in
sales during the second quarter of 1996 resulted in higher gross profit dollars
compared to the same period last year. Gross profit as a percentage of sales
rose 6.6% compared to the second quarter of 1995 due to lower raw material
costs and increased efficiencies.
Second quarter 1996 selling, general and administrative ("SG&A") expenses
represented 11.2% of sales, compared to 10.2% of sales in 1995. SG&A expenses
increased due to the addition of Tri-Glas Corporation and compensation costs
recognized from the exercise of common stock options.
Interest expense was higher as average borrowings outstanding were higher
in 1996, due to the acquisition of Tri-Glas Corporation, offset by a lower
weighted average interest rate.
Comparison of Six Months Ended June 30, 1996 and 1995
Net sales increased $11.5 million, or 31.7% as compared to the first six
months of 1995. Tri-Glas Corporation, the Company's newly acquired (July,
1995) subsidiary, contributed $7.3 million of the increased sales. Sales of
pickup truck bedliners and other light truck accessories increased $4.2 million
due to increased volume, increased market penetration and more favorable
product mix.
Consistent with results of the first quarter of 1996, the increase in
sales during the first six months of 1996 resulted in higher gross profit
dollars compared to the same period last year. Gross profit as a percentage of
sales rose 3.2% compared to 1995 due to lower raw material costs and increased
efficiencies.
SG&A expenses represented 10.7% of sales, compared to 11.4% of sales in
the first six months of 1995. SG&A expenses as a percentage of sales decreased
primarily due to the higher sales.
Amortization was higher in the first six months of 1996 as compared to
1995 due to additional intangible assets recorded as a result of acquiring
Tri-Glas Corporation.
Interest expense was higher as average borrowings outstanding were higher
in 1996, due to the acquisition of Tri-Glas Corporation, offset by a lower
weighted average interest rate.
7
<PAGE> 8
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements for its operations are working
capital (principally accounts receivable and inventory) and capital
expenditures. The Company's capital needs have historically been provided by
internally generated cash and through utilization of Company's revolving credit
facility. Working capital at June 30, 1996 was $13.0 million compared to $12.5
and $8.1 million at March 31, 1996 and December 31, 1995, respectively. The
change in working capital was due to higher cash and accounts receivable
balances resulting from higher sales.
At June 30, 1996, the Company had approximately $88.9 million of
outstanding debt, including $80.0 million of senior notes payable, $4.9 million
under its revolving credit facility and $4.0 million in various notes payable.
The Company generated sufficient cash in the second quarter of 1996 to reduce
borrowings outstanding under its revolving credit facility by $5.0 million from
March 31, 1996.
Cash generated in operating activities totaled $6.2 million for the six
months ended June 30, 1996 compared to $2.4 million for the same period in 1995
due principally to the increase in net income. The consolidated debt-to-equity
ratio improved to 2.24:1 at June 30, 1996 versus 2.65:1 at December 31, 1995.
As of June 30, 1996, the Company had approximately $15.4 million of
availability under its revolving credit facility 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 through at least 1996. 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)
8
<PAGE> 9
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: August 6, 1996 By: /s/ Daniel E. Braun
-------------- -------------------------
Daniel E. Braun, President and Chief
Executive Officer
(Principal Executive Officer)
Date: August 6, 1996 By: /s/ Mark J. Blume
-------------- ------------------------
Mark J. Blume, Vice President - Chief
Financial Officer
(Principal Financial and Accounting
Officer)
9
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,681
<SECURITIES> 0
<RECEIVABLES> 13,348
<ALLOWANCES> 201
<INVENTORY> 6,483
<CURRENT-ASSETS> 22,146
<PP&E> 27,171
<DEPRECIATION> 4,135
<TOTAL-ASSETS> 142,258
<CURRENT-LIABILITIES> 9,144
<BONDS> 88,494
0
0
<COMMON> 10
<OTHER-SE> 39,717
<TOTAL-LIABILITY-AND-EQUITY> 142,258
<SALES> 47,822
<TOTAL-REVENUES> 47,822
<CGS> 28,330
<TOTAL-COSTS> 28,330
<OTHER-EXPENSES> 4,337
<LOSS-PROVISION> 80
<INTEREST-EXPENSE> 4,887
<INCOME-PRETAX> 8,360
<INCOME-TAX> 3,280
<INCOME-CONTINUING> 5,080
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,080
<EPS-PRIMARY> 5.08
<EPS-DILUTED> 5.08
</TABLE>
