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FORM 10-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [FEE REQUIRED]
For the fiscal year ended December 31, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
Commission file number 1-10182
SCOTSMAN INDUSTRIES, INC.
(Exact name of registrant as specified in its charter)
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Delaware 36-3635892
(State of incorporation) (I.R.S. Employer Identification No.)
775 Corporate Woods Parkway, Vernon Hills, Illinois 60061
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (847) 215-4500
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Securities registered pursuant to Section 12(b) of the Act:
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Name of each exchange
Title of each class on which registered
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Common stock, $0.10 par value New York Stock Exchange
Common stock purchase rights,
no par value New York Stock Exchange
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Securities registered pursuant to Section 12(g) of the Act: None
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
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Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /
At March 15, 1996 there were 8,964,974 shares of registrant's common stock
outstanding, and the aggregate market value of the voting stock held by
nonaffiliates of the registrant as of such date was approximately $163.0
million. The market value of the registrant's Series A $0.62 Cumulative
Convertible Preferred Stock, par value $1.00 per share, held by nonaffiliates is
based on the market value, as of such date, of the shares of common stock into
which such stock is convertible.
DOCUMENTS INCORPORATED BY REFERENCE
Registrant's 1995 Annual Report to Shareholders for the fiscal year ended
December 31, 1995 (the "1995 Annual Report"): Parts I, II, and IV.
Registrant's definitive Proxy Statement for its 1996 Annual Meeting of
Shareholders to be held on May 16, 1996 (the "1996 Proxy Statement"): Part III.
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PART I
ITEM 1. BUSINESS
The registrant, Scotsman Industries, Inc. (hereinafter referred to, together
with its subsidiaries, as "Scotsman" or the "Company"), is a holding company
with subsidiaries engaged in the manufacture and marketing of refrigeration
products primarily for the foodservice industry, including ice machines, food
preparation and storage equipment, and drink dispensing equipment.
Scotsman was organized under the laws of the state of Delaware on January 26,
1989. Effective April 14, 1989, Scotsman was spun-off from Household
International, Inc. ("Household") through the issuance of one share of Scotsman
common stock for every five shares of Household common stock then outstanding to
Household shareholders. As of such date, Scotsman became a publicly traded
company listed on the New York Stock Exchange, and its operations ceased to be
owned by Household.
Scotsman conducts its domestic ice machine business through the Scotsman Ice
Systems division ("Scotsman Ice Systems") of its wholly-owned subsidiary,
Scotsman Group Inc. ("SGI"), and through the Crystal Tips product line of its
wholly-owned subsidiary, Booth, Inc. ("Booth"). Booth acquired substantially all
of the assets of Crystal Tips, Inc. in April of 1992. Scotsman conducts its
European ice machine business through two Italian subsidiaries, Frimont S.p.A.
("Frimont") and Castel MAC S.p.A. ("Castel MAC"). In January of 1993, Frimont
acquired the assets of Simag, an Italian ice machine manufacturer, further
expanding the Company's European ice machine line. Scotsman also entered into a
joint venture in 1995 in Shenyang, China to produce ice machines for the Chinese
market. See "--1995 Acquisitions and Strategic Alliances."
Scotsman manufactures and markets food preparation and storage equipment,
including food preparation workstations, refrigerators and freezers and other
equipment, through its wholly-owned subsidiary, The Delfield Company
("Delfield"), which was acquired on April 29, 1994. Scotsman also manufactures
and markets a limited line of refrigerated cabinets, dough retarders and blast
freezers in Europe through Frimont and Castel MAC. Scotsman had previously
manufactured and sold refrigerators and freezers in the United States through
its Glenco-Star Division, which was sold in September 1992.
Scotsman manufactures and markets drink dispensing equipment in the United
States through Booth and in Europe through Whitlenge Drink Equipment Limited
("Whitlenge") and through Hartek Beverage Handling GmbH and its Austrian
distributor, Hartek Awagem Vertriebsges m.b.H. (collectively, "Hartek" or the
"Hartek entities"). Whitlenge was acquired by Scotsman on April 29, 1994. Hartek
was acquired by Scotsman on December 31, 1995. See "--1995 Acquisitions and
Strategic Alliances."
Scotsman manufactures and markets niche products through Delfield, including air
ventilating equipment, private label "point of purchase" beverage
display/dispensing equipment and iced drink mixing and dispensing machines.
Scotsman also manufactures and markets a limited line of water coolers through
its Italian subsidiaries, Frimont and Castel MAC.
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1995 ACQUISITIONS AND STRATEGIC ALLIANCES
In June 1995, Scotsman entered into a joint venture with Shenyang Xinle
Precision Machinery Company ("Xinle") to produce ice machines in Shenyang,
China. Xinle, an arm of the Chinese Aerospace Agency, has approximately 6,000
employees and produces electronic control systems and various other products.
The joint venture will initially produce ice machines for the Chinese market,
and in the future may produce ice machines for distribution by Scotsman in other
markets. Scotsman invested in 1995 a total of $0.7 million, primarily in tooling
and equipment, for a 40 percent ownership in the venture, with an option to
increase its ownership to 60 percent within the first three years. The joint
venture began production of ice machines in December 1995.
On December 31, 1995, the Company's subsidiary, Scotsman Group Inc. acquired the
stock of Hartek Beverage Handling GmbH and the stock of its Austrian
distributor, Hartek Awagem Vertriebsges m.b.H. located in Radevormwald, Germany
and Vienna, Austria, respectively. Hartek is a beverage dispensing equipment
manufacturer. The Hartek entities had combined 1995 annual sales of $24 million.
The method of accounting used for the combination was the purchase method. The
two Hartek entities were acquired for $4.8 million and no shares of stock were
or will be issued as a result of these acquisitions. The Company also assumed
$6.4 million of Hartek debt as a result of the acquisition. Preliminary goodwill
of $1.9 million in total has been recorded and will be finalized within 12
months of the acquisition. The amount of goodwill from these acquisitions will
be amortized for book purposes over 40 years using the straight-line method.
Under the terms of the purchase agreement, the Company is required to pay to the
seller 75 percent of any tax loss carry forwards used in reduction of taxable
profits in the next three calendar years which were available to Hartek as of
December 31, 1995, not to exceed 2.2 million deutsche marks or, as of December
31, 1995, approximately $1.5 million.
PRODUCTS AND DISTRIBUTION
Scotsman manufactures refrigeration products that are marketed primarily to the
foodservice industry (restaurants, cafeterias, convenience stores and bars) and
also to the supermarket and lodging industries and to food processors. The
principal commercial products of Scotsman are ice machines, food preparation
workstations, refrigerators and freezers, refrigerated bakery equipment, drink
dispensing equipment, self-leveling tray and plate dispensers and ventilation
systems. Scotsman also manufactures compact consumer ice machines and
refrigerators for the luxury segment of the consumer appliance market.
ICE MACHINES. The Company manufactures and markets commercial ice-making
machines under the Scotsman and Crystal Tips trademarks worldwide, under the
Icematic and Simag trademarks in Europe and Asia and under various brands
through other dealer networks. The Company's ice machines produce four forms of
ice: cubes (consisting of contour, lenticular, gourmet and square cubes),
flakes, scale and nuggets. Each of these forms of ice is designed and marketed
for specific applications. Scotsman ice machines are either self-contained
units, which make, store and, in some cases, dispense ice, or modular units,
which make but do not store ice. Scotsman also manufactures and sells ice
storage bins to accompany modular units.
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A significant percentage of the sales of Scotsman commercial ice machines are to
the full service and fast-food restaurant industry. Other major end-users
include schools, government and military facilities, grocery stores, health care
facilities, hotels and motels, and convenience stores.
Scotsman commercial ice machines are sold both through a system of distributors
and directly by Scotsman to national customers, contractors, and governmental
and military buyers. Presently Scotsman Ice Systems has approximately 85
distributors in the United States, and Frimont and Castel MAC combined have
approximately 50 distributors in Europe and Asia. The Crystal Tips line also has
its own distribution network consisting of approximately 68 distributors in the
United States. The distributors generally do not carry competing brands of ice
machines. Independent service dealers also install and service the equipment.
The servicing functions performed by dealers are particularly important because
ice machines typically require more service, due to variable water conditions,
than other major appliances such as refrigerators. Scotsman also maintains
inventories of replacement parts to support its ice machine product line.
Scotsman sells directly to national customers such as large hotel chains,
fast-food franchisers and convenience stores. Sales to federal and state
governments are also made directly by Scotsman for use in employee dining,
health care and military facilities. Scotsman Ice Systems also owns and operates
one of its largest distributors in Southern California, which it purchased upon
the retirement of the former owners.
Scotsman is the only United States ice machine company with management and
production facilities in Europe. In foreign markets, Scotsman manufactures and
markets commercial ice machines and related components primarily through Castel
MAC and Frimont under the Icematic trademark and the Scotsman and Simag
trademarks, respectively. Each of these subsidiaries is located in Italy and
manufactures products for sale locally and for export primarily to Eastern and
Western Europe, the Middle East, Africa and the Far East. In the majority of
countries served, Castel MAC and Frimont each sell through separate distribution
channels. The Company also markets the Crystal Tips line internationally through
four export marketing firms based in the United States and Canada.
In November of 1992, Scotsman entered into distribution and trademark licensing
agreements with Howe Corporation. Under these agreements, Scotsman has the
exclusive right to distribute Howe industrial flakers in all foreign and
domestic markets for a five-year period, subject to renewal. Scotsman also has
the right to use the trademarks HOWE and Rapid Freeze in connection with the
marketing and distribution of these products.
In June of 1995, Scotsman entered into a joint venture with Xinle to produce
commercial ice machines in Shenyang, China for the Chinese market. See "--1995
Acquisitions and Strategic Alliances."
In addition to commercial ice machines, Scotsman also manufactures compact
consumer ice machines and refrigerators for the luxury segment of the consumer
appliance markets. These products are sold primarily through luxury consumer
appliance distributors who sell to dealers.
Scotsman's commercial ice machine business accounted for 52 percent, 57 percent
and 83 percent of the Company's sales in fiscal years 1995, 1994 and 1993,
respectively.
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FOOD PREPARATION & STORAGE EQUIPMENT. In the United States, Scotsman
manufactures and markets a wide range of commercial food preparation and storage
equipment through Delfield under the Delfield, Shellyglas and Shellymatic
trademarks. Delfield's principal products include customized and standard food
preparation workstations, commercial up-right and under-the-counter
refrigerators and freezers, mobile cafeteria systems and self-leveling tray and
plate dispensers. Delfield sells its equipment to various purchasers in the
foodservice industry, including dealers, wholesalers, major chain restaurants,
fast-food franchises and government entities.
Delfield sells directly to national accounts, including major retail chain
restaurants. Delfield also sells equipment domestically through over 2,000
non-exclusive dealers and dealer buying groups and through a network of
approximately 26 independent sales representative firms. Such dealers generally
carry competing lines of equipment. The sales representative firms typically
carry complementary foodservice equipment, but carry only Delfield refrigeration
equipment.
Delfield sells in the United Kingdom through a distributor and in South America
and Asia through an export agent. Export sales are less than 10 percent of
Delfield's total sales.
In Europe, Castel MAC and Frimont manufacture and market a line of refrigerated
cabinets under the Icematic and Scotsman brand names and a line of dough
retarders and blast freezers under the Tecnomac brand name. Tecnomac dough
retarders and blast freezers are sold primarily to the European commercial
bakery industry through dealers and agents specializing in that industry. Sales
of food preparation and storage equipment accounted for approximately 32
percent, 28 percent and 4 percent of Scotsman's sales in fiscal years 1995, 1994
and 1993, respectively.
DRINK DISPENSING EQUIPMENT. In the United States, Scotsman manufactures
soft-drink beverage dispensing equipment through Booth. Booth manufactures and
markets a complete line of non-coin operated soft-drink dispensing products and
accessories. Booth offers both pre-mix and post-mix dispensers which can either
be ice-cooled or electrically-cooled, ice and drink dispensers, hand-operated
valves and other related accessory products used in the fountain market. Booth
sells its dispensing equipment primarily to soft drink bottlers franchised by
The Coca-Cola Company, Pepsico, Inc., Dr. Pepper and 7-Up, often labeling the
equipment with the customer's name or trademark and the names of the beverages
that will be dispensed. Major end-users of Booth dispensing equipment are in the
foodservice industry.
In Europe, Whitlenge manufactures and markets soft drink dispensing equipment,
draft beer cooling equipment and related ancillary equipment. Whitlenge
specializes in remote and under-the-counter beverage cooling installations,
including large installations for foodservice restaurants, and also makes a
range of mechanically refrigerated over and under the counter soft-drink units.
Whitlenge sells directly to soft-drink bottlers and brewers in the United
Kingdom. Sales to export markets are made both by direct sales to bottlers and
brewers and through distributors and local agents in various markets throughout
Western and Central Europe and the Middle East.
Also in Europe, Hartek manufactures and markets soft drink dispensing equipment,
draft beer cooling equipment and related ancillary equipment which is sold
primarily in Germany, as well as Central and Eastern Europe and the Middle East.
Hartek sells directly to soft-drink bottlers and to brewers in Germany. Sales to
export markets are made both by direct sales to bottlers and brewers and through
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distributors and local agents in various markets throughout Western and Central
Europe and the Middle East. Hartek's products are sold under the Hartek brand
name.
Sales of drink dispensing equipment accounted for approximately 12 percent, 12
percent and 10 percent of Scotsman's sales in fiscal years 1995, 1994 and 1993,
respectively.
NICHE PRODUCTS. Scotsman also manufactures and markets a line of niche products,
primarily through Delfield, including air ventilating equipment under the Air
Tech trademark, private label "point of purchase" display and dispensing
equipment, and iced drink mixing and dispensing machines. Scotsman also
manufactures and markets water coolers, as well as coolers for bottled wine and
snacks, through Frimont and Castel MAC, and small industrial applications
through Whitlenge.
FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS
Financial information pertaining to the Company's foreign and domestic
operations is incorporated herein by reference from Note 18, "Geographic
Information," in the 1995 Annual Report.
ENVIRONMENTAL AND OTHER REGULATORY MATTERS
Scotsman's products and manufacturing processes are subject to various
environmental, health and safety regulations and standards. Such regulations and
standards, from time to time, may require significant changes in products or
manufacturing methods. Scotsman believes that environmental, health and safety
matters will not have a material effect on its business or financial condition.
However, legal and regulatory requirements in this area are increasing, and
there can be no assurance that significant costs and liabilities will not be
incurred as a result of currently unidentified or future problems or new
regulatory developments.
Chlorofluorocarbons ("CFCs"), a compound found in the refrigerants and
insulation materials used in most refrigeration systems, including those in
Scotsman refrigeration products, are an environmental concern, and the
international supply has been restricted due to their potential impact on the
atmosphere. Under the Federal Clean Air Act Amendments of 1990 (the "Clean Air
Act Amendments"), producers of CFCs were required to phase out production of
CFCs in a series of steps culminating in the termination of all such production
by the year 2000. Pursuant to authority granted under the Clean Air Act
Amendments, on February 11, 1992, former President Bush announced an accelerated
schedule pursuant to which, with certain limited exceptions, production of CFCs
in the United States was required to cease by January 1, 1996. Approximately 125
countries which are parties to the Montreal Protocol on Substances that Deplete
the Ozone Layer agreed to such an accelerated schedule.
Scotsman pioneered the use of hydrofluorocarbon refrigerants, with zero ozone
depletion potential, in commercial ice making equipment. All products currently
being manufactured by Scotsman are in compliance with the accelerated CFC
phase-out schedule.
COMPETITION
The primary markets for Scotsman's products are highly competitive. The most
significant competitive factors are price, product reliability and performance
and service, with the relative importance of such factors varying among
products. Delfield also relies on its computer-assisted design and manufacturing
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system and its design library in competing in the market for custom and standard
food preparation workstations.
Scotsman has a number of competitors in each product line that it offers.
Scotsman believes that IMI Cornelius, plc, is the leading supplier of beverage
dispensing equipment in continental Europe, one of the markets in which
Whitlenge and Hartek compete. Scotsman does not believe that another single
competitor or group of competitors dominates any market for any other product
line in which it competes. Most of Scotsman's competitors are small, privately
owned companies, although a few are divisions of larger companies.
RESEARCH AND DEVELOPMENT
Scotsman conducts an extensive research and development program in its product
fields. These programs seek to develop product improvements and cost reductions,
as well as new products. Scotsman's total research and development expenditures
for fiscal years 1995, 1994 and 1993 were approximately $4.8 million, $5.1
million and $3.9 million, respectively.
RAW MATERIALS
The principal materials used in the manufacture of Scotsman's products are
refrigeration components, including compressors, condensers, motors and
controls. Other raw materials include stainless steel, galvanized steel,
aluminum, copper and plastics. These materials are readily available from
several sources, and Scotsman has not experienced difficulties with respect to
their availability.
GENERAL
CUSTOMERS. Scotsman is not dependent upon any single customer, or upon any
single group of customers, and no single customer or related group of customers
accounted for 10 percent or more of Scotsman's consolidated revenues in 1995.
Delfield, Booth and Whitlenge are, however, each dependent upon a limited number
of major customers. Although the loss of one or more of such customers could
have a material adverse effect on the sales of Delfield, Booth or Whitlenge,
Scotsman does not believe that such a loss would have a material adverse effect
on Scotsman as a whole. No material portion of Scotsman's business is subject to
renegotiation of profits or termination of contracts at the election of the
government.
BACKLOG OF ORDERS. The backlog of unshipped orders at the end of fiscal years
1995 and 1994 was $29.3 million and $23.6 million, respectively. The increase in
the backlog of unshipped orders in 1995 was due primarily to the inclusion of
approximately $0.7 million in unshipped orders of Hartek and to unusually strong
fourth quarter demand for the products of Scotsman's other European operations.
Scotsman expects that all of the orders in the backlog at the end of fiscal year
1995 will be shipped during 1996.
SEASONALITY. The volume of sales for most of the products sold by Scotsman is
somewhat higher in the second and third quarters, corresponding with the major
selling season for refrigeration products. In addition, Delfield has experienced
significant quarterly fluctuations in the sales of foodservice equipment because
of the irregularity of large orders from major chain restaurants.
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PATENTS AND TRADEMARKS. Scotsman holds or is licensed under many United States
and foreign patents covering various design features used in its products, and
also holds a number of other patents and patent applications, licenses,
trademarks and trade names including the trademarks and trade names mentioned
herein. Scotsman does not believe that any of the foregoing is material to its
business, with the exception of the Scotsman and Delfield trademarks. Scotsman
believes it possesses adequate protection with respect to the Scotsman and
Delfield trademarks.
EMPLOYEES. Scotsman employs approximately 2,182 people, approximately 963 of
whom are covered by collective bargaining agreements with various labor unions.
Delfield is currently in the process of negotiating a new collective bargaining
agreement covering 517 of its employees to replace an existing collective
bargaining agreement which expires on April 15, 1996. Relationships with
employees of Scotsman have been satisfactory.
ITEM 2. PROPERTIES
Scotsman's corporate headquarters are located in Scotsman Ice Systems Division's
headquarters, a 36,000 square foot facility in Vernon Hills, Illinois which is
leased through November 1998. Since 1993, Scotsman has had an option to purchase
this property. Scotsman has facilities located in Fairfax, South Carolina,
consisting of a 247,000 square foot plant built in 1980 and an 80,000 square
foot separate warehouse. The Fairfax facilities are owned by Scotsman and
produce ice making machines and commercial refrigeration equipment. Scotsman
leases for storage, on a monthly basis, a 3,000 square foot section of a
building located in Fairfax. Scotsman also leases a 13,000 square foot
distribution facility near Los Angeles under a lease which expires in March
1998.
In June 1993, Booth began leasing 170,000 square feet of a facility located in
Dallas, Texas, under a ten-year lease which expires in June 2003. During 1994,
the Company completed the relocation of the manufacturing operations of both
Booth and Crystal Tips to this facility. Scotsman owns a 65,000-foot facility
near Dallas, Texas, which housed Booth's operations prior to the relocation and
has leased this facility to a tenant under a lease which expires in 2005.
Delfield's main headquarters are located in Mt. Pleasant, Michigan, where it
occupies a 347,000 square foot facility consisting of plant and office
facilities. A section of the facility is subject to a lien securing industrial
revenue bonds issued by Isabella County. Delfield also leases a 188,000 square
foot plant and office facility in Covington, Tennessee under a lease which will
expire in September 2006. Upon expiration of the lease, Delfield will have the
option to purchase the property for a nominal sum. The Tennessee facility was
financed by the issuance of industrial revenue bonds by the town of Covington,
Tennessee and is subject to a lien securing the bonds. Delfield also leases
warehouses on a month-to-month basis in approximately ten states, including
Michigan and Tennessee, for the storage of finished goods inventory.
The Company operates two plants in Italy which contain 242,000 and 205,000
square feet, respectively. The larger of these facilities is owned, and the
smaller consists of a number of buildings leased under separate leases which
expire between December 31, 1996, and January 1, 2002.
Whitlenge's main headquarters and its operations are located in a 76,000 square
foot building in Halesowen, England. The building is leased under separate
leases which expire from December 24, 2002, through December 24, 2006.
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Hartek's main headquarters and its operations are located in a 35,000 square
foot building in Radevormwald, Germany which is owned by the Company. Hartek
also leases 19,000 square feet of warehousing space in Radevormwald, Germany
which is renewable annually until December 1998. Hartek's Austrian
distributorship occupies 11,000 square feet in Vienna, Austria which is used
primarily for office and warehousing and is leased on an annual basis.
Scotsman considers the condition of its plants and other properties to be
generally good and believes the capacity of its plants to be adequate for the
current needs of its business. Except as described above, none of the principal
properties owned by Scotsman are subject to encumbrances material to the
operations of Scotsman.
ITEM 3. LEGAL PROCEEDINGS
LITIGATION RELATING TO INDIANAPOLIS ATHLETIC CLUB FIRE. Delfield, which was
acquired by the Company on April 29, 1994, was originally named as a defendant
in a number of actions brought in Marion County, Indianapolis, Indiana, arising
out of a fire at the Indianapolis Athletic Club (the "IAC") on February 5, 1992.
The actions included two cases filed in the Marion County Superior Court,
Indiana Athletic Club, Inc. v. The Delfield Company, et al, in which the IAC
seeks to recover property damages of between $10 to $12 million allegedly
incurred in the fire, and Mutz v. The Delfield Company, et al, brought by the
estate of Thomas R. Mutz alleging an unspecified amount of damages for the
alleged wrongful death of Mr. Mutz in the fire. A number of other actions
alleging claims for wrongful death, personal injury and/or property damage were
also filed. Although the cause of the fire has not yet been determined, the
claimants alleged, in these actions, that a refrigerator manufactured by
Delfield caused the fire and asserted negligence, strict liability and breach of
warranty claims against Delfield.
Delfield has been dismissed as a defendant in the suits brought by the IAC and
the estate of Mr. Mutz. Such dismissals were, however, without prejudice to the
rights of those plaintiffs to reinstate their claims against Delfield, and the
Company continues to monitor those actions. The plaintiffs in the IAC and the
Mutz actions have continued to pursue their claims against the Delfield Division
of Alco Standard Corporation ("Alco"). The IAC and the Mutz cases have been
consolidated and have been set for trial on January 27, 1997, although the
parties anticipate that the Mutz action will be bifurcated from the IAC action
prior to trial. All of the other actions in which Delfield was originally named
as a defendant have also been dismissed or settled for nominal amounts by
Delfield's insurer, except for two cases involving claims for property damage
and/or personal injury in which the total damages alleged do not exceed, in the
aggregate, $70,000.
Delfield has denied that the refrigerator caused the fire. In addition, Delfield
believes that the refrigerator in the IAC at the time of the fire was
manufactured, not by Delfield, but by the Delfield Division of Alco prior to the
acquisition of the Delfield Division by DFC Holding Corporation ("DFC"), which
was in turn acquired by Scotsman. Pursuant to the agreement by which DFC
acquired the Delfield Division, Alco is obligated to indemnify Delfield for all
losses to Delfield resulting from product liability claims relating to products
manufactured by the Delfield Division prior to its acquisition by DFC. Alco has
agreed that its indemnity applies to some of the actions arising out of the fire
(including the action brought by the IAC) but not all of the actions.
Delfield believes that all of the actions arising from the IAC fire are covered
by Alco's indemnity and that Delfield's insurance should cover any claims that
are not covered by Alco's indemnity. Moreover,
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under the terms of the agreements pursuant to which the Company acquired
Delfield and Whitlenge, the former shareholders of DFC and Whitlenge Acquisition
Limited ("WAL"), an affiliate of DFC, are also required to indemnify the Company
for up to $30 million in losses and expenses arising out of, among other things,
suits, claims or proceedings arising out of the IAC fire.
The Company is unable to determine at this time the amount of Delfield's
potential liability, if any, with respect to the IAC fire. Although no
assurances can be given, based upon the Company's review of Alco's indemnity,
Delfield's insurance policies, the indemnification obligations of the former
shareholders of DFC and WAL, and the financial ability of certain former
shareholders of DFC and WAL to comply with those indemnification obligations,
the Company does not believe that the imposition of liability upon Delfield in
one or more actions arising out of the IAC fire would be likely to have a
material adverse effect upon the financial condition of the Company or its
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the last fiscal
quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth the names, ages and positions of all executive
officers of Scotsman, the period that each has held his position with the
Company, and a brief account of each such officer's business experience during
the past five years. Executive officers are appointed annually at a meeting of
the Board of Directors of the Company held as soon as practicable after each
annual meeting of the Company's shareholders. Officers of the Company are
appointed to serve until the next annual election of officers and until their
respective successors are chosen.
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NAME AND AGE OFFICE AND EXPERIENCE
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Richard C. Osborne, 52 Mr. Osborne is Chairman of the Board and has held that
position since May 1991. He is also President, Chief
Executive Officer and a director of the Company and has
held those positions since April 1989.
Emanuele Lanzani, 61 Mr. Lanzani is an Executive Vice President of the
Company and has held that position since April 1989. He
is also the Managing Director, Frimont and Castel MAC.
Mr. Lanzani has been Managing Director of Castel MAC
since its acquisition by a wholly-owned subsidiary of
Household in October 1985 and has been Managing
Director of Frimont since 1968.
Paolo Faenza, 56 Mr. Faenza is General Manager, Castel MAC, and has
held that position since 1986.
Richard M. Holden, 45 Mr. Holden is Vice President-Human Resources of the
Company and has held that position since January 1990.
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NAME AND AGE OFFICE AND EXPERIENCE
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Donald D. Holmes, 58 Mr. Holmes is Vice President-Finance and Secretary of
the Company and has held those positions since April
1989.
Christopher D. Hughes, 49 Mr. Hughes is a Vice President of the Company and has
held that position since June 1994. Mr. Hughes is also
President of Booth and has held that position since May
1994. From 1993 to May 1994, he was Vice
President/General Manager of the Central and Western
Transit Operations of Morrison Knudsen Corporation, a
division engaged in the business of assembling new and
overhauling used passenger rail cars. From 1991 to
1993, Mr. Hughes was Vice President of Operations of
Scotsman Ice Systems and Scotsman's former Glenco-Star
division. From 1989 to 1991, he was President of
Scotsman's former Halsey Taylor/Consumer Products Division.
Ludwig H. Klein, 53 Mr. Klein is a Vice President of the Company and has
held that position since February 1996. Mr. Klein is also
Managing Director of Hartek and has held that position
since February 1995. From June 1994 until February
1995, he worked as an independent consultant and
provided, during that period, consulting services to Hartek
and in the capital goods industry. From July of 1986
until June of 1994, Mr. Klein held the position of General
Manager of Haacon Hebetechnik GmbH, a manufacturer
of industrial lifting equipment.
Kevin E. McCrone, 47 Mr. McCrone is a Vice President of the Company and has
held that position since April 1994. Mr. McCrone is also
President and Chief Executive Officer of Delfield. He
has served as its President and Chief Executive Officer
since 1984.
Gerardo Palmieri, 56 Mr. Palmieri is Director-Sales and Marketing, Frimont,
and has held that position since 1980.
</TABLE>
-11-
<PAGE> 12
<TABLE>
<CAPTION>
NAME AND AGE OFFICE AND EXPERIENCE
- ------------ ---------------------
<S> <C>
Randall C. Rossi, 44 Mr. Rossi is a Vice President of the Company and has
held that position since January 1995. Mr. Rossi is also
President of Scotsman Ice Systems and has held that
position since January 1995. From January 1994 to
January 1995, he was an Executive Vice President of
Scotsman Ice Systems. From 1989 to January 1994, he
was Vice President-Sales and Marketing of Scotsman Ice
Systems.
William J. Rotenberry, 41 Mr. Rotenberry is Vice President - Business
Development, has been employed by the Company since
January 1996 and became a Vice President of the
Company in February 1996. From 1990 until January
1996, he was Director of Corporate Development for
Joslyn Corporation, a diversified manufacturer.
Michael de St. Paer, 50 Mr. de St. Paer is a Vice President of the Company and
has held that position since April 1994. Mr. de St. Paer
is also Managing Director of Whitlenge and has held that
position since April 1993. From June 1992 to April 1993
he was Assistant Managing Director of Whitlenge. From
1991 until June 1992, he was the Managing Director and
a Group Technical Director of Hartek.
</TABLE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
The information contained in the table entitled "Common Stock" in the 1995
Annual Report and in Note 8 of the "Notes to Consolidated Financial Statements"
in the 1995 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA
The selected financial data contained in the table entitled "Five Year Summary"
in the 1995 Annual Report is incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" in the 1995 Annual Report are incorporated herein by reference.
-12-
<PAGE> 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The report of Arthur Andersen LLP, independent public accountants, and the
consolidated financial statements, together with the notes thereto (as set forth
in the List of Financial Statements in Part IV, Item 14 (a)(1), below) in the
1995 Annual Report are incorporated herein by reference. The selected financial
data contained in the table entitled "Selected Quarterly Financial Data" in the
1995 Annual Report are also incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
There were no changes in accountants or disagreements with accountants on
accounting and financial disclosures during 1995.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information contained in "Information Regarding Nominees and Directors" and
"Compliance with Section 16(a) of the Exchange Act" in the 1996 Proxy Statement
is incorporated herein by reference. See also "Executive Officers of the
Registrant," Part I, above.
ITEM 11. EXECUTIVE COMPENSATION
The information contained in the sections entitled "Executive Compensation,"
"Options and Stock Appreciation Rights," "Pension Plan," "Executive Compensation
and Severance Agreements, Including Change of Control Provisions," and
"Directors' Fees and Compensation" is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information contained in the sections entitled "Security Ownership of
Management" and "Security Ownership of Certain Beneficial Owners" in the 1996
Proxy Statement is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information contained in the sections entitled "Executive Compensation,"
"Executive Compensation and Severance Agreements, Including Change of Control
Provisions" and "Other Agreements" in the 1996 Proxy Statement is incorporated
herein by reference.
-13-
<PAGE> 14
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a)(1) LIST OF FINANCIAL STATEMENTS
The following financial statements, together with the report thereon of Arthur
Andersen LLP dated February 7, 1996, appearing in the Company's 1995 Annual
Report, are incorporated herein by reference.
Scotsman Industries, Inc. and Subsidiaries:
Report of Independent Public Accountants
Consolidated Statement of Income for each of the three years ended
December 31, 1995, January 1, 1995, and January 2, 1994.
Consolidated Balance Sheet as of December 31, 1995, and January 1,
1995.
Consolidated Statement of Cash Flows for each of the three years ended
December 31, 1995, January 1, 1995, and January 2, 1994.
Consolidated Statement of Shareholders' Equity for each of the three
years ended December 31, 1995, January 1, 1995, and January 2, 1994.
Notes to Consolidated Financial Statements.
Five Year Summary.
Selected Quarterly Financial Data (Unaudited).
(a)(2) LIST OF FINANCIAL STATEMENT SCHEDULES
Report of Independent Public Accountants on Schedules.
II - Valuation and Qualifying Accounts
(a)(3) LIST OF EXHIBITS
The following exhibits are filed as part of this report. Each management
contract or compensatory plan or arrangement required to be filed as an exhibit
to this report has been marked with an asterisk. Unless otherwise indicated, all
documents incorporated by reference to prior filings have been filed under
Commission File No. 1-10182.
-14-
<PAGE> 15
Exhibit 2 - Agreement for the Sale, Purchase and Assignment of
the Entire Share Capital of Hartek Beverage Handling
GmbH and Hartek Awagem Vertriebsges, m.b.H., dated
December 31, 1995, among Hartek Beverage Handling
B.V., Hartwall Bolagen AB, Scotsman Group Inc. and
Scotsman Industries, Inc.
Exhibit 3.1 - Restated Certificate of Incorporation of the Company
(incorporated herein by reference to the Company's
10-K for the fiscal year ended December 31, 1989).
Exhibit 3.2 - By-Laws of the Company, as amended (incorporated
herein by reference to the Company's 8-K, dated June
21, 1991).
Exhibit 4 - Rights Agreement dated as of April 14, 1989 between
Scotsman Industries, Inc. and Harris Trust & Savings
Bank (incorporated herein by reference to the
Company's 8-K, dated April 25, 1989), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994
(incorporated herein by reference to Scotsman
Industries, Inc. Amendment No. 4 to General Form for
Registration of Securities on Form 10/A, as filed
with the Commission on January 27, 1994).
Exhibit 10.1 - Reorganization and Distribution Agreement dated as of
March 15, 1989 by and among Household International,
Inc., Eljer Industries, Inc., Schwitzer, Inc. and
Scotsman Industries, Inc. (incorporated herein by
reference to the Company's 8-K, dated April 25,
1989).
Exhibit 10.2 - Tax Sharing Agreement dated as of March 15, 1989
among Household International, Inc., Eljer
Industries, Inc., Schwitzer, Inc. and Scotsman
Industries, Inc. (incorporated herein by reference to
the Company's 8-K, dated April 25, 1989).
Exhibit 10.3 - Benefits and Labor Agreement dated as of March 15,
1989 among Household International, Inc., Eljer
Industries, Inc., Schwitzer, Inc. and Scotsman
Industries, Inc. (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December
31, 1989).
Exhibit 10.4 - Reimbursement Agreement dated as of April 14, 1989 by
and between Household International, Inc. and
Scotsman Group, Inc. (incorporated herein by
reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
Exhibit 10.5 - Supplemental Reimbursement Agreement dated as of
August 4, 1989 among Household International, Inc.,
Scotsman Industries, Inc. and Scotsman Group, Inc.
(incorporated herein by reference to the Company's
10-K for the fiscal year ended December 31, 1989), as
amended by Amendment No. 1 thereto, dated as of
September 20, 1993 (incorporated herein by reference
to the Company's 10-Q for the quarter ended October
3, 1993).
-15-
<PAGE> 16
Exhibit 10.6 - Credit Agreement among Scotsman Group Inc. and the
other parties named therein, as Borrowers, the
Lenders named therein and The First National Bank of
Chicago, as Agent, dated as of April 29, 1994
(incorporated herein by reference to the Company's
10-Q for the quarter ended April 3, 1994), as amended
by Amendment No. 1 thereto, dated March 31, 1995
(incorporated herein by reference to the Company's
10-Q for the quarter ended April 2, 1995).
Exhibit 10.7 - Amended and Restated Note Purchase Agreement dated as
of April 29, 1994, as separately entered into among
Scotsman Group Inc., Scotsman Industries, Inc., and
each of the following: Connecticut General Life
Insurance Company, individually and for the account
of one or more separate accounts, Cigna Property and
Casualty Insurance Company, INA Life Insurance
Company of New York, Life Insurance Company of North
America, Ohio National Life Assurance Corporation and
Southern Farm Bureau Life Insurance Company
(incorporated herein by reference to the Company's
10-Q for the quarter ended April 3, 1994).
Exhibit 10.8 - Promissory Notes in the principal amounts of
$5,000,000 and $4,000,000, respectively, each made as
of June 30, 1995 by Scotsman Group Inc. to Comerica
Bank-Illinois, together with the related
Reaffirmation of Guaranty and Consent, dated June 30,
1995, by Scotsman Industries, Inc. in favor of
Comerica Bank-Illinois.
Exhibit 10.9 - Reimbursement Agreement, dated March 1, 1988, among
Household Manufacturing, Inc., King-Seeley Thermos
Co. and the National Westminster Bank PLC, as amended
by the Amendments dated as of April 14, 1989,
December 12, 1989, June 26, 1992, November 20, 1992,
March 17, 1993, among Scotsman Group Inc., Scotsman
Industries, Inc. and The Bank of Nova Scotia
(incorporated herein by reference to the Company's
10-K for the fiscal year ended January 3, 1993) and
the Amendment dated April 29, 1994 (incorporated
herein by reference to the Company's 10-Q for the
quarter ended April 3, 1994).
Exhibit 10.10 - ISDA Master Agreement, dated as of May 19, 1994,
including the Schedule thereto, dated as of May 19,
1994, and an Amended Confirmation, dated June 6,
1994, between Bank of America Illinois (formerly
known as Continental Bank) and Scotsman Group Inc.
(incorporated herein by reference to the Company's
10-Q for the quarter ended October 2, 1994).
Exhibit 10.11 - ISDA Master Agreement, dated as of March 3, 1994,
including the Schedule and Amended Confirmation (2)
thereto, between The First National Bank of Chicago
and Scotsman Group Inc. (incorporated herein by
reference to the Company's 10-K for the fiscal year
ended January 1, 1995)
Exhibit 10.12* - Long-Term Executive Incentive Compensation Plan of
Scotsman Industries, Inc., as amended May 21, 1992
(incorporated herein by reference to the Company's
10-Q for the quarter ended June 28, 1992).
-16-
<PAGE> 17
Exhibit 10.13* - Scotsman Industries, Inc., Executive Incentive
Compensation Program, Plans AA, A-1 and A-2
(incorporated herein by reference to the Company's
10-K for the fiscal year ended December 30, 1990) and
B-1.
Exhibit 10.14* - Scotsman Group Inc. Supplemental Tax Reduction
Investment Plan, dated as of April 14, 1989
(incorporated herein by reference to the Company's
10-K for the fiscal year ended December 30, 1990).
Exhibit 10.15* - Non-Employee Directors Stock Option Plan, effective
as of August 11, 1994 (incorporated herein by
reference to the Company's Registration Statement on
Form S-8, No. 33-59397).
Exhibit 10.16* - Employment Agreement dated September 16, 1991 between
Scotsman Group, Inc. and Richard C. Osborne
(incorporated herein by reference to the Company's
10-Q for the quarter ended September 29, 1991).
Exhibit 10.17* - Employment Agreement dated September 16, 1991 between
Scotsman Group, Inc. and Emanuele Lanzani
(incorporated herein by reference to the Company's
10-K for the fiscal year ended December 29, 1991).
Exhibit 10.18* - Employment Agreement dated September 16, 1991 between
Scotsman Group, Inc. and Donald D. Holmes
(incorporated herein by reference to the Company's
10-Q for the quarter ended September 29, 1991).
Exhibit 10.19* - Executive Severance Agreement dated as of September
16, 1991 between Richard C. Osborne and Scotsman
Group, Inc. (incorporated herein by reference to the
Company's 10-Q for the quarter ended September 29,
1991), as amended by Amendment No. 1 thereto, dated
as of January 11, 1994 (incorporated herein by
reference to the Company's 10-K for the fiscal year
ended January 2, 1994).
Exhibit 10.20* - Executive Severance Agreement dated as of September
16, 1991 between Emanuele Lanzani and Frimont S.p.A
(incorporated herein by reference to the Company's
10-K for the fiscal year ended December 29, 1991), as
amended by Amendment No. 1 thereto, dated as of
January 11, 1994 (incorporated herein by reference to
the Company's 10-K for the fiscal year ended January
2, 1994).
Exhibit 10.21* - Executive Severance Agreement dated as of September
16, 1991 between Donald D. Holmes and Scotsman Group
Inc. (incorporated herein by reference to the
Company's 10-Q for the quarter ended September 29,
1991), as amended by Amendment No. 1 thereto, dated
as of January 11, 1994, between Donald D. Holmes and
Scotsman Group, Inc (incorporated herein by reference
to the Company's 10-K for the fiscal year ended
January 2, 1994).
-17-
<PAGE> 18
Exhibit 10.22* - Retirement Program for Emanuele Lanzani of Frimont,
S.p.A., Subsidiary of King-Seeley Thermos Co. dated
July 25, 1984 (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December
31, 1989).
Exhibit 10.23 - Agreement dated March 27, 1981 by and between
Emanuele Lanzani and King-Seeley Thermos Co. and
Frimont, S.p.A. (incorporated herein by reference to
the Company's 10-K for the fiscal year ended December
31, 1989), as amended by the Amendment dated March
20, 1990 (incorporated herein by reference to the
Company's 10-Q for the quarter ended September 30,
1990).
Exhibit 10.24 - Industrial Building Lease Agreement dated September
21, 1988 by and between American National Bank and
Trust Company of Chicago, as Trustee under Trust
Agreement No. 64661 dated June 17, 1985, and
Household Manufacturing, Inc. (incorporated herein by
reference to the Company's 10-K for the fiscal year
ended December 31, 1989).
Exhibit 10.25 - Lease Agreement, dated as of April 16, 1993, by and
between the Western and Southern Life Insurance
Company and Booth, Inc. together with the related
Guaranty by Scotsman Group Inc. dated as of April 8,
1993 (incorporated herein by reference to the
Company's 10-Q for the quarter ended October 2,
1993).
Exhibit 10.26 - First Amendment to the Lease Agreement, dated October
27, 1993, by and between the Western and Southern
Life Insurance Company and Booth, Inc. (incorporated
herein by reference to the Company's 10-K for the
fiscal year ended January 1, 1995).
Exhibit 10.27 - Second Amendment to the Lease Agreement, dated
December 3, 1993, by and between the Western and
Southern Life Insurance Company and Booth, Inc.
(incorporated herein by reference to the Company's
10-K for the fiscal year ended January 1, 1995).
Exhibit 10.28 - Agreement and Plan of Merger, dated as of January 11,
1994, among Scotsman Industries, Inc., Scotsman
Acquisition Corporation, DFC Holding Corporation, The
Delfield Company, Onex Corporation, Onex DHC LLC,
Pacific Mutual Life Insurance Co., PM Group Life
Insurance Co., EJJM, Matthew O. Diggs, Jr., Timothy
C. Collins, W. Joseph Manifold, Charles R. McCollom,
Anita J. Moffatt Trust, Anita J. Moffatt, Remo
Panella, Teddy F. Reed, Robert L. Schafer, Graham E.
Tillotson, John A. Tilmann Trust, John A. Tilmann,
Kevin E. McCrone, Michael P. McCrone, Ronald A.
Anderson and Continental Bank N.A. (incorporated
herein by reference to the Company's 8-K, dated
January 13, 1994), as amended by the First
Amendment thereto, dated as of March 17, 1994
(incorporated herein by reference to the Company's
10-K for the fiscal year ended January 2, 1994).
-18-
<PAGE> 19
Exhibit 10.29 - Share Acquisition Agreement, dated as of
January 11, 1994, among Scotsman Industries,
Inc., Whitlenge Acquisition Limited,
Whitlenge Drink Equipment Limited, Timothy
C. Collins, Graham F. Cook, Christopher R.L.
Wheeler, Michael de St. Paer and John
Rushton (incorporated herein by reference
to the Company's 8-K, dated January 13,
1994), as amended by the First Amendment
thereto, dated as of March 17, 1994
(incorporated herein by reference to the
Company's 10-K for the fiscal year ended
January 2, 1994).
Exhibit 13 - Those portions of Scotsman's 1995 Annual
Report to Shareholders which are
incorporated herein by reference under Part
I, Item 1, "Financial Information about
Foreign and Domestic Operations," and Part
II, Items 5, 6, 7, and 8 of the Form 10-K,
consisting of "Management's Discussion and
Analysis of Financial Condition and Results
of Operations," the report of Arthur
Andersen LLP and the consolidated financial
statements, together with the notes thereto
(as set forth in the list of financial
statements under Item 14(a)(1)), "Five Year
Summary," "Selected Quarterly Financial
Data" and "Common Stock."
Exhibit 21 - List of Subsidiaries
Exhibit 23 - Consent of Arthur Andersen LLP
Exhibit 27 - Article 5 Financial Data Schedule for the
Fiscal Year Ended December 31, 1995.
Copies of the exhibits referred to above will be furnished to
shareholders upon written request at a cost of fifteen cents per page.
Requests should be made to Scotsman Industries, Inc. 775 Corporate
Woods Parkway, Vernon Hills, Illinois 60061, Attention: Donald D.
Holmes, Secretary.
(B) REPORTS ON FORM 8-K
The Registrant filed no reports on Form 8-K during the quarterly period ended
December 31, 1995.
(C) EXHIBITS
The exhibits required under this Item 14(c) are filed as a separate section of
this report.
(D) FINANCIAL STATEMENT SCHEDULES
See pages 21 through 22 of this report.
-19-
<PAGE> 20
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
Dated: March 28, 1996 SCOTSMAN INDUSTRIES, INC.
BY: /s/ R.C. Osborne
--------------------------------------
R.C. Osborne, Chairman of the Board,
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of Scotsman and in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ R.C. Osborne , Chairman of the Board, President, March 28, 1996
- -------------------------------------- Chief Executive Officer & Director
(R.C. Osborne) (Principal Executive Officer)
/s/ D.C. Clark , Director March 28, 1996
- --------------------------------------
(D.C. Clark)
/s/ T.C. Collins , Director March 28, 1996
- --------------------------------------
(T.C. Collins)
/s/ F.W. Considine , Director March 28, 1996
- --------------------------------------
(F.W. Considine)
/s/ M.O. Diggs, Jr. , Director March 28, 1996
- --------------------------------------
(M.O. Diggs, Jr.)
/s/ G.D. Kennedy , Director March 28, 1996
- --------------------------------------
(G.D. Kennedy)
/s/ J.J. O'Connor , Director March 28, 1996
- --------------------------------------
(J.J. O'Connor)
/s/ R.G. Rettig , Director March 28, 1996
- --------------------------------------
(R.G. Rettig)
/s/ D.D. Holmes , Vice President-Finance and March 28, 1996
- -------------------------------------- Secretary (Principal Financial &
(D.D. Holmes) Accounting Officer)
</TABLE>
-20-
<PAGE> 21
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To the Shareholders of Scotsman Industries, Inc.:
We have audited, in accordance with generally accepted auditing standards, the
consolidated financial statements included in Scotsman Industries, Inc.'s 1995
Annual Report to Shareholders incorporated by reference in this Form 10-K, and
have issued our report thereon dated February 7, 1996. Our report on the
consolidated financial statements includes an explanatory paragraph with respect
to the change in accounting for post-retirement benefits other than pensions,
post-employment expenses and income taxes effective January 4, 1993, as
discussed in Note 10 and Note 12 to the consolidated financial statements. Our
audit was made for the purpose of forming an opinion on those statements taken
as a whole. The schedule listed in Item 14(a)(2) Financial Statement Schedules
is the responsibility of the Company's management and is presented for purposes
of complying with the Securities and Exchange Commission's rules and is not part
of the basic consolidated financial statements. This schedule has been subjected
to the auditing procedures applied in the audit of the basic consolidated
financial statements and, in our opinion, fairly states in all material respects
the financial data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 7, 1996
-21-
<PAGE> 22
SCOTSMAN INDUSTRIES, INC.
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
(In thousands)
<TABLE>
<CAPTION>
Additions
----------------------
Charged Charged
Balance at to to Balance
Beginning Costs/ Other at End
of Period Expenses Accounts(A) Deductions of Period
--------- -------- ----------- ---------- ---------
<S> <C> <C> <C> <C> <C>
1993 -
Accounts Receivable
Reserves $1,260 $ 453 $ 103 $(268) $1,548
====== ===== ===== ===== ======
1994 -
Accounts Receivable
Reserves $1,548 $ 430 $ 716 $(398) $2,296
====== ===== ===== ===== ======
1995 -
Accounts Receivable
Reserves $2,296 $ 645 $ 572 $(553) $2,960
====== ===== ===== ===== ======
</TABLE>
- --------------
(A) Includes the translation impact and also includes increases due to
inclusion of the accounts receivable reserves of the acquired businesses
as of the date of their acquisition by the Company.
-22-
<PAGE> 23
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
- ------- -------------- -----------
<S> <C> <C>
2 Agreement for the Sale, Purchase and Assignment of the Entire Share
Capital of Hartek Beverage Handling GmbH and Hartek Awagem
Vertriebsges, m.b.H., dated December 31, 1995, among Hartek
Beverage Handling B.V., Hartwall Bolagen AB, Scotsman Group Inc.
and Scotsman Industries, Inc.
3.1 Restated Certificate of Incorporation of the Company (incorporated
herein by reference to the Company's 10-K for the fiscal year ended
December 31, 1989).
3.2 By-Laws of the Company, as amended (incorporated herein by
reference to the Company's 8-K, dated June 21, 1991).
4 Rights Agreement dated as of April 14, 1989 between Scotsman
Industries, Inc. and Harris Trust & Savings Bank (incorporated herein
by reference to the Company's 8-K, dated April 25, 1989), as
amended by Amendment No. 1 thereto, dated as of January 11, 1994
(incorporated herein by reference to Scotsman Industries, Inc.
Amendment No. 4 to General Form for Registration of Securities on
Form 10/A, as filed with the Commission on January 27, 1994).
10.1 Reorganization and Distribution Agreement dated as of March 15,
1989 by and among Household International, Inc., Eljer Industries,
Inc., Schwitzer, Inc. and Scotsman Industries, Inc. (incorporated
herein by reference to the Company's 8-K, dated April 25, 1989).
10.2 Tax Sharing Agreement dated as of March 15, 1989 among Household
International, Inc., Eljer Industries, Inc., Schwitzer, Inc. and
Scotsman Industries, Inc. (incorporated herein by reference to the
Company's 8-K, dated April 25, 1989).
10.3 Benefits and Labor Agreement dated as of March 15, 1989 among
Household International, Inc., Eljer Industries, Inc., Schwitzer, Inc.
and Scotsman Industries, Inc. (incorporated herein by reference to the
Company's 10-K for the fiscal year ended December 31, 1989).
10.4 Reimbursement Agreement dated as of April 14, 1989 by and between
Household International, Inc. and Scotsman Group, Inc. (incorporated
herein by reference to the Company's 10-K for the fiscal year ended
December 31, 1989).
</TABLE>
-23-
<PAGE> 24
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
- ------- -------------- -----------
<S> <C> <C>
10.5 Supplemental Reimbursement Agreement dated as of August 4, 1989
among Household International, Inc., Scotsman Industries, Inc. and
Scotsman Group, Inc. (incorporated herein by reference to the
Company's 10-K for the fiscal year ended December 31, 1989), as
amended by Amendment No. 1 thereto, dated as of September 20,
1993 (incorporated herein by reference to the Company's 10-Q for the
quarter ended October 3, 1993).
10.6 Credit Agreement among Scotsman Group Inc. and the other parties
named therein, as Borrowers, the Lenders named therein and The First
National Bank of Chicago, as Agent, dated as of April 29, 1994
(incorporated herein by reference to the Company's 10-Q for the
quarter ended April 3, 1994), as amended by Amendment No. 1
thereto, dated March 31, 1995 (incorporated herein by reference to the
Company's 10-Q for the quarter ended April 2, 1995).
10.7 Amended and Restated Note Purchase Agreement dated as of April 29,
1994, as separately entered into among Scotsman Group Inc.,
Scotsman Industries, Inc., and each of the following: Connecticut
General Life Insurance Company, individually and for the account of
one or more separate accounts, Cigna Property and Casualty Insurance
Company, INA Life Insurance Company of New York, Life Insurance
Company of North America, Ohio National Life Assurance
Corporation and Southern Farm Bureau Life Insurance Company
(incorporated herein by reference to the Company's 10-Q for the
quarter ended April 3, 1994).
10.8 Promissory Notes in the principal amounts of $5,000,000 and
$4,000,000, respectively, each made as of June 30, 1995 by Scotsman
Group Inc. to Comerica Bank-Illinois, together with the related
Reaffirmation of Guaranty and Consent, dated June 30, 1995, by
Scotsman Industries, Inc. in favor of Comerica Bank-Illinois.
10.9 Reimbursement Agreement, dated March 1, 1988, among Household
Manufacturing, Inc., King-Seeley Thermos Co. and the National
Westminster Bank PLC, as amended by the Amendments dated as of
April 14, 1989, December 12, 1989, June 26, 1992, November 20,
1992, March 17, 1993, among Scotsman Group Inc., Scotsman
Industries, Inc. and The Bank of Nova Scotia (incorporated herein by
reference to the Company's 10-K for the fiscal year ended January 3,
1993) and the Amendment dated April 29, 1994 (incorporated herein
by reference to the Company's 10-Q for the quarter ended April 3,
1994).
</TABLE>
-24-
<PAGE> 25
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
- ------- -------------- -----------
<S> <C> <C>
10.10 ISDA Master Agreement, dated as of May 19, 1994, including
the Schedule thereto, dated as of May 19, 1994, and an
Amended Confirmation, dated June 6, 1994, between Bank of
America Illinois (formerly known as Continental Bank) and
Scotsman Group Inc. (incorporated herein by reference to the
Company's 10-Q for the quarter ended October 2, 1994).
10.11 ISDA Master Agreement, dated as of March 3, 1994, including
the Schedule and Amended Confirmation (2) thereto, between
The First National Bank of Chicago and Scotsman Group Inc.
(incorporated herein by reference to the Company's 10-K for the
fiscal year ended January 1, 1995)
10.12 Long-Term Executive Incentive Compensation Plan of Scotsman
Industries, Inc., as amended May 21, 1992 (incorporated
herein by reference to the Company's 10-Q for the quarter
ended June 28, 1992).
10.13 Scotsman Industries, Inc., Executive Incentive Compensation
Program, Plans AA, A-1 and A-2 (incorporated herein by
reference to the Company's 10-K for the fiscal year ended
December 30, 1990) and B-1.
10.14 Scotsman Group Inc. Supplemental Tax Reduction Investment Plan,
dated as of April 14, 1989 (incorporated herein by reference to the
Company's 10-K for the fiscal year ended December 30, 1990).
10.15 Non-Employee Directors Stock Option Plan, effective as of August 11,
1994 (incorporated herein by reference to the Company's Registration
Statement on Form S-8, No. 33-59397).
10.16 Employment Agreement dated September 16, 1991 between Scotsman
Group, Inc. and Richard C. Osborne (incorporated herein by reference
to the Company's 10-Q for the quarter ended September 29, 1991).
10.17 Employment Agreement dated September 16, 1991 between Scotsman
Group, Inc. and Emanuele Lanzani (incorporated herein by reference
to the Company's 10-K for the fiscal year ended December 29, 1991).
10.18 Employment Agreement dated September 16, 1991 between Scotsman
Group, Inc. and Donald D. Holmes (incorporated herein by reference
to the Company's 10-Q for the quarter ended September 29, 1991).
10.19 Executive Severance Agreement dated as of September 16, 1991
between Richard C. Osborne and Scotsman Group, Inc.
(incorporated herein by reference to the Company's 10-Q for
the quarter ended September 29, 1991), as amended by
Amendment No. 1 thereto, dated as of January 11, 1994
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended January 2, 1994).
</TABLE>
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<PAGE> 26
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
- ------- -------------- -----------
<S> <C> <C>
10.20 Executive Severance Agreement dated as of September 16, 1991
between Emanuele Lanzani and Frimont S.p.A (incorporated
herein by reference to the Company's 10-K for the fiscal
year ended December 29, 1991), as amended by Amendment No. 1
thereto, dated as of January 11, 1994 (incorporated herein
by reference to the Company's 10-K for the fiscal year ended
January 2, 1994).
10.21 Executive Severance Agreement dated as of September 16, 1991
between Donald D. Holmes and Scotsman Group Inc. (incorporated
herein by reference to the Company's 10-Q for the quarter ended
September 29, 1991), as amended by Amendment No. 1 thereto, dated
as of January 11, 1994, between Donald D. Holmes and Scotsman
Group, Inc (incorporated herein by reference to the Company's 10-K
for the fiscal year ended January 2, 1994).
10.22 Retirement Program for Emanuele Lanzani of Frimont, S.p.A.,
Subsidiary of King-Seeley Thermos Co. dated July 25, 1984
(incorporated herein by reference to the Company's 10-K for the fiscal
year ended December 31, 1989).
10.23 Agreement dated March 27, 1981 by and between Emanuele
Lanzani and King-Seeley Thermos Co. and Frimont, S.p.A.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989), as amended by the
Amendment dated March 20, 1990 (incorporated herein by
reference to the Company's 10-Q for the quarter ended
September 30, 1990).
10.24 Industrial Building Lease Agreement dated September 21, 1988
by and between American National Bank and Trust Company of
Chicago, as Trustee under Trust Agreement No. 64661 dated
June 17, 1985, and Household Manufacturing, Inc.
(incorporated herein by reference to the Company's 10-K for
the fiscal year ended December 31, 1989).
10.25 Lease Agreement, dated as of April 16, 1993, by and between
the Western and Southern Life Insurance Company and Booth,
Inc. together with the related Guaranty by Scotsman Group
Inc. dated as of April 8, 1993 (incorporated herein by
reference to the Company's 10- Q for the quarter ended
October 2, 1993).
10.26 First Amendment to the Lease Agreement, dated October 27,
1993, by and between the Western and Southern Life Insurance
Company and Booth, Inc. (incorporated herein by reference to
the Company's 10-K for the fiscal year ended January 1, 1995)
10.27 Second Amendment to the Lease Agreement, dated December 3,
1993, by and between the Western and Southern Life Insurance
Company and Booth, Inc. (incorporated herein by reference to
the Company's 10-K for the fiscal year ended January 1, 1995)
</TABLE>
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<PAGE> 27
<TABLE>
<CAPTION>
Exhibit Page Number
Number Description(1) of Exhibit
- ------- -------------- -----------
<S> <C> <C>
10.28 Agreement and Plan of Merger, dated as of January 11, 1994, among
Scotsman Industries, Inc., Scotsman Acquisition Corporation, DFC
Holding Corporation, The Delfield Company, Onex Corporation,
Onex DHC LLC, Pacific Mutual Life Insurance Co., PM Group Life
Insurance Co., EJJM, Matthew O. Diggs, Jr., Timothy C. Collins,
W. Joseph Manifold, Charles R. McCollom, Anita J. Moffatt Trust,
Anita J. Moffatt, Remo Panella, Teddy F. Reed, Robert L. Schafer,
Graham E. Tillotson, John A. Tilmann Trust, John A. Tilmann, Kevin
E. McCrone, Michael P. McCrone, Ronald A. Anderson and
Continental Bank N.A. (incorporated herein by reference to the
Company's 8-K, dated January 13, 1994), as amended by the First
Amendment thereto, dated as of March 17, 1994 (incorporated herein
by reference to the Company's 10-K for the fiscal year ended January
2, 1994).
10.29 Share Acquisition Agreement, dated as of January 11, 1994, among
Scotsman Industries, Inc., Whitlenge Acquisition Limited, Whitlenge
Drink Equipment Limited, Timothy C. Collins, Graham F. Cook,
Christopher R.L. Wheeler, Michael de St. Paer and John Rushton
(incorporated herein by reference to the Company's 8-K, dated
January 13, 1994), as amended by the First Amendment thereto, dated
as of March 17, 1994 (incorporated herein by reference to the
Company's 10-K for the fiscal year ended January 2, 1994).
13 Those portions of Scotsman's 1995 Annual Report to Shareholders
which are incorporated herein by reference under Part I, Item 1,
"Financial Information about Foreign and Domestic Operations," and
Part II, Items 5, 6, 7, and 8 of the Form 10-K, consisting of
"Management's Discussion and Analysis of Financial Condition and
Results of Operations," the report of Arthur Andersen LLP and the
consolidated financial statements, together with the notes thereto (as
set forth in the list of financial statements under Item 14(a)(1)), "Five
Year Summary," "Selected Quarterly Financial Data" and "Common
Stock."
21 List of Subsidiaries
23 Consent of Arthur Andersen LLP
27 Article 5 Financial Data Schedule for the Fiscal Year Ended December
31, 1995.
</TABLE>
(1) Unless otherwise indicated, all documents incorporated herein by reference
to prior filings have been incorporated by reference to filings made under
Commission File No. 1-10182.
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<PAGE> 1
EXHIBIT 2
AGREEMENT FOR THE SALE, PURCHASE AND ASSIGNMENT
OF THE ENTIRE SHARE CAPITAL OF
HARTEK BEVERAGE HANDLING GmbH
AND
HARTEK-AWAGEM VERTRIEBGES. m.b.H.
1. Mr E. Hartwall, identified through his passport, acting not in his own
name but as director of HARTEK BEVERAGE HANDLING BV, which has its registered
offices at Fokkerstraat 11, 2811 Reeuwijk, Netherlands, and is registered in the
Commercial Register of the Chamber of Industry and Commerce for Central Holland
under file number 37302 (hereinafter referred to as THE VENDOR). A copy of an
extract from the Commercial Register of the Vendor is attached as APPENDIX 1.
2. Mr D. Holmes, identified through his passport, acting not in his own
name but as authorized agent for SCOTSMAN GROUP, INC., which has its registered
office at Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware,
USA (hereinafter referred to as THE PURCHASER), pursuant to the Power of
Attorney, a copy of which is attached hereto as APPENDIX 2.
3. Mr E. Hartwall, identified through his passport, acting not in his own
name but as director of HARTWALL BOLAGEN AB, Korsakerswagen 4, 00390
Helsingfors, Finland (hereinafter referred to as HARTWALL BOLAGEN).
4. Mr D. Holmes, identified through his passport, acting not in his own
name but as authorized agent for SCOTSMAN INDUSTRIES, INC., 775 Corporate Woods
Parkway, Vernon Hills, Illinois, USA (hereinafter referred to as SCOTSMAN),
pursuant to the Power of Attorney, a copy of which is attached hereto as
APPENDIX 3.
The above-named parties represented by the above-named individuals hereby
conclude the following:
<PAGE> 2
AGREEMENT FOR THE SALE, PURCHASE AND ASSIGNMENT
OF SHARES
PREAMBLE
A. The Vendor is the sole shareholder, and HARTWALL BOLAGEN is the
ultimate parent company of HARTEK BEVERAGE HANDLING GmbH, Otto Hahn Strasse
4, Radevormwald, Germany, which is registered in the Commercial Register of
Wipperfurth under file number HRB 1361 (hereinafter referred to as HARTEK), and
of HARTEK AWAGEM VERTRIEBSGES. m.b.H., Josef Osterreichergasse 41-4, Vienna,
Austria (hereinafter referred to as HARTEK AWAGEM) which is registered in the
Commercial Register of Vienna under file number BP360B/FN64432d.
B. Copies of the following documents are attached to this Agreement as
Appendices:
(a) extracts from the Commercial Registers relating to Hartek dated 10
November 1995 and relating to Hartek Awagem dated 19 December 1995
showing all matters requiring registration as of the date of this
Agreement (APPENDIX 4);
(b) the Articles of Association of the Companies as last amended (in der
zuletzt beschlossenen Fassung) (APPENDIX 5).
C. The Vendor intends to sell to the Purchaser and the Purchaser intends
to acquire from the Vendor all of the Shares in the Companies as going concerns
in accordance with the terms and conditions of this Agreement.
D. Hartwall Bolagen intends to guarantee the fulfillment of certain
obligations of the Vendor under this Agreement, and Scotsman intends to
guarantee the fulfillment of certain obligations of the Purchaser under this
Agreement.
THEREFORE, IT IS HEREBY AGREED AS FOLLOWS:
DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, except so far as the context otherwise requires, the
following terms shall have the following meanings:
ACCOUNTS means:
(a) the audited balance sheets of Hartek and Hartek Awagem as at the
Accounts Dates; and
(b) the audited profit and loss accounts of Hartek and Hartek Awagem as at
the Accounts Dates,
together with any notes, reports, statements or documents permitted or required
by German law in relation to Hartek and by Austrian law in relation to Hartek
Awagem to be made thereon or annexed or attached thereto;
ACCOUNTS DATE means the last day of the financial years of Hartek and Hartek
Awagem;
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<PAGE> 3
ADDITIONAL CONSIDERATION has the meaning given in clause 4.3;
ATS means Austrian Schillings;
AUSTRIAN ACCOUNTING PRINCIPLES means generally accepted accounting principles in
Austria;
BUILDINGS means all buildings and constructions existing on the Plant Premises
at the time of signature of this Agreement;
CASCADE means Hartek Cascade GmbH, Kirchgasse 5, Ratingen;
CASCADE PROFIT AND LOSS PARTICIPATION AGREEMENT means the domination and profit
and loss participation agreement between Hartek and Cascade dated 26 February
1993;
CASH BALANCE means the aggregate amount of Hartek and Hartek Awagem's cash
reserves as at the Transfer Date;
COMPANY OR THE COMPANIES means Hartek and Hartek Awagem singly and collectively;
COMPLETION ACCOUNTS means the consolidated balance sheet and consolidated profit
and loss statements for both Hartek and Hartek Awagem as at the Transfer Date to
be established in accordance with clauses 5.1 to 5.5;
DATE OF RECEIPT OF THE COMPLETION ACCOUNTS has the meaning given in clause
5.5.2;
ESCROW ACCOUNT (Notar-Anderkonto) means an escrow account established or to be
established with the Escrow Agent at such bank and account as he may specify for
the purpose;
ESCROW AGENT means Herr J. Schaudinn, Frankfurt, being a German notary public;
ESCROW AMOUNT means DM 1,500,000 (one million five hundred thousand
deutschmarks);
ESCROW GUARANTEE means an unconditional guarantee up to the Escrow Amount
payable upon the first written demand of the Purchaser issued by a first class
bank in Finland in favor of the Purchaser in form and substance reasonably
satisfactory to the Purchaser pursuant to clause 4.6;
ESTIMATED FUNDING COST DIFFERENCE means DM600,000 (six hundred thousand
deutschmarks);
ESTIMATED MONETARY DEBTS means DM7,500,000 (seven million, five hundred thousand
deutschmarks);
EXPERTS means an independent firm of internationally recognized chartered
accountants to be agreed upon by the Vendor and the Purchaser pursuant to clause
5.4 or, failing Agreement between the Vendor and the Purchaser pursuant to
clause 5.4, to be selected by the president for the time being of the
Industrie-und Handelskammer in Dusseldorf;
FUNDING COST DIFFERENCE means the amount by which the aggregate projected cost
to Hartek of borrowing the Monetary Debts from the Transfer Date to their
respective maturities exceeds the aggregate projected
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<PAGE> 4
cost which Scotsman would incur if it borrowed an amount equal to the Monetary
Debts for such period, discounted forwards at the rate per annum which is
Scotsman's cost of borrowing (as aforesaid) and determined in accordance with
clause 5.6.8;
GERMAN ACCOUNTING PRINCIPLES means accounting principles in accordance with
ss.246 et sequ. of the German Commercial Code and generally accepted in Germany
(Grundsatze ordnungsmassiger Buchfuhrung und Bilanzierung);
GROUP COST AGREEMENT means the agreement dated 23 November 1995 made between
Hartek Invest OY AB and Hartek;
HARTEK means Hartek Beverage Handling GmbH, Otto Hahn Strasse 4, Radevormwald;
HARTEK AWAGEN means Hartek Awagem Vertriebsges.m.b.H., Josef Osterreichergasse
41-4, Vienna, Austria;
HARTEK AWAGEM BUSINESS means the trading with goods of all kinds, especially
drink dispensing systems and catering equipment, as well as the planning,
installation and servicing of such equipment;
HARTEK AWAGEM SHARES means all shares in Hartek Awagem;
HARTEK AWAGEM SHARE CAPITAL means the registered share capital (Stamnikapital)
of Hartek Awagem amounting to ATS 1,500,000;
HARTEK BUSINESS means the manufacturing and sale of equipment and components for
the storage, the cooling and the dispensing of beverages of all kinds as well as
of similar devices, especially the manufacturing and sale of beverage dispensing
systems;
HARTEK SHARES means all shares in Hartek;
HARTEK SHARE CAPITAL means the registered share capital (Stamnikapital) of
Hartek amounting to DM1,150,000;
HARTWALL BOLAGEN means Hartwall Bolagen AB, Korsakerswagen 4, 00390 Helsingfors,
Finland;
INDUSTRIAL PROPERTY RIGHTS means all industrial property rights including, in
particular, patents (Patente), marks (Marken), brand names, copyrights and
design rights (Gebrauch- und Geschmacksmuster);
KALL means Kall GmbH;
KALL PROFIT AND LOSS PARTICIPATION AGREEMENT means the domination and profit and
loss participation agreement between Hartek and Kall dated 18 July 1991;
LEASED PREMISES means all real property on which the Companies operate or of
which they otherwise make use other than the Plant Premises;
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<PAGE> 5
LICENSES means all licenses and permits (Erlaubnisse und Genehmigungen) required
by any of the Companies for carrying on its business effectively in the places
and in the manner in which it is carried on as at the date of signature of this
Agreement;
MAIN AMOUNT means DM5,400,000 (five million four hundred thousand deutschmarks);
MONETARY DEBTS means all interest bearing bank debts of the Companies on a
consolidated basis as at the Transfer Date;
NET EQUITY means (in the sense of section 266 paragraph 3 lit. A of the German
Commercial Code -Handelsgesetzbuch, HGB) the monetary figure expressed in DM for
Hartek and Hartek Awagem on a consolidated basis as shown in the Completion
Accounts which results from the following calculation:
subscribed capital (geszeichnetes Kapital)
plus capital reserve (Kapitalucklage)
plus profit reserves (Gewinnrucklage)
plus profit carry forward/minus loss carry forward
(Gewinnvortrag/Verlustvortrag)
plus profit for 1995/minus loss for 1995 (Jahresuberschuss
1995/Jahresfehlbetrag 1995).
NET EQUITY SHORTFALL means the amount by which actual Net Equity (as determined
by reference to the Completion Accounts) falls short of DM8,300,000 (eight
million three hundred thousand deutschmarks) as at the Transfer Date;
PLANT PREMISES means the Companies' real estate listed in APPENDIX 6;
POLICIES means the insurance policies taken out by the Companies as at the date
of signature of this Agreement;
PURCHASE PRICE means DM 15,000,000 (in words: fifteen million deutschmarks) less
the aggregate of:
(a) the Monetary Debts; and
(b) the Funding Cost Difference,
as adjusted pursuant to the terms of this Agreement;
PURCHASER means Scotsman Group, Inc.;
PURCHASER'S ACCOUNTANTS means Arthur Andersen & Co. GmbH,
Wirtschaftsprufungsgesellschaft, Steuerberatungsgesellschaft/Koln und
Dusseldorf;
SCOTSMAN means Scotsman Industries, Inc.;
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<PAGE> 6
SHARES means singly and collectively the Hartek Shares and the Hartek Awagem
Shares;
STATEMENTS means the statements contained in clauses 9.2 to 9.28;
TAX shall have the meaning set out in clause 7.2.1;
TAX LIABILITY shall have the meaning set out in clause 7.2.2;
TRANSFER DATE means 31 December 1995, 24.00 hrs;
VENDOR means Hartek Beverage Handling BV;
VENDOR'S ACCOUNTANTS means KPMG Peat Marwick, Dusseldorf;
VENDOR'S BEST KNOWLEDGE means the best knowledge of any current directeur of the
Vendor, member of the board of directors of Hartwall Bolagen, or Geschaftsfuhrer
of Hartek or Hartek Awagem, together with the best knowledge of Frau Loffler, as
the case may be;
VENDOR GROUP means the group of companies affiliated with the Vendor or Hartwall
Bolagen (verbundene Unternehmen) within the meaning of section 15 of the German
Stock Corporation Act).
1.2 In this Agreement, unless the context otherwise requires:
(a) words denoting any gender shall include all genders;
(b) words denoting the singular shall include the plural and vice versa;
(c) the headings are inserted for convenience only and shall not affect the
construction of this Agreement;
(d) references to the Preamble, clauses and Appendices and subdivisions
thereof are to the Preamble and clauses of and Appendices to this
Agreement and subdivisions thereof respectively.
1.3 The Preamble and Appendices hereto form part of this Agreement and
shall have the force and effect as expressly set out in the body of this
Agreement. Accordingly, any reference to "this Agreement" shall include the
Preamble and Appendices hereto.
SALE AND ASSIGNMENT OF SHARES
2.1.1 The Hartek Share Capital amounts to DM 1,150,000 consisting of one
share in a nominal amount of DM 1,150,000.
2.1.2 The Hartek Awagem Share Capital amounts to ATS 1,500,000 consisting one
share in a nominal amount of ATS 1,500,00.
2.2 The Hartek Shares represent 100% of the Hartek Share Capital and the
Hartek Awagem Shares represent 100% of the Hartek Awagem Share Capital.
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<PAGE> 7
2.3 The Vendor hereby offers to sell and assign the Shares including all
ancillary rights and claims attaching thereto to the Purchaser. The Purchaser
hereby accepts this offer. The assignment will be effected by notarized
contracts which will be concluded by the Parties immediately after the signing
of this Agreement. Such notarization will cure the formal deficiencies of this
Agreement in accordance with Article 15 paragraph (4) of the German GmbH Act.
2.4 The Shareholders Meeting of Hartek has by way of shareholders'
resolution, which is attached as APPENDIX 7, granted its consent to the sale and
assignment of the Hartek Shares to the Purchaser.
PROFITS
3. For the avoidance of doubt, any right to the profit of the Companies
during their current financial year ending on 31 December 1995 shall accrue to
the Purchaser.
CONSIDERATION FOR THE SHARES
4.1 The consideration for the Shares shall consist of the Purchase Price
and the Additional Consideration.
PAYMENT OF THE PURCHASE PRICE
4.2 The Purchaser shall:
(a) within two business days after the date of this Agreement remit the
Main Amount and the Escrow Amount to a bank account of Freshfields,
Frankfurt, legal advisers to the Purchaser, and provide the Vendor with
a fax copy of the remittance instruction to its bank and the
instructions to Freshfields to remit such amounts in accordance with
paragraph (b) below;
(b) subject to the satisfaction (or waiver by the Purchaser) of the
undertakings set out in paragraphs (c), (d), (e), (f) and (g) of clause
6.1, on or before the Transfer Date, pay:
(i) the Main Amount to the Vendor to such bank and account as the
Vendor shall notify for the purpose; and
(ii) the Escrow Amount by remittance into the Escrow Account or, if
the Escrow Guarantee has been established on or before the
Transfer Date pursuant to clause 4.6, to the Vendor together
with the Main Amount in accordance with paragraph (i) above.
The Escrow Account shall be operated in accordance with clause 4.5. The Escrow
Guarantee may be established in accordance with clause 4.6.
THE ADDITIONAL CONSIDERATION
4.3.1 The Additional Consideration (the ADDITIONAL CONSIDERATION) shall
consist of 75% of the actual amount of any tax saving realized by Hartek in
respect of each of its financial years ended on 31 December 1996, 1997 and 1998
through the use of the amount of any tax loss carry forward available to Hartek
as at the Transfer Date in reduction of taxable profits for those financial
years Provided that
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<PAGE> 8
the Additional Consideration shall not exceed in aggregate DM 2.2 million (the
MAXIMUM ADDITIONAL CONSIDERATION).
4.3.2 Subject to clause 4.3.3, the Additional Consideration shall be paid by
the Purchaser to the Vendor within four (4) weeks after Hartek's audited
statutory annual accounts for each relevant financial year have been determined
(festgestellt) by Hartek's shareholders' meeting pursuant to section 42a of the
German law concerning companies with limited liability (Gesetz betreffend die
Gesellschaften mit beschrankter Haftung-GmbHG).
4.3.3 If the sum of the payments made pursuant to clause 4.3.2 has reached
the Maximum Additional Consideration, then the Purchaser shall have no
obligation to pay any further Additional Consideration to the Vendor. If the use
of any tax loss carry forward in respect of which Additional Consideration has
been paid to the Vendor pursuant to clause 4.3.2 is not permitted by any
relevant German tax authority with the result that tax is paid by Hartek, then
the Vendor shall, on or before the date such tax is payable by the Purchaser,
repay the amount of that Additional Consideration to the Purchaser. If such tax
payment is successfully appealed then the Additional Consideration shall be
repaid to the Vendor.
4.3.4 The Purchaser undertakes with the Vendor that it will not carry out any
restructuring or other change to the business or operating methods of Hartek or
its accounting principles as at the Transfer Date whose sole or main purpose is
to avoid the payment of Additional Consideration to the Vendor or to reduce the
amount which would, but for such restructuring or other change, have otherwise
been payable.
BANK ACCOUNTS
4.4 All payments to be made to the Vendor or Purchaser under this
Agreement, other than the payments into the Escrow Account, shall be made into
the account of the Vendor or the Purchaser to such bank and account as each may
specify for the purpose.
THE ESCROW ACCOUNT
4.5 The funds in the Escrow Account shall be held on the following terms:
(a) any bank or other charges arising on the Escrow Account shall be
charged to the Escrow Account;
(b) any interest or profit generated on the Escrow Account (subject to any
deduction of tax at source or any bank or other charges properly
charged to the Escrow Account) (the INCOME) shall accrue to and form
part of the Escrow Account. Each time part of the funds in the Escrow
Account is paid out it shall have added to it the corresponding
proportion of the Income;
(c) subject to paragraphs (d) and (e) below, the funds in the Escrow
Account shall be retained for a period of 12 months from the Transfer
Date (the ESCROW PERIOD). At the end of the Escrow Period (subject to
paragraphs (e) and (f) below) the Escrow Agent shall release to the
Vendor the funds in the Escrow Account (together with any Income);
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<PAGE> 9
(d) immediately upon final determination of any amount payable pursuant to
clause 5.6, the Purchaser and the Vendor shall issue joint written
instructions to the Escrow Agent to release such amount from the Escrow
Account to the Purchaser or the Vendor, as the case may be;
(e) to the extent that, prior to the expiry of the Escrow Period, the
Purchaser shall have notified the Vendor and the Escrow Agent of any
other claim arising under this Agreement (including, without
limitation, pursuant to clause 6, 7, 8, 9 or 10) and the amount of any
such claim shall have been agreed by the Vendor and the Purchaser or
determined in accordance with clause 21.2 the Escrow Agent shall
immediately upon such agreement or determination pay the amount of such
claim from the Escrow Account to the Purchaser;
(f) to the extent that the liability for or the quantum of any claim or
claims notified under (e) above shall not have been agreed or
determined (as described above) by the expiry of the Escrow Period, the
amount claimed (together with any interest thereon) shall continue to
be held in the Escrow Account after expiry of the Escrow Period pending
agreement or determination; immediately upon such agreement or
determination the Escrow Agent shall pay the amount of any claim from
the Escrow Account to the Purchaser and, immediately all such claims
have been so agreed or determined, the balance (if any) remaining in
the Escrow Account shall be paid to the Vendor.
THE ESCROW GUARANTEE
4.6.1 The Vendor shall be entitled on or before the Transfer Date or by not
less than thirty (30) days notice to the Purchaser at any time during the Escrow
Period to provide an Escrow Guarantee for the Escrow Period in favor of the
Purchaser for the Escrow Amount in substitution for operation of the Escrow
Account pursuant to clause 4.5
4.6.2 Upon delivery of the Escrow Guarantee to the Purchaser, the Purchaser
and the Vendor will instruct the Escrow Agent to pay the full amount then
standing to the credit of the Escrow Account to the Vendor LESS the amount (if
any) of any claim or claims which have been made but not agreed or determined as
referred to in clause 4.5(f) which shall remain in such Escrow Account in
accordance with that paragraph and LESS any amounts which are to be paid to the
Purchaser pursuant to clause 4.5(d) or (e) which shall be remitted to the
Purchaser.
4.6.3 The Purchaser shall be entitled to demand payment under the Escrow
Guarantee to the Escrow Agent into the Escrow Account on or before expiry of the
Escrow Period of the amount of any claim to be held thereafter in accordance
with clause 4.5(f).
COMPLETION ACCOUNTS
COMPLETION ACCOUNTS
5.1.1 The Vendor and the Purchaser shall use all reasonable endeavours to
procure that, promptly after the Transfer Date, the Completion Accounts for the
Companies are prepared and consolidated on the basis of German Accounting
Principles.
5.1.2 For the purposes of the Completion Accounts, the stocks and the
inventory of the Companies shall be valued in accordance with the following
rules and principles. The value of the stocks and the
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<PAGE> 10
inventory shall be determined, based on a physical inventory at the Transfer
Date, at the respective Company's average costs as presently applied. The value
so determined shall then be adjusted for any excess or obsolete inventory or
stocks, which shall be determined according to the following guidelines:
(a) raw materials (including purchased parts) or work in progress acquired
for use in a product not currently offered for sale by any of the
Companies, even if such product is listed in the respective Company's
most recent catalogue, shall be valued at one DM;
(b) finished goods not currently offered for sale by any of the Companies,
even if such products are listed in the respective Company's most
recent catalogue, shall be valued at one DM;
(c) any inventory or stocks (except products which have been introduced
into the market by the respective Company during the last six months
prior to the Transfer Date) which could not be expected to be consumed
within:
(i) six months (but less than one year) shall be subject to a
discount of 25%;
(ii) one year (but less than 18 months) shall be subject to a
discount of 50%;
(iii) 18 months (but less than 2 years) shall be subject to a
discount of 75%;
(iv) two years or more shall be discounted to one DM (such time
periods being based on the rate of sales for (or in the case
of raw materials, usage of) those products during the year
preceding the Transfer Date);
(d) items of inventory or stock which are damaged and are not economically
repairable, shall be valued at one DM; and
(e) returned goods which are not re-saleable in accordance with customary
industry practice at or above the inventory value that would otherwise
have been attributed thereto, shall be valued at one DM.
PREPARATION OF DRAFT COMPLETION ACCOUNTS
5.2 The Purchaser shall arrange for draft Completion Accounts to be
prepared by the Companies, and the Purchaser and the Vendor shall arrange that
the draft Completion Accounts be jointly reviewed by Purchaser's Accountants and
Vendor's Accountants with a view to such reviewed draft Completion Accounts
being delivered to the Purchaser and the Vendor within 45 days after the
Transfer Date. The Purchaser shall use all reasonable endeavours to ensure that
the Companies provide the Purchaser's Accountants and the Vendor's Accountants
with such access to such accounts, working papers and other financial
information of the Companies as is reasonably necessary for the purpose of their
review of the draft Completion Accounts.
NOTIFICATION
5.3 The Purchaser and the Vendor shall notify each other in writing within
30 days of receipt of such draft Completion Accounts if either of them or both
do not accept them for the purposes of this
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Agreement. If the Purchaser and/or the Vendor notifies the other that it does
not accept such draft Completion Accounts:
(a) it shall set out in detail its reasons for such non-acceptance and
specify the adjustments (and provide appropriate supporting evidence
for each such adjustment) which, in its opinion, should be made to the
draft Completion Accounts in order to comply with the requirements of
this Agreement; and
(b) the parties shall use all reasonable endeavours to meet and discuss the
objections of the Purchaser and/or the Vendor and to reach Agreement
upon the adjustments (if any) required to be made to the draft
Completion Accounts.
RESOLUTION OF DISPUTES
5.4 If the Vendor and the Purchaser do not reach Agreement within 30 days
of the Purchaser's and/or Vendor's notice of non-acceptance under clause 5.3,
whichever is earlier, then the matters in dispute shall be referred, on the
application of either party, for determination by the Experts, to be agreed upon
between the Purchaser and the Vendor or failing agreement between the Vendor and
the Purchaser within 14 days from the said application, to be selected by the
president for the time being of the Industrie- und Handelskammer in Dusseldorf.
The following terms of reference shall apply:
(a) the Purchaser's Accountants and the Vendor's Accountants shall
each promptly prepare a written statement on the matters in
dispute which (together with the relevant documents) shall be
submitted to the Experts;
(b) in giving such determination, the Experts shall state what
adjustments (if any) are necessary to the draft Completion
Accounts in respect of the matters in dispute (but in so doing
shall not exceed the scope of any such matters referred to
them for determination) in order to comply with the
requirements of this Agreement;
(c) the Experts shall act as an expert (Schiedsgutachter) (and not
as an arbitrator (Schiedsrichter)) in making any such
determination which shall be final and binding on the parties;
and
(d) the Experts' expenses shall be borne between the Vendor and
the Purchaser in such proportions as the Experts shall
determine by applying ss.ss. 91 et seq. of the German Code on
Civil Procedure.
FINAL DETERMINATION
5.5.1 If the Vendor and the Purchaser reach Agreement on the draft Completion
Accounts or the draft Completion Accounts are finally determined by the Experts
or the Purchaser and the Vendor have not notified the other pursuant to clause
5.3 of any objections to the draft Completion Accounts:
(a) the draft Completion Accounts as so agreed, determined or (as the case
may be) non-objected shall be the Completion Accounts for the purposes
of this Agreement and shall be final and binding on the parties; and
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(b) the amount of the Net Equity, Cash Balance and Monetary Debts (and the
amount payable pursuant to clause 5.6.5) shall be derived from the
Completion Accounts.
5.5.2 The Experts shall send the Completion Accounts immediately after their
determination to the Vendor and to the Purchaser, notifying the Vendor and
Purchaser by fax of such dispatch. and the Vendor and the Purchaser shall be
deemed to have received such Completion Accounts two working days later (the
DATE OF RECEIPT OF THE COMPLETION ACCOUNTS). If the draft Completion Accounts
become the Completion Accounts by Agreement of the Vendor and the Purchaser
pursuant to clause 5.5.1(a) or by non-objection pursuant to clause 5.5.1 (a),
then such events shall also constitute Dates of Receipt of the Completion
Accounts for the purposes of this Agreement.
ADJUSTMENT OF PURCHASE PRICE
5.6.1 If the Completion Accounts show a Net Equity Shortfall, then the
Purchase Price shall be reduced by an amount equal to such Net Equity Shortfall.
5.6.2 If the Monetary Debts are less than the Estimated Monetary Debts, the
Purchase Price shall be increased by the amount of such shortfall. If the
Monetary Debts are greater than the Estimated Monetary Debts, the Purchase Price
shall be reduced by the amount of such excess except and to the extent that the
Cash Balance exceeds DM1,000,000 (one million deutschmarks).
5.6.3 If the Cash Balance is less than DM1,000,000 (one million
deutschmarks), the Purchase Price shall be reduced by the amount of such
shortfall.
5.6.4 If the Funding Cost Difference is less than the Estimated Funding Cost
Difference, the Purchase Price shall be increased by the amount of such
shortfall. If the Funding Cost Difference is greater than the Estimated Funding
Cost Difference, the Purchase Price shall be reduced by the amount of such
shortfall.
5.6.5 The net amount of any increase or decrease (as the case may be) of the
Purchase Price pursuant to clause 5.6.1, 5.6.2 and 5.6.3 shall be paid to the
Vendor or the Purchaser (as the case may be) within ten (10) days of
determination thereof and, (if relevant) notification pursuant to clause 5.7.1.
5.6.6 The amount of any increase or decrease (as the case may be) of the
Purchase Price pursuant to clause 5.6.4 shall be paid to the Vendor or the
Purchaser (as the case may be) within ten (10) days of notification to the
Vendor of the amount of the Funding Cost Difference pursuant to clause 5.6.8.
5.6.7 If the Escrow Amount is not sufficient to cover the adjustment pursuant
to this clause 5.6 then, subject to clause 5.7.2, the Vendor shall pay to the
Purchaser the amount not so covered within ten (10) days upon the Purchaser's
written request.
5.6.8 The Purchaser shall, during the period of thirty (30) days of the
Transfer Date, with the assistance of the Vendor, use its reasonable endeavours
to renegotiate the terms and conditions of the Monetary Debts and shall use its
best efforts (including the offer of sufficient Scotsman guarantees) to release
existing Vendor Group guarantees for the Monetary Debts in each case so as to
reduce the Funding Cost Difference. If the terms and conditions have been
renegotiated they shall be used as the basis for calculating the Funding Cost
Difference. The amount of the Funding Cost Difference shall be determined
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(in consultation with the Vendor) by the Purchaser and notified to the Vendor
within three (3) months of the Transfer Date.
NOTIFICATION AND RIGHT TO WITHDRAW
5.7.1 The Purchaser shall notify the Vendor of a claim arising under clause
5.6.1, 5.6.2 or 5.6.3 within thirty (30) days of the Date of Receipt of the
Completion Accounts.
5.7.2 If the amount claimed by the Purchaser pursuant to clause 5.61 exceeds
DM3,000,000 (three million deutschmarks) then the Vendor shall have the option
to withdraw from this Agreement without liability (other than to transfer to the
Vendor such title to the Shares as the Purchaser received from the Vendor) on
the part of the Purchaser.
5.7.3 If the Vendor wishes to exercise the option referred to in clause 5.7.2
it shall do so by notice to the Purchaser within ten (10) days of notification
by the Purchaser of the amount claimed from the Vendor pursuant to clause 5.6
and the transfer referred to in clause 5.7.2 shall be conditional upon repayment
in full by the Vendor of the Main Amount and release by the Vendor of the full
Escrow Amount to the Purchaser, in each case together with interest thereon.
UNDERTAKINGS
PRE-COMPLETION UNDERTAKINGS
6.1 The Vendor undertakes to the Purchaser that on or prior to the Transfer
Date it will procure:
(a) the prompt repayment of all debts then owed to the Companies by the
Vendor or Hartwall Bolagen or any company within the Vendor Group
provided, however, that intercompany debts between Hartek and Hartek
Awagem are not subject to such repayment obligation;
(b) the prompt release of the Companies from any intra-group guarantees
and, pending such release, to indemnify the Companies from all claims,
losses and liabilities arising thereunder;
(c) each of the Kall Profit and Loss Participation Agreement and the
Cascade Profit and Loss Participation Agreement will have been
terminated;
(d) the entire issued share capital of each of Cascade and Kall has been
sold by Hartek (and all of the shares in each of Kall and Cascade
assigned to a third party) for cash without any liability whatsoever on
the part of Hartek at a price in the case of Kall which is not less
than the value attributed to it in the 1994 Accounts of Hartek and in
the case of Cascade, at a price of DM100,000 in accordance with
paragraph (g) below;
(e) the delivery to the Purchaser of a Control Power of Attorney duly
executed by the Vendor in the form set out in APPENDIX 8;
(f) the delivery to the Purchaser of a waiver by the lenders of the
Monetary Debts of any right to require repayment of all or any part of
the Monetary Debts by reason of the sale of the Shares by the Vendor to
the Purchaser in the form attached as APPENDIX 9;
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(g) that Hartwall Bolagen shall purchase from Hartek for cash at face
value, the debt in the amount of DM1,500,000 owed to Hartek by Cascade.
Hartek shall utilize the purchase proceeds in part repayment of the
debt of DM1,600,000 owed to Cascade by Hartek and shall repay the
balance of such debt from its own funds. Hartwall Bolagen shall acquire
all the shares in Cascade from Hartek for cash pursuant to paragraph
(d) above, for a purchase price of DM100,000;
(h) all the members of the board (Beirat) of Hartek will resign without any
claim for compensation.
POST-COMPLETION UNDERTAKINGS
6.2.1 The parties agree that Hartwall Bolagen and the Purchaser on behalf of
the Companies or the Companies directly with Hartwall Bolagen shall from time to
time negotiate at regular intervals over a three-year period from the Transfer
Date for continued sales by the Companies on arms-length terms of such
proportion of the Vendor Group's requirements of the Companies' products as may
be appropriate having regard to market conditions and to the extent that it
shall be lawful to do.
6.2.2 If after the Transfer Date a creditor of Cascade or Kall requires
Hartek pursuant to Section 303 (1) of the German Stock Corporation Act to
provide to it collateral in respect of a claim it has or alleges it has
against Cascade or Kall, the Purchaser shall notify the Vendor thereof
whereupon the Vendor shall promptly provide or make available to that creditor
collateral within the meaning of Section 303 (1) of the Stock Corporation Act.
The Vendor undertakes to indemnify Hartek or the Purchaser (as the Purchaser
may elect) on first written demand against any costs or losses Hartek may incur
as a result of a creditor making any such claim against Hartek or of Cascade or
Kall making any claim against Hartek under the Cascade Profit and Loss
Participation Agreement or Kall Profit and Loss Participation Agreement (or any
third party making a claim deriving therefrom).
6.2.3 The Vendor shall, within thirty (30) days of notice from the Purchaser,
reimburse the Purchaser for any accounts receivable of the Companies shown in
the Completion Accounts which remain unpaid 180 days after the Transfer Date to
the extent that the aggregate amount remaining unpaid exceeds the provision for
bad debts contained in the Completion Accounts. The maximum liability of the
Vendor under this clause 6.2.3 shall not exceed DM 500,000 (five hundred
thousand deutschmarks) in aggregate.
TAX
TAX INDEMNITY
7.1 The Vendor shall indemnify the Companies from, and hold the Companies
harmless in respect of any Tax Liability (as defined in clause 7.2.2 below)
which exists on the Transfer Date, or which arises from or relates to acts,
omissions or circumstances in the period prior to the Transfer Date except to
the extent that provisions in respect of the Tax Liability (as defined in clause
7.2.2 below) have been made in the Completion Accounts.
DEFINITIONS
7.2 For the purposes of this Agreement, the following terms shall have the
following meaning:
7.2.1 TAX shall include:
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(a) any tax (Steuern) within the meaning of ss.3 sub-paragraphs (1) and (2)
of the German Tax Procedure Act (Abgabenordnung);
(b) social security payments (Sozialversicherungsbeitrage);
(c) payments to the Association for the Guaranty of Pensions in Cases of
Bankruptcy (Pensionssicherungsverein),
together with any payment relating to any of the above including interest,
costs, penalties, late payment charges, late filing charges and any comparable
obligations (steuerliche Nebenleistungen) within the meaning of ss.3
sub-paragraph (3) of the German Tax Procedure Act.
7.2.2 For the purposes of this Agreement TAX LIABILITY shall mean:
(a) any liability of any of the Companies to make a payment of or relating
to Tax (in this event the Tax Liability shall be equal to the amount so
payable); and
(b) the loss (full or partial) of
(i) any right to repayment in respect of Tax (or the right to set
off any right to repayment of Tax against any Tax Liability)
to the extent such right is included in the Completion
Accounts (in this event the Tax Liability shall be equal to
the amount of the right so lost); and
(ii) any allowance, depreciation (Abschreibung), credit, deduction
or exemption relevant to the computation of any income,
profits or gains and net worth (Vermogen) for the purposes of
any Tax payable by any of the Companies (in this event the Tax
Liability shall be calculated on the assumption that the
allowance, credit or exemption can be used immediately)
by any of the Companies; and
(c) any disadvantage of any of the Companies relating to Tax which results
from an assessment of the equity breakdown (Bescheid uber die
Feststellung des verwendbaren Eigenkapitals) of the respective Company
deviating from that shown in the tax return of that Company for the
financial year ending as at 31 December 1994 (in this event the Tax
Liability shall be calculated on the assumption that such disadvantage
materializes immediately).
NOTIFICATION OF CLAIMS AND CONDUCT OF DISPUTES
7.3 If the Purchaser becomes aware that any Tax Liability will give rise to
a claim against the Vendor under clause 7.1 above, the Purchaser shall notify
the Vendor thereof without undue delay (unverzuglich) and shall take such action
as the Vendor may request to dispute the relevant assessment of Tax. The
Purchaser shall, however, only be obliged to take such action if he is promptly
indemnified from or secured to his reasonable satisfaction by the Vendor against
all losses, costs, damages and expenses that may result from such action.
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TAX AUDIT/RIGHT OF INSPECTION
7.4 The Purchaser shall inform the Vendor in due course of any impending
tax audit relating to financial years of any of the Companies ending on or
before the Transfer Date and the Vendor shall be entitled to inspect all tax
audit reports and to participate in all discussions with tax auditors relating
to such financial years.
TAX REPAYMENTS
7.5 If, in respect of any financial period of either of the Companies
expiring on or prior to the Transfer Date either of the Companies receives after
the Transfer Date a repayment in respect of Tax then, except to the extent a
right to receive such repayment was included in the Completion Accounts, the
Purchaser shall pay to the Vendor an amount equal to the actual repayment
received by either of the Companies within thirty (30) days of receipt thereof.
NON-COMPETE
RESTRICTION ON COMPETITION
8.1 During a period of five (5) years from the Transfer Date, the Vendor
shall not and shall procure that each other member of the Vendor Group shall not
(whether directly or indirectly) carry on or be engaged in or (except as the
owner for investment purposes of securities listed on a stock exchange and not
exceeding three (3) per cent in nominal value of the securities of the listed
issuer in question) be interested in any business:
(a) which competes, directly or indirectly, with the Hartek Business and/or
the Hartek Awagem Business; and
(b) which is carried on in the Federal Republic of Germany and/or Austria.
NO SOLICITATION
8.2 The Vendor shall not (and shall procure that each other member of the
Vendor Group shall not) within a period of three (3) years after the Transfer
Date, directly or indirectly, solicit or endeavour to entice away from the
Companies any person who was employed by any of the Companies in skilled or
managerial work at any time during the three (3) years prior to the Transfer
Date.
PENALTY
8.3 The Vendor shall pay to the Purchaser for each case of a breach of:
(a) clause 8.1 an amount equal to 10% of the turnover generated by the
activity carried out in breach of such provision, but in any case a
minimum amount of DM 100,000. In the event of a recurring breach, a
minimum penalty in the amount of DM 100,000 will be payable for each
week of the breach;
(b) clause 8.2 an amount equal to the sum of five times the aggregate of
the annual salary and the value in Deutschmarks of any fringe benefits
of the respective person.
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The right to claim damages or to demand specific performance in the event of a
breach of this clause 8 remains with the Purchaser.
GUARANTEES
GUARANTEE
9.1 The Vendor and the Guarantor jointly and severally represent, warrant
(sichern zu) and guarantee (garantieren) to the Purchaser as an independent
contractual obligation (im Wege eines selbstandigen Garantievertrages) that the
statements (the Statements) contained in clauses 9.2 to 9.28 below are correct
and not misleading as of the date of signing of this Agreement and as of the
Transfer Date (with reference to the facts then existing).
RECITALS, APPENDICES
9.2 The information contained in the Preamble and Appendices to this
Agreement is complete and correct in all material respects. Appendices to this
Agreement are true and complete copies of the documents in question.
CORPORATE
SHARES
9.3 The Vendor is the sole owner of the Shares. The Shares are in good
legal standing and have no defect in title (Rechtsmangel). The Shares (and all
other equity shares in either of the Companies which have been issued in the
past, whether or not still in existence) have been fully paid up in cash and
have not been repaid in whole or in part. The Shares carry full dividend
entitlement as at 1 January 1995. No obligation exists in respect of the Shares
or otherwise to pay in further capital. There are no rights or claims to issue
or grant any shares or equity interests in the Companies.
RIGHTS OF THIRD PARTIES
9.4 The Shares are free from any rights or claims of third parties and are
not subject to any option, preemption right or right of first refusal. The
Vendor is entitled to transfer the Shares as contemplated by this Agreement to
the Purchaser without any third party's consent. The Shares do not represent all
or substantially all of the Vendor's assets within the meaning of Section 419 of
the German Civil Code.
ENTERPRISE AGREEMENTS
9.5 None of the Companies is party to, or committed to enter into, any
enterprise agreement. The Group Cost Agreement will end on the Transfer Date.
BOOKS AND RECORDS
9.6 To the Vendor's Best Knowledge, all books and records of the Companies
are complete and correct, have been maintained with the care of a conscientious
businessman and the principle of proper bookkeeping.
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FINANCIAL
ACCOUNTS
9.7.1 Subject to clause 9.7.2, the Accounts of Hartek and Hartek Awagem for
the financial years 1992 (APPENDIX 10), 1993 (APPENDIX 11) and 1994 (APPENDIX
12) have been prepared on the basis of proper bookkeeping (aufgrund
ordnungsgemasser Buchfuhrung) and in relation to Hartek in accordance with the
German Accounting Principles and in relation to Hartek Awagem in accordance with
the Austrian Accounting Principles and, in each case, have been prepared
consistently, both in form and substance with the accounts for the relevant
preceding financial year of the Companies. The Accounts give a true and fair
view of the net worth (Vermogenslage), financial position (Finanzlage) and the
results (Ertragslage) of the Companies (in relation to Hartek within the meaning
of ss. 264 sub-paragraph (2) of the German Commercial Code and in relation to
Hartek Awagem within the meaning of the equivalent terms of the Austrian
Accounting Law (Rechnungslegungsgesetz)) as at, and for the financial year
ending on the respective Accounts Date. As at the relevant Accounts Date, none
of the Companies had liabilities, actual or contingent, known or unknown, and
whether or not already existing, other than those shown in the said Accounts.
The results of none of the Companies have been affected by any extraordinary
profits in relation to Hartek within the meaning of ss. 277 sub-paragraph (4) of
the German Commercial Code and in relation to Hartek Awagem, other than as is
expressly disclosed in the Accounts affected thereby.
9.7.2 For the avoidance of doubt, the Purchaser acknowledges for the purposes
of clause 9.7.1 that each of the Companies has been restructured since the
respective Accounts Dates and that such Accounts do not reflect the effects of
any restructuring which has taken place after the Accounts Date to which they
relate. The Vendor has disclosed to the Purchaser full particulars of all such
restructurings.
WORKING CAPITAL/CASH
9.8 The Companies have cash reserves of DM1,000,000 (one million
deutschmarks) on a consolidated basis as at the Transfer Date as shown in the
Completion Accounts.
DEBTS
9.9 There are no debts owing to any of the Companies other than trade debts
incurred in the ordinary and usual course of business of the Companies.
ACCOUNTS RECEIVABLE, BORROWINGS
9.10.1 None of the Companies has outstanding any borrowing or indebtedness in
the nature of borrowing other than moneys borrowed from Deutsche Bank and
Volksbank Remscheid eG which do not exceed DM10,000,000 and certain details of
which are set out in APPENDIX 13.
9.10.2 None of the Companies has received any notice to repay under any
Agreement relating to any borrowing or indebtedness in the nature of borrowing
which is repayable on demand.
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GUARANTEES, COMFORT LETTERS
9.11 None of the Companies has issued any guarantees and/or letters of
comfort or similar instruments securing the payment of monies by third parties.
ASSETS
ASSET OWNERSHIP
9.12 Other than in the ordinary course of business, except for the assets
listed in APPENDIX 14 all assets included in the Completion Accounts are fully
and solely owned by the Companies and free of any rights of third parties.
POSSESSION
9.13 Other than consignment stock as listed in APPENDIX 15 (as at 30
November 1995) and items possessed by third parties in the ordinary cause of
business, all of the assets owned by the Companies, or in respect of which the
Companies have a right of use, are in the possession of the Companies.
DEPENDENCY
9.14 To the Vendor's Best Knowledge the assets of the Companies and the
facilities and services to which the Companies have a contractual right include
all rights, properties, assets, facilities and services relevant to the carrying
on of the business of the Companies in the manner in which it is currently
carried on. Where any assets are used but not owned by the Companies or any
facilities or services are provided to the Companies by any third party, they
are provided on the basis of arm's length agreements.
CONDITIONS OF ASSETS
9.15 All the plant, machinery, equipment and vehicles used by the Companies:
(a) are in a good state of repair and have been regularly and properly
maintained in accordance with all relevant technical specifications,
safety regulations and the terms and conditions of any applicable
agreement, provided, however, that normal wear and tear as well as past
depreciation and actual book value will be taken into consideration;
(b) are capable of being efficiently and properly used for the purposes
(pound)or which they were acquired or are retained.
PLANT REGISTER
9.16 The plant registries of the Companies comprise a complete and accurate
record of all the plant, machinery, equipment and vehicles owned or possessed by
the Companies.
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REAL PROPERTY
9.17.1 The Companies have sole and unrestricted title to, and sole possession
of, the Plant Premises. Up-to-date extracts from the relevant Land Registers in
respect of the Plant Premises are attached as APPENDIX 16. The Companies have
not sold, and are not committed to transfer, any or all of the Plant Premises.
None of the Companies owns any real property other than the Plant Premises. The
Leased Premises are listed in APPENDIX 17. The Leased Premises are used on the
basis of valid lease agreements and all buildings thereon are in such condition
as corresponds to the relevant lease Agreement.
9.17.2 The Companies have neither granted nor have they committed to grant any
encumbrances, restrictions or rights of third parties in relation to the Plant
Premises, except for those shown in the extracts from the relevant Land
Registers attached as APPENDIX 16. All mortgages (Grundschulden, Hypotheken)
listed in relation to Hartek in Part III of the Land Register extracts (APPENDIX
16) secure only liabilities of the Companies which will be fully shown in the
Completion Accounts. The Companies have an unconditional right to require the
release of any such mortgage or encumbrance if and when the liability secured
ceases to exist.
9.17.3 To the Vendor's Best Knowledge, the Buildings do not encroach on
property owned by third parties and all permits, licenses etc. required in
relation to the Buildings have been properly granted, are of unlimited term and
in full force and effect and all conditions attaching to them are, and always
have been, duly complied with in all material respects. To the Vendor's Best
Knowledge, the condition and the present use of the Plant Premises including the
Buildings do not violate any zoning plans, building regulations or other legal
provisions.
CONNECTED PARTIES
9.18.1 Except as listed in APPENDIX 18 the Companies have no liabilities to,
or for the benefit of, any member of the Vendor Group.
9.18.2 No member of the Vendor Group, at the time of signing of this
Agreement, holds an interest in an enterprise which is engaged in the same area
of activity as the Companies in the Federal Republic of Germany/Austria.
9.18.3 None of the Companies has any subsidiary or holds any majority or
minority interest in another company or enterprise. Hartek's former interests in
Cascade and Kall have been (or will have been, not later than the Transfer Date)
sold by Hartek at book value and the Cascade Profit and Loss Participation
Agreement as well as the Kall Profit and Loss Participation Agreement have been
(or will have been, not later than the Transfer Date) validly and irrevocably
terminated.
9.18.4 Hartek is not subject to any liabilities resulting from the Cascade
Profit and Loss Participation Agreement and/or the Kall Profit and Loss
Participation Agreement nor from the former domination and profit and loss
participation agreements between Hartek and Kall Schankanlagen GmbH and/or
between Hartek and Kall Mix-Drink-GmbH.
ENVIRONMENT
9.19.1 To the Vendor's Best Knowledge there is not currently and there has not
been on, into or from any of the Plant Premises or Leased Premises any spill,
leakage, discharge, release, emission, injection,
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escape or deposit of any kind (whether to air, water (including underground
water), sewage systems or land or a combination of these) of any substance or
energy which may require investigation or remediation and which may result in
any liability of any of the Companies or inhibit, restrict or make materially
more costly any redevelopment of any of the Plant Premises or Leased Premises or
any part thereof.
9.19.2 To the Vendor's Best Knowledge and except as listed in APPENDIX 19
there are no underground storage tanks or vessels (whether used or disused)
located on any of the Plant Premises or Leased Premises.
9.19.3 To the Vendor's Best Knowledge none of the Companies has any obligation
or liability, absolute or contingent, known or unknown, with respect to the
storage, treatment, clean-up, disposal, containment or other remediation of any
land, building, water or substance.
9.19.4 All environmental audits and reviews of each of the Companies, its
business or the Plant Premises or the Leased Premises have been fully disclosed
to the Purchaser.
9.19.5 There has not been on, into or from the former premises at
Blau-Kreuz-Heim Strasse 19, 57299 Burbach-Holzhausen any spill, leakage,
discharge, release, emission, injection, escape or deposit of any kind (whether
to air, water (including underground water), sewage systems or land or a
combination of these) of any substance or energy which may require investigation
or remediation and which may result in any liability of any of the Companies.
INDUSTRIAL PROPERTY RIGHTS
9.20.1 The Companies do not own any Industrial Property Rights. To the
Vendor's Best Knowledge none of the Companies intends to use or requires the use
of any Industrial Property Rights. To the Vendor's Best Knowledge, none of the
Companies infringes any Industrial Property Rights (or use any confidential
information) of third parties.
9.20.2 No third party has been granted by any of the Companies a right to use
any Industrial Property Right or the firm name of any of the Companies or any
destined part thereof other than as set out in APPENDIX 20.
9.20.3 To the Vendor's Best Knowledge, there is no liability of any of the
Companies (actual or contingent) under any statutory employee inventor
compensation provision (including, in particular, the
Arbeitnehmererfindungsgesetz), or like employee inventor compensation provision,
in any jurisdiction.
COMPLIANCE
9.21.1 To the Vendor's Best Knowledge:
(a) each of the Companies has obtained all Licenses;
(b) the Licenses are in full force and effect, are not limited in duration
and not subject to any unusual or onerous conditions;
(c) the Licenses are (and have always been) complied with in all material
respects;
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(d) there are no circumstances which indicate that any of such Licenses may
be revoked or not renewed, in whole or in part, in the ordinary course
of events (whether as a result of the acquisition of the Shares or
otherwise); and
(e) the supply of water and energy is sufficient for the Companies's
current requirements and any planned increases of production and the
disposal of waste water is assured to the same degree.
9.21.2. The business operation of the Companies does not infringe any statutory
provisions or rights of third parties and the Companies have complied with all
their statutory obligations.
9.21.3 To the Vendor's Best Knowledge:
(a) none of the Companies has manufactured, sold or supplied any product or
service which is, or will become faulty (fehlerhaft) where the
respective Company does not have a valid and enforceable claim for
indemnification from any claim and liability resulting therefrom under
product liability insurance;
(b) all products manufactured or distributed by any of the Companies comply
with all relevant legal provisions and technical standards (such as
DIN); and
(c) no change or amendment to any such legal provision or technical
standards is currently planned which (once in force) will have the
result that the products currently manufactured or distributed by any
of the Companies would not comply with such standards and requirements
as so amended.
EMPLOYMENT, PENSIONS
9.22.1 APPENDIX 21 sets forth a list of all employees of the Companies with
aggregate annual compensation including fringe benefits and bonuses in excess of
DM100,000 containing information as to the name, position, date of commencement
of employment, salary, date of birth, notice period as well as all other
remuneration, bonuses and benefits. None of the Companies has agreed to any
variation of the terms of any employment or service Agreement. The Companies do
not have any standard terms of employment. All shop agreements
(Betriebsvereinbarungen) and other commitments and practices (Betgriebliche
Ubung) applicable to any of the Companies or its employees (in whole or in part)
are listed or contained in APPENDIX 22. The Companies may at any time
discontinue their operations at certain locations, reduce their workforce, cease
to employ employees and to implement operational changes (in relation to Hartek
within the meaning of Section 111 of the Shop Constitution Act) subject only to
the restrictions under applicable statutory law and collective bargaining
agreements.
9.22.2 None of the Companies has any absolute or contingent liabilities
arising from termination of employment or service agreements, early retirement
or pension contracts, commitments or schemes (including any direct pension
promise, direct insurance or through the setting up of a support fund or pension
fund) other than as listed in APPENDIX 23.
9.22.3 The provisions (Ruckstellungen) made in the Completion Accounts for
pension obligations of the Companies are correct and sufficient to cover all the
respective pension obligations of the Companies under agreements to which any of
the Companies is a party at the Transfer Date.
-22-
<PAGE> 23
9.22.4 APPENDIX 24 contains a list of all powers of attorney (including
Prokura und Handlungsvollmachten) as well as charts of all signatory authorities
(Zeichnungsberechtigung) granted by the Companies.
9.22.5 To the best knowledge of the Vendor and Hartwall Bolagen, Mr Klein does
not intend to resign and to the Vendor's Best Knowledge, no senior employee of
the Companies intends to resign in either case as a result of the acquisition of
the Shares by the Purchaser or other performance of the terms of this Agreement.
INSURANCES
9.23 The Policies are in full force and effect and will remain so for a
period of not less than two (2) months following the Transfer Date. All premiums
payable under the Policies on or prior to the Transfer Date have been or will be
paid when due.
OPERATION OF BUSINESS
9.24 None of the Companies is restricted in the operation of its business to
compete with other parties or in the purchasing or acquiring assets other than
as provided under applicable statutory law.
CONTRACTUAL MATTERS
9.25.1 Except as specified in APPENDIX 25 there is no Agreement to which any
of the Companies is a party:
(a) which, by virtue of the sale and transfer of the Shares or other
performance of the terms of this Agreement, may be adversely affected;
(b) entered into otherwise than by way of a bargain at arm's length or is
otherwise of an unusual or uncommon nature;
(c) is not enforceable by the Companies in accordance with its terms and
conditions;
(d) which upon termination will result in a liability of any of the
Companies to make a compensation, penalty or termination payment;
(e) which involves or is likely to involve expenditure by, or income of any
of the Companies in excess of DM 250,000 or, in the case of long-term
agreements, DM 250,000 per annum.
9.25.2 To the Vendor's Best Knowledge, neither the Companies nor a party with
whom any of the Companies has entered into any Agreement, is in material default
under such Agreement and there are no circumstances likely to give rise to any
such default, provided that this clause 9.25.2 shall only relate to agreements
of material and essential nature to the operations and/or conduct of business of
any of the Companies.
-23-
<PAGE> 24
INSOLVENCY/LITIGATION
9.26.1 None of the Companies is insolvent (in relation to Hartek within the
meaning of Section 102 of the German Bankruptcy Code and in relation to Hartek
Awagem within the meaning of the corresponding Austrian statutes) or
over-indebted (in relation to Hartek within the meaning of Section 64
subparagraph 1 sentence 2 of the GmbHG and in relation to Hartek Awagem within
the meaning of the corresponding Austrian statutes). No application for the
opening of a bankruptcy proceeding (Konkursverfahren) or composition proceeding
(Vergleichsverfahren) in respect of any of the Companies has been filed.
9.26.2 To the Vendor's Best Knowledge, none of the Companies is a plaintiff or
defendant in or otherwise a party to any litigation, arbitration or
administrative proceedings nor are there any litigation, arbitration or
administrative proceedings threatened and there are no circumstances likely to
give rise to any such proceedings, provided that this clause 9.26.2 shall only
apply to litigious or other proceedings which are outside the ordinary course of
business of any of the Companies.
RECENT EVENTS
9.27 Since 31 December 1994
(a) subject to the merger between Hartek and Kall-Mix-Drink GmbH in 1995,
each of the Companies has carried on its business only in the ordinary
and regular course (gewohnlicher und ordnungsgemasser
Geschaftsbetrieb), on an arm's length basis and without interrupting or
changing its nature, scope or manner;
(b) none of the Companies has transferred to any third party any part or
line of its business or any business opportunities;
(c) there has been no material deterioration in the prospects or (except in
the case of Hartek Awagem which anticipates a temporary shortfall in
profits for the financial period ending on the Transfer Date) in the
financial or business position or prospects or turnover of any of the
Companies;
(d) no event of damage has arisen which affects the value of any of the
Companies' assets or the operation of their business to a material
extent; and
(e) no significant customer of or supplier to any of the Companies has
ceased, or has indicated an intention to cease to deal (or to deal on a
materially smaller scale) with the respective Company and, to the Best
Knowledge of the Vendor, no such person is likely to do so.
DISCLOSURE
9.28 To the Vendor's Best Knowledge, all facts and circumstances material to
the assets, business, operations, financial condition or prospects of any of the
Companies have been disclosed to the Purchaser in this Agreement.
-24-
<PAGE> 25
PURCHASER'S RIGHTS
BREACH OF GUARANTEES
10.1. If any of the Statements is wholly or partly incorrect, incomplete or
misleading, the Vendor and the Guarantor shall jointly and severally indemnify
and hold the Purchaser or, if the Purchaser so elects, any of the Companies or
both harmless in respect of all liabilities, losses or damages resulting
therefrom and in any case pay to the Purchaser or the Company or Companies, as
the Purchaser elects, a sum equal to the amount which is necessary to put the
Purchaser and the Company or Companies, as the case may be, into the position
they would have been in had the Statements been correct, complete and not
misleading (positives Interesse).
PURCHASER'S KNOWLEDGE
10.2 Any investigation made by, or knowledge of, the Purchaser and/or any of
its advisers and/or any Managing Director or employee of any of the Companies
shall not affect any rights and claims the Purchaser or any of the Companies may
have against the Vendor.
LIMITATIONS
TIME LIMITATION
11.1 The Vendor shall not be liable in respect of any claims arising under
clauses 7.1 or 10.1, unless the Purchaser has given notice in writing of the
alleged claim to the Vendor:
(a) in the case of clause 7.1 above, within a period of four (4) months
following the date of the assessments (or amended assessments) or the
relevant administrative decisions or other measures of the tax or other
authorities which result in any Tax Liability becoming unappealable
(unanfechtbar wird); and
(b) in the case of clause 10.1 above within a period of eighteen (18)
months beginning on the Transfer Date.
OTHER LIMITATIONS
11.2.1 Claims under clause 10 and clause 17 can be made only:
(a) if the amount of the particular claim resulting from a certain set of
facts exceeds DM 50,000;
(b) if the total amount of claims exceeding DM 50,000 exceeds an aggregate
of DM 200,000 it being understood that if such threshold is exceeded,
not only the amount of the claims exceeding such threshold but all
claims can be made; and
(c) to the extent that the total amount of claims will not exceed DM
8,000,000 (eight million deutschmarks).
11.2.2 Claims may be brought under clause 10 and clause 17 only to the extent
that the matter is not specifically provided or reserved for in the Completion
Accounts.
-25-
<PAGE> 26
NON-APPLICABILITY OF LIMITATIONS
11.3 None of the limitations or exclusions of rights contained in clauses
11.1 and 11.2 above shall apply to a claim which is the result of fraud or
wilful concealment on the part of the Vendor.
INTERIM PERIOD
12. In the period from the date hereof to the Transfer Date, the Vendor
shall ensure (except to the extent otherwise agreed in writing with the
Purchaser) that:
(a) the Companies shall carry on their business only in the ordinary and
usual course and on arm's length terms;
(b) the Purchaser's representatives shall be allowed, upon reasonable
notice and during normal business hours, access to the books and
records of the Companies together with the right to take copies;
(c) no steps are taken or omissions made by it or the Companies which would
result in any Statement being incorrect, incomplete or misleading if
the Statement was repeated on or at any time before the Transfer Date
by reference to the facts and circumstances then existing;
(d) none of the Companies enters into any commitment (or makes an offer
which may lead to a contract or commitment) having a value or involving
expenditure in excess of DM 200,000 or which is of a long term or
unusual nature or which could involve an obligation of a material
nature or which may result in any material change in the nature or
scope of its operations; and
(e) none of the Companies acquires or disposes of, or agrees to acquire or
dispose of; any business or any asset having a value in excess of DM
200,000 or enters into any Agreement, contract, arrangement or
transaction (whether or not legally binding) other than in the ordinary
and usual course of business.
RIGHT TO NAME
13. The Vendor agrees that the Companies and any enterprise from time to
time connected with them within the meaning of Section 15 of the German Stock
Corporation Act shall continue to be entitled to use the Companies' current firm
names or similar names as part of their firm names after the Transfer Date.
PUBLICITY
14. Except as may be required by any applicable law or regulations
(including those of stock exchanges in the U.S.A. and Finland), no announcement
or disclosure in connection with the subject-matter or about any terms or
conditions of this Agreement shall be made by any party hereto without the prior
written consent of the other parties.
CONFIDENTIALITY
15. The Vendor shall, and shall ensure that all members of the Vendor Group
(including all of their respective employees, advisers etc.) keep confidential
and shall not, without the express written
-26-
<PAGE> 27
permission of the Purchaser, use at any time to the detriment of the Companies
or the Purchaser any business secrets or other confidential information in
respect of the Companies. For each case of a breach of this provision, the
Vendor shall pay to the Purchaser a penalty in the amount of DM 100,000.00 (in
words: one hundred thousand deutschmark). The provisions of this clause 15 shall
be without prejudice to any rights the Purchaser may have to claim damages or to
demand specific performance. Notwithstanding the first sentence of this clause
15, the Vendor shall be under no duty of confidentiality in respect of
information which they can demonstrate:
(a) is, at the time of disclosure, in the public domain; or
(b) has been lawfully disclosed by third parties who did not impose any
restrictions on its further disclosure or use; or
(c) is required to be disclosed under any law, rule or regulation, or by
any judgement, or order of any court or governmental body or agency
having jurisdiction over the Vendor.
PARENT COMPANIES GUARANTEES
16.1 Hartwall Bolagen hereby unconditionally and irrevocably guarantees as
an independent contractual obligation (im Wege eines selbstandigen
Garantievertrages) the proper and punctual performance by the Vendor of all its
obligations under or pursuant to this Agreement.
16.2 Scotsman hereby unconditionally and irrevocably guarantees as an
independent contractual obligation (im Wege eines selbstandigen
Garantievertrages) the proper and punctual performance by the Purchaser of all
its obligations under or pursuant to this Agreement.
OTHER REMEDIES
17. The remedies stipulated in this Agreement for the breach of any
warranty, guarantee or other obligation of any of the parties hereto shall not
exclude the application of any further remedy provided for under German or
Austrian law in relation to the fulfillment or breach of any obligation
hereunder Provided however that any right of the Purchaser to withdraw from the
Agreement (Rucktrittsrecht) is expressly excluded and the provisions of clause
11.2.1(c) shall apply (mutatis mutandis) to remedies under this clause 17.
COSTS
18. Each party shall bear its own costs (in each case including the costs
of legal, financial and other advisers) incurred in connection with the
negotiation, preparation and implementation of this Agreement. The Purchaser
shall bear the costs incurred in connection with the notarization of this
Agreement.
NOTICES
WRITTEN NOTICES
19.1 Any notice or other communication to be given under this Agreement
shall be in writing and signed by or on behalf of the party giving it and may be
served by sending it by fax or registered post to the address and for the
attention of the relevant party set out in clause 19.2 (or as otherwise notified
-27-
<PAGE> 28
from time to time hereunder). Any notice so served by fax or post shall be
deemed to have been received:
(a) in the case of fax, twelve (12) hours after the time of despatch;
(b) in the case of registered post, three days (3) from the date of
posting.
ADDRESSES
19.2 The addresses of the parties for the purpose of clause 19.1 are as
follows:
(a) THE VENDOR:
Address: Fokkerstraat 11, 2811 Reeuwijk
Netherlands
For the attention of: Mr E. Hartwall
(b) THE PURCHASER:
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061, USA
For the attention of: Mr D. Holmes
Fax: 001 708 634 8823
(c) HARTWALL BOLAGEN:
Address: 00390 Helsinki 39
Finland
For the attention of: Mr E. Hartwall
Fax: 00358 054 02420
(d) SCOTSMAN:
Address: 775 Corporate Woods Parkway
Vernon Hills, Illinois 60061, USA
For the attention of: Mr D. Holmes
Fax: 001 708 634 8823
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<PAGE> 29
SEVERABILITY, ENTIRE AGREEMENT, VARIATION
SEVERABILITY
20.1 If any provision of this Agreement (or any part thereof) is or becomes
invalid, unenforceable or impracticable in whole or in part, the other
provisions of this Agreement shall not be affected thereby. The invalid,
unenforceable or impracticable provision shall be deemed to be replaced by a
valid, enforceable and practicable provision the effect of which is as close as
possible to the intended effect of the invalid, unenforceable or impracticable
provision.
ENTIRE AGREEMENT
20.2 This Agreement sets forth the entire understanding between the parties
regarding the subject-matter hereof Modifications or supplements to this
Agreement are not binding unless they are executed in the legally required form
and in any case in writing. The same applies to any modification or waiver of
the requirements of this clause 20.2.
GOVERNING LAW, ARBITRATION, MISCELLANEOUS
GOVERNING LAW
21.1 This Agreement shall be governed by the laws of the Federal Republic of
Germany and in relation to the assignment (dinglicher Rechtsubergang) of the
Hartek Awagem Shares by the relevant mandatory provisions of Austrian law.
ARBITRATION
21.2 All disputes arising in relation to or in connection with the present
Agreement, or for the breach thereof, shall be finally settled under the then
valid Rules of Conciliation and Arbitration of the International Chamber of
Commerce by three arbitrators appointed in accordance with the said Rules. The
arbitration shall take place in Dusseldorf, Germany and shall be conducted in
the English language. The Vendor and Hartwall Bolagen shall be jointly entitled
to appoint not more than one arbitrator. The Purchaser and Scotsman shall be
jointly entitled to appoint not more than one arbitrator.
ANCILLARY ACTS
21.3 The Vendor shall take all such measures as the Purchaser may from time
to time reasonably require for the purpose of making the transfer of the Shares
effective. The Vendor shall, upon reimbursement of reasonable costs and expenses
incurred in connection therewith, assist the Purchaser in the enforcement of any
rights against third parties, and in the defence of any claims brought by third
parties, in relation to the Companies.
TRANSFER OF RIGHTS AND OBLIGATIONS UNDER THIS AGREEMENT
21.4 The Purchaser shall be entitled, after payment of the Purchase Price in
accordance with clause 4.2, to transfer all rights and obligations under this
Agreement to any of its affiliates (Vertragsubernahme) and the Vendor hereby
irrevocably consents to any such transfer.
-29-
<PAGE> 30
RIGHT OF CLAIM
21.5 Any of the Companies may bring claims against the Vendor under all
provisions in this Agreement which operate to the benefit of the Companies
and/or their affairs (Vertrag zu Gunsten Dritter) provided the Purchaser has
given its consent thereto.
Frankfurt am Main, 21 December 1995
/s/ E. Hartwall /s/ D. Holmes
- --------------------------------- ------------------------
HARTEK BEVERAGE HANDLING B.V. SCOTSMAN GROUP INC.
AS VENDOR AS PURCHASER
/s/ E. Hartwall /s/ D. Holmes
- --------------------------------- ------------------------
HARTWALL BOLAGEN AB SCOTSMAN INDUSTRIES INC.
AS GUARANTOR AS GUARANTOR
The above Agreement is hereby confirmed by the Parties to it after the
assignment of the Shares in notarized form on 21 December 1995 at 3.48 pm.
/s/ E. Hartwall /s/ D. Holmes
- --------------------------------- ------------------------
HARTEK BEVERAGE HANDLING B.V. SCOTSMAN GROUP, INC.
AS VENDOR AS PURCHASER
/s/ E. Hartwall /s/ D. Holmes
- --------------------------------- ------------------------
HARTWALL BOLAGEN AB SCOTSMAN INDUSTRIES INC.
AS GUARANTOR AS GUARANTOR
The above Agreement is hereby confirmed by the Parties to it again after the
assignment of the Shares (including the notarization of assignment of the Hartek
Awagem Shares) at 4.30 p.m.
/s/ E. Hartwall /s/ D. Holmes
- --------------------------------- ------------------------
HARTEK BEVERAGE HANDLING B.V. SCOTSMAN GROUP, INC.
AS VENDOR AS PURCHASER
/s/ E. Hartwall /s/ D. Holmes
- --------------------------------- ------------------------
HARTWALL BOLAGEN AB SCOTSMAN INDUSTRIES INC.
AS GUARANTOR AS GUARANTOR
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<PAGE> 1
EXHIBIT 10.8
TAX I.D. NO. 36-3635935
PROMISSORY NOTE
$5,000,000.00 Detroit, Michigan
June 30, 1995
On or before June 30, 1996, FOR VALUE RECEIVED, the undersigned,
SCOTSMAN GROUP INC., a Delaware corporation (herein called "Maker") promises to
pay to the order of COMERICA BANK-ILLINOIS, an Illinois banking corporation
(herein called "Bank"), at the principal office of Bank at Franklin Park,
Illinois, in lawful currency of the United States of America, FIVE MILLION
DOLLARS ($5,000,000.00) or so much of said sum as has been advanced and is then
outstanding hereunder, together with interest thereon as hereinafter set forth.
This Note is a note under which advances, repayments and new advances
may be made from time to time, provided that Bank shall not be obligated to make
any advance hereunder. Advances hereunder may be requested in Maker's discretion
by telephonic notice to Bank or by submission of a request for advance in form
annexed hereto as Exhibit "A". Any advance requested by telephonic notice (i)
shall be made only to Account No. 1076111614 with Bank in the name of Maker or
to such other account as Maker shall subsequently designate by written notice to
Bank, and (ii) shall be confirmed by Maker that same day by submission to Bank
by first class mail of the written request for advance aforementioned. Maker
acknowledges that if Bank makes an advance based on a telephonic request, it
shall be for Maker's convenience and all risks involved in the use of such
procedure shall be borne by Maker, and Maker expressly agrees to indemnify and
hold Bank harmless therefor. Bank shall have no duty to confirm the authority of
anyone requesting an advance by telephone.
Each advance outstanding under this Note from time to time shall bear
interest at a per annum rate equal to Bank's prime rate established by Bank from
time to time or such other rate accepted by Bank with respect thereto, and shall
be payable upon the repayment date therefor. The amount, rate and repayment date
of each advance shall be noted on Bank's records, which records will be prima
facie evidence thereof, absent manifest error. Failure to pay any advance on its
repayment date, without Bank's consent, shall constitute a default and such
advance shall thereafter bear interest at three percent (3%) above said prime
rate as it may vary from time to time until paid. Interest shall be computed on
a daily basis using a year of 360 days and assessed for the actual number of
days elapsed. Interest on each advance shall be payable monthly on the last day
of each month in the case of a prime based advance, and in all other cases on
the respective repayment date therefore which date shall not be later than the
maturity date of this Note.
This Note replaces the Promissory Note dated April 29, 1994 by Maker
payable to Bank, which Promissory Note was a renewal of a certain Promissory
Note dated June 17, 1993 in the principal amount of $5,000,000 by Maker payable
to Bank.
Whenever Bank deems itself insecure, or on default in payment of any
liability hereunder, or upon the occurrence of any Default as defined under that
Scotsman Group Inc. $90,000,000 Revolving Credit Agreement dated as of April 29,
1994, among Maker, The First National Bank of Chicago, as Agent, Bank, as
lender, and the various banks listed on the signature pages thereof, the
representations, warranties, covenants and default provisions of which are
hereby incorporated by reference into this Note,
<PAGE> 2
notwithstanding the earlier termination and expiration of said Revolving Credit
Agreement, as said representations, warranties, covenants and default provisions
may be amended from time to time in writing by and between the parties thereto,
or upon any default in payment of any other liability of Maker to Bank and
continuance thereof beyond any period of grace, if any, provided with respect
thereto, the Bank may declare this Note due forthwith. Nothing herein shall
limit any right granted Bank by other instrument or by law.
SCOTSMAN GROUP INC.
By: /s/ D. D. Holmes
-------------------------------
Its: V. P.
------------------------------
-2-
<PAGE> 3
EXHIBIT "A"
REQUEST FOR ADVANCE
TO: COMERICA BANK-ILLINOIS (the "Bank")
The undersigned hereby requests an advance, or confirms such a request
made by telephone, under the Five Million Dollar ($5,000,000.00) Promissory Note
dated June 30, 1995, made by undersigned to the Bank, pursuant to the following
terms:
Advance Amount: $________________ Interest Rate: __________% per annum
Advance Date: __________, 19__ Repayment Date:__________, 19__.
The proceeds of this advance shall be or have been deposited to the
Account No. _____________________ of the undersigned with the Bank or as
follows________________________________.
Undersigned warrant(s) that no condition exists or event has occurred
which constitute or, with the giving of notice or the running of time, or both,
would constitute a default under said Promissory Note or any related agreement
with the Bank, and the undersigned further warrants that no Event of Default, or
condition or event which, with the giving of notice or the running of time, or
both, would have otherwise constituted a "Default" under that certain Scotsman
Group Inc. Revolving Credit Agreement dated as of April 29, 1994, among the
undersigned, The First National Bank of Chicago, as Agent, and the banks and
other parties listed on the signature pages thereof (as amended from time to
time in writing by and between the parties thereto), notwithstanding the earlier
termination and expiration of said Credit Agreement, has occurred and is
continuing as of the date hereof.
Dated this _______ day of __________________, 19___.
SCOTSMAN GROUP INC.
By:
-------------------------------
Its:
------------------------------
<PAGE> 4
TAX I.D. NO. 36-3635935
PROMISSORY NOTE
$4,000,000.00 Detroit, Michigan
June 30, 1995
On or before June 30, 1996, FOR VALUE RECEIVED, the undersigned,
SCOTSMAN GROUP INC., a Delaware corporation (herein called "Maker") promises to
pay to the order of COMERICA BANK-ILLINOIS, an Illinois banking corporation
(herein called "Bank"), at the principal office of Bank at Franklin Park,
Illinois, in lawful currency of the United States of America, FOUR MILLION
DOLLARS ($4,000,000.00) or so much of said sum as has been advanced and is then
outstanding hereunder, together with interest thereon as hereinafter set forth.
This Note is a note under which advances, repayments and new advances
may be made from time to time, provided that Bank shall not be obligated to make
any advance hereunder. Advances hereunder may be requested in Maker's discretion
by telephonic notice to Bank or by submission of a request for advance in form
annexed hereto as Exhibit "A". Any advance requested by telephonic notice (i)
shall be made only to Account No. 1076111614 with Bank in the name of Maker or
to such other account as Maker shall subsequently designate by written notice to
Bank, and (ii) shall be confirmed by Maker that same day by submission to Bank
by first class mail of the written request for advance aforementioned. Maker
acknowledges that if Bank makes an advance based on a telephonic request, it
shall be for Maker's convenience and all risks involved in the use of such
procedure shall be borne by Maker, and Maker expressly agrees to indemnify and
hold Bank harmless therefor. Bank shall have no duty to confirm the authority of
anyone requesting an advance by telephone.
Each advance outstanding under this Note from time to time shall bear
interest at a per annum rate equal to Bank's prime rate established by Bank from
time to time or such other rate accepted by Bank with respect thereto, and shall
be payable upon the repayment date therefor. The amount, rate and repayment date
of each advance shall be noted on Bank's records, which records will be prima
facie evidence thereof, absent manifest error. Failure to pay any advance on its
repayment date, without Bank's consent, shall constitute a default and such
advance shall thereafter bear interest at three percent (3%) above said prime
rate as it may vary from time to time until paid. Interest shall be computed on
a daily basis using a year of 360 days and assessed for the actual number of
days elapsed. Interest on each advance shall be payable monthly on the last day
of each month in the case of a prime based advance, and in all other cases on
the respective repayment date therefore which date shall not be later than the
maturity date of this Note.
Whenever Bank deems itself insecure, or on default in payment of any
liability hereunder, or upon the occurrence of any Default as defined under that
Scotsman Group Inc. $90,000,000 Revolving Credit Agreement dated as of April 29,
1994, among Maker, The First National Bank of Chicago, as Agent, Bank, as
lender, and the various banks listed on the signature pages thereof, the
representations, warranties, covenants and default provisions of which are
hereby incorporated by reference into this Note, notwithstanding the earlier
termination and expiration of said Revolving Credit Agreement, as said
representations, warranties, covenants and default provisions may be amended
from time to time in writing by and between the parties thereto, or upon any
default in payment of any other liability of Maker
<PAGE> 5
to Bank and continuance thereof beyond any period of grace, if any, provided
with respect thereto, the Bank may declare this Note due forthwith. Nothing
herein shall limit any right granted Bank by other instrument or by law.
SCOTSMAN GROUP INC.
By: /s/ D. D. Holmes
-------------------------------
Its: V. P.
------------------------------
-2-
<PAGE> 6
EXHIBIT "A"
REQUEST FOR ADVANCE
TO: COMERICA BANK-ILLINOIS (the "Bank")
The undersigned hereby requests an advance, or confirms such a request
made by telephone, under the Four Million Dollar ($4,000,000.00) Promissory Note
dated June 30, 1995, made by undersigned to the Bank, pursuant to the following
terms:
Advance Amount: $_______________ Interest Rate: ___% per annum Advance Date:
__________, 19__ Repayment Date:__________, 19__.
The proceeds of this advance shall be or have been deposited to the
Account No. _____________________ of the undersigned with the Bank or as
follows: _____________________________.
Undersigned warrant(s) that no condition exists or event has occurred
which constitute or, with the giving of notice or the running of time, or both,
would constitute a default under said Promissory Note or any related agreement
with the Bank, and the undersigned further warrants that no Event of Default, or
condition or event which, with the giving of notice or the running of time, or
both, would have otherwise constituted a "Default" under that certain Scotsman
Group Inc. Revolving Credit Agreement dated as of April 29, 1994, among the
undersigned, The First National Bank of Chicago, as Agent, and the banks and
other parties listed on the signature pages thereof (as amended from time to
time in writing by and between the parties thereto), notwithstanding the earlier
termination and expiration of said Credit Agreement, has occurred and is
continuing as of the date hereof.
Dated this _______ day of __________________, 19___.
SCOTSMAN GROUP INC.
By:
-------------------------------
Its:
------------------------------
<PAGE> 7
REAFFIRMATION OF GUARANTY AND CONSENT
The undersigned has previously executed a Guaranty Agreement dated July 1, 1993
(the "Guaranty") in favor of COMERICA BANK-ILLINOIS (the "Lender") whereby the
undersigned unconditionally guaranteed to Lender the payment and performance of
any and all indebtedness, obligations and liabilities heretofore, now, or
hereafter owed by Scotsman Group Inc., a Delaware corporation (the "Borrower")
to Lender, including, without limitation, the payment and performance of
Borrower's Promissory Note dated April 29, 1994 in the principal sum of
$5,000,000 payable to the order of Lender with interest as therein described,
with the entire unpaid principal balance and accrued interest due on June 30,
1995 (the "Revolving Note") evidencing a $5,000,000 guidance line of credit loan
(the "Revolving Loan") extended by Lender to Borrower, and all loans and
advances made by Lender to Borrower thereunder.
The undersigned have been advised that Borrower has asked Lender to increase the
Revolving Loan from $5,000,000 to $9,000,000 and extend the maturity date
thereof to June 30, 1996, which would require the Borrower to execute two new
Promissory Notes in the aggregate principal sum of $9,000,000 payable to the
order of Lender with interest as therein described and with a maturity date of
June 30, 1996 (the "New Notes").
The undersigned has reviewed the New Notes and fully understands the terms and
provisions.
To induce Lender to increase the Revolving Loan to $9,000,000 and extend the
maturity date thereof to June 30, 1996 as aforesaid, the undersigned represents
and warrants to the Lender with the intent that the Lender rely thereon, as
follows:
1. The Guaranty is in full force and effect and is binding and enforceable
against the undersigned in accordance with its terms;
2. The undersigned irrevocably consents and agrees to Borrower's
execution, delivery and performance of the New Notes;
3. The liability of the undersigned to the Lender under the Guaranty shall
in no way be affected, modified, altered, or discharged in any fashion by the
Borrower's execution, delivery or performance of the New Notes;
4. The undersigned hereby restates and reaffirms all terms and provisions
of the Guaranty as if set forth in full herein; and
5. The undersigned does not possess any claims, defenses, offsets, or
counterclaims against the enforcement of the Guaranty, and the undersigned is,
and shall remain, unconditionally liable under the Guaranty for all
indebtedness, obligations, and liabilities heretofore, now or hereafter owed by
Borrower
<PAGE> 8
to Lender in accordance with the terms of the Guaranty, including, without
limitation, the indebtedness evidenced by the New Notes, and all extensions,
renewals, modification, and refinancings thereof.
Dated: June 30, 1995
WITNESSES: SCOTSMAN INDUSTRIES, INC.
/s/ Judy J. Peltekian By: /s/ D. D. Holmes
- --------------------------------- --------------------------------------
/s/ Donna Manahan Its: V. P.
- --------------------------------- -------------------------------------
-2-
<PAGE> 1
EXHIBIT 10.13
February 16, 1996
SCOTSMAN INDUSTRIES, INC.
1996 EXECUTIVE INCENTIVE COMPENSATION PROGRAM
PLAN B-1
PARTICIPANT___________
1. General
(a) This Plan for annual bonus, designed to provide increased
incentive through additional compensation to selected key
personnel, to be paid from profits to which such personnel
have contributed by their services during the fiscal year, is
declared effective for the bonus year ending December 31, 1995
to continue in effect thereafter from year to year unless
amended or discontinued as hereinafter provided.
(b) The Plan, as applicable to any current bonus year, may be
amended, revised or discontinued by action of the Management
Compensation Committee (the "Committee") of Scotsman
Industries only if extraordinary factors occur during the year
that would require restructuring of the Plan.
(c) The bonus for the preceding bonus year shall be paid in cash
to each participant, or in case of death, to his heirs or
personal representatives, each year following completion of
the regular annual audit by independent public accountants,
which normally is completed before February 28.
(d) A participant shall have no rights or obligations with respect
to any completed bonus year by reason of adjustments
applicable thereto made subsequent to determination of the
bonus for such completed bonus year. No rights of any nature
shall accrue to any participant or employee with respect to
any future bonus year.
(e) The Committee may at any time amend, revise or discontinue the
Executive Incentive Compensation Program as applicable to
subsequent bonus years.
2. Participants in Bonus
(a) Participants shall include key personnel selected as herein
provided. The Chairman, President and Chief Executive Officer
of Scotsman Industries shall recommend to the Committee prior
to March 1 of each year for its approval, revision or
disapproval, lists of names of employees for participation in
the bonus for the current bonus year.
(b) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee additional names of employees for
participation beginning at a fixed date in the year and upon
approval by the
<PAGE> 2
Executive Incentive Compensation Program
Plan B-1
Page 2
Committee such employees shall participate in the bonus for
that portion of the year subsequent to the fixed date.
(c) The Chairman, President and Chief Executive Officer of
Scotsman Industries may at any time during the bonus year
recommend to the Committee the exclusion, for cause, of any
employee from participation in the bonus for the year or for
any portion thereof. Upon approval of the recommendation by
the Committee, any such employee shall not participate in the
bonus for such year or for any portion of the year subsequent
to a date fixed by the Committee.
(d) A participant who is separated from employment, for any
reason, except death, disability, or retirement, prior to the
end of the bonus year shall not participate in the bonus or
any part thereof for the bonus year. However, the Chairman,
President and Chief Executive Officer of Scotsman Industries
may, at his sole discretion, recommend the separated employee
to the Committee for participation for all or part of the
bonus year.
3. Computation of Bonus
(a) The actual bonus earned shall consist of two parts. Part I is
discretionary subject to a maximum of 15.0%; Part II is the
percentage of the Net Operating Income objective earned
subject to a maximum bonus of 15.0%, the percentage of the ROI
objective earned subject to a maximum bonus of 10.0% and the
percentage of the Working Capital to Sales of 10.0%. For
purposes of this Plan, the bonus percentages are set at
various levels as follows:
<TABLE>
<CAPTION>
BONUS PERCENTAGE EARNED
-----------------------------------------------------
Cut-In Par Premium Maximum
------ --- ------- -------
<S> <C> <C> <C>
Part I - Individual Performance
Discretionary 0 7.5% 11.3% 15.0%
Part II - Team Results
Net Operating Income 0 7.5% 11.2% 15.0%
Return on Investment 0 5.0% 7.5% 10.0%
Working Capital to Sales 0 5.0% 7.5% 10.0%
- ---- ---- ----
Total 0 25.0% 37.5% 50.0%
= ==== ==== ====
</TABLE>
The bonus percentage under Part II for attainment of
objectives between any of the levels will be calculated on a
pro rata basis.
<PAGE> 3
Executive Incentive Compensation Program
Plan B-1
Page 3
(b) The discretionary bonus earned by each participant shall vary
from zero to a maximum of 15%. The percentage shall be
recommended by the Chairman, President and Chief Executive
Officer for approval or revision by the Committee.
(c) The Net Operating Income, Return on Investment and Working
Capital to Sales objectives for each Division will be
established by the Committee in U.S. dollars.
(d) The bonus payable to each participant shall be a percentage,
as determined in paragraphs 3(a), 3(b), and 3(c), of the
participant's bonus base. The maximum bonus payable under the
Plan is 50% of the participant's bonus base.
4. Definitions
(a) The Bonus Year is based on the accounting year used by
Scotsman Industries.
(b) A participant's bonus base shall be the amount of compensation
received by an employee during that portion of the bonus year
during which he/she is designated as a participant. For the
purposes hereof, compensation shall be the participant's base
rate compensation exclusive of bonuses payable hereunder,
company contributions to a pension plan and any and all rights
and benefits therein, or any other form of bonus, overtime, or
such other payments as may be excluded by the Committee.
(c) Division net operating income (NOI) shall be profit before
taxes on income of each participating division for the bonus
year, as determined in accordance with generally accepted
accounting principles, adjusted to eliminate extraordinary
gains and losses as determined by the Committee and interest
expense/income on debt and investments. NOI will be measured
on a LIFO basis covering U.S. operations and on a FIFO basis
covering foreign operations. However, any U.S. operations with
Corporate approved FIFO inventories will be measured on a FIFO
basis covering those inventories.
(d) Division average investment shall be the reported net assets
of the division adjusted to eliminate cash balances, short and
long-term investments including interdivision notes
receivable, short and long-term debt including interdivision
notes payable and obligations under capital leases, and
accrued and deferred taxes on income. Division average
investment may be adjusted to reflect extraordinary changes in
the net investment as determined by the Committee. Inventories
will be stated on a LIFO basis covering U.S. operations and on
a FIFO basis covering foreign operations.
(e) Working Capital to Sales shall be the percentage of the
monthly average of the reported consolidated working capital
to the annual sales of the participant's division excluding
inter-division/inter-company transactions. Working Capital is
defined as the net book value of the sum of trade accounts
receivable, inventory and trade accounts payable. Average
working capital will be based on month end balances starting
with the ending balance of the preceding year and ending with
the year end balance of the bonus year
<PAGE> 4
Executive Incentive Compensation Program
Plan B-1
Page 4
(average of 13 monthly balances), adjusted to eliminate
extraordinary gains and losses determined by the Committee.
<PAGE> 1
EXHIBIT 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
The Company generated cash from operating activities of $23.5 million in the
fiscal year ended December 31, 1995 ("1995"), compared with $16.2 million in
the prior year. Net income plus depreciation and amortization totaled $23.0
million in 1995, an increase of $4.2 million over the prior-year amount of
$18.8 million.
The Company's balance sheet at December 31, 1995, reflects the acquisition of
Hartek Beverage Handling GmbH and its Austrian distributor ("Hartek") as of
that date. The consolidated balance sheet included $12.9 million of assets and
$6.4 million of debt relating to the Hartek acquisition.
The Company's balance sheet and statement of cash flows for the prior year
ended January 1, 1995 ("1994"), were impacted substantially by the acquisitions
in April 1994 of The Delfield Company ("Delfield") and Whitlenge Drink
Equipment Limited ("Whitlenge"). The acquisition price included 667,000 shares
of common stock which were issued in the first quarter of 1995 based on
Delfield and Whitlenge having achieved a specified level of earnings before
interest, income taxes, depreciation and amortization ("EBITDA") in fiscal
1994.
Accounts receivable, excluding both the effects of changes in exchange rates
and the addition of approximately $1.4 million from the acquisition of Hartek,
increased by $2.6 million compared with year-end 1994 due to strong sales
growth in the Company's ice machine businesses. Inventories, excluding both
the effect of changes in exchange rates and the addition of approximately $5.4
million from the acquisition of Hartek, declined $2.0 million as increased
inventory turns were achieved at most of the Company's businesses. Trade
accounts payable and other liabilities decreased by $2.1 million, excluding
both the effects of changes in exchange rates and the addition of approximately
$6.6 million from the acquisition of Hartek, primarily due to lower inventory
purchases late in the year and the utilization of reserves established in prior
years for certain litigation matters.
Capital expenditures, including those financed through capital lease
obligations, were $6.6 million, compared with $5.5 million in the prior year.
Expenditures were made for productivity improvements, new product tooling, and
normal maintenance and replacement items. Capital expenditures in 1996 may
increase moderately from 1995 levels and are expected to be financed from
internally-generated funds.
Cash and temporary cash investments of $15.8 million, primarily held in foreign
subsidiaries, increased by $6.0 million. This increase was the result of cash
generated from operating activities, which was partially offset by cash applied
to the purchase of Hartek at year end and investments in properties and
equipment.
Long-term debt outstanding at December 31, 1995, was $74.7 million. Of this
amount, $41.8 million was outstanding as of December 31, 1995, under a $90
million reducing revolving credit agreement with a bank group. The Company
also used a portion of this agreement to provide for letters of credit totaling
$10.1 million as of December 31, 1995. Long-term debt also included a $20
million private placement agreement and industrial revenue bonds totaling $12.9
million. The interest rates attributable to the credit agreement and the
industrial revenue bonds are floating, whereas the interest rate relating to
the private placement agreement is fixed. The Company has entered into
interest rate swap agreements to reduce the impact of changes in interest rates
on its floating-rate long-term debt. The Company's long-term debt is
maintained under agreements which require compliance with specified financial
ratios. As of December 31, 1995, the Company was in compliance with all debt
covenants.
Total debt, including capital leases, at year end was $87.8 million, compared
with shareholders' equity of $112.3 million. This resulted in a
debt-to-capital ratio of 44 percent, compared with 50 percent at the end of the
prior year.
<PAGE> 2
Scotsman initiated a quarterly dividend of 2 1/2 cents per share in its first
quarter as a public company, which it has maintained. However, the decision to
pay dividends, and the amount of such dividends, is determined by the Scotsman
Board of Directors from time to time, and may change as conditions warrant.
The Company believes that its available cash resources and cash flows are
adequate to finance its future internal growth.
RESULTS OF OPERATIONS
Year ended December 31, 1995 ("1995"), compared with year ended January 1, 1995
("1994")
Scotsman Industries sales increased 22 percent in 1995, to $324.3 million,
compared with $266.6 million in 1994. Strong gains in worldwide ice machine
sales and the inclusion of Delfield and Whitlenge results for the full year
were primary contributors to this growth.
Ice machine sales increased 13 percent from the prior year and represented 52
percent of total sales in 1995. Domestic ice machine sales were up 7 percent,
a significantly greater gain than the market as a whole. New products and
expansion of the distribution system contributed to the share gain. Sales of
ice machines outside the U.S. increased more than 20 percent due to improvement
in Western European markets and substantial sales increases to the Asia-Pacific
region. In December 1995 the Company's joint venture in Shenyang, China began
production of ice machines to be sold in the domestic Chinese market.
Sales of food preparation and storage equipment increased 39 percent from 1994
to 1995 due to the inclusion of results for Delfield for a full year in 1995
versus a partial year (from April 29, 1994) for 1994. Pro forma full-year
sales of these products, as if Delfield had been acquired at the beginning of
1994, were up 1 percent. Reduced sales from Delfield to a few large national
accounts were largely offset by sales to other customers. Food preparation and
storage equipment represented approximately one-third of total Company sales in
1995.
The Company's 1995 worldwide drink dispensing equipment sales increased 23
percent versus the prior year, due to the inclusion of Whitlenge's sales for
only eight months of 1994. On a full-year basis, drink dispensing equipment
realized increased sales of 5 percent, compared with the prior year, primarily
due to Whitlenge's increased penetration of continental European markets.
Sales of this equipment accounted for 12 percent of 1995 Company sales. Niche
products, including ventilation equipment and certain contract products
comprised the balance of the Company's sales.
Gross profit increased significantly in dollars but declined as a percentage of
sales, to 27.1 percent in 1995 from 28.5 percent in 1994, as a result of the
full-year inclusion of Delfield and Whitlenge results, which historically have
had lower gross profit margins. The impact of increases of cost of materials
and a shift in sales mix at Delfield toward customers served by higher cost
distribution channels also impacted gross profit in 1995 as well.
Selling and administrative expenses for the year were up substantially in
dollars, again due in large measure to acquisitions. As a percentage of sales,
however, selling and administrative costs declined to 16.5 percent from 18.0
percent in the prior year due to lower litigation-related costs, favorable
health claims costs and the full-year inclusion of Delfield and Whitlenge and
their historically lower ratios.
Income from operations increased $6.2 million, or 22 percent, from the prior
year as a result of the above mentioned factors.
Interest expense, net, increased $0.9 million due to the higher average debt
levels associated with the Delfield and Whitlenge acquisitions. A higher
effective income tax rate of 45.2 percent in 1995, compared to 43.9 percent in
1994, reflects a greater proportion of income from the Company's higher-taxed
Italian subsidiaries.
<PAGE> 3
1995 net income of $15.4 million and fully-diluted net income per share of
$1.45 were record highs for Scotsman Industries. Hartek, acquired on December
31, 1995, had no impact on the income statement for the year. The effect of
changes in currency exchange rates was immaterial on the Company's results of
operations.
Year ended January 1, 1995 ("1994"), compared with year ended January 2, 1994
("1993")
Worldwide sales for 1994 were $266.6 million compared with $164.0 million in
the prior year, an increase of 63 percent. The Company's results were impacted
substantially by the April 1994 acquisitions of Delfield and Whitlenge, which
contributed approximately $93 million to the Company's 1994 sales following
their acquisition.
Sales of ice machines in 1994 increased 7 percent from the prior year.
Domestic ice machine sales increased 6 percent due to a strong economy and the
resulting increased market demand. Sales of the Company's Crystal Tips brand
ice machines were essentially level with the prior year, impacting the overall
domestic growth rate. Start-up production issues associated with the December
1993 relocation of the Crystal Tips business and several 1994 distribution
changes, as well as a prior-year build up of inventory in the distribution
system in anticipation of the move, negatively impacted 1994 Crystal Tips
sales.
Ice machine sales from the Company's European operations increased 10 percent
in 1994 in local currency, 7 percent in dollars, compared with the prior year.
Sales from these operations increased 4 percent in local currency in the first
six months of 1994 compared with the similar period of the prior year, while
sales in the second half of 1994 were up 19 percent in local currency from the
prior-year period, reflecting strong economic growth in the Western European
markets in the second half of the year.
Sales of the Company's Tecnomac brand refrigeration equipment for bakeries
increased 19 percent in local currency in 1994, 15 percent in dollars, versus
the prior year as the markets for those products, primarily in Italy, began to
rebound from an extended European recession.
The Company's 1994 worldwide drink dispensing equipment sales increased 94
percent versus the prior year, due to the inclusion of Whitlenge sales for the
eight months following its acquisition in April 1994. Whitlenge, on a 1994
full-year basis, realized increased sales of 5 percent in U.S. dollars, 2
percent in local currency, compared with the prior year. Sales of Booth soft
drink dispensers declined 3 percent from 1993 levels.
Delfield's sales of food preparation, storage and related equipment contributed
over $76 million to the Company's 1994 sales following its acquisition in April
1994. For the full year 1994 on a pro forma basis, Delfield's sales were up 16
percent over 1993, reflecting broad-based demand increases through the dealer
network and with national accounts.
The Company's 1994 sales on a pro forma basis, as if Delfield and Whitlenge had
been acquired as of the beginning of the year, were $304.1 million.
Gross profit increased significantly in dollars but declined as a percent of
sales, to 28.5 percent in 1994 from 30.2 percent in 1993, as a result of the
acquisitions of Delfield and Whitlenge. The historically lower gross profit
margins of those businesses, compared with the average of the other operations,
caused a reduction in the overall ratio of the consolidated businesses. Gross
profit margins of Booth/Crystal Tips declined in 1994 due to the higher costs
associated with the relocation and consolidation of those businesses. The
impact of those higher costs on the Company's overall gross margin was offset
by the positive effect of productivity improvements at other operations,
primarily at Scotsman Ice Systems, the largest of the Company's ice machine
businesses.
<PAGE> 4
Selling and administrative expenses for the year were up substantially, again
due in large measure to the acquisitions. Increased investment in research and
development resources and the costs associated with certain litigation matters
also contributed to the higher selling and administrative costs. As a
percentage of sales, however, selling and administrative costs declined, to
18.0 percent from 19.4 percent in the prior year, due to the historically lower
ratios at the acquired businesses.
Income from operations increased $10.6 million, or 60 percent, from the prior
year as a result of the above mentioned factors. Income from operations
increased for all of the businesses except for Booth/Crystal Tips, which
incurred an operating loss for the year due to consolidation costs and start-up
inefficiencies.
Interest expense, net, increased $1.2 million as a result of higher debt levels
associated with the acquisitions. An unfavorable interest rate swap agreement
established in 1989, which also contributed to 1994 interest expense, expired
in April 1994.
Income tax expense of $10.0 million reflects an effective tax rate of 43.9
percent, down from 44.8 percent in the prior year. This rate is influenced by
the proportion of highly-taxed Italian income and the non-tax-deductible
goodwill amortization arising from the acquisitions of Delfield and Whitlenge.
Net income of $12.8 million was reported for 1994, compared with $7.4 million
in 1993, an increase of 73 percent. Net income per share increased by 27
percent, from $1.06 in 1993 to $1.35 in 1994 on a fully-diluted basis,
including the effect of convertible preferred shares and 667,000 contingent
shares that were subsequently issued in the first quarter of 1995.
Pro forma net income and fully-diluted net income per share, as if the
acquisitions of Delfield and Whitlenge had been consummated at the beginning of
the year, were $13.5 million and $1.28, respectively.
<PAGE> 5
Scotsman Industries, Inc.
Consolidated Statement of Income
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
<S> <C> <C> <C>
Net sales $324,291 $266,632 $163,952
Cost of sales 236,402 190,518 114,472
-------- -------- --------
Gross profit 87,889 76,114 49,480
Selling and administrative expenses 53,435 47,900 31,874
-------- -------- --------
Income from operations 34,454 28,214 17,606
Interest expense, net 6,326 5,416 4,235
-------- -------- --------
Income before income taxes 28,128 22,798 13,371
Income taxes 12,720 10,013 5,989
-------- -------- --------
Net income before cumulative effect of accounting changes 15,408 12,785 7,382
Cumulative effect of accounting changes -- -- 29
-------- -------- --------
Net income $ 15,408 $ 12,785 $ 7,411
Preferred stock dividends 1,240 885 --
-------- -------- --------
Net income available to common shareholders $ 14,168 $ 11,900 $ 7,411
======== ======== ========
Net income per share before cumulative effect
of accounting changes:
Primary $ 1.58 $ 1.49 $ 1.06
-------- -------- --------
Fully diluted $ 1.45 $ 1.35 $ 1.06
-------- -------- --------
Net income per share:
Primary $ 1.58 $ 1.49 $ 1.06
-------- -------- --------
Fully diluted $ 1.45 $ 1.35 $ 1.06
-------- -------- --------
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
<PAGE> 6
Scotsman Industries, Inc.
Consolidated Balance Sheet
(Amounts in thousands)
<TABLE>
<CAPTION>
Dec. 31, Jan. 1,
1995 1995
<S> <C> <C>
Assets
Current Assets:
Cash and temporary cash investments $ 15,808 $ 9,770
Trade accounts and notes receivable, net of allowances
of $2,960 in 1995 and $2,296 in 1994 54,500 50,102
Inventories 52,251 48,613
Deferred income taxes 5,690 4,642
Other current assets 3,093 3,255
-------- --------
Total current assets 131,342 116,382
Properties and equipment, net 46,373 40,657
Goodwill,net 94,732 84,038
Other noncurrent assets 3,496 3,714
-------- --------
Total assets $275,943 $244,791
======== ========
Liabilities and Shareholders' Equity
Current Liabilities:
Short-term debt and current maturities of capitalized
lease obligations and long-term debt $ 13,037 $ 3,030
Trade accounts payable 24,174 24,290
Accrued income taxes 4,491 4,173
Accrued expenses 34,812 30,324
-------- --------
Total current liabilities 76,514 61,817
Long-term debt and capitalized lease obligations 74,719 85,161
Deferred income taxes 3,814 2,917
Other noncurrent liabilities 8,577 8,433
-------- --------
Total liabilities 163,624 158,328
Shareholders' Equity:
Common stock, $.10 par value, authorized 50,000,000 shares;
issued 9,153,014 shares and 8,462,197 shares, respectively 915 846
Preferred stock, $1.00 par value, authorized 10,000,000 shares;
issued 1,999,992 shares and 1,999,992 shares, respectively 2,000 2,000
Additional paid in capital 70,514 58,085
Retained earnings 45,232 31,959
Deferred compensation and unrecognized pension cost (88) (53)
Foreign currency translation adjustments (4,911) (5,031)
Less: Common stock held in treasury;
188,040 and 194,259 shares, respectively (1,343) (1,343)
-------- --------
Total shareholders' equity 112,319 86,463
-------- --------
Total liabilities and shareholders' equity $275,943 $244,791
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
<PAGE> 7
Scotsman Industries, Inc.
Consolidated Statement of Cash Flows
(Amounts in thousands)
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities:
Net income $ 15,408 $ 12,785 $ 7,411
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 7,594 6,019 3,674
Loss (gain) on property dispositions (39) 45 (52)
Change in assets and liabilities:
Trade accounts receivable (2,607) (7,779) (677)
Inventories 2,006 (3,815) 1,018
Trade accounts payable and other liabilities (2,074) 10,290 2,248
Other, net 3,162 (1,369) (1,962)
-------- ------- --------
Net cash provided by operating activities 23,450 16,176 11,660
Cash flows from investing activities:
Investment in properties and equipment (6,513) (5,434) (3,264)
Proceeds from dispositions of properties and equipment 215 34 67
Acquisition of Delfield and Whitlenge -- (28,689) --
Acquisition of Simag -- -- (5,506)
Investment in China joint venture, net (665) -- --
Acquisition of Hartek (1,491) -- --
------ ------- -------
Net cash used in investing activities (8,454) (34,089) (8,703)
Cash flows from financing and capital activities:
Short-term debt, net 3,616 (74) 1,662
Issuance of long-term debt 17,806 63,000 --
Principal payments under long-term debt
and capitalized leases (28,071) (42,831) (115)
Purchase of Scotsman Industries, Inc. common stock -- -- (38)
Dividends paid to shareholders (2,118) (1,339) (700)
------- ------- ------
Net cash provided by (used in) financing
and capital activities (8,767) 18,756 809
Effect of exchange rate changes on cash and
temporary cash investments (191) 465 (506)
-------- -------- --------
Net increase in cash and temporary cash investments 6,038 1,308 3,260
Cash and temporary cash investments at beginning of year 9,770 8,462 5,202
-------- -------- --------
Cash and temporary cash investments at end of year $ 15,808 $ 9,770 $ 8,462
======== ======== ========
Supplemental disclosure of cash flow information:
Cash paid during the year for:
Interest $ 7,431 $ 4,566 $ 4,356
======== ======== ========
Income taxes $ 10,992 $ 10,685 $ 5,048
======== ======== ========
Supplemental schedule of noncash investing and financing activities:
Investment in properties and equipment through issuance
of capitalized lease obligations $ (96) $ (56) $ --
======== ======== ========
Issuance of stock for acquisition of Delfield and Whitlenge $ (12,089) $(39,000) $ --
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
<PAGE> 8
Scotsman Industries, Inc.
Consolidated Statement of Shareholders' Equity
(Amounts in thousands, except number of shares)
<TABLE>
<CAPTION>
Foreign
Treasury Common Preferred Additional Currency
Stock Stock Stock Paid in Retained Translation Treasury
Number Par Value Par Value Capital Earnings Other (a) Adjustments Stock Total
----- -------- -------- -------- ------- -------- ---------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance at January 3, 1993 209,577 $ 720 $ -- $ 20,375 $14,144 $ (34) $(3,753) $(1,306) $ 30,146
Net income -- -- -- -- 7,411 -- -- -- 7,411
Foreign currency translation
adjustments -- -- -- -- -- -- (2,988) -- (2,988)
Issuance of deferred
compensation (7,282) -- -- 85 -- (85) -- -- --
Amortization of deferred
compensation -- -- -- -- -- 91 -- -- 91
Dividends declared to common
shareholders -- -- -- -- (700) -- -- -- (700)
Additional cost relating to
prior-year purchase of
Scotsman Industries, Inc.
common stock for treasury -- -- -- -- -- -- -- (38) (38)
Stock options exercised -- 1 -- 97 -- -- -- -- 98
Unrecognized pension cost -- -- -- -- -- (26) -- -- (26)
------- ----- ----- ------ ------ ----- ------ ------ ------
Balance at January 2, 1994 202,295 $ 721 $ -- $20,557 $20,855 $ (54) $(6,741) $(1,344) $33,994
------- ----- ----- ------ ------ ----- ------ ------ ------
Net income -- -- -- -- 12,785 -- -- -- 12,785
Foreign currency translation
adjustments -- -- -- -- -- -- 1,710 -- 1,710
Issuance of deferred
compensation (8,038) -- -- 118 -- (119) -- 1 --
Amortization of deferred
compensation -- -- -- -- -- 99 -- -- 99
Dividends declared to common
shareholders -- -- -- -- (796) -- -- -- (796)
Dividends declared to preferred
shareholders -- -- -- -- (885) -- -- -- (885)
Issuance of common and preferred
stock relating to acquisition
of Delfield and Whitlenge -- 120 2,000 36,880 -- -- -- -- 39,000
Stock options exercised -- 5 -- 530 -- -- -- -- 535
Unrecognized pension cost -- -- -- -- -- 21 -- -- 21
Other 2 -- -- -- -- -- -- -- --
------- ----- ----- ------ ------ ----- ------ ------ -------
Balance at January 1, 1995 194,259 $ 846 $2,000 $ 58,085 $ 31,959 $ (53) $ (5,031) $(1,343) $ 86,463
======= ===== ===== ====== ====== ===== ====== ======= =======
Net income -- -- -- -- 15,408 -- -- -- 15,408
Foreign currency translation
</TABLE>
<PAGE> 9
<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
adjustments -- -- -- -- -- -- 120 -- 120
Issuance of deferred
compensation (6,219) -- -- 120 -- (120) -- -- --
Amortization of deferred
compensation -- -- -- -- -- 129 -- -- 129
Dividends declared to common
shareholders -- -- -- -- (895) -- -- -- (895)
Dividends declared to preferred
shareholders -- -- -- -- (1,240) -- -- -- (1,240)
Issuance of common stock
relating to acquisition
of Delfield and Whitlenge -- 67 -- 12,022 -- -- -- -- 12,089
Stock options exercised -- 2 -- 287 -- -- -- -- 289
Unrecognized pension cost -- -- -- -- -- (44) -- -- (44)
------- ---- ----- ------ ------- ----- ------ ------ -------
Balance at December 31, 1995 188,040 $ 915 $2,000 $ 70,514 $ 45,232 $ (88) $(4,911) $(1,343) $112,319
======= ==== ===== ====== ======= ===== ====== ====== =======
</TABLE>
(a) Other shareholders' equity includes deferred compensation and unrecognized
pension cost.
The accompanying notes to consolidated financial statements are an integral
part of this statement.
<PAGE> 10
SCOTSMAN INDUSTRIES, INC.
DESCRIPTION OF BUSINESS
The Company is engaged in the manufacture and marketing of refrigeration
products primarily for the foodservice industry, including ice machines, food
preparation and storage equipment, and drink dispensing equipment.
Scotsman's commercial ice machine business accounted for 52 percent, 57 percent
and 83 percent of sales in fiscal years 1995, 1994 and 1993, respectively.
Scotsman ice machines are sold both through a system of distributors and
directly by Scotsman to national customers and governmental and military
buyers. Scotsman also manufactures and markets a line of consumer ice machines
primarily for the luxury home market.
Scotsman manufactures and markets drink dispensing equipment in Europe through
its United Kingdom subsidiary, Whitlenge, and through its Hartek German and
Austrian subsidiaries. Whitlenge and Hartek were acquired in April 1994 and
December 1995, respectively. Whitlenge's and Hartek's products are sold to soft
drink bottlers and breweries. Domestically, Scotsman also manufactures, through
its Booth, Inc. subsidiary, soft drink dispensing equipment which is sold
primarily in the United States to soft drink bottlers. Drink dispensing
equipment accounted for 12 percent, 12 percent and 10 percent of sales in
fiscal years 1995, 1994 and 1993, respectively.
Scotsman manufactures and markets a line of food preparation and storage
equipment through its Delfield subsidiary which was acquired in April 1994.
Delfield's products are sold primarily to U.S. commercial foodservice
establishments. Scotsman also manufactures and markets a line of bakery
equipment and commercial refrigerators and freezers through its European
businesses. Food preparation and storage equipment accounted for 32 percent,
28 percent and 4 percent of Scotsman's business in fiscal years 1995, 1994 and
1993, respectively.
Scotsman also manufactures and markets a line of niche products primarily
through its Delfield subsidiary which includes air ventilating equipment and
contract manufactured point of purchase merchandisers. Additionally, Scotsman
manufactures and markets water coolers through its European businesses.
Geographic information for Scotsman can be found in Note 18 in Notes to
Consolidated Financial Statements.
<PAGE> 11
SCOTSMAN INDUSTRIES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Effective April 14, 1989, Scotsman Industries, Inc. ("Scotsman" or "the
Company") was spun-off from Household International, Inc. ("Household")
through the issuance of one share of Scotsman common stock for every five
shares of Household common stock then outstanding to Household
shareholders. Scotsman became a publicly traded company listed on the New
York Stock Exchange and its operations ceased to be owned by Household.
Basis of Consolidation
The consolidated financial statements include the accounts of Scotsman
Industries, Inc. and its consolidated subsidiaries. All significant
intercompany transactions have been eliminated in consolidation.
Certain amounts in the consolidated financial statements for previous years
have been reclassified to conform to the presentation used for fiscal year
1995.
Use of Estimates
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 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.
Fiscal Year
The Company reports on a 52-53 week fiscal year ending on the Sunday
nearest to December 31. Fiscal years 1995, 1994 and 1993 had 52 weeks.
Cash Management
Scotsman uses a centralized cash management system to provide financing for
the majority of its domestic operations.
Temporary cash investments, primarily Eurodollar deposits or repurchase
agreements with maturities of ninety days or less, are carried at cost,
which approximates market. Interest income (in thousands) included in
interest expense, net was $633, $277 and $125 for fiscal years 1995, 1994
and 1993, respectively.
<PAGE> 12
Trade Accounts and Notes Receivable
Trade accounts and notes receivable at December 31, 1995, and January 1,
1995, included notes of $7.3 million and $7.9 million, respectively.
Inventories
Inventories are stated at the lower of cost or market and include the
appropriate elements of material, labor and manufacturing overhead
expenses. Cost is determined using the last-in, first-out ("LIFO") method
for a portion of domestic inventories and the first-in, first- out ("FIFO")
method for the balance of domestic and all foreign inventories.
Properties and Equipment
Properties and equipment, including capitalized leases, are recorded at
cost to the Company at date of acquisition and depreciated over either
their estimated useful lives, ranging from 3 to 40 years, or lease terms,
whichever is shorter, using principally the straight-line method for
financial reporting purposes and accelerated methods for tax reporting
purposes.
Goodwill
Cost of investments in excess of net assets of businesses acquired after
October 1970 is being amortized using the straight-line method over 40
years. The related amortization expense was $2.4 million, $1.5 million and
$0.3 million for the fiscal years 1995, 1994 and 1993, respectively. At
December 31, 1995, and January 1, 1995, accumulated amortization was $5.4
million and $3.0 million, respectively. After an acquisition, the Company
continually reviews whether subsequent events and circumstances have
occurred that indicate that the remaining estimated useful life of goodwill
may warrant revision or that the remaining balance of goodwill may not be
recoverable. If events and circumstances indicate that goodwill related to
a particular business should be reviewed for possible impairment, the
Company uses projections to assess whether future operating income of the
business on a non-discounted basis is likely to exceed the goodwill
amortization over the remaining life of the goodwill, to determine whether
a writedown of goodwill to recoverable value (as determined by the same
projections) is appropriate.
<PAGE> 13
Financial Instruments
The Company has only limited involvement with derivative financial
instruments and does not use them for trading purposes. The Company's
participation in derivatives is limited primarily to interest rate swap
agreements and forward exchange contracts. The Company enters into interest
rate swap agreements to reduce the impact of changes in interest rates on
its floating-rate long-term debt. The difference between the fixed and
floating rates, which is to be paid or received, is accrued as interest
rates change and is recognized over the life of the swap agreements. The
cash impacts of these instruments are included with the cash flows of the
items to which they relate in the Consolidated Statement of Cash Flows.
Interest Expense
Interest expense included in the Consolidated Statement of Income is
related to private placement debt, debt covered under a credit agreement,
industrial development revenue bonds, capitalized lease obligations, and
borrowings on domestic lines of credit and foreign lines of credit.
Research and Development Costs
Research and development costs related to both present and future products
are expensed currently. Research and development expenditures for fiscal
years 1995, 1994 and 1993 were $4.8 million, $5.1 million and $3.9 million,
respectively.
Foreign Currency Translation
The Company has foreign subsidiaries located in Italy, Germany, Austria and
the United Kingdom. Foreign subsidiary income and expenses are translated
into United States dollars at the average rates of exchange prevailing
during the year. The assets and liabilities are translated into U.S.
dollars at the rates of exchange on the balance sheet date, and the related
translation adjustments are accumulated as a separate component of
shareholders' equity. As the Company intends to maintain its investments
in these subsidiaries indefinitely, ultimate realization of these
translation adjustments is highly uncertain. Foreign currency transaction
gains and losses are minimal and are recorded in income as they occur.
Income Taxes
Federal and state income taxes are not provided on undistributed earnings
of foreign subsidiaries that have been or are intended to be reinvested
indefinitely.
<PAGE> 14
Stock Options
In 1995 the Financial Accounting Standards Board issued Statement of
Accounting Standards No. 123, "Accounting for Stock-Based Compensation,"
("SFAS 123"). Currently, when stock options are exercised proceeds from
the sale of common stock issued under those options are credited to common
stock. Therefore, under the method used by the Company, no charges or
credits are made to income for stock options. As permitted by SFAS 123,
the Company will continue to account for stock options as described above.
As such, the financial statement effect of this new standard will be
limited to additional required footnote disclosure in 1996.
Earnings Per Share
Primary earnings per share are computed based on income after preferred
stock dividends. The number of shares includes common stock and common
stock equivalents.
The calculation of fully-diluted net income per share is based on net
income before preferred stock dividends. The number of shares includes
common stock and common stock equivalents, assumes conversion of the
convertible preferred stock from the date of issue and also includes the
dilutive impact, as if issuance had occurred on the acquisition date of
Delfield and Whitlenge, of contingent shares that were issued subsequent to
January 1, 1995.
2. CUMULATIVE EFFECT OF ACCOUNTING CHANGES
In the first quarter of 1993 the Company implemented changes in accounting
principles for post-retirement health care benefits, post-employment
expenses and income taxes. The cumulative effect of these accounting
changes was as follows:
Unfavorable cumulative effect of accounting change due to post-retirement
health care benefits (in thousands) of $(1,660) pre-tax and $(1,029)
after-tax. (See Note 10 of Notes to Consolidated Financial Statements.)
Unfavorable cumulative effect of accounting change due to other
post-employment benefits (in thousands) of $(508) pre-tax and $(243) after-
tax. (See Note 10 of Notes to Consolidated Financial Statements.)
Favorable cumulative effect of accounting change relating to income taxes
(in thousands) of $1,301. (See Note 12 of Notes to Consolidated Financial
Statements.)
<PAGE> 15
3. INVENTORIES
Inventories consisted of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1995 Jan. 1, 1995
<S> <C> <C>
Finished goods $21,604 $19,450
Work-in-process 8,023 9,805
Raw materials 22,624 19,358
------ ------
Total inventories $52,251 $48,613
====== ======
</TABLE>
Approximately $7.5 million and $10.7 million of total Company inventories
were valued on the LIFO method in fiscal 1995 and 1994, respectively. In
1995 there were reductions in levels of inventory valued on LIFO which
reduced cost of sales (in thousands) by $43. If inventories valued on the
LIFO method had been valued using the FIFO method, they would have been
$4.1 million and $3.8 million higher at December 31, 1995, and January 1,
1995, respectively.
4. PROPERTIES AND EQUIPMENT
Properties and equipment consisted of assets owned and leased under capital
lease arrangements as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1995 Jan. 1, 1995
-------------- --------------
<S> <C> <C>
Owned:
Land $ 1,995 $ 1,669
Buildings and leasehold
improvements 28,046 23,432
Machinery, fixtures and
equipment 49,294 41,014
Accumulated depreciation
and amortization (37,949) (30,574)
------- -------
Owned, net 41,386 35,541
------- -------
Leased:
Buildings and leasehold
improvements 5,029 4,970
Machinery, fixtures and
equipment 1,540 1,388
Accumulated depreciation
and amortization (1,582) (1,242)
------ --------
Leased, net 4,987 5,116
------ -------
Properties and equipment,
net $ 46,373 $ 40,657
======= =======
</TABLE>
<PAGE> 16
5. SHORT-TERM DEBT
Short-term debt (in thousands) at December 31, 1995, and January 1, 1995,
was $12,767 and $2,780, respectively, and principally related to amounts
owed under lines of credit. The weighted average interest rate based on
short-term debt outstanding as of December 31, 1995, and January 1, 1995,
was 7.3 percent and 6.7 percent, respectively. Average borrowings (in
thousands) and the related weighted average interest rates were as follows:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Bank and other borrowings $2,463 $3,404
Weighted average interest rate 7.9% 8.0%
====== ======
</TABLE>
The maximum aggregate short-term debt outstanding (in thousands) at the end
of any month during fiscal years 1995 and 1994 was $12,767 and $3,472,
respectively.
6. LINES OF CREDIT
The Company maintains various credit agreements which are used primarily to
fund the Company's working capital needs. At December 31, 1995, these
agreements (in thousands) included foreign and domestic lines of credit of
$25,415 and $9,000, respectively. Lines of credit are reviewed annually,
with amounts borrowed under lines of credit included in short-term debt.
At December 31, 1995, foreign and domestic lines of credit not in use were
(in thousands) $18,648 and $3,000, respectively. Borrowings under these
agreements are available at the prime rate or other prevailing market
rates. There are no fees or compensating balance requirements on the lines
of credit.
7. ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1995 Jan. 1, 1995
------------- -------------
<S> <C> <C>
Payroll and employee benefits $ 6,394 $ 6,498
Current portion of product
warranties 5,994 5,918
Reserve for customer allowances 3,446 3,366
Other current liabilities 18,978 14,542
------ ------
Total accrued expenses $34,812 $30,324
======= =======
</TABLE>
<PAGE> 17
8. LONG-TERM DEBT AND CAPITALIZED LEASE OBLIGATIONS
Long-term debt and capitalized lease obligations consisted of the following
(in thousands):
<TABLE>
<CAPTION>
Dec. 31, Jan. 1,
1995 1995
------------ ------------
<S> <C> <C>
Credit Agreement
with floating interest rates;
due 1998-2000 $41,765 $ 52,000
11.43% Private Placement
Agreement; due 1997-1998 20,000 20,000
Allendale County Industrial
Revenue Bonds with floating
interest rate; due 2001 9,250 9,250
Town of Covington
Industrial Revenue Bonds
with floating interest rate;
due 2002 - 2006 3,150 3,150
Isabella County
Industrial Revenue Bonds
with floating interest rate;
due 1995 - 2003 500 550
Capital lease obligations
with various interest rates;
due 1995 - 1998 324 461
------- --------
Total $74,989 $ 85,411
Current portion 270 250
------ --------
Long-term portion $74,719 $ 85,161
======= ========
</TABLE>
In April 1994 a new $90 million reducing revolving credit agreement
("Credit Agreement") was established to provide the financing for the cash
consideration paid in connection with the acquisitions of Delfield and
Whitlenge, the refinancing of the majority of approximately $35 million in
existing indebtedness of Delfield and Whitlenge, replacement of letters of
credit of approximately $10.1 million, working capital for the Company and its
subsidiaries following the acquisitions, and transaction costs associated with
the acquisitions. Under the terms of the Credit Agreement, the revolving
credit facility reduces by $7 million at the end of years one and two, $12
million at the end of year three and $5 million at the end of years four and
five, with the remaining balance due at the end of year six. As of December 31,
1995, of the $83.0 million of credit available under this agreement, $31.1
million was unused.
<PAGE> 18
Borrowings under the Credit Agreement will bear interest at a floating rate
based upon, at the Company's option, (a) the higher of the agent bank's
corporate base rate or the federal funds rate plus 0.5 percent per annum, or
(b) the rate offered by the agent bank for deposits in the relevant
Eurocurrency, plus an applicable margin. The applicable margin will vary
between 0.50 percent and 1.0 percent per annum, depending upon the Company's
ratio of earnings before interest, taxes and amortization to total interest.
Commitment fees on the Credit Agreement vary from 0.175 percent to 0.25 percent
per annum on the unused portion.
In 1989 the Company issued $20.0 million of private placement debt held
primarily by insurance companies.
The Allendale County Industrial Revenue Bonds are secured by a bank letter of
credit for $9.6 million. The current cost of the commitment fee on the letter
of credit ranges from 0.50 percent to 1.0 percent on outstanding principal and
interest depending on the Company's interest coverage ratio as defined in the
Credit Agreement as described above. The interest rate applicable to the
Allendale County Industrial Revenue Bonds was 5.228 percent and 5.695 percent
at December 31, 1995, and January 1, 1995, respectively.
Delfield had two industrial revenue bonds outstanding which the Company assumed
as of the acquisition in April 1994. One series was issued by the town of
Covington, Tennessee and the other was issued by Isabella County, Michigan. The
Town of Covington Industrial Revenue Bonds are secured by a building with a net
book value of $4.4 million as of December 31, 1995. The Isabella County
Industrial Revenue Bonds are secured by a building section with a net book
value of $0.8 million as of December 31, 1995. The interest rates for these two
industrial revenue bonds as of December 31, 1995, were 5.3125 percent and 6.12
percent, respectively.
The Company also has various capital lease obligations which are collateralized
by properties and equipment with a net book value of approximately $0.5
million.
<PAGE> 19
The weighted average effective interest rate was 7.7 percent at December
31, 1995 and January 1, 1995. Future required maturities of long-term
debt and capital leases assuming letters of credit are outstanding at the
same level as December 31, 1995, were as follows (in thousands):
<TABLE>
<S> <C>
1996 $ 270
1997 10,145
1998 10,059
1999 70
2000 41,835
Thereafter 12,610
-------
Total $74,989
=======
</TABLE>
The Credit Agreement and private placement agreement contain various
financial covenants that, among other things, require the Company to
maintain, on a consolidated basis, specified leverage, interest expense
coverage and cash flow coverage ratios, and a minimum adjusted consolidated
tangible net worth. The Company was in compliance with these covenants as
of December 31, 1995. Among other restrictions, one of the Company's
covenants has the effect of restricting the amount of the Company's
dividends to its shareholders to an amount equal to $2.0 million plus 40
percent of the sum of cumulative net income from May 2, 1994, forward and
the net cash proceeds from the issuance of equity securities after April
29, 1994. Under such a covenant, $34.0 million of retained earnings was
restricted as of December 31, 1995. The Company is precluded from paying
dividends to its shareholders if a default or an event which, but for the
lapse of time or giving of notice, or both, would constitute a default
under the Credit Agreement has occurred and is continuing or would occur
after giving effect to the payment of such dividends.
9. OPERATING LEASES
The Company leases certain of its offices, buildings, and machinery and
equipment for periods up to 20 years with various renewal options. Rental
expense under operating leases was $2.4 million in 1995, $2.0 million in
1994 and $1.4 million in 1993.
<PAGE> 20
Future minimum lease commitments under noncancelable operating leases at
December 31, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Operating
Leases
---------
<S> <C>
1996 $1,600
1997 1,530
1998 1,371
1999 873
2000 919
Thereafter 2,703
-----
Total minimum lease
commitments $8,996
=====
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company sponsors defined benefit pension plans for certain salaried and
hourly employees. Plans covering salaried employees provide benefits that
are based on years of service and compensation. Plans covering hourly
employees provide benefits of stated amounts for each year of service. The
pension assets are invested in institutional mutual funds which contain
both equities and fixed investments. The Company complies with funding
requirements under the Employee Retirement Income Security Act.
As a result of the spin-off of the Company from Household International,
Inc. in 1989, Household became responsible for all domestic salaried
pension benefits accrued prior to March 31, 1989.
For the years ended December 31, 1995, and January 1, 1995, net periodic
pension cost and the funded status of the Company's pension plans presented
includes information for The Delfield Company defined benefit pension plan
which covers its Mt. Pleasant union hourly employees and the Whitlenge
Drink Equipment Limited Retirement Benefit Scheme which covers certain of
its salaried employees.
The Company adopted a supplemental executive retirement plan ("SERP") for
certain employees in 1994. For the years ended on or after January 1,
1995, net periodic pension cost and the funded status of the Company's
pension plans presented below includes information for the SERP.
<PAGE> 21
Net periodic pension cost (in thousands) included in the Consolidated
Statement of Income was $1,154 in 1995, $1,017 in 1994 and $524 in 1993.
The components of net periodic pension cost are (in thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended
----------------------------------------
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Service cost $ 919 $ 815 $ 442
Interest cost 667 475 175
Actual return on
plan assets (797) (213) (116)
Net amortization
and deferral 365 (60) 23
----- ----- ----
Net periodic
pension cost $1,154 $1,017 $ 524
===== ===== ====
</TABLE>
<PAGE> 22
The funded status of the Company's pension plans (in thousands),
excluding the Italian and German pension plans, was as follows:
<TABLE>
<CAPTION>
Dec. 31, 1995 Jan. 1, 1995
---------------------- ---------------------
Plan Accumulated Plan Accumulated
Assets Benefits Assets Benefits
Exceed Exceed Exceed Exceed
Accumulated Plan Accumulated Plan
Benefits Assets Benefits Assets
----------- --------- ----------- ---------
<S> <C> <C> <C> <C>
Actuarial present
value of:
Vested benefits
obligation $(1,688) $(5,193) $(2,804) $(2,717)
Non-vested
benefits
obligation - (1,542) (360) (431)
------ ------- ------ ----
Accumulated
benefit
obligation (1,688) (6,735) (3,164) (3,148)
Effects of
anticipated
future
compensation
levels (292) (1,607) (1,363) (330)
------ -------- ------ ------
Projected
benefit
obligation (1,980) (8,342) (4,527) (3,478)
Plan assets
at fair
value 1,772 5,393 3,295 2,154
----- ----- ------ ------
Projected
benefit
obligation
in excess
of plan
assets (208) (2,949) (1,232) (1,324)
Unrecognized
liability
(net asset) -- (12) 3 (14)
Unrecognized
prior
service cost -- 1,289 484 841
Unrecognized
net (gain)
or loss (79) 1 (309) (321)
Adjustment
required
to recognize
minimum
liability - (482) - (208)
------ ---- ------- -----
Accrued
pension
cost $ (287) $(2,153) $ (1,054) $(1,026)
====== ====== ====== =====
</TABLE>
<PAGE> 23
Assumptions used in the actuarial computations were:
<TABLE>
<CAPTION>
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Discount rate 7.5 - 9.0% 8.0 - 9.0% 7.5%
Rate of increase
in compensation
levels 4.0 - 7.0% 4.0 - 7.0% 4.0%
Expected long-term
rate of return
on assets 8.5 - 10.0% 9.0 - 10.0% 8.5%
</TABLE>
The Company has pension plans covering employees in its Italian
subsidiaries. These plans combine aspects of both government mandated
and non-contributory plans. Total pension expense under these plans
included in the Consolidated Statement of Income (in thousands) was
$888, $785 and $828 in fiscal years 1995, 1994 and 1993, respectively.
The unfunded liability for these plans included in the Consolidated
Balance Sheet at December 31, 1995, and January 1, 1995, (in
thousands) was $4,286 and $4,046, respectively. The Company also has
a Hartek pension plan in Germany which covers only a former employee
and his spouse. Information for the Hartek pension plan has not been
included in the tables presented as the amounts were immaterial as of
December 31, 1995.
The Company also sponsors defined contribution benefit plans.
Participation in one of these plans is available to substantially all
domestic employees. Company contributions to these plans are based on
either a percentage of employee contributions or a specified amount
depending on the provisions of the plan. Total costs incurred under
the plans were (in thousands) $568, $643 and $203 for fiscal years
1995, 1994 and 1993, respectively.
The Company maintains plans that provide certain health care benefits
to certain employees retiring from the Company on or after attaining
age 55 who have rendered at least 10 years of service to the Company.
These plans are unfunded. The Company reserves the right to change or
terminate the benefits at any time.
<PAGE> 24
Effective January 4, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, "Employers' Accounting for Post-
retirement Benefits Other Than Pensions," ("SFAS 106") on the
immediate recognition basis. The standard requires that the expected
cost of post-retirement benefits be charged to expense during the
years that the employees render service. Previously, the Company
recognized these costs on a pay-as-you-go basis.
The cumulative effect of this accounting change was to decrease income
for the 12 months ended January 2, 1994, by (in thousands) $1,660
($1,029, or $0.15 per share, after-tax), representing the amount of
unfunded obligation measured as of January 4, 1993.
Net periodic post-retirement benefit cost for the fiscal years ended
December 31, 1995, January 1, 1995, and January 2, 1994, included the
following components (in thousands):
<TABLE>
<CAPTION>
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
---- ---- ----
<S> <C> <C> <C>
Service cost on benefits earned $132 $161 $108
Interest cost on accumulated
post-retirement benefit obligation 139 142 135
Amortization of net loss subsequent
to transition - 4 -
--- --- ----
Net periodic post-retirement
benefit cost $271 $307 $243
=== === ===
</TABLE>
<PAGE> 25
The following table sets forth the status of the plan, reconciled to the
accrued post-retirement benefit cost recognized in the Company's balance sheet
(in thousands):
<TABLE>
<CAPTION>
Dec. 31, Jan. 1,
1995 1995
---- ----
<S> <C> <C>
Accumulated post-retirement
benefit obligation:
Retirees $ 820 $ 837
Fully-eligible active plan
participants 141 134
Other active plan
participants 1,161 1,020
----- ------
Total $2,122 $1,991
Unrecognized loss (126) (118)
------ ------
Accrued post-retirement
benefit cost recognized
in the balance sheet $1,996 $1,873
===== =====
</TABLE>
The accumulated post-retirement benefit obligation was determined
using a discount rate of 7.5 percent in 1995 and 8.0 percent in 1994.
The health care cost trend rates were assumed to be 12.6 percent and
11.3 percent in 1996 and 13.7 percent and 12.0 percent in 1995 for
pre-65 and post-65 benefits, respectively, with both rates gradually
declining to 5.5 percent and remaining at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage
point in each year would increase the accumulated post-retirement
benefit obligation by approximately (in thousands) $378 for 1995 and
$341 for 1994, and the aggregate of the service and interest cost
components of net periodic post-retirement benefit cost by
approximately (in thousands) $57 for 1995 and $63 for 1994.
Effective January 4, 1993, the Company also adopted Statement of
Financial Accounting Standards No. 112, "Employers' Accounting for
Post-employment Benefits" ("SFAS 112"). The statement requires
accrual accounting for benefits provided to former or inactive
employees after employment but before retirement. The Company
previously accounted for a certain portion of these post-employment
benefits on a pay-as-you-go basis. The impact of the change to SFAS
112 was an unfavorable pre-tax amount (in thousands) of $508 ($243 net
of tax or $.03 per share) in 1993. Other than the effect of the
cumulative catch-up, the impact on pre-tax income of this accounting
change for 1993, 1994 and 1995 was not material.
<PAGE> 26
11. FAIR VALUE OF FINANCIAL INSTRUMENTS
During 1994 the Company adopted Statement of Financial Accounting
Standards No. 107, "Disclosures About Fair Value of Financial
Instruments," ("SFAS 107") and Statement of Financial Accounting
Standards No. 119, "Disclosure About Derivative Financial Instruments
and Fair Value of Financial Instruments"("SFAS 119"). These statements
require certain disclosures about the fair value of financial
instruments, including derivative financial instruments, for which it
is practicable to estimate fair value.
The following methods and assumptions were used to estimate the fair
market value of each class of financial instrument for which it is
practicable to estimate that value:
Cash and Temporary Cash Investments
Temporary cash investments consist principally of investments
in short-term, interest-bearing instruments. The carrying
amount approximates fair market value.
Trade Accounts and Notes Receivable and Payable
The carrying amount of the Company's trade accounts and notes
receivable and payable approximates market value.
Long-Term Debt
The carrying amount of most of the Company's long-term debt
and the Company's short-term debt approximates market value
since rates on those debt agreements are variable and are set
periodically based on current rates during the year. An
exception would be the private placement agreement which has a
fixed interest rate of 11.43 percent. The fair value of the
private placement agreement was estimated based on the current
rates quoted to the Company for debt with the same maturities.
<PAGE> 27
Letters of Credit
As collateral for the Company's industrial revenue bonds and
for certain of its insurance programs, the Company had a total
of $10.1 million of letters of credit outstanding as of
December 31, 1995. The Company pays letter of credit fees to
its bank group that range from 0.50 to 1.0 percent based upon
the Company's interest coverage ratio as defined in the Credit
Agreement. It is the Company's opinion that the replacement
costs for such letters of credit would not significantly vary
from the present fee structure. No material loss is
anticipated due to nonperformance by counterparties to these
agreements.
Swap Agreements and Forward Contracts
Effective May 1994 the Company entered into two interest rate
swap agreements to reduce the impact of changes in interest
rates on its domestic floating-rate long-term debt. Both of
the interest rate swap agreements had a notional principal
amount of $10 million and interest payable was at a fixed rate
of 5.64 percent and 6.33 percent, respectively. In return for
both of these agreements, the Company will receive floating
rate interest payments based on three-month London Interbank
Offered Rate. These agreements will expire in May 1997.
These two swap agreements are accounted for as hedges. As of
January 1, 1995, the Company had a forward exchange contract
outstanding to hedge an intercompany note receivable that the
Company had with its United Kingdom subsidiary. The Company
had no material forward exchange contracts outstanding as of
December 31, 1995.
The fair value of interest rate swaps is the estimated amount
that the Company would receive or pay to terminate the
agreements as of the balance sheet date.
<PAGE> 28
The estimated fair value of the Company's financial instruments at
December 31, 1995, (in thousands) was as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
--------- -------
<S> <C> <C>
Assets:
Cash and temporary
cash investments $15,808 $15,808
Trade accounts
and notes receivable 54,500 54,500
Liabilities:
Short-term debt 12,767 12,767
Trade accounts payable 24,174 24,174
Long-term debt 74,665 76,675
Interest rate
swap agreements -- 176
</TABLE>
The estimated fair value of the Company's financial
instruments at January 1, 1995, (in thousands) was as follows:
<TABLE>
<CAPTION>
Carrying Fair
Amount Value
--------- -------
<S> <C> <C>
Assets:
Cash and temporary
cash investments $ 9,770 $ 9,770
Trade accounts
and notes receivable 50,102 50,102
Liabilities:
Short-term debt 2,780 2,780
Trade accounts payable 24,290 24,290
Long-term debt 84,950 86,277
Interest rate
swap agreements -- (866)
Forward exchange contract -- 350
</TABLE>
12. INCOME TAXES
Effective January 4, 1993, the Company changed its method of
accounting for income taxes as a result of the required adoption of
Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes" ("SFAS 109"). SFAS 109 requires a change in accounting
for income taxes to an asset and liability approach. The cumulative
effect of this change in 1993 was a favorable impact of $1.3 million,
or $.19 per share.
<PAGE> 29
In accordance with SFAS 109, net deferred tax assets and liabilities
related to different tax jurisdictions are not offset in the Company's
balance sheet. The components of the consolidated net deferred tax
assets and liabilities as of December 31, 1995, and January 1, 1995,
were as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1995 Jan. 1, 1995
<S> <C> <C>
Gross deferred tax assets:
Tax credits due to Italian
reorganization $ 556 $ 681
Warranty accruals 2,907 2,883
Reserve for Delfield and
Whitlenge 1,055 -
Reserve for Hartek 1,091 -
Reserve for bad debts 797 787
Inventory reserves 754 876
Reserve for post-retirement
medical costs 791 743
Tax benefit of German
net operating loss carry forwards 4,851 -
Other 2,989 3,099
------- ------
Total gross deferred tax assets 15,791 9,069
------- ------
Valuation allowance (4,991) (189)
------- ------
Total deferred tax assets $ 10,800 $ 8,880
======= ======
Gross deferred tax liabilities:
Properties and equipment $(5,702) $(4,984)
Inventory related items (909) (157)
Simag goodwill amortization (1,186) (895)
Other (1,157) (1,407)
------ ------
Total gross deferred tax liabilities $(8,954) $(7,443)
======= ======
</TABLE>
Deferred taxes reflected in the accompanying balance sheets as of December 31,
1995, and January 1, 1995, were as follows (in thousands):
<TABLE>
<CAPTION>
Dec. 31, 1995 Jan. 1, 1995
------------- ------------
<S> <C> <C>
Current portion of deferred
tax asset $5,690 $ 4,642
Noncurrent portion of deferred 22 -
tax asset
Current portion of deferred
tax liability (52) (288)
Noncurrent portion of deferred
tax liability (3,814) (2,917)
------ ------
Net deferred tax asset $ 1,846 $ 1,437
====== ======
</TABLE>
<PAGE> 30
The valuation allowance as of December 31, 1995, includes $4.9
million to entirely offset the tax asset established for Hartek pre-
acquisition net operating loss carry forwards which might not be
realized due to the terms of the purchase agreement of Hartek (see
note 16) which requires substantial repayment to the seller if
utilized and due to a pending decision of the Supreme Tax Court in
Germany which may result in such carry forwards being not utilizable
by the Company. The valuation allowance also includes $0.1 million to
partially offset the tax asset in Italy relating to a prior-year
reorganization of one of the Company's Italian subsidiaries. The
Company established this reserve for the Italian tax asset due to the
limited carry forward life of net operating losses in Italy.
The provision (benefit) for income taxes consisted of the following
(in thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended
----------------------------------------
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
United States:
Current $ 7,431 $ 7,300 $ 4,209
Deferred 855 (746) (327)
------- ------ ------
8,286 6,554 3,882
------- ------ -----
Foreign:
Current 3,605 2,412 2,055
Deferred 829 1,047 52
------ ------ ------
4,434 3,459 2,107
------ ------ ------
Provision for
income taxes $ 12,720 $ 10,013 $ 5,989
====== ====== ======
</TABLE>
<PAGE> 31
The provision (benefit) for deferred income taxes included the following (in
thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended
----------------------------------------
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Amortization of
of Italian
reorganization
benefits $ 122 $ 535 $ 507
Depreciation 307 203 43
Reserve for Glenco-Star
disposition 249 56 (108)
Reserve for swap loss -- 38 143
Warranty reserve (33) (304) (553)
Inventory adjustments 913 (95) (619)
Reserve for relocation
of Crystal Tips -- 167 673
Valuation allowance
reduction (51) (117) (157)
Other, net 177 (182) (204)
------ ----- -------
Total $ 1,684 $ 301 $ (275)
------ ----- -----
</TABLE>
Income before income taxes from foreign operations was $8.9 million in 1995,
$6.9 million in 1994 and $3.4 million in 1993. The differences between the
Company's effective tax rate and the statutory federal income tax rate were as
follows:
<TABLE>
<CAPTION>
For the Fiscal Years Ended
--------------------------------------
Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
Statutory federal
income tax rate 35.0% 35.0% 34.0%
Increase in rate resulting from:
State and local income
taxes, net of federal
tax benefit 2.9 2.7 3.1
Foreign tax effect 4.9 4.9 7.0
Other 2.4 1.3% 0.7
---- ----- -----
45.2% 43.9% 44.8%
---- ----- -----
</TABLE>
In accordance with the Company's accounting policy, provision for U.S.
income taxes has not been made on $28.7 million of undistributed
earnings of foreign subsidiaries at December 31, 1995.
<PAGE> 32
13. STOCK OPTIONS AND DEFERRED COMPENSATION
The Company has a long-term executive incentive program which provides
for granting key employees options to purchase the Company's common
stock. Under the program, options are exercisable at a rate set by
the Compensation Committee of the Board of Directors of the Company.
To date, options have been exercisable in cumulative annual increments
of 25 percent commencing one year after the date of grant. The option
price per share is not less than the fair market value of one share on
the date of the grant. An option may not be exercisable after more
than ten years and one day from the date of the grant.
On August 11, 1994, the Board of Directors adopted, subject to
shareholder approval at the 1995 Annual Meeting of Shareholders, the
Non-Employee Directors Stock Option Plan. The plan provides for (a)
an automatic award of options to purchase shares of the Company's
common stock to non-employee directors as of the effective date of the
plan, (b) automatic awards to non-employee directors who are elected
or appointed to the Board of Directors after the effective date and
(c) automatic annual awards thereafter. The options will vest 100
percent on the date preceding the first annual meeting of shareholders
following the date of the grant of the options. The option price per
share may not be less than the fair market value of one share on the
date of the grant. An option may not be exercisable after more than
ten years and one day from the date of the grant.
The Non-Employee Directors Stock Option Plan was approved by the
shareholders at the 1995 Annual Meeting of Shareholders. Accordingly,
each of the seven non-employee directors of the Company was deemed to
have been granted an option to purchase 2,000 shares of the Company's
common stock as of August 11, 1994, the effective date of the plan.
The following table has been restated to reflect this grant of a total
of 14,000 shares in 1994.
<PAGE> 33
Information with respect to the plans is as follows:
<TABLE>
<CAPTION>
Option Option Price
Shares Range Per Share
------ ---------------
<S> <C> <C>
Outstanding at
Jan. 3, 1993 425,344 $ 7.25 - $12.88
Granted 77,250 $11.19
Exercised (9,888) $ 7.25 - $12.88
Forfeited (20,820) $ 7.25 - $12.88
------- -------------
Outstanding at
Jan. 2, 1994 471,886 $ 7.25 - $12.88
Granted 70,550 $15.13 - $16.50
Exercised (51,656) $ 7.25 - $12.88
Forfeited (18,195) $ 7.25 - $16.50
------- -------------
Outstanding at
Jan. 1, 1995 472,585 $ 7.25 - $16.50
Granted 79,400 $18.06 - $19.44
Exercised (23,835) $ 7.25 - $16.50
Forfeited (3,500) $ 9.06 - $18.06
------- -------------
Outstanding at
Dec. 31, 1995 524,650 $7.25 - $19.44
Exercisable at
Dec. 31, 1995 356,568 $7.25 - $16.50
------- --------------
</TABLE>
The Company issued from treasury 6,219, 8,038 and 7,282 shares of
common stock in fiscal years 1995, 1994 and 1993, respectively, as
annual Board of Directors fees. Costs relating to these fees (in
thousands) of $129, $99 and $91 were recorded in fiscal years 1995,
1994 and 1993, respectively.
<PAGE> 34
14. ACQUISITION OF SIMAG
The Company's Frimont, S.p.A. subsidiary acquired on January 8, 1993,
the assets of Simag, an ice machine manufacturer located in Milan,
Italy. The method of accounting used for the combination was the
purchase method. The results of Simag are included in the income
statement for the Company beginning after January 8, 1993. Simag was
acquired for $5.5 million and no shares of stock were or will be
issued as a result of this acquisition. Goodwill of $4.4 million
resulting from the Simag acquisition will be amortized for book
purposes over 40 years using the straight-line method. No contingent
payments, options or commitments were specified in the acquisition
agreement of Simag. This acquisition did not have a material effect
on the Company's results of operations.
15. ACQUISITION OF DELFIELD AND WHITLENGE
On April 29, 1994, the Company completed the acquisition of The
Delfield Company and Whitlenge Drink Equipment Limited for
approximately $69.3 million in a combination of cash, preferred stock
and common stock. The cash outlay was offset by cash on the books of
the acquired businesses at closing of $3.9 million. Scotsman
shareholders approved the issuance of common and preferred stock
related to the acquisition at a special shareholders meeting on April
28, 1994.
The method of accounting used for the combination was the purchase
method. The initial amount of goodwill allocated to Delfield and
Whitlenge was $73.7 million and is being amortized over 40 years using
the straight-line method. The acquisition price included: (a) $30.4
million in cash, (b) 1.2 million shares of common stock (with a market
value of approximately $16.5 million on the acquisition date) and (c)
2.0 million shares of Series A $0.62 cumulative convertible preferred
stock with an aggregate liquidation preference of $22.5 million which
are convertible into 1,525,393 shares of common stock. Also, the
acquisition price of $69.3 million was increased by $12.1 million to
include 667,000 shares of additional common stock based upon the
businesses of Delfield and Whitlenge meeting a specified level of
earnings before interest, income taxes, depreciation and amortization
in fiscal year 1994. These additional shares were issued subsequent
to January 1, 1995. In addition, Scotsman also assumed Delfield and
Whitlenge debt of approximately $35 million which was substantially
repaid on the acquisition date. (See Note 8.) The results of Delfield
and Whitlenge are included in the income statements for the Company
beginning after April 29, 1994.
<PAGE> 35
Delfield, headquartered in Mt. Pleasant, Michigan, manufactures and
sells refrigerated foodservice equipment, primarily in the United
States. Whitlenge, located near Birmingham, England, manufactures and
sells drink dispensing equipment in Western Europe.
The accompanying unaudited condensed pro forma income statement
information is presented to illustrate the effect of certain events on
the historical income statement information of the Company as if the
acquisitions of Delfield and Whitlenge had occurred as of the first
day of each period presented.
The pro forma information includes assumptions and estimates and is
not necessarily indicative of the results of operations of the Company
as they may be in the future or as they might have been had the
transaction occurred as discussed above.
The unaudited condensed pro forma income statement information should
be read in conjunction with the historical condensed financial
statements and notes thereto of the Company appearing elsewhere
herein.
(Amounts in thousands, except per-share data)
PRO FORMA (Unaudited)
<TABLE>
<CAPTION>
Twelve Months Ended Jan. 1, 1995 Jan. 2, 1994
<S> <C> <C>
Net sales $304,144 $278,557
Net income before
extraordinary item
and cumulative effect
of accounting changes 13,547 10,010
Net income per share
before extraordinary item
and cumulative effect
of accounting changes (a) $ 1.28 $ 0.96
Average number of common
shares outstanding (b) 10,570 10,393
</TABLE>
(a) Pro forma net income per share includes the dilutive effect of the
667,000 additional shares of common stock which were contingently
issuable as described above.
<PAGE> 36
(b) Pro forma weighted average number of common shares outstanding
consists of the following: For all periods presented, Scotsman common
stock and common stock equivalents before the impact of the issuance
of the additional 1.2 million shares in April 1994, the full-year
impact of the additional 1.2 million common shares, 1,525,393 common
stock equivalents for the convertible preferred shares outstanding,
and the 667,000 contingently issuable shares of common stock. The
computation for the 12 months ended January 2, 1994, does not include
the dilutive effect of stock options outstanding as that effect is
immaterial.
16. ACQUISITION OF HARTEK
The Company's Scotsman Group Inc. subsidiary acquired on December 31,
1995, the stock of Hartek Beverage Handling GmbH and the stock of
Hartek Awagem Vertriebsges. m.b.H. ("Hartek"), a beverage dispensing
manufacturer and a small distributor of Hartek and other products
located in Radevormwald, Germany and Vienna, Austria, respectively.
The combined Hartek businesses had 1995 annual sales of approximately
$24 million. The method of accounting used for the combination was the
purchase method. The results of the Hartek businesses have not been
included in the income statements of the Company since these
businesses were acquired on December 31, 1995. The two Hartek
entities were acquired for $4.8 million, subject to adjustment based
on the terms of the purchase agreement, and no shares of stock were or
will be issued as a result of these acquisitions. The cash outlay was
offset by cash on the books of Hartek at closing of $3.3 million.
Goodwill of $1.9 million has been recorded and will be finalized
within 12 months of the acquisition. The preliminary amount of
goodwill from these acquisitions will be amortized for book purposes
over 40 years using the straight-line method. Under the terms of the
agreement governing the purchase of the Hartek businesses, the Company
is required to pay to the seller 75 percent of any tax loss carry
forwards used in reduction of taxable profits in the next three
calendar years which were available to Hartek as of December 31, 1995,
not to exceed an amount of 2.2 million Deutsche marks or, as of
December 31, 1995, approximately $1.5 million. In addition, Scotsman
also assumed Hartek debt of approximately $6.4 million.
<PAGE> 37
Pro forma unaudited 1995 net sales of the Company, as if Hartek were
acquired on the first day of fiscal year 1995 would have been $349
million. Pro forma information relating to net income and earnings
per share has not been presented as the pro forma impact of those
numbers on the Company's results was not material. Pro forma
information includes assumptions and estimates and is not necessarily
indicative of the results of operations of the Company as they may be
in the future or as they might have been had the transaction occurred
as discussed above.
17. CONTINGENCIES
On March 26, 1993, Remcor Products Company ("Remcor") filed a lawsuit
against the Company's subsidiary, Scotsman Group Inc. ("SGI"), and
Scotsman Group's subsidiary, Booth, Inc. ("Booth"), in the United
States District Court for the Northern District of Illinois. In its
Complaint, Remcor alleged that certain ice/drink dispensers made and
sold by SGI and Booth infringe a patent owned by Remcor relating to a
cold plate system.
On May 19, 1995, SGI, Booth and Remcor entered into a settlement
agreement resolving the lawsuit, and on May 25, 1995, the United
States District Court for the Northern District of Illinois entered an
order dismissing, with prejudice, the claims filed in this case.
Under the terms of the settlement agreement, SGI and Booth may
continue to manufacture and sell ice-beverage dispensers employing
their current design pursuant to a license included in the settlement
agreement. While the settlement agreement provides that the financial
terms of the settlement are confidential, the amount paid to Remcor
was within the reserve previously established by the Company in
connection with the lawsuit.
<PAGE> 38
18. GEOGRAPHIC INFORMATION
The Company's geographic data, based on the locations of
operations, are as follows (in thousands):
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 31, Jan. 1, Jan. 2,
1995 1995 1994
<S> <C> <C> <C>
Sales to unaffiliated
customers:
United States $239,110 $201,746 $119,127
Europe 85,181 64,886 44,825
------- ------- -------
Total $324,291 $266,632 $163,952
======= ======= =======
Operating profit:
United States $ 25,309 $ 20,773 $ 13,450
Europe 9,145 7,441 4,156
------- ------- -------
Total $ 34,454 $ 28,214 $ 17,606
======= ======= =======
Identifiable assets:
United States $181,994 $172,608 $ 66,069
Europe 93,949 72,183 37,104
------- ------- -------
Total $275,943 $244,791 $103,173
======= ======= =======
</TABLE>
Export sales from the United States were less than 10 percent of consolidated
net sales for all years presented.
<PAGE> 39
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Scotsman Industries, Inc.:
We have audited the accompanying consolidated balance sheet of Scotsman
Industries, Inc. (a Delaware Corporation) and subsidiaries as of December 31,
1995, and January 1, 1995, and the related consolidated statements of income,
shareholders' equity and cash flows for each of the three years in the period
ended December 31, 1995. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Scotsman Industries, Inc. and
subsidiaries as of December 31, 1995, and January 1, 1995, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
As discussed in Note 10 and Note 12 to the consolidated financial statements,
the Company changed its methods of accounting for post-retirement benefits
other than pensions, post-employment expenses and income taxes effective
January 4, 1993.
Arthur Andersen LLP
Chicago, Illinois
February 7, 1996
<PAGE> 40
Scotsman Industries, Inc.
Selected Quarterly Financial Data
(Unaudited)
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION> Fiscal year 1995 Fiscal year 1994 (a)
-------------------------------------------- --------------------------------------------
For The Three Months Ended Dec. 31, Oct. 1, July 2, Apr. 2, Jan. 1, Oct. 2, July 3, Apr. 3,
1995 1995 1995 1995 1995 1994 1994 1994
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales $ 70,779 $ 87,075 $ 90,363 $ 76,074 $ 66,565 $ 86,282 $ 75,799 $ 37,986
Cost of sales 52,709 63,348 64,471 55,874 49,677 61,125 52,916 26,800
-------- -------- -------- -------- -------- -------- -------- --------
Gross profit 18,070 23,727 25,892 20,200 16,888 25,157 22,883 11,186
Selling and administrative
expenses 13,506 13,079 13,627 13,223 12,660 15,064 12,700 7,476
-------- -------- -------- -------- -------- -------- -------- --------
Income from operations 4,564 10,648 12,265 6,977 4,228 10,093 10,183 3,710
Interest expense, net 1,366 1,639 1,744 1,577 1,495 1,615 1,399 907
-------- -------- -------- -------- -------- -------- -------- --------
Income before income taxes 3,198 9,009 10,521 5,400 2,733 8,478 8,784 2,803
Income taxes 1,259 4,099 4,792 2,570 1,043 3,799 3,912 1,259
-------- -------- -------- -------- -------- -------- -------- --------
Net income $ 1,939 $ 4,910 $ 5,729 $ 2,830 $ 1,690 $ 4,679 $ 4,872 $ 1,544
======== ======== ======== ======== ======== ======== ======== ========
Net income per share (b):
Primary $ 0.18 $ 0.50 $ 0.59 $ 0.29 $ 0.16 $ 0.52 $ 0.58 $ 0.22
======== ======== ======== ======== ======== ======== ======== ========
Fully diluted $ 0.18 $ 0.46 $ 0.54 $ 0.27 $ 0.16 $ 0.44 $ 0.51 $ 0.22
======== ======== ======== ======== ======== ======== ======== ========
Weighted average common shares
outstanding:
Primary 9,111,889 9,129,549 9,128,141 8,565,289 8,397,481 8,379,719 8,010,699 7,136,085
Fully diluted 10,650,140 10,654,786 10,653,582 10,640,578 10,595,294 10,583,355 9,601,544 --
</TABLE>
<PAGE> 41
(a) The results for fiscal year 1994 included the results of Delfield and
Whitlenge subsequent to their acquisitions on April 29, 1994.
(b) For quarters during 1994 and 1995 the dilutive effect of stock options
outstanding was included in the weighted average common shares outstanding.
For quarters ending subsequent to April 29, 1994, net income per share on
a primary basis was computed to be net income after preferred stock
dividends. For quarters ending subsequent to April 29, 1994, fully-diluted
net income per share was based on net income before preferred stock
dividends and the number of shares assumed the conversion of convertible
preferred stock from the date of issue and also included the dilutive
impact, as if issuance had occurred on the acquisition date, of contingent
shares that have been distributed to the sellers of Delfield and Whitlenge
subsequent to January 1, 1995, based on those businesses having achieved a
specified combined level of earnings during fiscal year 1994.
<PAGE> 42
Scotsman Industries, Inc.
Five Year Summary
(Amounts in thousands, except per-share data)
<TABLE>
<CAPTION>
For the Fiscal Years Ended Dec. 31, Jan. 1, Jan. 2, Jan. 3, Dec. 29,
1995(a) 1995 (b) 1994 1993 1991 (c)
<S> <C> <C> <C> <C> <C>
Net sales $324,291 $266,632 $163,952 $168,674 $164,126
Income before income taxes 28,128 22,798 13,371 10,185 936
Net income (loss) 15,408 12,785 7,411 6,392 (1,674)
Net income (loss) per share:
fully diluted (d) 1.45 1.35 1.06 0.90 (0.24)
Total assets (e) 275,943 244,791 103,173 96,103 112,808
Long-term debt and capitalized
lease obligations, excluding
current portion (e) 74,719 85,161 29,469 29,589 29,807
Cash dividends declared per
common share $ 0.10 $ 0.10 $ 0.10 $ 0.10 $ 0.10
======== ======== ======== ======== ========
</TABLE>
(a) The information for the fiscal year ended December 31, 1995, includes
balance sheet information for the Hartek businesses which were acquired
on December 31, 1995.
(b) The results for the fiscal year ended January 1, 1995, include the results
from Delfield and Whitlenge as of the date of their acquisitions, April 29,
1994.
(c) The results for the fiscal year ended December 29, 1991, included a $1.0
million after-tax loss recognized from the sale of assets of the Halsey
Taylor business in July 1991 and a $5.0 million after-tax reserve
established for the then planned disposition of the Glenco-Star division.
Net income on an unaudited pro forma basis for the fiscal year ended
December 29, 1991, adjusted to exclude the losses of $6.0 million described
above and the results of operations of Glenco-Star and Halsey Taylor, would
have been $5.6 million, or $.79 per share. Pro forma results are based on
assumptions and estimates and are not necessarily indicative of the results
of the Company as they might have been had the transaction occurred as
discussed above.
(d) The calculation of net income per share for the fiscal years 1995, 1994,
1993, 1992 and 1991 was based on 10,649,763, 9,488,965, 7,000,651,
7,096,976 and 7,098,968 weighted average shares of common stock,
respectively. The calculation of fully-diluted net income per share for the
fiscal years ended January 1, 1995, and December 31, 1995, is based on net
income before preferred stock dividends. The number of shares assumes
conversion of convertible preferred stock from the date of issue and also
includes the dilutive impact, as if issuance had occurred on the
acquisition date, of contingent shares which were subsequently distributed
to the sellers of Delfield and Whitlenge based on those businesses having
achieved a specified combined level of earnings during fiscal year 1994,
and also includes the dilutive impact of common stock options outstanding.
The net income per-share calculation for fiscal years ended prior to
January 1, 1995, did not reflect the dilutive effect of stock options
outstanding as the dilutive effect was immaterial.
(e) At year end
<PAGE> 43
Scotsman Industries, Inc.
Common Stock
Scotsman Industries, Inc. common stock is listed on the New York Stock
Exchange. The common stock ticker symbol is SCT.
<TABLE>
<CAPTION>
Dividends
1994 High Low Last Declared
<S> <C> <C> <C> <C>
1st Quarter 16 7/8 14 14 3/8 $0.025
2nd Quarter 15 13 13 1/4 $0.025
3rd Quarter 16 1/2 13 3/8 16 3/8 $0.025
4th Quarter 18 1/4 15 3/8 17 1/8 $0.025
--------
Total dividends declared $0.100
Shares outstanding at January 1, 1995 8,267,938
Shareholders of record at January 1, 1995 5,321
</TABLE>
<TABLE>
<CAPTION>
Dividends
1995 High Low Last Declared
<S> <C> <C> <C> <C>
1st Quarter 18 5/8 16 7/8 18 1/2 $0.025
2nd Quarter 19 3/4 17 18 1/2 $0.025
3rd Quarter 20 15 1/8 16 3/8 $0.025
4th Quarter 17 3/4 16 17 5/8 $0.025
--------
Total dividends declared $0.100
Shares outstanding at December 31, 1995 8,964,974
Shareholders of record at December 31, 1995 4,800
</TABLE>
<PAGE> 1
EXHIBIT 21
LIST OF SUBSIDIARIES OF THE REGISTRANT
<TABLE>
<CAPTION>
JURISDICTION OF OTHER NAMES UNDER WHICH
NAME OF SUBSIDIARY INCORPORATION SUBSIDIARY DOES BUSINESS
- ------------------ --------------- ------------------------
<S> <C> <C>
Scotsman Group Inc. Delaware Scotsman
Scotsman Commercial Ice
Systems, Inc.
Scotsman Ice Systems
Scotsman of Los Angeles
Booth, Inc. Texas Crystal Tips
Castel MAC, S.p.A. Italy None
DFC Holding Corporation Delaware None
The Delfield Company Delaware None
Hartek Awagem Vertriebsges m.b.H. Austria None
Hartek Beverage Handling GmbH Germany None
Frimont, S.p.A. Italy None
Scotsman Drink Equipment Limited England None
Whitlenge Acquisition Limited England None
Whitlenge Drink Equipment Limited England None
Whitlenge Drink Equipment, N.V. Belgium None
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our reports included in, or incorporated by reference to, this
Form 10-K into the Company's previously filed Registration Statements, File Nos.
33-35870, 33-35871, 33-53482, 33-57219, 33-56353, 33-59397 and 33-60377.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 25, 1996
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM SCOTSMAN
INDUSTRIES, INC. CONSOLIDATED BALANCE SHEET AS OF DECEMBER 31, 1995 AND SCOTSMAN
INDUSTRIES, INC. CONSOLIDATED STATEMENT OF INCOME FOR THE TWELVE MONTHS ENDED
DECEMBER 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-02-1995
<PERIOD-END> DEC-31-1995
<CASH> 15,808
<SECURITIES> 0
<RECEIVABLES> 54,500
<ALLOWANCES> 2,960
<INVENTORY> 52,251
<CURRENT-ASSETS> 131,342
<PP&E> 46,373
<DEPRECIATION> 39,531
<TOTAL-ASSETS> 275,943
<CURRENT-LIABILITIES> 76,514
<BONDS> 74,719
915
0
<COMMON> 2,000
<OTHER-SE> 109,404
<TOTAL-LIABILITY-AND-EQUITY> 275,943
<SALES> 324,291
<TOTAL-REVENUES> 324,291
<CGS> 236,402
<TOTAL-COSTS> 236,402
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 6,326
<INCOME-PRETAX> 28,128
<INCOME-TAX> 12,720
<INCOME-CONTINUING> 15,408
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 15,408
<EPS-PRIMARY> 1.58
<EPS-DILUTED> 1.45
</TABLE>
