<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, 1999
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 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)
(608) 742-5301
(Registrant's telephone number, including area code)
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 June 30, 1999, the Registrant had 1,019,974.7661 shares of $0.01 par value
common stock outstanding.
<PAGE> 2
This Quarterly Report on Form 10-Q contains forward-looking statements
within the meaning of that term in Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934. Additional written or oral
forward-looking statements may be made by the Company from time to time, in
filings with the Securities Exchange Commission or otherwise. Statements
contained herein that are not historical facts are forward-looking statements
made pursuant to the safe harbor provisions referenced above.
Forward-looking statements may include, but are not limited to,
projections of revenues, income or losses, capital expenditures, plans for
future operations, financing needs or plans, compliance with financial covenants
in loan agreements, plans for liquidation or sale of assets or businesses, plans
relating to products or services of the Company, assessments of materiality,
predictions of future events, the ability to obtain additional financing, the
Company's ability to meet obligations as they become due, the impact of pending
and possible litigation, as well as assumptions relating to the foregoing. In
addition, when used in this discussion, the words "anticipates," "believes,"
"estimates," "expects," "intends," "plans" and similar expressions are intended
to identify forward-looking statements. Forward-looking statements are
inherently subject to risks and uncertainties, including, but not limited to,
the impact of leverage, dependence on major customers, reliance on sales of new
trucks, fluctuating demand for passenger cars and light trucks, ability to
develop complementary products, risks in product and technology development,
fluctuating resin prices, competition, litigation, labor disputes, capital
requirements, and other risk factors detailed in the Company's Securities and
Exchange Commission filings, some of which cannot be predicted or quantified
based on current expectations.
Consequently, future events and actual results could differ materially
from those set forth in, contemplated by, or underlying the forward-looking
statements. Statements in this Quarterly Report, particularly "Part 1 Item 2
Management's Discussion and Analysis of Financial Condition and Results of
Operations", and "Part 2, Item 1 Legal Proceedings" describe factors, among
others, that could contribute to or cause such differences.
Readers are cautioned not to place undue reliance on any
forward-looking statements contained herein, which speak only as of the date
hereof. The Company undertakes no obligation to publicly release the result of
any revisions to these forward-looking statements that may be made to reflect
events or circumstances after the date hereof or to reflect the occurrence of
unanticipated events.
2
<PAGE> 3
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PENDA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998
-------------------- ------------------
(in thousands)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 9,682 $ 6,336
Accounts receivable, net 13,210 10,667
Inventories, net 6,249 5,701
Deferred income taxes 833 833
Other 1,575 844
-------------------- ------------------
Total current assets 31,549 24,381
Property, plant and equipment
Land and improvements 735 744
Buildings and improvements 7,559 7,388
Machinery and equipment 23,222 21,278
Furniture and fixtures 660 600
Construction in progress 1,224 1,817
-------------------- ------------------
33,400 31,827
Less accumulated depreciation 13,726 11,885
-------------------- ------------------
Net property, plant and equipment 19,674 19,942
Goodwill and other intangible assets, net 93,495 94,836
-------------------- ------------------
Total assets $ 144,718 $ 139,159
==================== ==================
</TABLE>
3
<PAGE> 4
PENDA CORPORATION
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31,
(UNAUDITED) 1998
------------------- -------------------
(in thousands)
<S> <C> <C>
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable $ 3,097 $ 3,612
Accrued interest 2,797 2,841
Employee compensation 2,043 1,174
Current maturities of long-term debt 585 651
Other accrued liabilities 2,311 2,388
------------------- -------------------
Total current liabilities 10,833 10,666
Long-term debt, less current portion 79,252 78,699
Deferred income taxes 10,459 9,547
------------------- -------------------
Total liabilities 100,544 98,912
Shareholders' equity:
Common stock 10 10
Additional paid-in capital 25,140 24,990
Retained earnings 19,024 15,247
------------------- -------------------
Total shareholders' equity 44,174 40,247
------------------- -------------------
Total liabilities and shareholders' equity $ 144,718 $ 139,159
=================== ===================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
4
<PAGE> 5
PENDA CORPORATION
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30, JUNE 30,
(UNAUDITED) (UNAUDITED)
----------------------------- ----------------------------
(in thousands)
<S> <C> <C> <C> <C>
1999 1998 1999 1998
Net sales $ 24,927 $ 22,737 $ 47,362 $ 41,128
Cost of sales 13,941 13,457 26,981 25,623
----------- ----------- ----------- ------------
Gross profit 10,986 9,280 20,381 15,505
Selling expenses 2,957 2,189 5,496 3,482
General and administrative expenses 1,231 1,378 2,627 2,511
Amortization 844 773 1,735 1,547
----------- ----------- ----------- ------------
Operating income 5,954 4,940 10,523 7,965
Interest expense 2,056 2,244 4,092 4,491
Other expense, net 179 115 375 227
----------- ----------- ----------- ------------
Income before income taxes 3,719 2,581 6,056 3,247
Provision (benefit) for income taxes 1,485 992 2,279 1,177
----------- ----------- ----------- ------------
Net income $ 2,234 $ 1,589 $ 3,777 $ 2,070
----------- ----------- ----------- ------------
Earnings per share of common stock
Basic $ 2.19 $ 1.56 $ 3.70 $ 2.04
----------- ----------- ----------- ------------
Diluted $ 2.19 $ 1.56 $ 3.70 $ 2.04
----------- ----------- ----------- ------------
Weighted average common shares outstanding
Basic 1,020 1,017 1,020 1,017
----------- ----------- ----------- ------------
Diluted 1,020 1,017 1,020 1,017
=========== =========== =========== ============
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
5
<PAGE> 6
PENDA CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30,
(UNAUDITED)
------------------------------------------------
1999 1998
--------------------- --------------------
(in thousands)
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 3,777 $ 2,070
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation 1,841 1,596
Amortization 1,341 1,547
Deferred income taxes 912 471
Changes in operating assets and liabilities:
Accounts receivable (2,543) (3,621)
Inventories (548) 60
Refundable income taxes - 518
Accounts payable (515) 146
Accrued interest (44) (2)
Other 60 852
--------------------- --------------------
Net cash provided by operating activities 4,281 3,637
--------------------- --------------------
INVESTING ACTIVITIES:
Capital expenditures (1,573) (771)
--------------------- --------------------
Net cash used in investing activities (1,573) (771)
--------------------- --------------------
FINANCING ACTIVITIES:
Proceeds from (payments on) capital leases 488 (113)
Issuance of common stock 150 -
--------------------- --------------------
Net cash (used in) provided by financing activities 638 (113)
--------------------- --------------------
Net increase in cash and cash equivalents 3,346 2,753
Cash and cash equivalents at beginning of period: 6,336 4,460
===================== ====================
Cash and cash equivalents at end of period: $ 9,682 $ 7,213
===================== ====================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
6
<PAGE> 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. BASIS OF PRESENTATION
Penda Corporation (the "Company" or "Penda") is one of the world's
largest manufacturers and suppliers of pickup truck accessories serving original
equipment manufacturers ("OEMs") and the automotive aftermarket (the
"aftermarket"). The Company manufacturers thermoformed high-density polyethylene
plastic pickup truck bedliners that are designed to both enhance the vehicle's
appearance and help protect truck beds from damage, thereby extending the useful
life and increasing the resale value of the pickup truck. The Company also
manufactures fiberglass accessory products for pickup trucks, vans, and Class 8
trucks that are sold by truck dealers, specialty automotive stores, other
retailers, and OEMs. Other truck accessories including bed mats, tailgate
liners, cargo tie-downs, toolboxes, and cargo liners designed for sport utility
vehicles and other light trucks are also distributed through the Company's OEM
and aftermarket distribution systems
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, 1998 as filed with the SEC.
2. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
---------------- ----------------
<S> <C> <C>
Finished goods $ 2,885 $ 3,031
Work in process 812 680
Raw materials and supplies 2,874 2,245
Less allowance for inventory obsolescence (322) (255)
---------------- ----------------
$ 6,249 $ 5,701
================= =================
</TABLE>
3. COMPREHENSIVE INCOME
The components of comprehensive income, net of related tax, are as
follows:
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30, 1999 June 30, 1998
---------------- ----------------
<S> <C> <C>
Net Income $ 3,777 $ 2,070
Foreign currency translation adjustments - (60)
================ ================
Comprehensive income $ 3,777 $ 2,010
================ ================
</TABLE>
7
<PAGE> 8
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, 1998.
RESULTS OF OPERATIONS
Comparison of Three Months Ended June 30, 1999 and 1998
NET SALES: Net sales increased $2.2 million, or 9.6%, from $22.7
million in the second quarter of 1998 to $24.9 million in the second quarter of
1999. This increase is due to improved aftermarket sales and increased sales
activity with General Motors and Toyota.
COST OF GOODS SOLD AND GROSS PROFIT: Cost of sales increased $0.5
million, or 3.6% from $13.4 million in the second quarter of 1998 to $13.9
million in the second quarter of 1999. This increase is due to higher volume
offset by favorable cost reductions and improved distribution efficiency through
full truckload volumes. Gross profit increased $1.7 million, or 18.4% from $9.3
million in the second quarter of 1998 to $11.0 million in the second quarter of
1999. Gross profit margins increased from 40.8% in the second quarter of 1998 to
44.1% the second quarter of 1999. This improvement was due to the Company's
continued cost reduction efforts and improved plant utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses increased $0.6 million, or 17.4% from $3.6 million in
the second quarter of 1998 to $4.2 million in the second quarter of 1999. As a
percentage of sales, selling, general and administrative expenses increased from
15.7% in the second quarter of 1998 to 16.8% in the second quarter of 1999. This
increased expense is due to a new co-branding advertising campaign with the
NASCAR trademark through print, radio and television, which resulted in record
setting sales in the second quarter of 1999.
OPERATING INCOME: As a result, operating income increased $1.0 million
or 20.5% from $5.0 million in the second quarter of 1998 to $6.0 million in the
second quarter of 1999.
INTEREST EXPENSE: Interest expense decreased $0.2 million or 8.4% from
$2.3 million in the second quarter of 1998 to $2.1 million in the second quarter
of 1999 due to senior note repurchases in 1998.
Comparison of Six Months Ended June 30, 1999 and 1998
NET SALES: Net sales increased $6.2 million, or 15.2%, from $41.2
million in the first six months of 1998 to $47.4 million in the first six months
of 1999. This increase is due to improved aftermarket sales and increased sales
activity with General Motors and Toyota.
COST OF GOODS SOLD AND GROSS PROFIT: Cost of sales increased $1.4
million, or 5.3% from $25.6 million in the first six months of 1998 to $27.0
million in the first six months of 1999. This increase is due to higher volume
offset by favorable cost reductions and improved distribution efficiency through
full truckload volumes. Gross profit increased $4.9 million, or 31.4% from $15.5
million in the first six months of 1998 to $20.4 million in the first six months
of 1999. Gross profit margins increased from 37.7% in the first six months of
1998 to 43.0% the first six months of 1999. This improvement is due to the
Company's continued cost reduction efforts and improved plant utilization.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES: Selling, general and
administrative expenses increased $2.1 million, or 35.5% from $6.0 million in
the first six months of 1998 to $8.1 million in the first six months of 1999. As
a percentage of sales, selling, general and administrative expenses increased
from
8
<PAGE> 9
14.6% in the first six months of 1998 to 17.2% in the first six months of 1999.
This increased expense is due to a new co-branding advertising campaign with the
NASCAR trademark through print, radio and television, which resulted in record
setting sales in the second quarter of 1999.
OPERATING INCOME: As a result, operating income increased $2.6 million
or 32.1% from $7.9 million in the first six months of 1998 to $10.5 million in
the first six months of 1999.
INTEREST EXPENSE: Interest expense decreased $0.4 million or 8.9% from
$4.5 million in the first six months of 1998 to $4.1 million in the first six
months of 1999 due to senior note repurchases in 1998.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary capital requirements for its operations are
working capital (principally inventory and accounts receivable) and capital
expenditures. In addition, the Company has annual note payments of $400,000 and
semi-annual interest (only) payments due on its unsecured 10.75% Senior Notes
due in 2004 ("Notes") and, if used, quarterly payments due on its revolving
Credit Facility. The Company's working capital at June 30, 1999 was $12.5
million compared to $18.5 million at December 31, 1998.
The Company's consolidated debt-to-equity ratio decreased to 1.81:1 at
June 30, 1999 from 1.97: 1 at December 31, 1998. At June 30, 1999, the Company
had approximately $79.8 million of outstanding debt, including $76.8 million of
senior notes payable, $1.2 million in various notes payable, and $1.8 million in
capital lease obligations. As of June 30, 1999, the Company had no outstanding
borrowings and $12.5 million of borrowing ability available under the Credit
Facility.
Management believes that funds generated from operations and funds
available under the Credit Facility will be sufficient to satisfy the Company's
debt service obligations, working capital requirements and commitments for
capital expenditures through at least 1999, but that any significant
acquisitions by the Company would generally require additional financing. There
can be no assurance that such acquisition financing will be available to the
Company on satisfactory terms.
YEAR 2000 COMPLIANCE
The Company continues to implement the remediation and acceptance
testing phases of its Year 2000 program described in the Company's annual report
on Form 10-K for the year ended December 31, 1998, which is incorporated herein
by reference. The Company as of the end of the second quarter is 93% compliant
in remediation and acceptance testing.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risks, which include changes in U.S.
interest rates and commodity prices. The Company does not engage in financial
transactions for trading or speculative purposes.
9
<PAGE> 10
INTEREST RATE RISK. The interest payable on the Company's Credit
Facility is affected by changes in market interest rates. As of June 30, 1999,
the Company had no outstanding debt under the Credit Facility. Based on
borrowings through June 30, 1999, a 10% increase or decrease in the average cost
of the Company's Credit Facility debt would not be material. In addition, the
Company has fixed income investments consisting of cash equivalents and
short-term investments in marketable debt securities, which are also affected by
changes in market interest rates. The Company does not use derivative financial
instruments in its investment portfolio.
COMMODITY PRICES. The Company is exposed to fluctuation in market
prices for plastic and electricity related to its manufacturing operations. The
Company manages its exposure to changes in those prices primarily through the
terms of its supply and procurement contracts. This exposure is material to 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 such
ordinary course litigation the outcome of which would have a material adverse
effect on its financial condition or results of operations. Set forth below is
an update of material developments in certain non-ordinary course litigation
more fully described in the Company's Annual Report on Form 10-K for the year
ended December 31, 1998, and Quarterly Report on Form 10-Q for fiscal quarter
ended March 31, 1999.
CLASS ACTION LAWSUITS
The Company, along with various other manufacturers of pickup truck
bedliners, is a defendant in certain class action lawsuits. The plaintiffs in
these lawsuits allege that the bedliners prevent the discharge of static
electricity which can accumulate during the filling of portable fuel containers
creating the potential for fire or explosion and that they did not receive any
warning of this danger. The Company has placed warning labels on its bedliners
since 1996. On July 20, 1999, the Circuit Court for Champaign County, Illinois
granted preliminary approval of a settlement in which the Company and the other
defendants would fund a public education campaign, use uniform warning label,
and pay the plaintiffs' attorneys' fees. The Company has established reserves on
its financial statements for its portion of the settlement. A hearing on final
court approval is set for October 15, 1999. In the event the settlement is not
approved by the court, the Company intends to vigorously defend these lawsuits.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
On April 30, 1999, the Company sold an aggregate of 3,350.4982 shares
of common stock to Mr. Samuel Mostkoff, Vice President and General Counsel, for
$150,000 in cash and a Promissory Note in the principal sum of $50,000 at an
interest rate of 8% per annum with a maturity date of April 30, 2004 and secured
by a pledge of stock. This stock sale was exempt from registration under Section
4(2) of the Securities Act of 1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not Applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS
Not Applicable
10
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ITEM 5. OTHER INFORMATION
Not Applicable
11
<PAGE> 12
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits - See below
Exhibit Description
10.1 Amendment to Lease Schedule #48500-03 between Firstar Leasing Services
Corporation dated July 6, 1999
27.1 Financial Data Schedule (for SEC use only)
12
<PAGE> 13
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: July 30, 1999 By: /s/ Jack L. Thompson
----------------------------------------
Jack L. Thompson
President and Chief Executive Officer
(Principal Executive Officer)
Date: July 30, 1999 By: /s/ Leo. E. Waner
----------------------------------------
Leo E. Waner
Vice President - Chief Financial Officer
(Principal Financial and Accounting Officer)
13
<PAGE> 1
EXHIBIT 10.1
LEASE SCHEDULE #48500-03
TO MASTER LEASE AGREEMENT (MLA)
BY AND BETWEEN FIRSTAR LEASING SERVICES CORPORATION ("LESSEE")
AND THE UNDERSIGNED LESSEE ("LESSEE")
A. LEASE TYPE: NONTAX OPERATING LEASE
B. EQUIPMENT LEASED: Lessee unconditionally accepts all of the Equipment in
the attached description.
C. TOTAL EQUIPMENT COST: $535,465.00
D. TERM: The term of this Schedule commences on July 5, 1999, ("
Commencement Date") and expires on July 5, 2004 ("Initial Term"). Unless
sooner terminated as set forth in the MLA and at Lessor's option, this
Schedule shall be renewable as provided in Section G below in its
entirety.
E. BASE RENT: As rent for the Equipment described in this Schedule, Lessee
shall pay Lessor the sum of $7,976.65 ("Rent") per month in advance from
the Commencement Date. The first Rent payment shall be due on July 5,
1999, and the remaining Rent payments shall be due on the same day of
every month thereafter during the Initial Term of this Schedule (and any
Renewal Term).
F. LOCATION: The Equipment shall be located at 2344 W. Wisconsin Street,
Portage, Wisconsin, in the County of Columbia, and shall not be removed
therefrom without the prior written consent of Lessor. In the case of
Equipment constituting motor vehicles, the Equipment shall be titled and
domiciled in the State of Wisconsin, and shall not be retitled or
domiciled in any other State without the written consent of Lessor.
G. LEASE PURCHASE, RENEWAL AND RESALE PROVISIONS.
(1) FIrst Purchase Option
On the last date of the Initial Term of the Schedule, Lessee may
purchase for cash all (and only all) of the Equipment then covered by
the Schedule for a price equal to 40% percent of Original Equipment
Cost (as defined below) upon thirty (30) days prior written notice to
Lessor.
(2) First Resale Option
If Lessee elects not to purchase the Equipment pursuant to subsection
(a) above, Lessee has the option to sell the Equipment on terms
approved by Lessor in writing, unless Lessor, at Lessor's sole
discretion, elects to sell the Equipment. In no event shall Lessee
sell the Equipment for less than 40 percent of Original Equipment
Cost (exclusive of any sales tax and expenses of sale) without
Lessor's prior written consent, and in any event, Lessee shall only
sell the Equipment upon ten (10) business days prior written notice
to Lessor. The Net Sale Proceeds (as defined below) shall be promptly
paid to Lessor; provided that (1) if the Net Sale Proceeds exceed 40
percent of Original Equipment Cost, such excess shall be paid to
Lessee (after satisfaction of Lessee's obligations relating to the
Schedule); and (2) if the Net Sale Proceeds are less than 40 percent
of Original Equipment Cost, Lessee shall immediately pay to Lessor in
good funds the difference thereof up to a maximum of 12.3 percent of
Original Equipment Cost.
14
<PAGE> 2
(3) Renewal
If Lessee does not elect to exercise the purchase or sale options
described in subsections (a) or (b) above, then the Schedule will be
automatically renewed for a period of twelve (12) months ("First
Renewal Term") at a rental payment equal to the Fair Market Value
Rental Value of Original Equipment Cost payable monthly in advance.
In all other respects, the Schedule shall remain unchanged and in
full force and effect.
(4) ADDITIONAL TERMS AND CONDITIONS
(a) As used in this Section G: "Original Equipment Cost" shall mean
the amount paid for the Equipment by Lessor, including any
sales taxes, installation costs, delivery charges and any other
costs or expenses paid by Lessor to acquire the Equipment and
provide same to Lessee under the MLA (which for the purposes of
this Schedule is $535,465.00), and "Net Sale Proceeds" shall
mean the gross amount received from the disposition of the
Equipment (excluding any sales taxes paid), less all costs paid
by Lessor or Lessee to deinstall, store, deliver, reinstall,
test and recertify the Equipment, as well as any appraisal or
remarketing fees and expenses paid by Lessor to a third party
as to the Equipment, plus any attorneys' fees incurred by
Lessor.
(b) Lessee shall pay all taxes, fees, costs, expenses and other
charges of any kind incurred by Lessor pertaining to the
purchase or resale of the Equipment. Any sale of the Equipment
shall be on an "AS IS" AND "WHERE IS" BASIS WITH NO WARRANTIES
(EXPRESS OR IMPLIED) AS TO ANY MATTER WHATSOEVER (INCLUDING
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE), EXCEPT
THAT NO SECURITY INTEREST, LIEN OR ENCUMBRANCE AGAINST SUCH
EQUIPMENT HAS BEEN CREATED BY OR THROUGH LESSOR.
(c) Lessee's ability to renew the Schedule and exercise the
purchase option described above are conditioned upon no event
of default having occurred under the MLA prior to Lessee's
payment of the amount necessary to renew the Schedule or to
purchase the Equipment described therein.
(d) For purposes of federal and state income taxation, Lessee shall
be deemed the "owner" of the Equipment and entitled to any tax
benefits associated therewith.
H. INSURANCE/STIPULATED LOSS VALUE: Lessor will provide Lessee with its
insurance requirements regarding the Equipment separately. The Stipulated
Loss Values during the Initial Term (and any Renewal Term) of this
Schedule for each unit of Equipment lost, stolen, destroyed or damaged
beyond repair ("Stipulated Loss Values") are set forth in Attachment A
hereto.
I. INCORPORATION BY REFERENCE/ORAL MODIFICATIONS: The Master Lease Agreement
(MLA) executed by Lessee is incorporated herein in its entirety, and
Lessee hereby reaffirms all of the representations and warranties
contained in said MLA. This Schedule constitutes a separate and
independent lease of property from any other Lease Schedule. If any
provisions of this Schedule conflict with any provisions of the MLA, the
provisions of this Schedule shall prevail. The parties agree this
Schedule constitutes a security agreement under Article 9 of the Uniform
Commercial Code, and Lessee grants to Lessor a security interest in the
Equipment. LESSEE AGREES THAT THE MLA AND THIS SCHEDULE MAY ONLY BE
MODIFIED, RESCINDED OR TERMINATED UPON THE PRIOR WRITTEN CONSENT OF
LESSOR AND LESSEE.
15
<PAGE> 3
LESSEE: PENDA CORPORATION
By: /s/__________________________
---------------------------
(PRINT OR TYPE NAME AND TITLE)
Accepted at St. Louis Park, Minnesota, this ____ day of ______________, 19_____.
LESSOR: FIRSTAR LEASING SERVICES CORPORATION
By: /s/__________________________________
-----------------------------------
16
<PAGE> 4
EQUIPMENT DESCRIPTION
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Place of Installation
or Domicile
Quantity Equipment Original Cost
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
One (1) New Model R-224-E Thermoformer (S/N: $535,465.00 Penda Corporation
13878) 2344 W. Wisconsin
Portage, WI 53901
- -------------------------------------------------------------------------------------------------------
Total Cost: $535,465.00
- -------------------------------------------------------------------------------------------------------
</TABLE>
17
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 9,682
<SECURITIES> 0
<RECEIVABLES> 13,709
<ALLOWANCES> 499
<INVENTORY> 6,249
<CURRENT-ASSETS> 31,549
<PP&E> 33,400
<DEPRECIATION> 13,726
<TOTAL-ASSETS> 144,718
<CURRENT-LIABILITIES> 10,833
<BONDS> 79,838
0
0
<COMMON> 10
<OTHER-SE> 44,164
<TOTAL-LIABILITY-AND-EQUITY> 144,718
<SALES> 47,362
<TOTAL-REVENUES> 47,362
<CGS> 26,981
<TOTAL-COSTS> 26,981
<OTHER-EXPENSES> 10,233
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,092
<INCOME-PRETAX> 6,056
<INCOME-TAX> 2,279
<INCOME-CONTINUING> 3,777
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,777
<EPS-BASIC> 3.70
<EPS-DILUTED> 3.70
</TABLE>
