SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[x] THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to __________
Commission File Number: 033-68444
THE SCOTSMAN GROUP, INC.
(Exact name of Registrant as specified in its Charter)
Maryland 52-0665775
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
8211 Town Center Drive 21236
Baltimore, Maryland (Zip Code)
(Address of principal executive offices)
(410) 931-6000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year -
if changed since last report)
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 __
The Registrant is a wholly-owned subsidiary of Scotsman Holdings, Inc., a
Delaware corporation. As of March 31, 1996, Scotsman Holdings, Inc. owned
3,320,000 shares of common stock ("Common Stock") of the Registrant.
<PAGE>
THE SCOTSMAN GROUP, INC.
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at March 31, 1996 1
and December 31, 1995
Consolidated Statements of Operations for the three 2
months ended March 31, 1996 and 1995
Consolidated Statements of Cash Flows for the three 3
months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
THE SCOTSMAN GROUP, INC. AND SUBSIDIARY
Consolidated Balance Sheets
March 31,
1996 December 31,
Assets (Unaudited) 1995
------ ----------- ----
(dollars in thousands)
Cash and temporary investments $ 365 679
Trade accounts receivable, less allowance for
doubtful accounts 18,318 17,372
Prepaid expenses and other current assets 7,053 7,048
Rental equipment, at cost 369,619 364,369
Less accumulated depreciation 46,884 40,162
-------- --------
Net rental equipment 322,735 324,207
------- -------
Property, plant and equipment, net 22,015 21,088
Deferred financing costs, net 7,224 7,830
Other assets 5,326 5,455
--------- --------
$ 383,036 383,679
======= =======
Liabilities and Stockholder's Equity
------------------------------------
Accounts payable $ 5,988 6,667
Accrued expenses 12,115 8,114
Rents billed in advance 9,466 9,809
Long-term debt 238,338 242,695
Deferred compensation 2,175 1,900
Deferred income taxes 52,379 51,986
-------- --------
Total liabilities 320,461 321,171
------- -------
Stockholder's equity:
Common stock, $.01 par value. Authorized
10,000,000 shares; issued and outstanding
3,320,000 shares 33 33
Additional paid-in capital 56,844 56,844
Retained earnings 5,698 5,631
-------- ------
Total stockholder's equity 62,575 62,508
-------- ------
$ 383,036 383,679
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
THE SCOTSMAN GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
---- ----
(in thousands except share and per share amounts)
Revenues:
Leasing $ 26,515 21,713
Sales of new units 6,009 4,370
Delivery and installation 6,503 6,401
Other 3,617 2,303
----- -----
Total revenues 42,644 34,787
------ ------
------ ------
Costs of sales and services:
Leasing:
Depreciation and amortization 7,071 5,217
Other direct leasing costs 5,998 4,502
New units 5,040 3,704
Delivery and installation 5,121 5,224
Other 647 411
------ ------
Total costs 23,877 19,058
------ ------
Gross profit 18,767 15,729
------ ------
Selling, general and administrative expenses 10,864 8,944
Other depreciation and amortization 555 422
Interest, including amortization of deferred
financing costs 6,263 5,260
Total operating expenses 17,682 14,626
------ ------
Earnings before income taxes 1,085 1,103
Income tax expense 418 426
------ -------
Net earnings $ 667 677
======= =======
Earnings per common share $ 0.20 0.20
======== ========
Weighted average shares outstanding 3,320,000 3,320,000
========= =========
See accompanying notes to consolidated financial statements.
<PAGE>
THE SCOTSMAN GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
Three months ended March 31, 1996 and 1995
(Unaudited)
1996 1995
---- ----
(dollars in thousands)
Cash flows from operating activities:
Net earnings $ 667 677
Adjustments to reconcile net earnings
to net cash provided by operating activities:
Depreciation and amortization 8,232 5,990
Provision for bad debts 424 361
Deferred income tax expense 393 401
Provision for deferred compensation 275 275
Gain on sale of rental equipment (521) (407)
(Increase) decrease in net trade accounts
receivable (1,370) 1,031
Increase in accrued expenses 4,001 3,733
Other (916) (336)
----- -----
Net cash provided by operating activities 11,185 11,725
------ ------
Cash flows from investing activities:
Redemption of certificates of deposit 250 1,005
Rental equipment additions (7,674) (15,840)
Proceeds from sales of rental equipment 2,596 1,783
Purchases of property, plant and equipment, net (1,464) (1,077)
----- -----
Net cash used in investing activities $ (6,292) (14,129)
----- ------
(continued)
<PAGE>
THE SCOTSMAN GROUP, INC. AND SUBSIDIARY
Consolidated Statements of Cash Flows
(Unaudited)
1996 1995
---- ----
Cash flows from financing activities:
Proceeds from long-term debt 38,903 41,277
Repayment of long-term debt (43,260) (38,850)
Increase in deferred financing costs --- (75)
Payment of dividends (600) ---
------- -------
Net cash (used in) provided by
financing activities (4,957) 2,352
------- ------
Net decrease in cash (64) (52)
Cash at beginning of period 416 697
-------- -------
Cash at end of period $ 352 645
======== =======
Supplemental cash flow information:
Cash paid for income taxes $ 61 22
Cash paid for interest $ 1,789 1,028
====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
THE SCOTSMAN GROUP, INC. AND SUBSIDIARY
Notes to Consolidated Financial Statements
(Unaudited)
(1) FINANCIAL STATEMENTS
The financial information for the three months ended March 31, 1996 and 1995
has not been audited. In the opinion of management, the unaudited financial
statements contain all adjustments (consisting only of normal, recurring
adjustments) necessary to present fairly the Company's financial position as
of March 31,1996 and its operating results and cash flows for the three
months ended March 31, 1996 and 1995. The results of operations for the
periods ended March 31, 1996 and 1995 are not necessarily indicative of the
operating results for the full year.
Certain information and footnote disclosure normally included in financial
statements prepared in accordance with generally accepted accounting
principles have been omitted. It is suggested that these financial
statements be read in conjunction with the financial statements and notes
thereto included in the Company's latest Form 10-K.
(2) EARNINGS PER SHARE
Earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the periods.
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended March 31, 1996 Compared with Three Months Ended March 31,
1995. Revenues in the quarter ended March 31, 1996 were $42.6 million, a $7.9
million or 22.6% increase from revenues of $34.8 million in the same period of
1995. This increase resulted primarily from a $4.8 million or 22.1% increase in
leasing revenue, a $1.6 million or 37.5% increase in new sales revenue and a
$1.3 million or 57.1% increase in other revenue. The increase in leasing revenue
is attributable to an increase in the average number of units in the fleet of
11.7% to approximately 37,000 units for the first quarter of 1996, an increase
in fleet utilization of approximately 2 percentage points to 82% and an increase
of approximately $10 in the average monthly rental rate. The increase in new
sales revenue is due primarily to the overall branch expansion experienced by
the Company during 1995, growing from 38 locations at March 31, 1995 to
approximately 51 at March 31, 1996. Other revenue increased as a result of
increases in the rental of steps and furniture as well as miscellaneous revenue
related to services provided for customer-owned units.
Gross profit for the quarter was $18.8 million, a $3.0 million or 19.3%
increase from the first quarter of 1995. This increase is primarily due to an
increase in leasing gross profit of $1.5 million or 12.1% and an increase in
gross profit from other revenue of $1.1 million. These increases reflect the
increases in leasing revenue and other revenue described above.
Selling, general and administrative expenses increased by $1.9 million or
21.5% from the first quarter of 1995. Of this increase, $1.4 million represents
field related expenses incurred in conjunction with the branch expansion that
the Company has experienced as described above. This increase is comprised
primarily of a $0.9 million increase in personnel-related expenses and a $0.2
million increase in occupancy expenses.
Interest expense increased by $1.0 million or 19.1% in the first quarter of
1996. This increase is due primarily to the increase in the average balance
outstanding under the revolving line of credit during the quarter compared to
the comparable period of 1995.
Liquidity and Capital Resources
During the three months ended March 31, 1996 and 1995, the Company's
principal source of funds consisted of cash flow from operating and financing
sources. Cash flow from operating activities of $11.2 million and $11.7 million
for the three months ended March 31, 1996 and 1995, respectively, was largely
generated by the Company's leasing operations, which includes the rental and
sale of units from its lease fleet. The increase in accrued expenses at March
31, 1996 is primarily due to a $3.9 million increase in accrued interest.
The Company has increased its EBITDA and believes that EBITDA provides the
best indication of its financial performance and provides the best measure of
its ability to meet historical debt service requirements. The Company defines
EBITDA as net income before depreciation, amortization, provision for deferred
compensation, interest and income taxes. EBITDA as defined by the Company does
<PAGE>
not represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as an alternative to cash
flows as a measure of liquidity, nor should it be considered as an alternative
to net income as an indicator of the Company's operating performance. The
Company's EBITDA increased by $3.0 million or 24.6% to $15.2 million in the
first three months of 1996 compared to $12.3 million in the same period of 1995.
This increase in EBITDA is a result of increased leasing activity resulting from
the overall increase in the number of units in the fleet, offset by increased
SG&A expenses to support the increased activities during the three months ended
March 31, 1996.
Cash flow used in investing activities of $6.3 million and $14.1 million in
the three months ended March 31, 1996 and 1995, respectively, was primarily for
net additions to the Company's lease fleet, including the acquisition of
existing lease fleets in 1995. Cash used in financing activities of $5.0 million
in the three months ended March 31, 1996 was primarily for the repayment of
borrowings under the line of credit, while cash provided by financing activities
of $2.4 million in the three months ended March 31, 1995 resulted primarily from
the funding of the fleet expansion discussed above.
The Company believes it will have, for the next 12 months, sufficient
liquidity under its revolving line of credit and from cash generated from
operations to meet its expected obligations as they arise.
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE SCOTSMAN GROUP, INC.
By: /s/ Gerard E. Holthaus
----------------------
Gerard E. Holthaus
President
Dated: May 13, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Capacity Date
/s/ Gerard E. Holthaus President, Chief Operating May 13, 1996
- - ---------------------- Officer and Director
Gerard E. Holthaus
/s/ Katherine K. Giannelli Vice President and Controller May 13, 1996
- - --------------------------
Katherine K. Giannelli
<PAGE>
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