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
June 30, 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.
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(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 August 5, 1996 there were 9,257,014 shares of registrant's
-------------- ---------
common stock outstanding.
<PAGE> 2
SCOTSMAN INDUSTRIES, INC.
FORM 10-Q
June 30, 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 1. LEGAL PROCEEDINGS
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
SIGNATURE
<PAGE> 3
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
-----------------------------
SCOTSMAN INDUSTRIES, INC.
CONDENSED STATEMENT OF INCOME
(Unaudited)
-----------
(In thousands, except per-share amount)
---------------------------------------
For the Three
Months Ended
--------------------------
June 30, July 2,
1996 1995
-------- -------
Net sales $104,423 $90,363
Cost of sales 73,562 64,471
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Gross profit $ 30,861 $25,892
Selling and administrative expenses 15,854 13,627
------- ------
Income from operations $ 15,007 $12,265
Interest expense, net 1,422 1,744
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Income before income taxes $ 13,585 $10,521
Income taxes 6,520 4,792
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Net income $ 7,065 $ 5,729
Preferred stock dividends 252 310
-------- ------
Net income available
to common shareholders $ 6,813 $ 5,419
======= ======
Net income per share (i):
Primary $ 0.73 $ 0.59
======= ======
Fully diluted $ 0.66 $ 0.54
======= ======
<PAGE> 4
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
-----------------------------
CONDENSED STATEMENT OF INCOME - continued
- -----------------------------
(i) PRIMARY:
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: 9,315,726 and 9,128,141 for
the three months ended June 30, 1996, and July 2, 1995,
respectively. The computation includes the dilutive impact
of common stock options outstanding.
FULLY DILUTED:
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 June 30, 1996, and
July 2, 1995, were 10,701,692 and 10,653,582, respectively.
See notes to unaudited condensed financial statements.
<PAGE> 5
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
-----------------------------
SCOTSMAN INDUSTRIES, INC.
CONDENSED STATEMENT OF INCOME
(Unaudited)
-----------
(In thousands, except per-share amount)
---------------------------------------
For the Six
Months Ended
-------------------------
June 30, July 2,
1996 1995
------- -------
Net sales $189,956 $166,437
Cost of sales 135,692 120,345
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Gross profit $ 54,264 $ 46,092
Selling and administrative expenses 30,877 26,850
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Income from operations $ 23,387 $ 19,242
Interest expense, net 2,837 3,321
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Income before income taxes $ 20,550 $ 15,921
Income taxes 9,866 7,362
------- -------
Net income $ 10,684 $ 8,559
Preferred stock dividends 562 620
------- -------
Net income available
to common shareholders $ 10,122 $ 7,939
======= =======
Net income per share (i):
Primary $ 1.10 $ 0.90
======= =======
Fully diluted $ 1.00 $ 0.80
======= =======
<PAGE> 6
PART I--FINANCIAL INFORMATION
ITEM 1. Financial Statements
-----------------------------
CONDENSED STATEMENT OF INCOME - continued
- -----------------------------
(i) PRIMARY:
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: 9,228,046 and 8,846,717 for
the six months ended June 30, 1996, and July 2, 1995,
respectively. The computation includes the dilutive impact
of common stock options outstanding.
FULLY DILUTED:
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 six months ended June 30, 1996, and July
2, 1995, were 10,700,100 and 10,648,992, respectively.
See notes to unaudited condensed financial statements.
<PAGE> 7
SCOTSMAN INDUSTRIES, INC.
CONDENSED BALANCE SHEET
(In thousands)
--------------
June 30, Dec. 31,
A S S E T S 1996 1995
---------- ----------
(unaudited)
CURRENT ASSETS:
Cash and temporary cash investments $ 16,699 $ 15,808
Trade accounts receivable, net of
reserves of $3,161 and $2,960 77,413 54,500
Inventories 54,703 52,251
Deferred income taxes 5,558 5,690
Other current assets 2,960 3,093
---------- ----------
Total current assets $157,333 $131,342
PROPERTIES AND EQUIPMENT, net of
accumulated depreciation of $42,011
and $39,531 46,772 46,373
GOODWILL, net 94,566 94,732
OTHER NONCURRENT ASSETS 3,429 3,496
---------- ----------
$302,100 $275,943
========== ==========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Short-term debt and current maturities
of long-term debt and capitalized
lease obligations $ 3,133 $ 13,037
Trade accounts payable 34,830 24,174
Accrued income taxes 10,333 4,491
Accrued expenses 34,549 34,812
---------- ----------
Total current liabilities $ 82,845 $ 76,514
LONG-TERM DEBT AND CAPITALIZED LEASE
OBLIGATIONS 83,712 74,719
DEFERRED INCOME TAXES 4,163 3,814
OTHER NONCURRENT LIABILITIES 8,725 8,577
---------- ----------
Total liabilities $179,445 $163,624
========== ==========
SHAREHOLDERS' EQUITY:
Common stock, $.10 par value $ 944 $ 915
Preferred stock, $1.00 par value 1,625 2,000
Additional paid in capital 70,983 70,514
Retained earnings 54,898 45,232
Deferred compensation and
unrecognized pension cost (148) (88)
Foreign currency translation adjustments (4,305) (4,911)
Less: Common stock held in treasury (1,342) (1,343)
---------- ----------
Total Shareholders' Equity $122,655 $112,319
---------- ----------
$302,100 $275,943
========== ==========
See notes to unaudited condensed financial statements.
<PAGE> 8
SCOTSMAN INDUSTRIES, INC.
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited)
(In Thousands)
--------------
For the Six
Months Ended
-----------------------
June 30, July 2,
1996 1995
---------- ----------
CASH FLOW FROM OPERATING ACTIVITIES:
Net income $ 10,684 $ 8,559
Adjustments to reconcile net income to
net cash provided by operating activities-
Depreciation and amortization 4,333 3,647
Change in assets and liabilities-
Trade accounts receivable (22,235) (18,486)
Inventories (2,290) (1,790)
Trade accounts payable and other
liabilities 15,577 4,313
Other, net (113) 1,987
---------- ----------
Net cash provided by (used in)
operating activities $ 5,956 $ (1,770)
---------- ----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in properties and equipment $ (3,360) $ (3,233)
Proceeds from disposal of property,
plant and equipment 178 63
Acquisition of Hartek (231) -
---------- ----------
Net cash used in investing activities $ (3,413) $ (3,170)
---------- ----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Principal payments under long-term debt
and capitalized lease obligations $ (5,340) $ (111)
Issuance of long-term debt 14,517 9,000
Dividends paid to shareholders (1,068) (1,050)
Short-term debt, net (9,755) (1,619)
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Net cash (used in) provided by
financing activities $ (1,646) $ 6,220
---------- ----------
Effect of exchange rate changes on cash
and temporary cash investments (6) 242
NET INCREASE IN CASH AND TEMPORARY CASH
INVESTMENTS $ 891 $ 1,522
CASH AND TEMPORARY CASH INVESTMENTS, beginning
of period 15,808 9,770
---------- ----------
CASH AND TEMPORARY CASH INVESTMENTS,
end of period $ 16,699 $ 11,292
========== ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest $ 3,758 $ 3,539
========== ==========
Income taxes $ 3,711 $ 4,151
========== ==========
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Investment in properties and equipment through
issuance of capitalized lease obligations $ (42) $ (64)
========== ==========
Issuance of common stock for acquisition $ - $(12,089)
========== ==========
See notes to unaudited condensed financial statements.
<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 consisting only of recurring items 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):
June 30, December 31,
1996 1995
--------- -----------
Finished goods $23,558 $21,604
Work-in-process 10,658 8,023
Raw materials 20,487 22,624
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Total inventories $54,703 $52,251
========= ===========
<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 $5.0 million. No shares of stock were or
will be issued as a result of this acquisition. The cash outlay
to the seller was offset by cash on the books of Hartek at
closing of $3.3 million. Preliminary goodwill of $2.9 million
has been recorded and will be finalized within 12 months of the
acquisition. The amount of goodwill from this acquisition is
being 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 June 30,
1996, approximately $1.4 million. In addition, at the date of
acquisition, Scotsman also assumed Hartek debt of approximately
$6.4 million.
Pro forma second quarter and June year-to-date 1995 unaudited
sales for the Company, as if Hartek were acquired on the first
day of fiscal year 1995, would have been $99 million and $181
million, respectively. 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 second quarter sales and earnings in
1996. Net sales for the second quarter of 1996 were $104.4
million, up $14.1 million or 16 percent from sales for the second
quarter of 1995. Second quarter 1996 results include sales of
$8.0 million from Hartek, which was acquired on December 31,
1995. Net income for the second quarter of 1996 was $7.1
million, up $1.3 million or 23 percent compared to the second
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 second quarter of 1996 and the
second quarter of 1995.
The Company also reported record results for the six months ended
June 30, 1996. Net sales for the first half of 1996 were $190.0
million, up $23.5 million or 14 percent from sales for the first
half of 1995. Results for the first half of 1996 include sales
of $14.2 million from Hartek, which was acquired on December 31,
1995. Net income for the first half of 1996 was $10.7 million,
up $2.1 million or 25 percent compared to the same period 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 half of 1996 and the first half of
1995.
Scotsman's worldwide ice machine sales, representing
approximately half of the Company's sales for both the second
quarter and the first half of 1996, were up in U.S. dollars 10
percent for the quarter and 11 percent year-to-date,
respectively, compared with the same periods in 1995. European
ice machine sales were up over 20 percent in U.S. dollars for
both the second quarter of 1996 and the first half of 1996 when
compared to the same periods in 1995.
<PAGE> 12
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
-------------------------------------------------
Results of Operations - continued
- ---------------------
Second quarter 1996 sales of beverage dispensing equipment,
representing approximately 20 percent of the Company's sales for
the quarter and year-to-date period, were up more than 100
percent compared to the second quarter of 1995. First half 1996
sales of beverage dispensing equipment were up over 90 percent
compared to prior year. Growth in beverage dispensing sales in
1996 was being driven by the acquisition of Hartek and continuing
market penetration on the European continent by the Company's
U.K.-based Whitlenge Drink Equipment business. Excluding Hartek
sales from 1996 results, beverage dispensing sales were up over
20 percent in U.S. dollars when compared to the second quarter of
the prior year and were up 20 percent in U.S. dollars for the
year-to-date period.
Sales of food preparation and storage equipment decreased 2
percent in U.S. dollars for the second quarter and 5 percent in
U.S. dollars for the year-to-date period when compared to the
same periods in the prior year. Increases in the volume of sales
to the majority of the Company's customer base, almost entirely
offset declines in volume of sales to certain major chains. Food
preparation and storage equipment represented approximately one
fourth of the Company's sales in the second quarter and year-to-
date period ending June 1996.
Selling and administrative expenses increased by $2.2 million for
the second quarter and $4.0 million for the six months ended June
1996 when compared to the same periods in 1995. The increase was
primarily attributable to the inclusion of selling and
administrative expenses of the newly-acquired Hartek business.
Interest expense, net, decreased by $0.3 million in the second
quarter of 1996 and by $0.5 million for the 1996 year-to-date
period, primarily the result of lower domestic long-term
borrowings.
The Company's overall effective tax rate was higher for both the
second quarter (48 percent versus 46 percent) and first half of
1996 (48 percent versus 46 percent) compared with the same
periods of the prior year. The higher rate for both the quarter
and first half of the year was 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 increased by $0.9 million
from year end 1995 to June 30, 1996, reflecting slightly higher
domestic cash balances. Accounts receivable increased by $22.2
million from December of 1995, primarily resulting from the sales
increase when comparing the second quarter of 1996 to the fourth
quarter of 1995. Inventory increased by $2.3 million and trade
accounts payable increased by $10.2 million when compared to
December of 1995. The increases in inventory and trade accounts
payable reflect increased seasonal activity. The changes in
accounts receivable, inventory and accounts payable from December
1995 have all been presented excluding the impact of foreign
exchange on those categories.
Shareholders' equity also increased by $10.3 million from
December of 1995 primarily due to income for the first six months
of 1996 and favorable accumulated translation adjustments,
partially offset by the impact of dividends.
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 June 30, 1996, was
41 percent compared with 44 percent at December 31, 1995.
On February 15, 1996, and May 16, 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, and June 28,
1996, respectively.
<PAGE>
<PAGE> 14
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
LITIGATION RELATING TO INDIANAPOLIS ATHLETIC CLUB FIRE. As
previously reported under Item 3 of the Company's most recent
Annual Report on Form 10-K, 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 plaintiffs in these actions
alleged that the fire was caused by a refrigerator manufactured
by Delfield. As previously reported, Delfield was dismissed as a
defendant in two of those suits, Mutz v. The Delfield Company,
et. al. and Indiana Athletic Club, Inc. v. The Delfield Company,
et al., after an investigation of its claim that the refrigerator
was manufactured, not by Delfield, but by the Delfield Division
of Alco Standard Corporation ("Alco") prior to the acquisition of
the Delfield Division by Delfield Holding Company ("DFC") which
was, in turn, acquired by Scotsman. Such dismissals were,
however, without prejudice to the rights of the plaintiffs to
reinstate their claims against Delfield.
During the second quarter, Alco and the other defendants in Mutz
agreed to enter into a settlement agreement with the estate of
Mr. Mutz, resolving all of the claims of the estate against such
defendants. Under the terms of the settlement agreement, Alco
and/or its insurer have agreed to pay a total of $200,000 as
Alco's share of the settlement amount. During that same period,
all of the other actions arising out of the fire in which
Delfield had been originally named as a defendant (except for the
action brought by the IAC itself) were settled for nominal
amounts by Delfield's insurer.
Alco is virtually the only remaining defendant in the IAC action,
and that action remains set for trial on January 27, 1996. The
IAC has recently quantified its alleged damages at approximately
$9 to $10 million. Although Delfield is not currently a
defendant in the IAC case, the Company continues to monitor this
action. For more information concerning the IAC litigation,
including information concerning the agreements pursuant to which
Alco has agreed to indemnify Delfield for any losses arising out
of the action brought by the IAC, and the former shareholders of
DFC and Whitlenge Acquisition Limited, an affiliate of DFC, have
agreed to indemnify Scotsman for up to $30 million in losses and
expenses arising out of the fire, see Item 3 of the Company's
Annual Report on Form 10-K for the Fiscal Year Ended December 31,
1995.
Item 4. Submission of Matters to a Vote of Security Holders
The Annual Meeting of Shareholders of Scotsman
Industries, Inc. was held on May 16, 1996, for the
purpose of electing three directors each to serve
for a term of three years. Proxies for the meeting
were solicited by management pursuant to Regulation
14A under the Securities Exchange Act of 1934, and
there was no solicitation in opposition to
management's solicitation.
<PAGE> 15
All three of management's nominees for director
listed in the proxy statement were elected. The
results of the vote were as follows:
Shares Broker
Voted Shares Non-
"FOR" "WITHHELD" Votes
__________ __________ ______
Matthew O. Diggs 8,390,240 16,772 -0-
James J. O'Connor 8,390,201 16,811 -0-
Robert G. Rettig 8,390,563 16,449 -0-
The following persons continued their terms of
office as directors of the Company following the
Annual Meeting: Donald C. Clark, Timothy C.
Collins, Frank W. Considine, George D. Kennedy, and
Richard C. Osborne.
<PAGE> 16
Item 6. Exhibits and Reports
on Form 8-K
--------------------
(a) Exhibits
Exhibit 10 Promissory Notes in the
principal amounts of
$5,000,000 and $6,000,000,
respectively, each made by
Scotsman Group Inc. to
Comerica Bank, together with
the related Guaranty and
Consent dated June 30, 1996,
by Scotsman Industries, Inc.
in favor of Comerica Bank.
Exhibit 27 Article 5 Financial Data
Schedule for the Period Ended
June 30, 1996.
(b) The Registrant filed no reports on Form 8-K
during the quarterly period ended June 30,
1996.
<PAGE> 17
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 August 12, 1996 By: /s/ Donald D. Holmes
--------------- -----------------------
Donald D. Holmes
Vice President-Finance
and Secretary
<PAGE> 18
EXHIBIT INDEX
Exhibit No. Description Page No.
- ---------- ----------- --------
10 Promissory Notes in the principal 19
amounts of $5,000,000 and
$6,000,000, respectively, each
made by Scotsman Group Inc. to
Comerica Bank, together with the
related Guaranty and Consent dated
June 30, 1996, by Scotsman
Industries, Inc. in favor of
Comerica Bank.
27 Article 5 Financial Data Schedule 30
for the Period Ended June 30, 1996
EXHIBIT 10
TAX I.D. NO. 36-3635935
PROMISSORY NOTE
$5,000,000.00 Detroit, Michigan
June 30, 1996
On or before June 30, 1997, FOR VALUE RECEIVED, the
undersigned, SCOTSMAN GROUP INC., a Delaware corporation (herein
called "Maker") promises to pay to the order of COMERICA BANK, a
Michigan banking corporation (herein called "Bank"), at the
principal office of Bank at Detroit, Michigan, 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 forementioned. 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
<PAGE> 20
respective repayment date therefore which date shall not be later
than the maturity date of this Note.
This Note replaces the Promissory Note dated June 30, 1995
by Maker payable to Comerica Bank-Illinois, 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 Comerica
Bank- Illinois.
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 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:Vice President
--------------------------
<PAGE> 21
EXHIBIT "A"
REQUEST FOR ADVANCE
TO: COMERICA BANK (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, 1996, 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> 22
TAX I.D. NO. 36-3635935
PROMISSORY NOTE
$6,000,000.00 Detroit, Michigan
June 30, 1996
On or before June 30, 1997, FOR VALUE RECEIVED, the
undersigned, SCOTSMAN GROUP INC., a Delaware corporation (herein
called "Maker") promises to pay to the order of COMERICA BANK, a
Michigan banking corporation (herein called "Bank"), at the
principal office of Bank at Detroit, Michigan, in lawful currency
of the United States of America, SIX MILLION DOLLARS
($6,000,000.00) 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
<PAGE> 23
respective repayment date therefore which date shall not be later
than the maturity date of this Note.
This Note replaces the Promissory Note dated June 30, 1995
by Maker payable to Comerica Bank-Illinois in the principal
amount of $4,000,000 by Maker payable to Comerica Bank-Illinois.
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 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: Vice President
--------------------------
<PAGE> 24
EXHIBIT "A"
REQUEST FOR ADVANCE
TO: COMERICA BANK (the "Bank")
The undersigned hereby requests an advance, or confirms such
a request made by telephone, under the Six Million Dollar
($6,000,000.00) Promissory Note dated June 30, 1996, 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> 25
GUARANTY
(Unlimited)
This Guaranty is executed and delivered on June 30, 1996, by
SCOTSMAN INDUSTRIES, INC., a Delaware corporation ("Guarantor")
whose address is 775 Corporate Woods Parkway, Vernon Hills,
Illinois, to COMERICA BANK, a Michigan banking corporation
("Bank") of Detroit, Michigan.
WHEREAS, SCOTSMAN GROUP, INC., a Delaware corporation, whose
address is 775 Corporate Woods Parkway, Vernon Hills, Illinois
("Borrower") desires to enter into one or more banking
transactions with and thereby become obligated to Bank, for the
payment of one or more Liabilities, as defined below, from time
to time, though it may not be continuously, and/or to obtain
other credit accommodations from Bank from time to time; and
WHEREAS, Guarantor desire(s) to see the success of, and/or
receive(s) direct and/or indirect benefits from the Borrower as
general or limited partner, shareholder, subsidiary, affiliate or
otherwise.
NOW, THEREFORE, for valuable consideration, the receipt and
adequacy of which is hereby acknowledged, and to induce Bank to
enter into banking transactions with or otherwise make credit
accommodations in favor of the Borrower, the GUARANTOR HEREBY
UNCONDITIONALLY AND ABSOLUTELY GUARANTEES TO BANK the prompt
payment when due, whether at maturity or on any accelerated or
extended payment date or otherwise, of any and all Liabilities,
until such Liabilities are fully paid and satisfied as to
principal, interest and other sums due and payable thereunder.
"Liabilities" shall mean all indebtedness and obligations of
Borrower ("Borrower" wherever used herein shall include any
partnership, firm, corporation, or other organization or entity
succeeding in whole or substantial part whether immediately or
otherwise to the business and/or property with or without the
liabilities of the above named Borrower) to Bank whatsoever,
present or future, direct or indirect, absolute or contingent,
now or hereafter existing or arising, due or to become due,
howsoever arising or evidenced, including, but not limited to,
any borrowings of Borrower evidenced by Borrower's promissory
notes, obligations under reimbursement or letter of credit
agreements naming Borrower as account party, and obligations of
Borrower on any note, draft or other instrument, whether or not
negotiable in form, upon which Borrower is primarily or
secondarily liable, which may be paid, accepted, purchased or
discounted by Bank, whether or not such indebtedness or
obligation is known to Guarantor now or at the time such
indebtedness or obligation is incurred, and all amendments,
renewals or extensions, in whole or in part, of any such
indebtedness or obligations. Guarantor shall also pay, on
demand, any and all expenses (including without limitation
reasonable attorneys fees) which may be incurred or paid by Bank
<PAGE> 26
in preserving, protecting or enforcing any of its rights or
remedies in connection with, or collecting against Guarantor
under, this Guaranty ("Collection Costs").
Guarantor further agrees as follows:
1. ABSOLUTE AND UNCONDITIONAL OBLIGATION. This Guaranty
is a guaranty of payment and not of collection. The obligation
of the Guarantor under this Guaranty (the "Obligation") shall be
absolute and primary, and complete and binding as to each
Guarantor and subject to no condition whatever, precedent or
otherwise, irrespective of the validity, regularity or
enforceability of any of the Liabilities, the absence of any
action to enforce the same, any waiver or consent with respect
thereto, or any failure or delay in the enforcement thereof.
Notice of acceptance hereof or action in reliance hereon shall
not be required. Bank shall be under no obligation to give
Guarantor notice of Borrower's incurring future Liabilities to
Bank or amendments, renewals or extensions of any Liabilities, or
any other fact or matter pertaining to Borrower. Nor shall the
Obligation be affected by the bankruptcy, insolvency,
incompetence or death, or any change in ownership or control, of
the Borrower, or of any other party. The Obligation shall be
independent of and in addition to any similar obligation or other
liability of the Guarantor to Bank.
2. WAIVER. Guarantor waives presentment, demand, protest,
notice of protest or dishonor, diligence in collecting the
Liabilities, any requirement first to proceed against the
Borrower or against any guarantor or other party, or to exhaust
any security for the performance of any of the Liabilities. Any
collateral or other security of Borrower or any other party or
any guaranty or other obligation of any party which Bank now or
subsequently holds may be released or otherwise dealt with by
Bank in all respects as though this Guaranty were not in
existence and the Obligation shall be in no way affected thereby,
Guarantor hereby waiving and foregoing all rights in respect of
any action, or failure to act, by Bank regarding such collateral
or other security.
3. CONTINUING OBLIGATION. The Obligation shall be
continuing and, irrespective of any statute of limitations
otherwise applicable, shall cover all Liabilities incurred by
Borrower before any revocation of this Guaranty becomes effective
as provided below (and shall also include Liabilities of the
Borrower incurred after such revocation pursuant to any agreement
to lend, whether optional or obligatory, existing at the date of
revocation), and as to any Liabilities so incurred, shall
continue until the same are fully paid and satisfied. The
bankruptcy or insolvency of any Guarantor or revocation by any
Guarantor shall not affect the Obligation of any others, but such
others shall continue to be liable for the Liabilities (including
future Liabilities) as though such bankrupt, insolvent or
revoking party had not been a party hereto. Bank may, if it so
<PAGE> 27
desires (but shall not be obligated to do so), file a claim under
this Guaranty in any such bankruptcy or insolvency proceeding,
provided that the continuance of the Obligation in accordance
with this Guaranty shall not be affected thereby. The Obligation
shall also survive the death of any or all of the undersigned and
shall be binding upon the estate of any deceased party and upon
any surviving party for all Liabilities (including future
Liabilities), the same as if such death had not occurred. Bank
shall be under no duty to the estate or to any survivor or to any
other Guarantor, to present any claim based on this Guaranty
against the estate of any deceased party.
4. REVOCATION. Guarantor (or any of them) may revoke this
Guaranty only as herein provided, and not otherwise. Revocation
shall be in writing signed by the revoking party, or, if
deceased, by the personal representative of such party, and shall
be delivered to the President, Secretary, or any Vice President
of Bank in person at Bank, and shall become effective at the
opening of business on the day next succeeding the delivery
thereof. Any such revocation shall have prospective effect only,
from and after the effective date of revocation, and shall not
terminate or otherwise affect the Obligation of the revoking
party existing prior to the effective date of revocation.
5. SUBROGATION. Guarantor expressly waives any claim for
reimbursement, contribution, indemnity, or subrogation which the
Guarantor may have or obtain against the Borrower by reason of
payment by the Guarantor of any of the Liabilities. In the event
of the liquidation, reorganization or bankruptcy of Borrower
(whether voluntary or involuntary) or in the event that Borrower
shall make an arrangement or composition with its creditors or
become subject to any receivership or other insolvency
proceedings, Bank shall be entitled to receive all dividends or
other payments with respect to the Liabilities until its claims
have been paid in full, and Guarantor shall continue to be liable
to Bank to the extent provided herein for any balance of the
Liabilities which may be owing to Bank. If any amount shall be
paid to or received by Guarantor on account of any subrogation
rights arising at any time when all Liabilities shall not have
been paid and discharged in full, such amount shall be held in
trust by Guarantor for the benefit of Bank and shall forthwith be
paid to Bank to be credited and applied against the Obligation.
6. CONTINUED EFFECTIVENESS OR REINSTATEMENT.
Notwithstanding any prior revocation, termination or discharge
hereof, the effectiveness of this Guaranty shall continue to be
reinstated, as the case may be, in the event that (a) any payment
received or credit given by Bank in respect of the Liabilities is
returned, disgorged or rescinded as an avoidable preference,
impermissible setoff, fraudulent conveyance or otherwise under
any applicable state or federal law, including, without
limitation, laws pertaining to bankruptcy or insolvency, in which
case this Guaranty shall thereafter be enforceable against
Guarantor as if such returned, disgorged or rescinded payment or
<PAGE> 28
credit had not been received or given by Bank, and whether or not
Bank relied upon such payment or credit or changed its position
as a consequence thereof; or (b) any liability is imposed, or
sought to be imposed, against Bank relating to the environmental
condition of, or the present of hazardous or toxic substances on,
in or about, any property mortgaged to Bank by the Borrower,
Guarantor or any other party as collateral (in whole or in part)
for any of the Liabilities, whether such condition is known or
unknown, now exists or subsequently arises (excluding only
conditions which arise after any acquisition by Bank of any such
property, by foreclosure, in lieu of foreclosure or otherwise,
due to the wrongful act or omission of Bank), in which case this
Guaranty shall thereafter be enforceable against Guarantor to the
extent of all liability, costs and expenses (including reasonable
attorneys fees) incurred by Bank as the direct or indirect result
of any such environmental condition or hazardous or toxic
substances. For purposes of this Guaranty, "environmental
condition" includes, without limitation, conditions existing with
respect to the surface or ground water, drinking water supply,
land surface or subsurface strata and the ambient air; and
"hazardous or toxic substances" shall include any and all
substances now or subsequently determined by any federal, state
or local authority to be hazardous or toxic, or otherwise
regulated by any such authority.
7. JOINT AND SEVERAL GUARANTY. If signed by more than one
Guarantor, the Obligation of the undersigned shall be joint and
several, and, as used herein, "Guarantor" shall refer to the
undersigned collectively, and to either or any of them. Bank, in
its sole discretion, may release any one or more of the
undersigned with or without consideration, and may fail or elect
not to prove a claim against the estate of any bankrupt,
insolvent, incompetent or deceased Guarantor, without reducing or
otherwise affecting the liability of any other Guarantor.
8. GENERAL. This Guaranty may not be amended except by
express writing instrument executed by Guarantor and Bank, and no
waiver by any party shall be effective unless given in writing by
such party. The rights and remedies provided for in this
Guaranty are cumulative, and nothing herein shall limit any right
or remedy granted Bank by other instrument or by law. If any
term or provision of this Guaranty or its application to any
circumstance shall, to any extent, be invalid or unenforceable,
the remainder of this Guaranty, or the application of such term
or provision to circumstances other than those as to which it is
held invalid or unenforceable, shall not be affected thereby, and
each term and provision of this Guaranty shall be valid and
enforceable to the fullest extent permitted by law. Captions
have been used in this Guaranty for convenience of reference
only, and shall not be given substantive effect. This Guaranty
shall be governed by and construed in accordance with the laws of
the State of Michigan.
<PAGE> 29
This Guaranty has been duly executed and delivered as of the
date set forth above.
Witnesses: SCOTSMAN INDUSTRIES, INC.
/s/ Caroline Damask /s/ D. D. Holmes
- ------------------------------ ------------------------------
/s/ Donna Manahan Vice President
- ------------------------------ ------------------------------
Accepted by:
COMERICA BANK, a Michigan
banking corporation
By: __________________________
Its: _________________________
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information
extracted from Scotsman Industries, Inc. Condensed
Balance Sheet (Unaudited) as of June 30, 1996 and
Scotsman Industries, Inc. Condensed Statement of
Income (Unaudited) for the Six Months Ended June 30,
1996 and is qualified in its entirety by reference to
such financial statements.
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-29-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 16,699
<SECURITIES> 0
<RECEIVABLES> 77,413
<ALLOWANCES> 3,161
<INVENTORY> 54,703
<CURRENT-ASSETS> 157,333
<PP&E> 46,772
<DEPRECIATION> 42,011
<TOTAL-ASSETS> 302,100
<CURRENT-LIABILITIES> 82,845
<BONDS> 83,712
<COMMON> 944
0
1,625
<OTHER-SE> 120,086
<TOTAL-LIABILITY-AND-EQUITY> 302,100
<SALES> 189,956
<TOTAL-REVENUES> 189,956
<CGS> 135,692
<TOTAL-COSTS> 135,692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,837
<INCOME-PRETAX> 20,550
<INCOME-TAX> 9,866
<INCOME-CONTINUING> 10,684
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 10,684
<EPS-PRIMARY> 1.10
<EPS-DILUTED> 1.00
</TABLE>
