Form 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ------------------------------------------------------------------------------
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarter ended September 30, 1998
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 number 333-56813
BRAND SCAFFOLD SERVICES, INC.
(Exact name of registrant as specified in its charter)
Delaware 13-3909681
(State or other jurisdiction of (I.R.S. employer identification no.)
incorporation or organization)
15450 South Outer 40, #270, Chesterfield, MO 63017
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (314) 519-1000
- ------------------------------------------------------------------------------
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 requirements for the past 90 days. Yes: [ ] No: [X]*
Indicate the number of shares outstanding of each of the Registrant's
classes of Common Stock as of the latest practicable date.
Class of Common Stock Outstanding at October 31, 1998
$.01 Par Value 100 shares
- --------
* Brand Scaffold Services, Inc. became subject to the filing requirements of
Section 15(d) on October 15, 1998.
INDEX
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations for the Three and
Nine Months Ended September 30, 1998 and 1997 2
Consolidated Balance Sheets at September 30, 1998 and
December 31, 1997 3-4
Consolidated Statements of Cash Flows for the Nine Months
Ended September 30, 1998 and 1997 5-6
Notes to Consolidated Financial Statements 7-9
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 10-14
PART II - OTHER INFORMATION
Item 6. (a) Exhibits 15
(b) Reports on Form 8-K
SIGNATURES 15
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(In thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
(unaudited) (unaudited)
--------------------- ------------------
1998 1997 1998 1997
--------- --------- -------- --------
<S> <C> <C> <C> <C>
Revenue ........................................ $ 47,127 $ 36,070 $147,782 $118,173
Operating expenses ............................. 36,384 27,794 113,038 88,535
--------- --------- -------- --------
Gross profit ................................. 10,743 8,276 34,744 29,638
Selling and administrative expenses ............ 7,599 5,539 19,868 16,868
Nonrecurring start-up expenses ................. -- 697 -- 1,936
--------- --------- -------- --------
Operating income ............................. 3,144 2,040 14,876 10,834
Interest expense ............................... 4,353 3,977 12,712 11,553
Interest income ................................ (67) (84) (171) (324)
--------- --------- -------- --------
Pretax income (loss) ......................... (1,142) (1,853) 2,335 (395)
Provision for income tax ....................... -- -- -- --
--------- --------- -------- --------
Income (loss) before extraordinary
loss ........................................ (1,142) (1,853) 2,335 (395)
Extraordinary loss on debt extinguishment,
net of tax of $0 ................................ -- -- 4,329 --
--------- --------- -------- --------
Net income (loss) ............................ (1,142) (1,853) (1,994) (395)
Less accretion of preferred stock dividends .... (1,212) (1,051) (3,511) (4,145)
========= ========= ======== ========
Net income (loss) applicable to common stock.. $ (2,354) $ (2,904) $ (5,505) $ (4,540)
========= ========= ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
</TABLE>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
ASSETS
<S>
CURRENT ASSETS: <C> <C>
Cash and cash equivalents ........................ $ 5,117 $ 2,217
Trade accounts receivable, net of allowance for
doubtful accounts: 1998, $1,005; 1997, $1,000 .. 27,225 23,672
Costs and estimated earnings in excess of billings
on uncompleted contracts ....................... 1,595 2,145
Notes receivable, current portion ................ 280 388
Note receivable from WMI, current portion ........ 2,850 2,700
Other current assets ............................. 2,771 2,374
-------- --------
Total current assets ......................... 39,838 33,496
PROPERTY AND EQUIPMENT:
Land ............................................. 1,633 1,633
Buildings ........................................ 2,176 2,097
Vehicles and other equipment ..................... 7,706 5,383
Scaffolding equipment ............................ 172,424 160,576
Leasehold improvements ........................... 837 790
-------- --------
Total property and equipment, at cost .......... 184,776 170,479
Less-Accumulated depreciation and amortization ... 24,422 14,938
-------- --------
Total property and equipment, net ............ 160,354 155,541
-------- --------
OTHER ASSETS:
Intangible assets, net ........................... 248 --
Deferred financing costs, net .................... 5,586 5,575
Note receivable from WMI, net of current portion.. -- 2,175
Notes receivable, net of current portion ......... 655 756
-------- --------
Total other assets ........................... 6,489 8,506
======== ========
TOTAL ASSETS ....................................... $206,681 $197,543
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving loan ............................................ $ -- $ 4,500
Current maturities of long-term debt ...................... 4,250 9,500
Accounts payable .......................................... 2,556 4,186
Accrued expenses -
Payroll and related accruals ............................ 5,213 3,945
Workers compensation and health benefits ................ 6,555 3,717
Other ................................................... 7,406 2,696
Billings in excess of costs and estimated earnings
on uncompleted contracts ................................ 661 745
--------- ---------
Total current liabilities ............................. 26,641 29,289
--------- ---------
LONG-TERM DEBT .............................................. 154,750 140,250
--------- ---------
DEFERRED INCOME TAXES ....................................... 1,899 2,040
--------- ---------
COMMITMENTS AND CONTINGENCIES
14.5% SENIOR EXCHANGEABLE PREFERRED STOCK ................. 34,651 31,140
--------- ---------
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, $0.01 par value, 100 shares
authorized, issued and outstanding ...................... -- --
Paid-in capital ........................................... 18,477 18,477
Receivable from sale of Holding's Common Stock ............ (336) (336)
Predecessor basis adjustment .............................. (13,038) (13,038)
Cumulative translation adjustment ......................... (1,103) (525)
Accumulated deficit ....................................... (15,260) (9,754)
--------- ---------
Total stockholder's equity (deficit) .................... (11,260) (5,176)
========= =========
Total liabilities and stockholder's equity (deficit) .... $ 206,681 $ 197,543
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30 (unaudited)
------------------------
1998 1997
---------- ----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net (loss) .......................................... $ (1,994) $ (395)
Adjustments to reconcile net (loss) to net cash
provided by operating activities -
Depreciation and amortization ..................... 10,541 9,685
Extraordinary loss ................................ 4,329 --
Changes in operating assets and liabilities -
Trade accounts receivable, net .................... (3,552) (612)
Costs and estimated earnings in excess of billings
on uncompleted contracts ........................ 551 1,152
Notes receivable .................................. 206 1,552
Scaffolding equipment ............................. 3,122 3,220
Accounts payable .................................. (1,631) 1,998
Accrued expenses .................................. 3,920 (2,669)
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................ (84) 247
Other ............................................. 326 (2,246)
-------- --------
Net cash provided by operating activities ..... 15,734 11,932
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .................. (14,333) (10,766)
Receipts on note receivable from WMI ................ 2,025 1,650
Proceeds from sales of property and equipment
other than scaffolding ............................ 17 31
Acquisitions ........................................ (400) --
-------- --------
Net cash used for investing activities ........ (12,691) (9,085)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ........................ 130,000 --
Payments of long-term debt .......................... (120,750) (6,000)
Borrowings/(payments) of revolving loan ............. (4,500) --
Debt issuance financing costs ....................... (4,893) --
-------- --------
Net cash used for financing activities .......... (143) (6,000)
-------- --------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS ......................................... 2,900 (3,153)
CASH AND CASH EQUIVALENTS, beginning of
Period .............................................. 2,217 4,881
======== ========
CASH AND CASH EQUIVALENTS, end of period .............. $ 5,117 $ 1,728
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In thousands)
<TABLE>
<CAPTION>
Nine months ended
September 30 (unaudited)
------------------------
1998 1997
---------- ----------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid ....................................... $10,721 $10,558
======= =======
NONCASH TRANSACTIONS:
Paid in-kind accretion of preferred stock dividends . $ 3,511 $ 4,145
Purchase of scaffold equipment via capital lease .... 3,800 --
======= =======
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The financial statements included herein for the periods ended September 30,
1998 and 1997 have been prepared by the Company without audit. In the opinion of
management, all adjustments have been made which are of a normal recurring
nature necessary to present fairly the Company's financial position as of
September 30, 1998 and September 30, 1997 and the results of operations for
the three and nine months ended and cash flows for the nine months then ended.
Certain information and footnote disclosures have been condensed or omitted for
these periods. The results for interim periods are not necessarily indicative
of results for the entire year.
1. Organization and Business
Brand Scaffold Services, Inc. (a Delaware corporation) and its subsidiaries
(the "Company") are 100% owned by DLJ Brand Holdings, Inc. ("Holdings").
Holdings is owned 65.5% by Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), 9.3% by
Carlisle Enterprises, L.P. ("Carlisle"), 18.6% by Waste Management Industrial
Inc. ("WIS") and 6.5% by the directors, officers and employees of the Company.
WIS is a subsidiary of Waste Management, Inc. ("WMI").
The Company believes it operates in one segment. The Company provides
scaffolding services primarily to refining, chemical, petrochemical and utility
industries, and to a lesser extent, pulp and paper plants, nuclear facilities
and general commercial clients. Scaffolding services are typically provided in
connection with periodic, routine cleaning and maintenance of refineries,
chemical plants and utilities, as well as for new construction projects. The
Company provides personnel to erect and dismantle scaffolding structures,
transport scaffolding to project sites and supervise and manage such activities.
In addition, the company rents and occasionally sells scaffolding that is
classified as property and equipment on the consolidated balance sheet. The
Company maintains a substantial inventory of scaffolding in the United States
and Canada.
2. Summary of Significant Accounting Policies
The accompanying financial statements are prepared on a consolidated basis and
include those assets, liabilities, revenues and expenses directly attributable
to the operations of the Company. All significant intercompany balances and
transactions have been eliminated.
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the reported amounts of assets and liabilities, the disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
3. Debt and Borrowing Arrangements
At September 30, 1998 and December 31, 1997 long term-debt consisted of the
following (in thousands):
September 30, December 31,
1998 1997
------------- ------------
(unaudited)
Term Loans ............................... $ 29,000 $149,750
10 1/4% Senior Notes ..................... 130,000 --
Less Current Portion ................... 4,250 9,500
======== ========
Long-Term Debt ........................... $154,750 $140,250
======== ========
In 1996, the Company entered into a Credit Agreement, which provided for Term
Loan Commitments under Senior Secured Credit facilities totaling $160 million,
and a Revolving Loan Commitment totaling $30 million. In February 1998, the
Company issued $130 million of 10 1/4% Senior Notes due February 2008. The
offering was underwritten by DLJ. The proceeds of this offering were used to
repay $120 million of the Term Loans outstanding under the Credit Agreement. In
addition, in February 1998, the Company amended the Credit Agreement to reduce
the total facility to $60 million. This amendment included revisions to certain
covenant requirements.
4. Commitments and Contingencies
In the ordinary course of conducting its business, the Company becomes involved
in various pending claims and lawsuits. These primarily relate to employee
matters. The outcome of these matters is not presently determinable, however, in
the opinion of management, based on the advice of legal counsel, the resolution
of these matters is not anticipated to have a material adverse effect on the
financial position or results of operations of the Company.
5. Comprehensive Income
For the three months ended September 30, 1998 and 1997, comprehensive income
(loss) was $(1.9) million and $(1.6) million, respectively and for the nine
months ended September 30, 1998 and 1997, comprehensive income (loss) was $(2.6)
million and $(0.5) million, respectively.
6. Accounting Standard Not Yet Implemented
In June 1998, the Financial Accounting Standards Board ("FASB") adopted SFAS
No. 133, "Accounting for Derivative Instruments and Hedging Activities". SFAS
No. 133 establishes accounting and reporting standards requiring that every
derivative instrument (including certain derivative instruments embedded in
other contracts) be recorded in the balance sheet as either an asset or
liability measured at its fair value and that changes in the derivative's fair
value be recognized currently in earnings unless specific hedge accounting
criteria are met. Special accounting for qualifying hedges allows a derivative's
gains and losses to offset related results on the hedged item in the income
statement, and requires that a company must formally document, designate, and
assess the effectiveness of transactions that receive hedge accounting. SFAS
No. 133 is effective for fiscal years beginning after June 15, 1999. The
Company has not yet quantified the impacts of adopting SFAS No. 133 on its
consolidated financial statements nor has it determined the timing or method
of its adoption of SFAS No. 133. However, SFAS No. 133 could increase
volatility in earnings and other comprehensive income.
7. Acquisitions
In September 1998, the Company acquired the operating assets of Scaffold Rental
and Erection ("SRE"). SRE is an Atlanta based company that provides scaffolding
services to industrial customers primarily in the southeastern states.
8. Subsequent Events
In October 1998, the Company acquired the operating assets of Brook Company
("Brook"). Brook is a New Orleans based specialty provider of temporary
structures and enclosures for the special events market.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATION
The matters discussed in this Form 10-Q of Brand Scaffold Services, Inc. (the
"Company") contain forward looking statements that involve a number of risks
and uncertainties. A number of factors could cause actual results, performance,
achievements of the Company, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by
such forward-looking statements. These factors include, but are not limited
to, the competitive environment in the industrial and commercial scaffolding
industry in general and in the Company's specific market areas; changes in
prevailing interest rates and the availability of and terms of financing to
fund the anticipated growth of the Company's business; inflation; changes in
costs of goods and services; economic conditions in general and in the
Company's specific market areas; demographic changes; changes in or failure
to comply with federal, state and/or local government regulations; liability
and other claims asserted against the Company; changes in operating strategy
or development plans; the ability to attract and retain qualified personnel;
the significant indebtedness of the Company; labor disturbances; changes in
the Company's acquisition and capital expenditure plans; risks associated
with the Year 2000 issue; and other factors referenced herein. The forward
looking statements contained herein reflect the Company's current beliefs and
specific assumptions with respect to future business decisions and are based
on information currently available. Accordingly, the statements are subject
to significant risks, uncertainties and contingencies, which could cause the
Company's actual operating results, performance or business prospects to
differ from those expressed in, or implied by, these statements.
The following discussion and analysis should be read in conjunction with the
attached condensed financial statements and notes thereto.
Overview
The Company is the largest North American provider of industrial scaffolding
rental, erection, dismantlement and design services. The Company provides
industrial turnkey scaffolding services which facilitate access to tall
structures for maintenance, turnarounds and capital projects, principally in the
refining, petrochemical, chemical, utility and pulp and paper industries. The
Company provides turnkey services, which include equipment rental, labor for the
erection and dismantlement of the scaffolding and scaffolding design services.
The Company also provides scaffolding services to the commercial market
(primarily nonresidential construction) and sells a small amount of scaffolding.
The Company typically provides on-going maintenance services under long-term
contracts; the duration of these contracts is usually three to five years.
Turnarounds occur every one to four years depending on the industry and the type
of turnaround being performed. Although some turnarounds may be postponed for a
period of time, they are a necessary component of maintaining industrial
facilities and are required to ensure the safe and efficient operation of such
facilities. The Company believes the necessity for on-going maintenance and
turnarounds provide a stable, recurring revenue base.
The Company's business is seasonal. End-use industries such as the refining and
utility industries experience increased demand for their products during the
summer months. Consequently, turnarounds are generally scheduled during the
first and fourth quarters of the year.
Results of Operations
Revenues - Revenues for the three months ended September 30, 1998 increased
30.7% to $47.1 million from $36.1 million for the same period in 1997. Revenues
for the nine month period ended September 30, 1998 increased 25.1% to $147.8
million from $118.2 million for the same period in 1997. Labor revenue increased
40.3% to $34.2 million for the three months ended September 30, 1998 as compared
to the same period in 1997 and 29.6% to $107.0 million for the nine month period
ended September 30, 1998 as compared to the same period in 1997. Rental revenue
increased 19.0% to $11.8 million for the third quarter of 1998 compared to the
same period in 1997 and 20.1% to $36.4 million for the nine month period ended
September 30, 1998 as compared to the same period in 1997. The increase in
revenues was primarily attributable to increased activity in the industrial
scaffolding market. Increased turnaround and capital maintenance activity as
well as unplanned utility outages in the gulf coast accounted for approximately
$17.2 million of the positive variance in the nine month period. Additionally,
in the northern part of the country, utility plant renovation and maintenance
work along with an increase in refinery turnarounds accounted for $6.9 million
of the positive variance in the nine month period.
Gross Profit - Gross profit for the three months ended September 30, 1998
increased 29.8% to $10.7 million from $8.3 million for the same period in 1997.
Gross profit for the nine month period ended September 30, increased 17.2% to
$34.7 million from $29.6 million for the same period in 1997. Labor gross profit
(labor revenue less labor cost) increased 51.8% to $5.5 million for the three
months ended September 30, 1998 as compared to the same period in 1997 and 12.5%
to $16.3 million for the nine month period ended September 30, 1998 as compared
to the same period in 1997. Gross profit as a percentage of revenue was
relatively flat for the three month period ended September 30, 1998 as compared
to the same period in 1997, decreasing to 22.8% from 22.9%. Gross profit as a
percentage of revenue for the nine month period ended September 30, 1998
decreased to 23.5% from 25.1% for the same period in 1997. This decrease is
primarily due to a higher mix of labor revenue to total revenue for the nine
month period. Labor profit margins are lower than rental and sale profit
margins. Much of the increased revenue was from industrial projects requiring
a high percentage of labor, thus causing overall profit margins to be lower.
Selling and Administrative Expenses - Selling and administrative expenses for
the three months ended September 30, 1998 increased 37.2% to $7.6 million from
$5.5 million for the same period in 1997. Selling and administrative expenses
for the nine month period ended September 30, 1998 increased 17.8% to $19.9
million from $16.9 million for the same period in 1997. Selling and
administrative expenses as a percentage of revenue for the three month period
ended September 30, 1998 increased to 16.1% from 15.4% for the same period in
1997. Selling and administrative expenses as a percentage of revenue for the
nine month period ended September 30, 1998 decreased to 13.4% from 14.3% for
the same period in 1997. For the three month period ended September 30, 1998,
the savings realized from a cost reduction program implemented in 1997 were
offset by a $1.3 million increase in bonus and commission expense.
Operating Income - As a result of the above, operating income for the three
months ended September 30, 1998 increased 54.2% to $3.1 million from $2.0
million for the same period in 1997 and increased 37.2% for the nine months
ended September 30, 1998 to $14.8 million from $10.8 million for the same
period in 1997. The operating income results from 1997 were affected by
certain non-recurring start-up expenses incurred by the Company as a result
of the Company's efforts to establish itself as a stand-alone entity.
Interest Expense - Interest expense for the three months ended September 30,
1998 increased 9.5% to $4.4 million from $4.0 million for the same period in
1997. Interest expense for the nine month period ended September 30, 1998
increased 10.0% to $12.7 million from $11.6 million for the same period in
1997. The increase in both periods is mainly due to a higher weighted
average interest rate on all outstanding debt. For the quarters ended
September 30, 1998 and 1997, the weighted average interest rate was 9.9%
and 9.1%, respectively and for the first nine months of 1998 and 1997, the
weighted average interest rate was 9.8% and 8.9%, respectively.
Extraordinary Items (net of tax) - Extraordinary items for the nine months
ended September 30, 1998 were $4.3 million compared to $0 for the nine
months ended September 30, 1997. This extraordinary charge represents the
write off of the pro rata share of deferred financing costs related to the
portion of the Term Loans repaid with proceeds from the issuance of the 10
1/4% Senior Notes in February, 1998.
Net Loss - As a result of the above, net loss for the three months ended
September 30, 1998 decreased 38.4% to $(1.1) million from $(1.9) million for
the same period in 1997 and increased 404.8% for the nine months ended
September 30, 1998 to $(2.0) million from $(0.4) million for the same
period in 1997.
Liquidity and Capital Resources
The Company has historically utilized internal cash flow from operations and
borrowings under the Bank Facility to fund its operations, capital
expenditures, and working capital requirements. As of September 30, 1998
and 1997, the Company had working capital of $13.2 million and $8.4 million,
respectively and cash of $5.1 million and $1.7 million, respectively. For the
nine months ended September 30, 1998 the Company provided cash of $2.9 million
of which $15.7 million was generated from operating activities.
One of the Company's major uses of cash is capital expenditures. The Company's
capital expenditure requirements are comprised of maintenance and expansion
expenditures. The Company's maintenance capital expenditure requirements are
generally for scaffolding planks and other items used in the business, such as
trucks. Expansion capital expenditures are for new scaffolding, are
discretionary and vary annually based on the Company's level of scaffolding
rental activity and management's growth expectations. During the nine months
ended September 30, 1998, total capital expenditures were $14.3 million of
which expansion capital expenditures accounted for $9.7 million.
The other major uses of cash were the payment of interest on long term debt and
principal on term loans. For the nine months ended September 30, 1998 interest
payments were $10.7 million and principal payments were $120.8 million. $119.8
of term loans were repaid with the $130.0 million in proceeds received from
the 10 1/4% Senior Notes issued in February, 1998.
Year 2000 Issue
The Year 2000 issue is the result of computer programs being written using two
digits rather than four to define the applicable year. Computer programs that
have date sensitive software may recognize a date using "00" as the year 1900
rather than the year 2000. This could result in a system failure or
miscalculations causing disruptions of operations, including, among other
things, a temporary inability to process transactions.
The Company recognizes the importance of the Year 2000 problem and has
completed the first phase of identifying all mission critical information
technology ("IT") and non-IT systems that are affected. These systems include
all computer workstations, telephone/PBX systems, computer operating systems
and accounting, data processing and other miscellaneous systems. Various
systems, including the core billing/rental systems, are Year 2000 compliant.
The Company expects all other systems, including key financial systems, to be
Year 2000 compliant by October 1999.
The Company is not presently aware of any Year 2000 issues encountered by its
business partners that would materially impact the Company's operations. There
can be no assurance that the Company will not experience operational
difficulties as a result of Year 2000 issues either arising out of internal
systems or caused by its business partners which may have a material adverse
effect on its business operations.
The Company estimates that the total cost for executing the Year 2000 plan
will not exceed $50,000 and estimates that the Year 2000 plan for its financial
systems will be completed by May 1999. In planning for the most likely worst
case scenario, all major elements in the Company's comprehensive program have
been addressed. The Company's current contingency plan will be to replace only
those individual financial system applications that would not be Year 2000
compliant by mid 1999. No known event, trend or uncertainty is likely to have
a material adverse impact on the Company's results of operations, liquidity or
financial condition.
The Company's Year 2000 compliance program is divided into seven major
projects as shown in the table below:
Percent
Complete as
of September
30, 1998
Year 2000 Project Time Frame
- --------------------------------------------- ------------- -------------
Review IT system infrastructure 05/98 - 07/98 100
Review non-IT systems 06/98 - 08/98 100
Upgrade non-IT systems 07/98 - 10/99 20
Upgrade PBX/phone systems 11/98 - 09/99 20
PC workstation review and upgrade 07/98 - 08/99 40
Update core business distributed systems 04/98 - 07/98 100
Update core business centralized systems 07/98 - 05/99 20
PART II - OTHER INFORMATION
ITEM 2. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit Index
27. Financial Data Schedule
(b) No reports were filed on Form 8-K during the period for which this
report is filed.
SIGNATURES
Pursuant to the requirement 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.
BRAND SCAFFOLD SERVICES, INC.
Date: November 24, 1998 /s/ John M. Monter
----------------------------------
John M. Monter
Chief Executive Officer, President
Date: November 24, 1998 /s/ Ian Alexander
----------------------------------
Ian Alexander
Chief Financial Officer,
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
This Schedule Contains Summary Financial Information Extracted From
Financial Statements as of and for the Nine Months Ended September 30,
1998
</LEGEND>
<CIK> 1062742
<NAME> BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> SEP-30-1998
<EXCHANGE-RATE> 1
<CASH> $5,117
<SECURITIES> 0
<RECEIVABLES> 32,015
<ALLOWANCES> (1,005)
<INVENTORY> 0
<CURRENT-ASSETS> 39,838
<PP&E> 184,776
<DEPRECIATION> (24,422)
<TOTAL-ASSETS> 206,681
<CURRENT-LIABILITIES> 26,641
<BONDS> 130,000
34,651
0
<COMMON> 0
<OTHER-SE> (11,260)
<TOTAL-LIABILITY-AND-EQUITY> 206,681
<SALES> 0
<TOTAL-REVENUES> $147,782
<CGS> 0
<TOTAL-COSTS> 113,038
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 191
<INTEREST-EXPENSE> 12,712
<INCOME-PRETAX> 2,335
<INCOME-TAX> 0
<INCOME-CONTINUING> 2,335
<DISCONTINUED> 0
<EXTRAORDINARY> 4,329
<CHANGES> 0
<NET-INCOME> (1,994)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
