<PAGE> 1
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 June 30, 1999
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
incorporation or organization) identification no.)
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: [X] No: [ ]
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 July 31, 1999
$.01 Par Value 100 shares
<PAGE> 2
PAGE 1
INDEX
<TABLE>
<CAPTION>
Page
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statements of Operations for the Three and Six Months
Ended June 30, 1999 and 1998 2
Consolidated Balance Sheets at June 30, 1999 and December 31, 1998
3-4
Consolidated Statements of Cash Flows for the Six Months Ended June
30, 1999 and 1998 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
</TABLE>
<PAGE> 3
PAGE 2
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 Six Months Ended
June 30 June 30
(unaudited) (unaudited)
------------------------------------------------------------------
1999 1998 1999 1998
------------------------------------------------------------------
<S> <C> <C> <C> <C>
Revenue ........................................ $ 53,936 $ 49,965 $ 113,063 $ 100,655
Operating expenses ............................. 41,937 37,841 87,767 76,655
------------------------------------------------------------------
Gross profit ................................. 11,999 12,124 25,296 24,000
Selling and administrative expenses ............ 8,081 6,283 16,016 12,269
------------------------------------------------------------------
Operating income ............................. 3,918 5,841 9,280 11,731
Interest expense ............................... 4,574 4,364 9,053 8,359
Interest income ................................ (3) (41) (40) (104)
------------------------------------------------------------------
Pretax income (loss) ......................... (653) 1,518 267 3,476
Provision for income tax ....................... -- -- -- --
------------------------------------------------------------------
Income (loss) before extraordinary loss ...... (653) 1,518 267 3,476
Extraordinary loss on debt extinguishment, net
of tax of $0 ................................. -- -- -- 4,329
------------------------------------------------------------------
Net income (loss) ............................ (653) 1,518 267 (853)
Less accretion of preferred stock dividends .... (1,349) (1,172) (2,651) (2,300)
------------------------------------------------------------------
Net income (loss) applicable to common stock . $ (2,002) $ 346 $ (2,384) $ (3,153)
==================================================================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 4
PAGE 3
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(unaudited) 1998
-----------------------------
<S> <C> <C>
ASSETS
CURRENT ASSETS:
Cash and cash equivalents ........................ $ 978 $ 3,125
Trade accounts receivable, net of allowance for
doubtful accounts: 1999, $734; 1998, $812 ...... 30,164 31,485
Costs and estimated earnings in excess of billings
on uncompleted contracts ....................... 1,292 2,056
Notes receivable, current portion ................ 192 132
Note receivable from WMI, current portion ........ 725 2,175
Other current assets ............................. 2,400 3,192
-----------------------------
Total current assets ......................... 35,751 42,165
PROPERTY AND EQUIPMENT:
Land ............................................. 1,644 1,633
Buildings ........................................ 2,717 2,284
Vehicles and other equipment ..................... 16,174 11,281
Scaffolding equipment ............................ 181,397 172,970
Leasehold improvements ........................... 632 853
-----------------------------
Total property and equipment, at cost .......... 202,564 189,021
Less-Accumulated depreciation and amortization ... 36,640 27,421
-----------------------------
Total property and equipment, net ............ 165,924 161,600
-----------------------------
OTHER ASSETS:
Intangible assets, net ........................... 1,097 1,186
Deferred financing costs, net .................... 5,149 5,350
Notes receivable, net of current portion ......... 599 759
-----------------------------
Total other assets ........................... 6,845 7,295
-----------------------------
TOTAL ASSETS ....................................... $ 208,520 $ 211,060
=============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 5
PAGE 4
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(unaudited) 1998
-------------------------------
<S> <C> <C>
LIABILITIES AND STOCKHOLDER'S
EQUITY (DEFICIT)
CURRENT LIABILITIES:
Revolving loan ....................................... $ 1,005 $ --
Current maturities of long-term debt ................. 5,500 5,000
Accounts payable ..................................... 2,437 4,026
Accrued expenses -
Payroll and related accruals ....................... 4,509 6,419
Workers compensation and health benefits ........... 8,476 6,304
Other .............................................. 7,145 7,536
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................... 853 800
----------------------------
Total current liabilities ........................ 29,925 30,085
----------------------------
LONG-TERM DEBT ......................................... 150,500 153,500
----------------------------
NOTES PAYABLE AND CAPITAL LEASE
OBLIGATION ............................................. 3,755 4,176
----------------------------
DEFERRED INCOME TAXES .................................. 1,990 1,875
----------------------------
COMMITMENTS AND CONTINGENCIES
14.5% SENIOR EXCHANGEABLE
PREFERRED STOCK .................................... 38,558 35,907
----------------------------
STOCKHOLDER'S EQUITY (DEFICIT):
Common stock, $0.01 par value, 100 shares
authorized, issued and outstanding ................. -- --
Paid-in capital ...................................... 18,520 18,525
Receivable from sale of Holding's Common Stock ....... (336) (336)
Predecessor basis adjustment ......................... (13,038) (13,038)
Cumulative translation adjustment .................... (704) (1,368)
Accumulated deficit .................................. (20,650) (18,266)
----------------------------
Total stockholder's equity (deficit) ............... (16,208) (14,483)
----------------------------
Total liabilities and stockholder's equity (deficit) $ 208,520 $ 211,060
============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 6
PAGE 5
BAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
<TABLE>
<CAPTION>
Six months ended
June 30 (unaudited)
----------------------------
1999 1998
----------------------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) ................................... $ 267 $ (853)
Adjustments to reconcile net income (loss) to net
Cash provided by operating activities -
Depreciation and amortization ..................... 10,037 6,788
Extraordinary loss ................................ -- 4,329
Gain on sale of fixed assets other than scaffolding (36) --
Changes in operating assets and liabilities -
Trade accounts receivable, net .................... 1,362 (5,114)
Costs and estimated earnings in excess of billings
on uncompleted contracts ........................ 775 98
Notes receivable .................................. 100 137
Scaffolding equipment ............................. 1,632 2,167
Accounts payable .................................. (1,587) (249)
Accrued expenses .................................. (15) 6,836
Billings in excess of costs and estimated earnings
on uncompleted contracts ........................ 50 (80)
Other ............................................. 648 (2,105)
----------------------------
Net cash provided by operating activities ..... 13,233 11,950
----------------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of property and equipment .................. (14,079) (9,868)
Payments for acquisitions ........................... (875) --
Receipts on note receivable from WMI ................ 1,450 1,350
Redemption of Parent Company Stock .................. (5) --
Proceeds from sales of property and equipment
other than scaffolding ............................ 45 4
----------------------------
Net cash used for investing activities ........ (13,464) (8,514)
----------------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from long-term debt ........................ -- 130,000
Payments of long-term debt .......................... (2,500) (120,250)
Borrowings/(payments) of revolving loan ............. 1,005 (4,500)
Debt issuance financing costs ....................... -- (4,799)
Payments on capital lease obligation ................ (421) --
----------------------------
Net cash (used for) provided by financing
activities ...................................... (1,916) 451
----------------------------
INCREASE/(DECREASE) IN CASH AND CASH
EQUIVALENTS ......................................... (2,147) 3,887
CASH AND CASH EQUIVALENTS, beginning of
period ................................................ 3,125 2,217
----------------------------
CASH AND CASH EQUIVALENTS, end of period .............. $ 978 $ 6,104
============================
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 7
PAGE 6
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(In thousands)
<TABLE>
<CAPTION>
Six months ended
June 30 (unaudited)
---------------------
1999 1998
---------------------
<S> <C> <C>
SUPPLEMENTAL CASH FLOW DISCLOSURES:
Interest paid ....................................... $8,505 $3,786
=====================
NONCASH TRANSACTIONS:
Paid in-kind accretion of preferred stock dividends . $2,651 $2,300
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE> 8
PAGE 7
BRAND SCAFFOLD SERVICES, INC. AND SUBSIDIARIES
Notes to the Consolidated Financial Statements
The financial statements included herein for the periods ended June 30, 1999 and
1998 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 June
30, 1999 and the results of operations and cash flows for the three and six
month periods ended June 30, 1999 and 1998. 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 64.7% by Donaldson, Lufkin & Jenrette, Inc. ("DLJ"), 9.2% by Carlisle
Enterprises, L.P. ("Carlisle"), 18.4% by Waste Management Industrial Inc.
("WIS") and 7.7% 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.
<PAGE> 9
PAGE 8
3. Debt and Borrowing Arrangements
At June 30, 1999 and December 31, 1998 long term-debt consisted of the following
(in thousands):
<TABLE>
<CAPTION>
June 30,
1999 December 31,
(unaudited) 1998
-------------------------
<S> <C> <C>
Revolving Loans.............. $ 1,005 --
Term Loans................... 26,000 28,500
10 1/4% Senior Notes......... 130,000 130,000
Less Current Portion....... 6,505 5,000
-------------------------
Long-Term Debt............... $ 150,500 $ 153,500
=========================
</TABLE>
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 June 30, 1999 and 1998, comprehensive income (loss)
was $(.3) million and $1.2 million, respectively and for the six months ended
June 30, 1999 and 1998, comprehensive income (loss) was $.9 million and $(1.0)
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,
<PAGE> 10
PAGE 9
2000. 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. Acquisition
In April 1999, the Company acquired the operating assets of Philip Scaffold
Corporation ("Philip"). Philip is a Denver based company that provides
scaffolding services to industrial customers primarily in the rocky mountain
region of the U.S.
<PAGE> 11
PAGE 10
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
<PAGE> 12
PAGE 11
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 June 30, 1999 increased 7.9% to
$53.9 million from $50.0 million for the same period in 1998. Revenues for the
six month period ended June 30, 1999 increased 12.3% to $113.1 million from
$100.7 million for the same period in 1998. Labor revenue increased 11.4% to
$39.7 million for the three months ended June 30, 1999 as compared to the same
period in 1998 and 15.0% to $83.7 million for the six month period ended June
30, 1999 as compared to the same period in 1998. Rental revenue increased 4.2%
to $13.0 million for the second quarter of 1999 compared to the same period in
1998 and 8.4% to $26.6 million for the six month period ended June 30, 1999 as
compared to the same period in 1998. The increase in revenues was primarily
attributable to the acquisitions made in 1998 and 1999 and the strong revenue
growth in the southeast portion of the country.
Gross Profit - Gross profit for the three months ended June 30, 1999 decreased
1.0% to $12.0 million from $12.1 million for the same period in 1998. Gross
profit for the six month period ended June 30, increased 5.4% to $25.3 million
from $24.0 million for the same period in 1998. Labor gross profit (labor
revenue less labor cost) increased 38.6% to $7.4 million for the three months
ended June 30, 1999 as compared to the same period in 1998 and 34.7% to $14.5
million for the six month period ended June 30, 1999 as compared to the same
period in 1998. Gross profit as a percentage of revenue decreased for the three
month period ended June 30, 1999 as compared to the same period in 1998,
decreasing to 22.2% from 24.3%. Gross profit as a percentage of revenue for the
six month period ended June 30, 1999 decreased to 22.4% from 23.8% for the same
period in 1998. This decrease is due to several factors, the first is a 1.7%
higher mix of labor revenue to total revenue for the six month period. Labor
profit margins are lower than rental and sale profit margins. The increased
percentage of labor revenue is therefore causing overall profit margins to be
lower. The other significant factor is the increase in depreciation expense of
operating assets, for the six month period ending June 30, 1999, depreciation
expense for operating assets increased $3.2 million as compared to the same
period in 1998. The increased expense is due primarily to the change in the
estimated useful life of scaffolding planks from 7 to 2 years in July of 1998.
This decrease in the useful life caused an increase of $2.6 million in
depreciation expense.
Selling and Administrative Expenses - Selling and administrative expenses for
the three months ended June 30, 1999 increased 28.6% to $8.1 million from $6.3
million for the same period in 1998. Selling and administrative expenses for the
six month period ended June 30, 1999 increased 30.5% to $16.0 million from $12.3
million for the same period in 1998. Selling and administrative expenses as a
percentage of revenue for the three month period ended June 30, 1999 increased
to 15.0% from 12.6% for the same period in 1998. Selling and administrative
<PAGE> 13
PAGE 12
expenses as a percentage of revenue for the six month period ended June 30, 1999
increased to 14.2% from 12.2% for the same period in 1998. This increase in
expense was primarily attributable to increased salaries, related payroll taxes
and benefits. There are also several other factors attributing to this increase
including, higher telecommunications expense, an increase in the bonus accrual
and the divisions acquired in late 1998 and early 1999 have a higher selling and
administrative cost structure than existing divisions.
Operating Income - As a result of the above, operating income for the three
months ended June 30, 1999 decreased 32.9% to $3.9 million from $5.8 million for
the same period in 1998 and decreased 20.9% for the six months ended June 30,
1999 to $9.3 million from $11.7 million for the same period in 1998.
Interest Expense - Interest expense for the three months ended June 30, 1999
increased 6.3% to $4.6 million from $4.3 million for the same period in 1998.
Interest expense for the six month period ended June 30, 1999 increased 8.3% to
$9.1 million from $8.4 million for the same period in 1998. The increase is due
to a higher weighted average interest rate on all outstanding debt for the six
month period and a higher average outstanding debt balance. For the quarters
ended June 30, 1999 and 1998, the weighted average interest rate was 9.86% and
9.94%, respectively and for the first six months of 1999 and 1998, the weighted
average interest rate was 9.82% and 9.69%, respectively.
Extraordinary Items (net of tax) - Extraordinary items for the six month period
ended June 30, 1999 and 1998 were $0 and $4.3 million respectively. 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 the
proceeds from the issuance of the 10 1/4% Senior notes in February, 1998.
Net Income (Loss) - Net income (loss) for the three months ended June 30, 1999
and 1998 was $(.7) million and $1.6 million respectively, and increased to $.3
million from $(.9) for the six month period ended June 30, 1999 and 1998. The
net loss in 1998 is attributable to the extraordinary charge discussed above.
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 June 30, 1999 and 1998, the Company had
working capital of $5.8 million and $18.8 million, respectively and cash of $1.0
million and $3.1 million, respectively. For the six months ended June 30, 1999
and 1998 the Company provided cash of $13.4 million and $11.6 million 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
<PAGE> 14
PAGE 13
of scaffolding rental activity and management's growth expectations. During the
six months ended June 30, 1999, total capital expenditures were $14.1 million of
which expansion capital expenditures accounted for $8.2 million.
The other major uses of cash were the payment of interest on long term debt and
principal on term loans. For the six months ended June 30, 1999 interest
payments were $8.5 million and principal payments were $2.5 million.
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 August 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 August 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:
<PAGE> 15
PAGE 14
<TABLE>
<CAPTION>
Percent
Complete
as of
June 30,
Year 2000 Project Time Frame 1999
----------------------------------------------------------------------------------------
<S> <C> <C>
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 40
Upgrade PBX/phone systems 11/98 - 09/99 75
PC workstation review and upgrade 07/98 - 09/99 50
Update core business distributed systems 04/98 - 07/98 100
Update core business centralized systems 07/98 - 08/99 80
</TABLE>
<PAGE> 16
PAGE 15
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: August 4, 1999 /s/ John M. Monter
------------------------------------
John M. Monter
Chief Executive Officer, President
Date: August 4, 1999 /s/ Ian Alexander
------------------------------------
Ian Alexander
Chief Financial Officer,
Vice President, Finance
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS AS OF AND FOR THE SIX MONTHS ENDED JUNE 30, 1999.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 978
<SECURITIES> 0
<RECEIVABLES> 31,081
<ALLOWANCES> 734
<INVENTORY> 0
<CURRENT-ASSETS> 35,751
<PP&E> 202,564
<DEPRECIATION> 36,640
<TOTAL-ASSETS> 208,520
<CURRENT-LIABILITIES> 29,925
<BONDS> 154,255
38,558
0
<COMMON> 0
<OTHER-SE> (16,208)
<TOTAL-LIABILITY-AND-EQUITY> 208,520
<SALES> 0
<TOTAL-REVENUES> 113,063
<CGS> 0
<TOTAL-COSTS> 87,767
<OTHER-EXPENSES> 16,016
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 9,053
<INCOME-PRETAX> 267
<INCOME-TAX> 0
<INCOME-CONTINUING> 267
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 267
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
