<PAGE> 1
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 quarterly period ended April 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: 0-22798
----------------
SPECIALTY EQUIPMENT COMPANIES, INC.
- -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-3337593
- -------------------------------------------------------------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1245 Corporate Blvd., Suite 401, Aurora, IL 60504
- -------------------------------------------------------------------------------
(Address of principal executive offices) (Zip Code)
(630) 585-5111
- -------------------------------------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all and 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 requirement for the past 90 days. Yes X No .
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at June 11 , 1998
- ----------------------------- -----------------------------
Common Stock, $0.01 par value 18,291,810 shares
The exhibit index is on page 15.
<PAGE> 2
Page 2
PART I. FINANCIAL INFORMATION
ITEM I. FINANCIAL STATEMENTS
SPECIALTY EQUIPMENT COMPANIES, INC.
CONSOLIDATED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended
April 30,
1997 1998
---- ----
<S> <C> <C>
Net revenue $ 109,242 $ 127,665
Cost of sales 76,309 88,179
---------- ----------
Gross margin 32,933 39,486
Selling, general and administrative expenses 16,015 20,446
---------- ----------
Earnings from operations 16,918 19,040
Interest expense, net 4,129 4,085
---------- ----------
Earnings from operations before income taxes 12,789 14,955
Income taxes 4,576 5,477
---------- ----------
Net earnings $ 8,213 $ 9,478
========== ==========
Basic earnings per share $ 0.46 $ 0.52
========== ==========
Diluted earnings per share $ 0.41 $ 0.47
========== ==========
Weighted average shares outstanding-basic 18,020 18,161
Weighted average shares outstanding-diluted 20,106 20,053
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 3
Page 3
SPECIALTY EQUIPMENT COMPANIES, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
January 31, April 30,
1998 1998
---- ----
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ 39,947 $ 44,453
Accounts receivable, net 63,043 81,709
Inventories 54,030 53,884
Deferred tax assets, net 15,310 15,310
Other current assets 3,143 3,349
---------- ----------
Total current assets 175,473 198,705
Property, plant and equipment, net 38,743 39,383
Restricted cash equivalents 2,662 2,199
Goodwill 15,645 15,546
Other intangibles, net 7,973 7,792
Other assets 954 914
---------- ----------
Total assets $ 241,450 $ 264,539
---------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Current installments of long-term debt $ 18,395 $ 18,328
Accounts payable 26,425 32,958
Accrued liabilities 68,748 74,873
Accrued income taxes 5,340 8,600
---------- ----------
Total current liabilities 118,908 134,759
Long-term debt, excluding current installments 159,591 159,587
Other non-current liabilities 1,762 1,720
Stockholders' equity (deficit):
Common stock 181 183
Additional paid-in capital 58,298 57,202
Accumulated deficit (88,041) (78,563)
Foreign currency translation adjustment (308) (175)
Other (2,327) (2,327)
Treasury stock, at cost (6,614) (7,847)
---------- ----------
Total stockholders' deficit (38,811) (31,527)
---------- ----------
Total liabilities and stockholders' deficit $ 241,450 $ 264,539
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 4
Page 4
SPECIALTY EQUIPMENT COMPANIES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
Three months ended
April 30,
1997 1998
---- ----
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 8,213 $ 9,478
Items not affecting cash:
Depreciation 1,137 1,142
Amortization 187 282
Utilization of net operating loss carryforward 273 273
Changes in current assets and liabilities (excluding
effects of business acquired):
Accounts receivable (12,740) (18,666)
Inventories 5,840 146
Other current assets 370 (206)
Accounts payable and other current liabilities,
excluding current installments of long-term debt 12,465 15,851
---------- ----------
Net cash flows provided by operating activities 15,745 8,300
Cash flows from investing activities:
Additions to property, plant and equipment (714) (1,782)
Cash equivalents restricted for capital additions 126 463
Business acquired (883) -
---------- ----------
Net cash used in investing activities (1,471) (1,319)
Cash flows from financing activities:
Repayments of long-term debt - (4)
Proceeds from exercise of stock options 176 347
Options withheld for taxes (520) (1,713)
Acquisition of treasury stock - (1,233)
---------- ----------
Net cash used in financing activities (344) (2,603)
---------- ----------
Other, net 138 128
---------- ----------
Net increase in cash 14,068 4,506
Cash:
Beginning of period 7,787 39,947
---------- ----------
End of period $ 21,855 $ 44,453
========== ==========
</TABLE>
The accompanying notes are an integral part of these unaudited consolidated
financial statements.
<PAGE> 5
Page 5
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
1. General
These consolidated financial statements should be read with the
consolidated financial statements and the notes thereto for the fiscal year
ended January 31, 1998 included in the Company's Annual Report on Form 10-K
filed with the Securities and Exchange Commission ("Commission") on April 13,
1998.
In the opinion of management, all adjustments, consisting only of normal
recurring adjustments necessary for a fair statement of (a) the results of
operations for the three month periods ended April 30, 1997 and 1998, (b) the
financial position at April 30, 1998 and (c) the statements of cash flows for
the three month periods ended April 30, 1997 and 1998, have been made. The
financial results for the three months ended April 30, 1998 are not necessarily
indicative of the financial results for the entire 1999 fiscal year. Certain
reclassifications have been made to the prior period financial statements to
conform with the current period presentation.
Net earnings per share is computed based on the weighted average number of
basic and diluted common shares outstanding during the period.
During the quarter ended April 30, 1998, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive
Income." SFAS No. 130 establishes standards for the reporting and display of
comprehensive income and its components (revenues, expenses, gains and losses)
in a full set of general-purpose financial statements, and requires a total for
comprehensive income to be provided in condensed financial statements of
interim periods. Comprehensive income includes all changes in stockholders'
equity during the period except those resulting from investments by owners and
distributions to owners. Comprehensive earnings for the quarters ended April
30, 1997 and 1998 consisted of the following:
<TABLE>
<CAPTION>
Three months ended
April 30,
1997 1998
---- ----
<S> <C> <C>
Net earnings $ 8,213 $ 9,478
Other comprehensive earnings:
Foreign currency translation adjustment,
net of taxes - 81
---------- ----------
Comprehensive earnings $ 8,213 $ 9,559
========== ==========
</TABLE>
2. Accounts Receivable
Accounts receivable at the following dates consisted of the following:
<TABLE>
<CAPTION>
January 31, April 30,
1998 1998
---- ----
<S> <C> <C>
Accounts receivable $ 66,998 $ 85,639
Less: allowance for doubtful accounts 3,955 3,930
---------- ----------
$ 63,043 $ 81,709
========== ==========
</TABLE>
<PAGE> 6
Page 6
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
3. Inventories
Inventories at the following dates consisted of the following:
<TABLE>
<CAPTION>
January 31, April 30,
1998 1998
---- ----
<S> <C> <C>
Raw materials $ 28,602 $ 30,536
Work-in-process 8,885 8,652
Finished goods 16,624 14,777
---------- ----------
54,111 53,965
Less: excess of FIFO cost over LIFO 81 81
---------- ----------
Total $ 54,030 $ 53,884
========== ==========
</TABLE>
The Company uses the LIFO method of valuing inventories. LIFO, compared
to FIFO, had a de minimis effect on the cost of sales for the three month
periods ended April 30, 1997 and 1998.
4. Intangibles and Goodwill:
<TABLE>
<CAPTION>
January 31, April 30,
1998 1998
---- ----
<S> <C> <C>
Goodwill $ 15,843 $ 15,843
Less: accumulated amortization 198 297
---------- ----------
15,645 15,546
========== ==========
Intangibles consist of the following:
Patents $ 991 $ 991
Other intangibles 52,076 52,076
Deferred pension costs 1,961 1,961
---------- ----------
55,028 55,028
Less: accumulated amortization 47,055 47,236
---------- ----------
Net intangibles $ 7,973 $ 7,792
========== ==========
</TABLE>
Other intangibles primarily include deferred financing fees, engineering
drawings, distribution networks and skilled workforce.
5. Income Taxes
At January 31, 1998, the Company had a net deferred tax asset of $32.3
million less a valuation allowance of $22.1 million. The Company has
approximately $16.1 million in NOL carry forwards. However, a number of issues
regarding the treatment of certain changes in ownership of the Company pursuant
to certain provisions of the Internal Revenue Code of 1986, as amended ("IRC"),
may arise which, if determined adversely, could limit the amount and/or use of
the NOL carry forwards. The NOL carry forwards are available through fiscal
2008.
<PAGE> 7
Page 7
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
6. Long-Term Debt
Long-term debt at the following dates consisted of the following:
<TABLE>
<CAPTION>
January 31, April 30,
1998 1998
---- ----
<S> <C> <C>
Revolving line of credit $ - -
11-3/8% senior subordinated notes due 2003 149,040 $ 149,040
Industrial project revenue bonds due 2009 6,400 6,400
Other long-term debt 18,711 18,711
Capitalized leases 3,835 3,764
---------- ----------
177,986 177,915
Less: current installments 18,395 18,328
---------- ----------
Total long-term debt $ 159,591 $ 159,587
========== ==========
</TABLE>
Under the revolving credit facility, the Company had $45.0 million
available for additional borrowings.
7. Commitments and Contingent Liabilities
The Company is involved in litigation and claims incidental to its
business. The ultimate outcome of these matters cannot presently be determined
because of the uncertainties inherent in litigation. However, such claims are
being vigorously contested and management does not believe that it is probable
that the ultimate outcome of the loss contingencies relating to such litigation
and claims will have, individually or in the aggregate, a material adverse
impact upon the financial condition or results of operations of the Company.
The following is a summary of the more significant litigation and claims.
The Company was a defendant along with other defendants in an action filed
on July 20, 1995 entitled "Thermodyne Food Service Products, Inc. and AFTEC,
Inc. v. McDonald's Corporation, et al." in the United States District Court,
Northern District of Illinois, Eastern Division. Plaintiffs alleged that the
Company and other defendants misappropriated trade secrets in connection with
the Company's development of an oven for McDonald's and OSI. As a result of a
ruling on a motion to dismiss, all the claims against the Company other than
the trade secret claim were dismissed. The case was settled by the terms of a
confidential settlement agreement dated May 28, 1997 pursuant to which one of
the defendants agreed to make a settlement payment in a confidential amount.
Although the Company is not required under the terms of this settlement
agreement to pay any damages or make any settlement payments, it is possible
that the codefendant who did make a settlement payment will seek a contribution
from the Company. The Company has not established a reserve in its financial
statements relating to this matter.
<PAGE> 8
Page 8
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
The Company and certain of its current and former directors are named as
defendants in an action filed by Virginia A. Noerr, who claims to own shares of
the Company's common stock. The action "Noerr v. Greenwood et al.," C.A. No.
14320, is pending in the Court of Chancery for the State of Delaware in and for
New Castle County, Delaware. Plaintiff purports to bring this action both as
a class action on behalf of all stockholders of record on April 2, 1993 and
derivatively for the benefit of the Company. Plaintiff's complaint, which has
twice been amended, asserts that (i) the defendants breached their fiduciary
duties to the Company by soliciting stockholder approval of the Company's
Executive Long-Term Incentive Plan and Non-Employee Directors Long-Term
Incentive Plan by means of a misleading proxy statement and (ii) the Board
breached its fiduciary duty in approving such option plans. The complaint
seeks an order declaring the stockholder approval of those option plans void,
canceling the options granted thereunder, enjoining the directors exercising
any such options, imposing a constructive trust for the benefit of the Company
upon any profits the individual named defendants may have made through exercise
of their options, requiring an accounting in connection therewith, and awarding
unspecified damages plus plaintiff's attorneys' fees and expenses also in an
unspecified amount. The most recent amended complaint was filed after the
court granted in part the defendants' joint motion to dismiss the complaint,
striking certain non-disclosure claims; the court's order, however, denied the
remainder of defendants' motion to dismiss. The Company and the individual
defendants believe that the allegations made in the complaint as amended are
without merit and are factually incorrect and the Company intends to contest
these allegations vigorously. The individual defendants have each made demand
upon the Company for indemnification with respect to this action. The Company
believes that if the Company were liable to the individual defendants for
indemnification, the uninsured portion of such liability would not be material
to the Company.
The Company received notice of potential environmental actions from (i)
the South Carolina Department of Health and Environmental Control ("SCDHEC")
and the EPA with respect to drums of hazardous waste materials disposed of in
South Carolina, (ii) the SCDHEC with respect to the clean up of the Unisphere
Hazardous Waste Site in Spartanburg County, South Carolina, and (iii) the
Nevada Department of Conservation and Natural Resources, Division of
Environmental Protection ("NDEP"), which issued a finding of alleged violation
and order relating to alleged soil and ground water contamination. With
respect to the SCDHEC matter discussed in (i) above, management is unable to
determine the existence or amount of its potential liabilities because no
formal proceedings have been commenced and no notifications have been received
regarding this matter since December, 1992. The Company has reason to believe
that this site will be the subject of no further action by the EPA.
With respect to the SCDHEC matter discussed in (ii) above, management is
unable to determine the existence or amount of its potential liability, if any,
because the use of the site by Beverage-Air occurred prior to the purchase of
the Beverage-Air assets by the Company from Gerlach Industries in November,
1986. With respect to the NDEP matter discussed in (iii) above, the Company
has spent approximately $319,000 to conduct tests and to implement a
remediation program, but given the pendency of the Company's appeal and its
uncertain outcome, management cannot estimate what, if any, additional
expenditures might be required, though they are not expected to materially
affect the financial position or results of operations of the Company.
Letters of Credit
As of April 30, 1998, the Company had letters of credit outstanding
totaling $10.0 million, which guarantee various business activities, including
$6.5 million of letters of credit which guarantee the Industrial Project
Revenue Bonds (see note 6 above).
<PAGE> 9
Page 9
SPECIALTY EQUIPMENT COMPANIES, INC.
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
8. Stock Option Plan and Stock Warrants
On May 6, 1993 the stockholders approved long-term incentive plans for
both non-employee directors and employees. Pursuant to the Non-Employee
Directors Long-Term Incentive Plan ("Director Plan") each non-employee director
was granted an option to purchase 175,241 shares of the Company's common stock
at a price of $1.00 per share (which was not less than management's
determination of the fair market value of the underlying shares on the date of
grant). The aggregate grants under the Director Plan totaled 876,205 shares.
The options under the Director Plan all vested and became exercisable on May 6,
1995, as on such date all of the conditions to vesting were satisfied. All
options awarded pursuant to the Director Plan expire on May 6, 2000.
The Executive Long-Term Incentive Plan, as amended, ("Employee Plan")
allows for the issue of a total of 4,004,814 shares of the Company's common
stock. A total of 118,750 options may still be granted under the Employee
Plan. All of the options granted are at an exercise price which was not less
than management's determination of the fair market value of the underlying
shares at the respective dates of grant.
The following sets forth information with respect to options issued and
outstanding:
<TABLE>
<CAPTION>
Average option Range of
Shares price per share Option Prices
------ --------------- -------------
<S> <C> <C> <C>
Options outstanding at
January 31, 1998 2,466,637 $ 2.87 $ 1.00-13.44
Options exercised (279,041) (1.00) 1.00
Options withheld for taxes (83,075) (1.00) 1.00
--------- --------------- -------------
Options outstanding at April 30,
1998 (1,954,521) exercisable 2,104,521 $ 3.18 $ 1.00-13.44
========= =============== =============
</TABLE>
Options withheld for taxes are options which are withheld by the Company,
upon exercise by the grantee, to satisfy the grantee's withholding tax
liability. The options withheld cannot be reissued.
A non-employee director has stock warrants currently exercisable to
purchase 1,136,747 shares of Common Stock at approximately $2.01 per share.
<PAGE> 10
Page 10
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF THE OPERATIONS AND
FINANCIAL CONDITION
Results of Operations
Three Month Period Ended April 30, 1998 (Fiscal 1999) Compared to Three Month
Period Ended April 30, 1997 (Fiscal 1998).
Revenue. Revenue for the three months ended April 30, 1998 increased 16.9% to
$127.7 million compared with $109.2 million for the comparable period in fiscal
1998. The revenue increase for the three months was primarily attributable to
sales of beverage equipment to the soft drink market. In addition, sales were
higher as the result of the inclusion of $7.0 million in revenue from Gamko
Holding B.V. ("Gamko"), which was acquired in August 1997. Sales of products
for use outside the U.S. increased 5.8%, due to the inclusion of Gamko sales,
offset principally by reduced sales of beverage equipment to Latin America, as
a result of a large non-recurring shipment in the prior year quarter, and lower
sales to the Asian market. For the first three months of fiscal 1999, revenue
from sales of products for use outside the United States was 32.8% of revenue
as compared with 36.2% for the same period in fiscal 1998.
Gross Margin. Gross margin for the three months ended April 30, 1998 increased
19.9% to $39.5 million, compared with $32.9 million for the comparable period
in fiscal 1998. As a percent of revenue, gross margin increased from 30.1% of
revenue for the three month period ended April 30, 1997 to 30.9% of revenue in
the three month period ended April 30, 1998. The increase in gross margin
percentage for the three month period ended April 30, 1998 was due to the
inclusion of Gamko and a favorable impact from sales mix.
Selling, General and Administrative Expenses. Selling, general and
administrative ("SG&A") expense for the three months ended April 30, 1998
increased 27.7% to $20.4 million. As a percent of revenue, SG&A increased from
14.6% to 16.0% in the three months ended April 30, 1998, compared to the
comparable period in fiscal 1998. The higher expenses reflect the inclusion of
Gamko as well as higher selling and research and development expenses for the
three months ended April 30, 1998.
Interest Expense. Interest expense for the three months ended April 30, 1998
decreased 1.1% to $4.1 million compared with the same period in fiscal 1998.
<PAGE> 11
Page 11
The following table sets forth selected operating data as a percentage of
Company net revenue:
<TABLE>
<CAPTION>
Three months ended
April 30,
1997(%) 1998(%)
------- -------
<S> <C> <C>
Beverage-Air 44.8 46.5
Taylor 39.6 34.1
Wells/Bloomfield 13.3 11.4
Gamko - 5.5
World Dryer 2.3 2.5
----- -----
Net revenue 100.0 100.0
Gross margin 30.1 30.9
Selling, general and administrative expenses 14.6 16.0
----- -----
Earnings from operations 15.5 14.9
Interest expense, net (3.8) (3.2)
Income taxes (4.2) (4.3)
----- -----
Net earnings 7.5 7.4
===== =====
</TABLE>
Liquidity and Capital Resources
Net cash flows provided by operations were $8.3 million for the three
months ended April 30, 1998 compared with $15.7 million for the three months
ended April 30, 1997. The decrease is primarily the result of an increase in
working capital compared to the prior year. See -- "Results of Operations --
Revenue."
Net cash used in investing activities amounted to $1.3 million for the
three months ended April 30, 1998 compared with $1.5 million for the three
months ended April 30, 1997. The prior year includes $0.9 million for
acquisition of businesses. Through the first three months of fiscal 1999, total
capital expenditures have been $1.8 million. The Company anticipates that
capital expenditures for fiscal 1999 will be approximately $9.0 million. The
Company's capital spending for the balance of fiscal 1999 is expected to be
primarily related to the acquisition, installation, improvement and equipping
of its Beverage-Air and Taylor production facilities.
On September 16, 1997 the Company announced a plan to purchase $10 million
of its common stock (up to 600,000 shares) in the open market and in private
transactions. For the three months ended April 30, 1998 the Company purchased
70,035 shares of its common stock at an average price of $17.60 per share.
Through June 11, 1998 the Company has purchased a total of 473,931 shares at an
average price of $16.56 per share.
As of April 30, 1998, the Company had net working capital of $63.9
million. The Company's average operating working capital (defined as average
monthly gross accounts receivable and net inventory less accounts payable) as a
percentage of sales declined from 21% during fiscal year 1998 to 20% for the
three months ended April 30, 1998. The Company's earnings from operations were
sufficient to cover fixed charges for the three months ended April 30, 1998.
<PAGE> 12
Page 12
As of April 30, 1998, the Company had no borrowings under the Revolving
Credit Facility of its Bank Credit Agreement. However, it had outstanding
letters of credit in the amount of $10.0 million, including $6.5 million of
letters of credit which guarantee the Industrial Project Revenue Bonds
(referenced in note 6 to the financial statements included as item 1 hereto).
Under the Revolving Credit Facility, the Company had $45.0 million available
for additional borrowings. In addition, the Company had cash and cash
equivalents of $44.4 million as of April 30, 1998.
The Company had four financial covenants to meet at April 30, 1998 under
the Bank Credit Agreement -- a liquidity ratio covenant at April 30, 1998 of at
least 1.25:1.00; a senior funded debt to cash flow covenant for the twelve
months ended April 30, 1998 of not greater than 2.00:1.00; a total funded debt
to cash flow covenant ratio for the twelve months ended April 30, 1998 not
greater than 3.50:1.00 and an interest coverage covenant ratio of at least
2.0:1.00. The Company met each of these covenants as it had a liquidity ratio
of 28.48:1.00 at April 30, 1998; a senior funded debt to cash flow ratio of
0.09:1.00 for the twelve months ended April 30, 1998; total funded debt to cash
flow ratio for the twelve months ended April 30, 1998 of 2.45:1.00 and an
interest coverage ratio for the twelve months ended April 30, 1998 of
4.15:1.00.
The Company's Bank Credit Agreement expires on November 30, 1998. The
first call date on the Notes is December 1, 1998. The Company believes that
given the current interest rate environment and the Company's improved credit
position it may be able to refinance the Notes and the Credit Agreement under
more favorable terms, although there can be no assurance that such refinancing
will be possible.
Management believes that the Bank Credit Agreement and the other sources
of capital described above, with internally generated funds, will be adequate
to meet the Company's anticipated capital and cash requirements for at least
the next twelve months, including debt service and corporate income taxes.
Impact of Inflation
Management does not believe that inflation has had a material impact on
the Company's operations during the first three months of fiscal 1999.
Management believes that the Company may face increasing costs during the
balance of the fiscal year as a result of inflation which the Company may not
fully be able to offset with increased productivity or pass on to its customers
due to competitive factors within the industry.
Safe Harbor for Forward-Looking Statements Under the Securities Litigation
Reform Act of 1995
Except for historical information contained herein, this Quarterly Report
to Stockholders contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements are subject
to certain risks and uncertainties that could cause actual results to differ
materially from those anticipated and discussed herein. These factors include:
general economic conditions and their impact on the growth of the quick service
restaurant and soft drink bottler industries, the Company's dependence on its
major customer and key management personnel, the effects of competition, the
demands relating to further overseas expansion, the significance of the
Company's outstanding indebtedness and other factors detailed elsewhere from
time to time in the Company's filings with the Securities and Exchange
Commission.
<PAGE> 13
Page 13
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See note 7 of "Notes to Unaudited Consolidated Financial Statements"
included in Part I. Item 1. of this Form 10-Q.
Item 3. Quantitative and Qualitative Disclosure About Market Risk
The disclosure requirements pursuant to Item 305 of Regulation S-K are not
yet effective for the Company. Such disclosures will be included in the
Company's filing commencing with its Annual Report on Form 10-K for the fiscal
year ending January 31, 1999.
Item 4. Submissions of Matters to a Vote of Security Holders
There were no matters submitted to a vote of stockholders for the quarter
ended April 30, 1998.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
27.1 Financial Data Schedule
2. Reports on Form 8-K.
None.
<PAGE> 14
Page 14
SIGNATURE
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.
Specialty Equipment Companies, Inc.
(Registrant)
Date: June 12, 1998 /s/ Jeffrey P. Rhodenbaugh
----------------------- --------------------------
Jeffrey P. Rhodenbaugh, Chief Executive
Officer (Principal Executive Officer)
Date: June 12, 1998 /s/ Donald K. McKay
----------------------- --------------------------
Donald K. McKay, Chief Financial Officer
(Principal Financial and Accounting
Officer)
<PAGE> 15
Page 15
Exhibit Index
Exhibit
No. Description
------- -----------
27.1 Financial data schedule.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<CURRENCY> US DOLLAR
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> JAN-31-1999
<PERIOD-START> FEB-01-1998
<PERIOD-END> APR-30-1998
<EXCHANGE-RATE> 1
<CASH> 44,453
<SECURITIES> 0
<RECEIVABLES> 85,639
<ALLOWANCES> (3,930)
<INVENTORY> 53,884
<CURRENT-ASSETS> 198,705
<PP&E> 68,450
<DEPRECIATION> (29,067)
<TOTAL-ASSETS> 264,539
<CURRENT-LIABILITIES> 134,759
<BONDS> 159,587
0
0
<COMMON> 183
<OTHER-SE> (31,710)
<TOTAL-LIABILITY-AND-EQUITY> 264,539
<SALES> 127,665
<TOTAL-REVENUES> 127,665
<CGS> 88,179
<TOTAL-COSTS> 88,179
<OTHER-EXPENSES> 20,446
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,085
<INCOME-PRETAX> 14,955
<INCOME-TAX> 5,477
<INCOME-CONTINUING> 9,478
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 9,478
<EPS-PRIMARY> 0.52
<EPS-DILUTED> 0.47
</TABLE>
