SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended
March 31, 1996
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-10182
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Scotsman Industries, Inc.
-------------------------------------------------------
(Exact name of registrant as specified in its charter)
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
--------------
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
-------- -----
At May 8, 1996 there were 8,966,735 shares of registrant's common stock
----------- ---------
outstanding.
<PAGE> 2
SCOTSMAN INDUSTRIES, INC.
--------------------------
FORM 10-Q
---------
March 31, 1996
---------------
INDEX
------
PART I--FINANCIAL INFORMATION:
Item 1. FINANCIAL STATEMENTS-
HISTORICAL-
Condensed Statement of Income
Condensed Balance Sheet
Condensed Statement of Cash Flows
Notes to Condensed Financial Statements
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
PART II--OTHER INFORMATION:
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
<PAGE> 3
PART I--FINANCIAL INFORMATION
-----------------------------
ITEM 1. Financial Statements
-----------------------------
<TABLE>
<CAPTION>
SCOTSMAN INDUSTRIES, INC.
--------------------------
CONDENSED STATEMENT OF INCOME
------------------------------
(Unaudited)
------------
(In thousands, except per-share amount)
----------------------------------------
For the Three
Months Ended
<S> <C> <C>
----------------------------
Mar. 31, Apr. 2,
1996 1995
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Net sales $85,533 $76,074
Cost of sales 62,130 55,874
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Gross profit $23,403 $20,200
Selling and administrative expenses 15,023 13,223
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Income from operations $ 8,380 $ 6,977
Interest expense, net 1,415 1,577
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Income before income taxes $ 6,965 $ 5,400
Income taxes 3,346 2,570
-------- -------
Net income $ 3,619 $ 2,830
Preferred stock dividends 310 310
-------- -------
Net income available
to common shareholders $ 3,309 $ 2,520
======== =======
Net income per share (i):
Primary $ 0.36 $ 0.29
======== =======
Fully diluted $ 0.34 $ 0.27
======== =======
</TABLE>
<PAGE> 4
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
-----------------------------
CONDENSED STATEMENT OF INCOME - continued
-----------------------------
(i) Primary earnings per common share are computed by dividing net
income available to common shareholders by the weighted average
number of common shares and common stock equivalents outstanding
during each period: 9,140,363 and 8,565,289, for the three
months ended March 31, 1996 and April 2, 1995, respectively.
The calculation of fully-diluted net income per share is based on
net income before preferred stock dividends. The number of
shares assumes the conversion of the convertible preferred stock
from April 29, 1994, the date of issue, and also includes the
dilutive impact, as if issuance had occurred on April 29, 1994,
the date of the acquisition of The Delfield Company ("Delfield")
and Whitlenge Drink Equipment Limited ("Whitlenge"), of
contingent shares which were distributed to the sellers of
Delfield and Whitlenge in March 1995 based on those businesses
having achieved a specified combined level of earnings during
fiscal year 1994. The total number of shares used in the fully-
diluted calculation for the three months ended March 31, 1996,
and April 2, 1995 were 10,669,965 and 10,640,578, respectively.
See notes to unaudited condensed financial statements.
<PAGE> 5
<TABLE>
<CAPTION>
SCOTSMAN INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(In thousands)
---------------
Mar. 31, Dec. 31,
A S S E T S 1996 1995
----------- ----------- -----------
(unaudited)
<S> <C> <C>
CURRENT ASSETS:
Cash and temporary cash investments $ 14,883 $ 15,808
Trade accounts receivable, net of
reserves of $3,112 and $2,960 63,287 54,500
Inventories 56,161 52,251
Deferred income taxes 5,625 5,690
Other current assets 3,459 3,093
Total current assets $143,415 $131,342
PROPERTIES AND EQUIPMENT, net of
accumulated depreciation of $40,689
and $39,531 46,278 46,373
GOODWILL, net 93,898 94,732
OTHER NONCURRENT ASSETS 3,970 3,496
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$287,561 $275,943
======== =======
LIABILITIES AND SHAREHOLDERS' EQUITY
-------------------------------------
CURRENT LIABILITIES:
Short-term debt and current maturities
of long-term debt and capitalized
lease obligations $ 4,976 $ 13,037
Trade accounts payable 31,340 24,174
Accrued income taxes 7,760 4,491
Accrued expenses 32,662 34,812
-------- -------
Total current liabilities $ 76,738 $ 76,514
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS 83,372 74,719
DEFERRED INCOME TAXES 3,835 3,814
OTHER NONCURRENT LIABILITIES 8,534 8,577
-------- --------
Total liabilities $172,479 $163,624
======== ========
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value $ 915 $ 915
Preferred stock, $1.00 par value 1,998 2,000
Additional paid in capital 70,516 70,514
Retained earnings 48,317 45,232
Deferred compensation and
unrecognized pension cost (59) (88)
Foreign currency translation adjustments (5,263) (4,911)
Less: Common stock held in treasury (1,342) (1,343)
-------- --------
Total Shareholders' Equity $115,082 $112,319
-------- --------
$287,561 $275,943
======== ========
See notes to unaudited condensed financial statements.
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
SCOTSMAN INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands)
------------------
For the Three
Months Ended
-----------------
Mar. 31, Apr. 2,
1996 1995
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<S> <C> <C>
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 3,619 $ 2,830
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 1,980 1,824
Change in assets and liabilities-
Trade accounts receivable (8,654) (5,126)
Inventories (3,947) (4,412)
Trade accounts payable and other
liabilities 8,069 5,088
Other, net (485) (146)
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Net cash provided by
operating activities $ 582 $ 58
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CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in properties and equipment $ (1,451) $ (2,043)
Proceeds from disposal of property,
plant and equipment 89 47
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Net cash used in investing activities $ (1,362) $ (1,996)
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CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term debt
and capitalized lease obligations $ (2,101) $ (55)
Issuance of long-term debt 10,866 3,000
Dividends paid to shareholders (534) (517)
Short-term debt, net (7,927) 694
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Net cash provided by financing activities $ 304 $ 3,122
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Effect of exchange rate changes on cash
and temporary cash investments (449) 218
NET (DECREASE) INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS $ (925) $ 1,402
<PAGE> 8
CASH AND TEMPORARY CASH INVESTMENTS, beginning
of period 15,808 9,770
CASH AND TEMPORARY CASH INVESTMENTS, ---------- ---------
end of period $ 14,883 $ 11,172
========== =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 1,411 $ 1,115
========== =========
Income taxes $ 163 $ 1,344
========== =========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Investment in properties and equipment through
issuance of capitalized lease obligations $ (42) $ (32)
========== =========
Issuance of common stock for acquisition $ -- $(12,089)
========== =========
See notes to unaudited condensed financial statements.
</TABLE>
<PAGE> 9
SCOTSMAN INDUSTRIES, INC.
--------------------------
NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS
--------------------------------------------------
(1) BASIS OF PRESENTATION:
-------------------------
The condensed consolidated financial statements include the accounts
of Scotsman Industries, Inc. and its consolidated subsidiaries (the
"Company").
All accounting policies used in the preparation of the quarterly
condensed financial statements are consistent with the accounting
policies described in the notes to financial statements for the year
ended December 31, 1995, appearing in the Company's 1995 Annual Report
to Shareholders ("Annual Report"). In the opinion of management, the
interim financial statements reflect all adjustments which are
necessary for a fair presentation of the Company's financial position,
results of operations and cash flows for the interim periods
presented. The results for such interim periods are not necessarily
indicative of results for the full year. These financial statements
should be read in conjunction with the consolidated financial
statements and the accompanying notes to consolidated financial
statements included in the aforementioned Annual Report.
(2) INVENTORIES:
---------------
Inventories consisted of the following (in thousands):
Mar. 31, Dec. 31,
1996 1995
-------- --------
Finished goods $25,914 $21,604
Work-in-process 9,202 8,023
Raw materials 21,045 22,624
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Total inventories $56,161 $52,251
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<PAGE> 10
(3) 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., a beverage dispensing manufacturer
and a small distributor of Hartek and other products located in
Radevormwald, Germany and Vienna, Austria, respectively (collectively,
"Hartek"). Hartek had 1995 annual sales of approximately $24 million.
The method of accounting used for the combination was the purchase
method. The results of Hartek have been included in the income
statements for the Company as of the date of acquisition, December 31,
1995. Hartek was 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 the acquisition. The cash
outlay was offset by cash on the books of Hartek at closing of $3.3
million. Preliminary goodwill of $1.9 million has been recorded and
will be finalized within 12 months of the acquisition. The amount of
goodwill from the acquisition will be amortized for book purposes over
40 years using the straight-line method. Under the terms of the
agreement governing the purchase of Hartek, the Company is required
to pay to the seller 75 percent of the actual amount of any tax saving
realized by Hartek in respect of each of its financial years ended on
December 31, 1996, 1997 and 1998 through the use of the amount of any
tax loss carry forward available to Hartek as of December 31, 1995, in
reduction of taxable profits for those financial years 1996 through
1998. This additional consideration is not to exceed an amount of 2.2
million deutsche marks or, as of March 31, 1996, approximately $1.5
million. In addition, Scotsman also assumed Hartek debt of
approximately $6.4 million.
Pro forma first quarter 1995 unaudited sales for the Company, as if
Hartek were acquired on the first day of fiscal year 1995, would have
been $82 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.
<PAGE> 11
SCOTSMAN INDUSTRIES, INC.
--------------------------
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
------------------------------------------------------------
Results of Operations
---------------------
The Company reported record first quarter sales and earnings in 1996.
Net sales for the first quarter of 1996 were $85.5 million, up $9.5
million or 12 percent from sales for the first quarter of 1995. First
quarter 1996 results include sales of $6.2 million from Hartek, which
was acquired on December 31, 1995. Net income for the first quarter
of 1996 was $3.6 million, up $0.8 million or 28 percent compared to
the first quarter of 1995. The impact of changes in foreign exchange
rates did not have a significant impact on the comparison of the
results of operations between the first quarter of 1996 and the first
quarter of 1995.
Scotsman's worldwide ice machine sales, representing approximately
half of the Company's sales for the first quarter of 1996, were up 13
percent in U.S. dollars compared with the first quarter of 1995. Ice
machine sales were up over 20 percent in Europe and 7 percent in the
United States, which reflects continued strength in the European ice
machine markets and an increase in market share in the United States.
First quarter 1996 sales of beverage dispensing equipment,
representing approximately 20 percent of the Company's sales for the
quarter, were up approximately 80 percent compared to the same period
of the prior year. Excluding Hartek sales from 1996 results, beverage
dispensing sales were up 14 percent when compared to the first quarter
of the prior year. Whitlenge, the Company's U.K.-based beverage
dispensing business, recorded sales gains of more than 30 percent for
the quarter which was the result of increased export initiatives.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
------------------------------------------------------------
Results of Operations - continued
---------------------
Sales of food preparation and storage equipment, representing slightly
more than one quarter of the Company's sales in the first quarter of
1996, decreased 9 percent for the quarter compared to the first
quarter of the prior year. Lower national account sales at Delfield,
along with a lower volume of European bakery equipment sales, were the
primary contributors to that decrease.
The Company's gross profit increased by $3.2 million compared with the
first quarter of 1995. Gross profit margin increased 0.8 points, from
26.6 percent to 27.4 percent of sales, as the Company benefitted from
moderate price increases in some products and improved gross profit
margins in food preparation and storage equipment which reflected
productivity improvements resulting from the implementation of cell
manufacturing in 1996. Also, Booth/Crystal Tips had improved gross
margins which continued its recent trend of productivity gains
following the relocation of that business.
Selling and administrative expenses increased by $1.8 million or 14
percent when compared to the first quarter of 1995. The increase in
selling and administrative expenses was primarily attributable to the
inclusion of Hartek results for the first quarter of 1996.
Income from operations increased by $1.4 million or 20 percent which
reflects the impact of strong worldwide ice machine sales, the impact
of substantial increased sales volume in the Whitlenge dispensing
business, and also the contribution to profits by the newly-acquired
Hartek business.
Interest expense, net, decreased by $0.2 million or 10 percent when
compared to the prior year's first quarter, primarily the result of
the slightly lower domestic borrowings during the first quarter of
1996 compared to the first quarter of 1995.
The Company's overall tax rate for the first quarter of 1996 was 48.0
percent compared with 47.6 percent for the prior-year period. This
higher rate is primarily attributable to a greater percentage of
earnings from higher-taxed foreign operations.
<PAGE> 13
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
------------------------------------------------------------
Financial Condition
-------------------
Cash and temporary cash investments decreased by $0.9 million from
December of 1995 reflecting lower cash balances at the Company's
foreign subsidiaries. Inventory increased by $3.9 million from
December of 1995, which reflects normal seasonal activity in
anticipation of the Company's major selling season. Accounts
receivable was $8.7 million higher than December 1995 primarily
resulting from the sales increase when comparing the first quarter of
1996 to the fourth quarter of 1995. Trade accounts payable was $7.1
million higher than December 1995 which also reflects the increased
inventory purchases. The changes in accounts receivable, inventory
and accounts payable from December 1995 have been presented excluding
the impact of foreign exchange on those categories.
Shareholders' equity also increased $2.8 million from December 1995
which reflects net income of the first quarter, partially offset by
the impact of dividends and changes in accumulated translation
adjustments.
Short-term debt of $6.4 million assumed in the acquisition of Hartek
was replaced in the first quarter of 1996 with lower cost long-term
debt. The debt-to-capital ratio at March 1996 was 43 percent compared
with 44 percent at December 1995.
On February 15, 1996 the Company's Board of Directors declared a
dividend of 2 1/2 cents per share payable to common shareholders of
record on March 29, 1996.
<PAGE> 14
PART II. OTHER INFORMATION
---------------------------
Item 6. Exhibits and Reports
on Form 8-K
--------------------
(a) Exhibits
Exhibit 27 Article 5 Financial Data Schedule
for the Period Ended March 31,
1996.
(b) The Registrant filed no reports on Form 8-K during
the quarterly period ended March 31, 1996.
<PAGE> 15
SIGNATURE
Pursuant to the requirements of the Securities and Exchange
Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
SCOTSMAN INDUSTRIES, INC.
Date May 13, 1996 By:/s/ Donald D. Holmes
------------ --------------------
Donald D. Holmes
Vice President-Finance
and Secretary
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial
information extracted from Scotsman
Industries, Inc. Condensed Balance Sheet
(Unaudited) as of March 31, 1996 and
Scotsman Industries, Inc. Condensed
Statement of Income (Unaudited) for the
Three Months Ended March 31, 1996 and is
qualified in its entirety by reference
to such financial statements.
<MULTIPLIER> 1000
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<PERIOD-TYPE> 3-MOS
<CASH> 14,883
<SECURITIES> 0
<RECEIVABLES> 63,287
<ALLOWANCES> 3,112
<INVENTORY> 56,161
<CURRENT-ASSETS> 143,415
<PP&E> 46,278
<DEPRECIATION> 40,689
<TOTAL-ASSETS> 287,561
<CURRENT-LIABILITIES> 76,738
<BONDS> 83,372
<COMMON> 915
0
1,998
<OTHER-SE> 112,169
<TOTAL-LIABILITY-AND-EQUITY> 287,561
<SALES> 85,533
<TOTAL-REVENUES> 85,533
<CGS> 62,130
<TOTAL-COSTS> 62,130
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,415
<INCOME-PRETAX> 6,965
<INCOME-TAX> 3,346
<INCOME-CONTINUING> 3,619
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,619
<EPS-PRIMARY> 0.36
<EPS-DILUTED> 0.34
</TABLE>
