SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
[X] SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 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
WILLIAMS SCOTSMAN, 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)
-
Registrants' telephone number, including area code: (410) 931-6000
Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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__
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. [X]
The Registrant is a wholly-owned subsidiary of Scotsman Holdings, Inc., a
Delaware corporation. As of March 28, 1997, Scotsman Holdings, Inc. owned
3,320,000 shares of common stock ("Common Stock") of the Registrant.
<PAGE>
PART I
Item 1. Business
General
Williams Scotsman, Inc., formerly known as The Scotsman Group, Inc.,
("Scotsman" or the "Company") believes, based upon management's assessment of
the industry, it is the second largest lessor of mobile office units in the
United States as ranked by lease fleet size and revenues. The Company maintains
a fleet of approximately 40,600 units which are leased through a network of 56
branch offices in 32 states. To a lesser extent, the Company also sells new and
used mobile office units and sells and leases modular structures. The Company's
products provide flexible, relocatable, cost-effective and timely solutions for
space requirements. The Company has over 12,500 customers operating in
approximately 450 diverse industries including education, utilities, health
care, chemicals, engineering services and construction.
The Company's primary business is the leasing of mobile office units. These
units typically range in size from eight to 14 feet in width and 16 to 70 feet
in length and are generally constructed using a steel frame undercarriage with
an exterior of wood or aluminum. The Company has the flexibility to readily
adapt its lease fleet units to meet a wide variety of customer needs. Units can
be configured using any combination of the Company's standard products which are
offered in a variety of sizes and floor plans. The basic functional design of
mobile office units has remained virtually unchanged since the inception of the
industry in the 1940s. Mobile office units are extremely durable and, due in
part to an active maintenance program, the Company's units retain a significant
percentage of their original value. The Company's lease fleet units have an
average age of approximately eight years and an estimated economic useful life
of approximately 20 years.
To a lesser extent, the Company also sells, leases and services modular
structures, which compete with conventional space alternatives. Modular
structures revenues represented less than 1% of total revenues in the year ended
December 31, 1996. Each modular structure typically is three thousand square
feet or more in size and comprises several smaller units which are assembled
into a single structure at the building site. Modular structures can generally
be dismantled and refurbished as individual mobile office units and returned to
the Company's lease fleet.
On December 16, 1993, Scotsman Holdings, Inc. ("Holdings") acquired all of
the issued and outstanding capital stock of the Company. In connection with the
acquisition and related refinancing (the "Acquisition"), the Company issued
$165.0 million aggregate principal amount of 9 1/2% Senior Secured Notes Due
2000 and entered into a Loan and Security Agreement with Congress Financial
Corporation. Upon consummation of the Acquisition, the Company retired certain
existing indebtedness consisting of $175.0 million principal amount of 11.31%
Senior Secured Notes and a $15.6 million senior secured credit facility.
<PAGE>
The Company and its predecessors have operated in the mobile office and
modular structures industry since 1945. In 1990 the Company more than doubled
its size through the combination of Scotsman Manufacturing Co., Inc. ("Scotsman
Manufacturing") with Williams Mobile Offices, Inc. ("Williams"). Since 1990, the
Company has substantially eliminated duplicate functions of the two predecessor
companies, eliminated manufacturing operations, and repositioned the Company to
significantly reduce its modular structures operations and focus on its core
leasing activities, which accounted for substantially all of the total gross
profit in the year ended December 31, 1996.
The Company purchases its new units through third-party suppliers. The
Company believes there are numerous manufacturers and suppliers of mobile office
units and modular structures which supply these products at competitive prices
throughout the United States. The Company anticipates being able to procure an
adequate supply of product on acceptable terms for its projected operational
requirements. The Company does not believe that the loss of any one of its
suppliers would have a material adverse effect on its operations.
Recent Developments
The Company has announced that its parent company, Scotsman Holdings, Inc.,
is considering various strategic alternatives, including a sale of the Company.
In this connection, Scotsman Holdings has retained Goldman, Sachs & Co. as its
financial advisor. There can be no assurance that any transaction will be
consummated.
Operating Strategy
Due to the local and regional nature of its business, the Company's goals
are to become the leader in each of the local markets in which it competes and
to expand its coverage to additional local markets. To achieve market
leadership, the Company has implemented a strategy which emphasizes (i) superior
service, (ii) a well maintained, readily available and versatile lease fleet,
(iii) effective fleet management using proprietary information systems, and (iv)
targeted marketing through an experienced and motivated sales force. The Company
believes that it is generally the first or second largest provider of
relocatable space in each of its regional markets as measured by lease fleet
size and revenues. The Company's branch offices are distributed throughout the
United States and are located in the majority of the major metropolitan areas.
To further its market leadership, expand its coverage to additional local
markets and leverage its existing cost structure, the Company plans to continue
to capitalize on the industry's fragmentation by acquiring mobile office lease
fleets. During 1994, the Company acquired approximately 5,500 units through the
acquisition of Mobile Holdings, Inc. ("MFO") in September and from other lease
fleet acquisitions. During 1995 and 1996, the Company acquired a total of
approximately 3,600 units through the acquisition of various lease fleets. See
2
<PAGE>
note 1 of Notes to Financial Statements included elsewhere herein. Increased
penetration in existing markets through acquisitions of competitors allows the
elimination of duplicate branch offices and overhead, an expanded customer base
and facilitates higher profitability. Expanded coverage to additional local
markets allows the Company to capitalize on market-specific opportunities,
diversify geographically and further leverage its cost structure.
Competition
Although the Company's competition varies significantly by market, the
mobile office and modular structure industry, in general, is highly competitive.
The Company competes primarily in terms of product availability, customer
service and price. The Company believes that its reputation for customer service
and its ability to offer a wide selection of units suitable for many varied uses
at competitive prices allow it to compete effectively. However, certain of the
Company's competitors are less leveraged, have greater market share or product
availability in a given market and have greater financial resources than the
Company.
Employees
At December 31, 1996, the Company employed 607 persons. None of the
Company's employees are covered by a collective bargaining agreement. The
Company considers its relationship with its employees to be good.
Regulatory Matters
The Company must comply with various federal, state and local
environmental, health and safety laws and regulations in connection with its
operations. The Company believes that it is in substantial compliance with
applicable environmental, health and safety laws and regulations. In addition to
compliance costs, the Company may incur costs related to alleged environmental
damage associated with past or current properties owned or leased by the
Company. The Company believes that its liability, if any, for any environmental
remediation will have no material adverse effect on its financial condition.
3
<PAGE>
Item 2. Properties
The Company's headquarters is a three-story modular office structure
located on 3.1 acres in suburban Baltimore, Maryland. The location, ownership
status, approximate size and primary use of the Company's other principal
properties are set forth in the table below.
<TABLE>
<CAPTION>
Ownership Size
Location Status In Acres Primary Use
- -------- ------ -------- -----------
<S> <C> <C> <C>
Albuquerque, NM Owned 2.0 Branch Office
Albuquerque, NM Leased 1.7 Drop Lot
Allentown, PA Leased 4.8 Branch Office
Atlanta, GA Owned 6.2 Branch Office
Atlanta, GA Owned 30.82 Branch Office (future)
Baltimore, MD Owned 7.3 Branch Office
Berlin, NJ Owned 26.0 Branch Office
Birmingham, AL Leased 4.9 Branch Office
Boise, ID Leased 2.0 Branch Office
Casper, WY Leased 2.0 Branch Office
Charles City, VA Owned 9.2 Branch Office (future)
Charleston, SC Leased 3.0 Branch Office
Charleston, SC Owned 1.5 Branch Office
Charlestown, WV Leased 10.5 Branch Office
Cherry Hill, NJ Owned 4.3 Branch Office
Cherry Hill, NJ Leased 18.6 Branch Office (future)
Cherry Hill (Mt. Laurel), NJ Leased 7.5 Storage Lot
Cheshire, CT Leased 9.6 Branch Office
Chicago, IL Owned 6.5 Branch Office
Cincinnati, OH Owned 6.2 Branch Office
Cleveland, OH Owned 8.0 Branch Office
Columbus, OH Leased 1.1 Branch Office
Dallas, TX Leased 4.4 Branch Office
Denver, CO Leased 4.0 Branch Office
Detroit, MI Leased 4.6 Branch Office
Durham, NC Leased 4.4 Branch Office
Ellwood City, PA Leased 5.0 Storage Lot
Fresno, CA Leased 3.5 Branch Office
Ft. Lauderdale, FL Leased 6.0 Branch Office
Ft. Myers, FL Owned 8.9 Branch Office
Ft. Myers, FL Owned 1.9 Storage Lot
Grand Junction, CO Leased 0.65 Branch Office
Houston, TX Owned 7.87 Branch Office
Jacksonville, FL Leased 2.3 Branch Office
Langhorne, PA Leased * Sales Office
Kansas City, MO Leased 2.19 Branch Office
Irmo, SC Owned 5.0 Branch Office
Kingwood, TX Leased * Administrative Office
Kinston, NC Leased 3.0 Storage Lot
4
<PAGE>
Lafayette, LA Leased 4.0 Branch Office
Las Vegas, NV Leased 2.5 Branch Office
Long Island, NY Leased 3.1 Storage Lot
Louisville, KY Leased 3.0 Branch Office
Manassas, VA Leased 2.7 Branch Office
Mira Loma, CA Leased 17.0 Branch/Storage
Mobile, AL Leased 3.0 Branch Office
New Orleans, LA Leased 10.15 Branch Office
Norfolk, VA Leased 5.5 Branch Office (future)
North East, MD Owned 33.1 Leased Property
Orlando, FL Leased 5.5 Branch Office
Orlando, FL Owned 4.0 Service Facility
Pelham, NH Owned 16.0 Branch Office
Phoenix, AZ Leased 2.2 Branch Office
Phoenix, AZ Leased 10.0 Branch Office (future)
Pittsburgh, PA Leased 2.0 Branch Office
Portland, OR Leased 1.3 Branch Office
Richmond, VA Owned 6.6 Branch Office
Riverside, CA Leased 13.5 Branch Office
Rotterdam, NY Leased 2.1 Branch Office
Salt Lake City, UT Leased 4.7 Branch Office
San Antonio, TX Leased 2.6 Branch Office
San Diego, CA Leased 1.3 Branch Office
Santa Fe Springs, CA Leased 16.5 Branch Office
Seattle, WA Leased 1.4 Branch Office
South Kearny, NJ Leased 5.0 Branch Office
St. Charles, MO Leased 2.5 Branch Office
Statesville, NC Leased 3.0 Storage Lot
Syracuse, NY Leased 5.0 Branch Office
Tampa, FL Owned 4.8 Branch Office
Tulsa, OK Leased 2.1 Branch Office
Tulsa, OK Owned 4.3 Branch Office
Vacaville, CA Leased 11.0 Branch Office
* Less than .1 acre.
---------------
</TABLE>
The Company believes that its existing owned and leased facilities are
adequate for its operations.
5
<PAGE>
Item 3. Legal Proceedings
The Company is involved in certain legal actions arising in the ordinary
course of business. The Company believes that none of these actions, either
individually or in the aggregate, will have a material adverse effect on the
Company's business, results of operations or financial condition.
Item 4. Submission of Matters to a Vote of Security Holders
None.
6
<PAGE>
PART II
Item 5. Market for Registrant's Common Equity and Related Shareholder Matters
There is no established public trading market for the Company's Common
Stock. The Company is a wholly-owned subsidiary of Scotsman Holdings, Inc., a
Delaware corporation.
During 1996, the Company paid dividends to Holdings in the aggregate amount
of $2,070,000, in accordance with provisions of the Note Indenture. The Company
does not intend to pay any further dividends in the foreseeable future but
reserves the right to do so.
Pursuant to the Scotsman Holdings, Inc. 1994 Employee Stock Option Plan
(the "Plan"), options for 115,050 shares of Holdings were granted during 1996.
No shares of Holdings' common stock were issued during 1996 upon the exercise of
the options previously granted under the Plan. This transaction was exempt from
the registration requirements of the Securities Act of 1933, as amended,
pursuant to Section 4(2) thereunder.
7
<PAGE>
ITEM 6. SELECTED HISTORICAL FINANCIAL DATA
The following tables summarize certain selected historical financial data which
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Financial Statements
appearing elsewhere herein. The selected historical financial data set forth
below for the fiscal years ended December 31, 1992, 1993, 1994, 1995 and 1996
and as of the end of each of such periods have been derived from the audited
Financial Statements.
<TABLE>
<CAPTION>
Fiscal Years Ended (1)
--------------------------------------------
1992 1993 1994 1995 1996
---- ---- ---- ---- ----
(Dollars in thousands)
Statement of Operations Data:
Revenues:
<S> <C> <C> <C> <C> <C>
Leasing $ 72,744 $ 73,384 $ 79,342 $ 96,498 $116,769
New units sales 27,709 18,501 22,290 23,126 28,042
Delivery and installation 28,369 24,237 26,511 28,162 32,767
Other 3,712 3,011 5,832 10,734 17,564
------- ------- ------- ------- -------
Total $132,534 $119,133 $133,975 $158,520 $195,142
- --------------------------------------------------------------------------------
Gross profit:
Leasing $ 41,146 $ 39,340 $ 39,960 $ 49,978 $ 59,534
New unit sales 3,354 2,534 2,854 3,853 4,999
Delivery and installation 4,874 3,363 4,942 6,114 7,520
Other 2,515 1,639 4,285 8,108 13,590
------ ------ ------ ------ ------
Total $ 51,889 $ 46,876 $ 52,041 $ 68,053 $ 85,643
- --------------------------------------------------------------------------------
Selling, general and administrative
expenses $ 28,237 $ 24,264 $ 29,303 $ 36,295 $ 42,260
Restructuring costs (2) 1,921 6,082 912 --- ---
Earnings (loss) from continuing
operations before extraordinary item (582) (3,841) 1,072 4,559 9,195
Earnings (loss) from continuing
operations before extraordinary
item per common share (0.17) (1.15) 0.32 1.37 2.77
==== ==== ==== ==== ====
Ratio of earnings to fixed charges(3) 1.0x 0.7x 1.1x 1.3x 1.6x
- --------------------------------------------------------------------------------
Balance Sheet Data (4):
Rental equipment, net $209,388 $246,550 $283,181 $324,207 $356,183
Total assets 263,287 295,882 335,633 383,679 428,697
Long-term debt 191,019 176,408 206,346 242,695 268,753
Stockholder's equity 17,585 56,877 57,949 62,508 69,633
- --------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
(1) On December 16, 1993, Holdings purchased all of the issued and outstanding
stock of Scotsman. The acquisition was accounted for under the purchase
method of accounting by Holdings, and the Company restated its balance
sheet to "push down" the effects of the purchase accounting adjustments.
(2) Restructuring costs consist primarily of costs incurred in connection with
the acquisition of Scotsman by Holdings in December 1993.
(3) The ratio of earnings to fixed charges is computed by dividing fixed
charges into earnings from continuing operations before income taxes and
extraordinary items plus fixed charges. Fixed charges include interest,
expensed or capitalized, including amortization of deferred financing costs
and debt discount and the estimated interest component of rent expense.
(4) Balance sheet data at December 31, 1993 reflect the acquisition of Scotsman
by Holdings and the related "push down" of the purchase accounting
adjustments. See note (1) above.
9
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion regarding the financial condition and results of
operations of the Company for the three fiscal years ended December 31, 1996
should be read in conjunction with the more detailed information and Financial
Statements included elsewhere herein.
General
The Company derives its revenues and earnings from the leasing and sale of
mobile office units and modular structures and their delivery and installation.
Leasing operations account for a majority of the Company's revenues and gross
profits and are primarily comprised of the leasing of mobile office units and
the sale of units from the Company's lease fleet. Used mobile office units are
sold by the Company in the ordinary course of its business at either fair market
value or pursuant to pre-established lease purchase options. The Company's cash
flow from leasing operations is favorably affected by the sale of used units
from the Company's lease fleet, as the costs of such units generally have been
incurred in previous fiscal periods. Accordingly, the sale of used units results
in the availability of the total cash proceeds and the reporting of gross profit
on such sales.
New unit sales revenues are derived from the sale of new mobile offices,
similar to those units rented by the Company, and from the sale of modular
structures. Revenues from delivery and installation result from activities
related to the transportation and installation of and site preparation for both
leased and sold products. Other revenues are derived from the sale of parts,
granting of insurance waivers, rental and sale of steps and furniture and other
services provided by the Company.
The Company's business is affected by the economic conditions of the local
or regional markets in which it operates. Economic conditions have an impact
upon rental rates, fleet utilization and new unit sales. The Company, however,
believes that mobile office leasing is less affected by unfavorable economic
conditions than its other operations and that during periods of economic
uncertainty many businesses postpone or delay making major capital expenditures
for space needs and instead choose the flexibility and lower cost of leasing
mobile offices.
10
<PAGE>
Results of Operations
Fiscal 1996 Compared With Fiscal 1995. Revenues in fiscal 1996 were $195.1
million, a $36.6 million or 23.1% increase from revenues of $158.5 million in
fiscal 1995. The increase resulted from a $20.3 million or 21.0% increase in
leasing revenue, a $4.9 million or 21.3% increase in new sales revenue, a $4.6
million or 16.4% increase in delivery and installation revenue and a $6.8
million or 63.3% increase in other revenue. The increase in leasing revenue is
attributable to a 10% increase in the average lease fleet to approximately
38,600 units, an increase in the average fleet utilization of approximately four
percentage points to 85% and an increase of $10 in the average monthly rental
rate. The increase in new sales revenue is primarily due to the overall branch
expansion that the Company has experienced during 1995 and 1996. The increase in
delivery and installation revenue is attributable to the increases in the
leasing and new unit sales revenue described above. Other revenue increased as a
result of increases in the rental of steps, ramps and furniture as well as
miscellaneous revenue related to services provided for customer-owned units.
Gross profit in fiscal 1996 was $85.6 million, a $17.6 million or 25.8%
increase from fiscal 1995 gross profit of $68.1 million. This increase is
primarily a result of an increase in leasing gross profit of $9.6 million or
19.1% and gross profit from other revenue of $5.5 million or 67.6%. The increase
in gross profit from leasing is a result of the increase in leasing revenue
described above while the leasing profit margins dropped slightly. This decline
in leasing profit margins is a result of the increases in depreciation and
amortization expense during fiscal 1996. Excluding depreciation and
amortization, leasing margins increased from 76.1% for fiscal 1995 to 77.2% for
fiscal 1996. The increase in gross profit from other revenue is due to the
increase in other revenue described above.
Selling, general and administrative (S,G&A) expenses increased by $6.0
million or 16.4% from fiscal 1995, primarily due to an increase in field related
expenses. This increase is a result of the branch expansion activity experienced
by the Company during fiscal 1995 and 1996 and is comprised of a $3.6 million
increase in personnel expenses and a $0.7 million increase in occupancy
expenses.
Interest expense increased by 14.7% to $25.8 million in fiscal 1996 from
$22.5 million in fiscal 1995 primarily as a result of the increase in the
average balances outstanding under the revolving line of credit. The increase is
due to financing the fleet expansion and growth experienced by the Company
during 1996.
Fiscal 1995 Compared With Fiscal 1994. Revenues in fiscal 1995 were $158.5
million, a $24.5 million or 18.3% increase from revenues of $134.0 million in
fiscal 1994. The increase resulted primarily from a $17.2 million or 21.6%
increase in leasing revenue and a $4.9 million or 84.1% increase in other
revenue. The increase in leasing revenue is attributable to a 23.9% increase in
the average lease fleet to approximately 35,000 units, while average rental
rates declined slightly due to a change in the fleet mix and utilization dropped
slightly. The increase in the fleet reflects the acquisition activity by the
11
<PAGE>
Company during 1995 as well as general fleet expansion. The increase in other
revenue is due to the overall increases in revenue enhancement programs,
primarily the rental of steps, as well as miscellaneous revenue related to
services provided for customer-owned units.
Gross profit in fiscal 1995 was $68.1 million, a $16.0 million or 30.8%
increase from fiscal 1994 gross profit of $52.0 million. This increase is
primarily a result of an increase in leasing gross profit of $10.0 million or
25.1% and gross profit from other revenue which increased by $3.8 million or
89.2%. The increase in gross profit from leasing is a result of the increase in
leasing revenue described above as well as an increase in the leasing profit
margin to 51.8% from 50.4% in 1994. Excluding depreciation and amortization,
leasing margins increased from 74.1% in fiscal 1994 to 76.1% in fiscal 1995. The
increase in gross profit from other revenue is due to the increase in other
revenue described above.
Selling, general and administrative (S,G&A) expenses increased by $7.0
million or 23.9% from fiscal 1994. This increase is comprised of a $5.1 million
increase in field related expenses, a $0.8 million increase in expenses related
to the deferred compensation plan and a $1.1 million increase in other S,G&A
expenses. The increase in field related expenses is the result of lease fleet
acquisitions and branch expansion activity experienced by the Company during
fiscal 1995 and is comprised primarily of a $3.9 million increase in personnel
expenses and a $0.9 million increase in occupancy expenses.
Interest expense increased by 20.2% to $22.5 million in 1995 from $18.7
million in fiscal 1994 primarily as a result of the increase in the average
balances outstanding under the revolving line of credit during 1995. This
increase is the result of financing fleet expansion and acquisitions made by the
Company.
Liquidity and Capital Resources
During fiscal 1994, 1995, and 1996, the Company's principal sources of
funds consisted of cash flow from operating and financing sources. Cash flow
from operating activities of $21.8 million in fiscal 1994, $33.9 million in
fiscal 1995 and $46.0 million in fiscal 1996 was largely generated by its
leasing operations which included the rental and sale of units from the
Company's lease fleet. Mobile office leasing operations have been the most
reliable source of the Company's cash flow.
The Company has increased its EBITDA and believes that EBITDA provides the
best indicator 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, interest, provision for
deferred compensation, and income taxes. EBITDA as defined by the Company does
not represent cash flow from operations as defined by generally accepted
12
<PAGE>
accounting principles and should not be considered as an alternative to cash
flow 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 $18.8 million or 33.3% to $75.4 million in fiscal 1996
compared to $56.6 million in fiscal 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 and new unit sales activity, partially offset by increased
SG&A expenses to support the increased activities during fiscal 1996.
Cash flow used in investing activities was $46.7 million in fiscal 1994,
$68.0 million in fiscal 1995 and $70.0 million in fiscal 1996. The Company's
primary capital requirements are for the purchase of new units for its lease
fleet and units purchased through acquisition. The Company seeks to maintain its
lease fleet in good condition at all times and generally increases the size of
its lease fleet only in those local or regional markets experiencing economic
growth. During fiscal 1994, 1995 and 1996, the Company significantly increased
its net capital expenditures through purchases of new units for the rental
fleet, capital improvements and betterments for existing units and the
acquisitions of existing rental fleets including the acquisition of MFO in 1994,
increasing the size of the rental fleet by approximately 8,000 units during
1994, 4,000 units during 1995 and 3,000 units during 1996. This increased
activity was in response to increased customer demand and the implementation of
the Company's acquisition strategy. The following table sets forth the Company's
investment in its lease fleet for the periods indicated.
<TABLE>
<CAPTION>
Fiscal Years Ended
December 31,
------------
1994 1995 1996
---- ---- ----
(Dollars in millions)
Gross capital expenditures for rental
equipment:
<S> <C> <C> <C>
Acquisitions.............................. $21.2 $25.0 $ 3.1
New units and betterments................. 40.6 47.1 69.2
---- ---- ----
61.8 72.1 72.3
Book values of sold, used units............ (6.4) (7.7) (9.7)
---- ---- ----
Net capital expenditures for rental
equipment................................. $55.4 $64.4 $62.6
==== ==== ====
Lease fleet maintenance expenses........... $13.9 $15.3 $16.7
==== ==== ====
</TABLE>
13
<PAGE>
The Company believes it can manage its capital requirements for its lease
fleet, and thus its cash flow, through the careful monitoring of its lease fleet
additions. For instance, the Company believes that during an economic downturn
it can sell used units while limiting additions to its lease fleet to maintain
cash flow. Selling used units during an economic downturn may result in lower
sales prices for the Units. During fiscal 1994, 1995 and 1996, selling prices
for used units (excluding units sold pursuant to purchase options) averaged
approximately 102%, 101% and 97%, respectively, of total capitalized cost of the
unit. Such costs include the cost of the unit as well as costs of significant
improvements made to the unit. See further explanation below and note 2 of Notes
to Financial Statements. Historically, the Company has recognized net gains on
the sale of used units.
Lease fleet maintenance expenses represent the costs for repairing,
refurbishing and servicing used units and are included in the Company's cost of
leasing. Generally, costs of improvements and betterments aggregating less than
$1,000 per unit are expensed as incurred. Expenditures greater than $1,000 that
significantly extend the economic useful life of a unit or that materially alter
a unit's composition are capitalized. The Company's maintenance and
refurbishment program is designed to help (i) maintain the value of lease fleet
units and (ii) realize rental rates and operating cash flows from older units
comparable to those from newer units. The sale of used units helps preserve the
overall high quality of the Company's lease fleet and enhances cash flow.
Other capital expenditures of $1.2 million, $6.9 million and $10.3 million
in fiscal 1994, 1995 and 1996, respectively, consist of those capital
expenditures for items not directly related to the lease fleet such as branch or
headquarters equipment, leasehold improvements and management information
systems.
Cash provided by financing activities was $24.2 million in 1994, $33.8
million in 1995 and $23.9 million in 1996. Cash flow was generated primarily
from borrowings of long-term debt net of repayments thereon, offset by the
dividends paid to Holdings.
The Company's credit facility, at December 31, 1996, provides for a total
line of credit up to an aggregate principal amount of $120.0 million at any time
outstanding. Effective January 31, 1997, the facility was amended to increase
the total line of credit to an aggregate principal amount of $140.0 million. The
credit facility has three components, as amended: (i) a revolving line of credit
in an aggregate amount of up to $20.0 million at any one time outstanding to be
used by the Company for general operating and working capital purposes of the
Company and other corporate purposes (other than non-ordinary course
acquisitions), (ii) a line of credit in an amount of up to $110.0 million to be
used to purchase new fleet or to pay the cash purchase price (and related
expenses) for future arm's length acquisitions of assets or stock of companies
in the same or similar businesses as the business in which the Company is
currently engaged and (iii) a line of credit in an aggregate amount of up to
$10.0 million which may be used either for the purposes described in subsection
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<PAGE>
(i) or subsection (ii) above at the Company's option. The credit facility, as
amended, matures on December 16, 1997, is secured by a first lien on
substantially all of the assets of the Company and can be extended to December
16, 1998 at the option of the Company. Approximately $103.8 million is
outstanding under the credit facility at December 31, 1996. The credit facility
contains certain financial covenants and provides for certain events of default
as are customarily contained in facilities of a similar type.
Interest on the loans under the credit facility, as amended, is payable
monthly at the rate of 0.25% per annum in excess of the prime rate from time to
time publicly announced by Philadelphia National Bank, changing monthly with
each change in prime rate or 2.50% per annum in excess of LIBOR, with the
applicable rate to be selected at the option of the Company.
The Company believes it will have, for the next 12 months, sufficient
liquidity under its credit facility and from cash generated from operations to
meet its expected obligations as they arise.
Seasonality
The Company's operations are somewhat seasonal, with some effect on
revenues but little or no seasonal effect upon earnings.
Inflation
The Company believes that inflation has not had a material effect on its
results of operations. However, an inflationary environment could materially
increase interest rates on the Company's floating rate debt and the replacement
cost of units in the Company's lease fleet. The price of used units sold by the
Company could also increase in such an environment. In addition, the Company may
seek to limit its exposure to interest rate fluctuations by utilizing certain
hedging mechanisms, although it is under no obligation to do so.
15
<PAGE>
Item 8.
INDEX TO FINANCIAL STATEMENTS
Page
----
Independent Auditors' Reports.............................................. 17
Consolidated Balance Sheets as of December 31, 1996 and 1995............... 19
Consolidated Statements of Operations for the years ended
December 31, 1996, 1995 and 1994......................................... 20
Consolidated Statements of Changes in Stockholder's Equity
for the years ended December 31, 1996, 1995 and 1994..................... 21
Consolidated Statements of Cash Flows for the years ended
December 31, 1996, 1995 and 1994......................................... 22
Notes to Consolidated Financial Statements................................. 24
INDEX TO FINANCIAL STATEMENTS SCHEDULES
Schedule II - Valuation and Qualifying Accounts............................ 51
All schedules not listed have been omitted because of the absence of the
conditions under which they are required or the required information is included
elsewhere in the financial statements or notes thereto.
16
<PAGE>
Report of Independent Auditors
Board of Directors
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.)
We have audited the accompanying consolidated balance sheets of Williams
Scotsman, Inc. (formerly The Scotsman Group, Inc.) and subsidiary as of December
31, 1996 and 1995, and the related consolidated statements of operations,
stockholder's equity and cash flows for the years then ended. Our audits also
included the 1996 and 1995 financial statement schedule listed in the Index at
Item 14(a). These consolidated financial statements and schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the consolidated financial statements and schedule 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 1996 and 1995 consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Williams Scotsman, Inc. (formerly The Scotsman Group, Inc.) and subsidiary as of
December 31, 1996 and 1995, and the results of their operations and their cash
flows for the years then ended in conformity with generally accepted accounting
principles. Also, in our opinion, the related 1996 and 1995 financial statement
schedule, when considered in relation to the basic financial statements taken as
a whole, presents fairly in all material respects the information set forth
therein.
ERNST & YOUNG LLP
Baltimore, Maryland
January 24, 1997
17
<PAGE>
Independent Auditors' Report
----------------------------
The Board of Directors
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.)
We have audited the accompanying consolidated statement of operations, changes
in stockholder's equity and cash flows of Williams Scotsman, Inc. (formerly The
Scotsman Group, Inc.) and subsidiary (Scotsman) for the year ended December 31,
1994. These consolidated financial statements are the responsibility of
Scotsman's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audit.
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the results of operations and cash flows of
Williams Scotsman, Inc. (formerly The Scotsman Group, Inc.) and subsidiary for
the year ended December 31, 1994 in conformity with generally accepted
accounting principles.
KPMG PEAT MARWICK LLP
Baltimore, Maryland
March 10, 1995
18
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Consolidated Balance Sheets
<TABLE>
<CAPTION>
December 31,
1996 1995
--------------------------------------
(In Thousands)
Assets
Cash, and temporary investments of $13 in 1996 and $263 in 1995
<S> <C> <C>
$ 351 $ 679
Trade accounts receivable, net of allowance for doubtful accounts of
$258 in 1996 and $447 in 1995 (Note 3) 23,145 17,372
Prepaid expenses and other current assets 9,295 7,048
Rental equipment, net of accumulated depreciation of $67,520 in 1996
and $40,162 in 1995 (Note 3) 356,183 324,207
Property, plant and equipment, net (Notes 2 & 3) 29,032 21,088
Deferred financing costs, net 5,494 7,830
Other assets 5,197 5,455
--------------------------------------
$428,697 $383,679
======================================
Liabilities and stockholder's equity
Accounts payable $ 9,826 $ 6,667
Accrued expenses 8,924 8,114
Rents billed in advance 10,621 9,809
Long-term debt (Note 3) 268,753 242,695
Deferred compensation (Note 7) 3,300 1,900
Deferred income taxes (Note 5) 57,640 51,986
--------------------------------------
Total liabilities 359,064 321,171
--------------------------------------
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 12,756 5,631
--------------------------------------
Total stockholder's equity 69,633 62,508
--------------------------------------
$428,697 $383,679
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
19
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Consolidated Statements of Operations
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
--------------------------------------
(In thousands except per share amounts)
Revenues
<S> <C> <C> <C>
Leasing $116,769 $ 96,498 $ 79,342
Sales of new units 28,042 23,126 22,290
Delivery and installation 32,767 28,162 26,511
Other 17,564 10,734 5,832
--------------------------------------
Total revenues 195,142 158,520 133,975
--------------------------------------
Cost of sales and services Leasing:
Depreciation and amortization 30,588 23,417 18,804
Other direct leasing costs 26,647 23,103 20,578
Sales of new units 23,043 19,273 19,436
Delivery and installation 25,247 22,048 21,569
Other 3,974 2,626 1,547
--------------------------------------
Total costs of sales and services 109,499 90,467 81,934
--------------------------------------
Gross profit 85,643 68,053 52,041
------------------------------------
Selling, general and administrative expenses 42,260 36,295 30,215
Other depreciation and amortization 2,411 1,851 1,349
Interest, including amortization of deferred financing
costs of $2,449, $1,601, and $1,439 25,797 22,485 18,705
--------------------------------------
Total operating expenses 70,468 60,631 50,269
--------------------------------------
Income before income taxes 15,175 7,422 1,772
Income tax expense (Note 5) 5,980 2,863 700
--------------------------------------
Net income $ 9,195 $ 4,559 $ 1,072
======================================
Net income per common share $ 2.77 $ 1.37 $ 0.32
======================================
</TABLE>
See accompanying notes to consolidated financial statements.
20
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Consolidated Statements of Changes in Stockholder's Equity
<TABLE>
<CAPTION>
Additional
Common Stock Paid-in Retained
Shares Amount Capital Earnings Total
-------------------------------------------------
(In Thousands)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993 3,320 $ 33 $56,844 $ - $56,877
Net income - - - 1,072 1,072
-------------------------------------------------
Balance at December 31, 1994 3,320 33 56,844 1,072 57,949
Net income - - - 4,559 4,559
-------------------------------------------------
Balance at December 31, 1995 3,320 33 56,844 5,631 62,508
Dividends - $ .62 per share - - - (2,070) (2,070)
Net income - - - 9,195 9,195
-------------------------------------------------
Balance at December 31, 1996 3,320 $ 33 $56,844 $12,756 $69,633
=================================================
</TABLE>
See accompanying notes to consolidated financial statements.
21
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
------------------------------
(In Thousands)
Cash flows from operating activities
<S> <C> <C> <C>
Net income $ 9,195 $ 4,559 $ 1,072
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 35,448 26,869 21,592
Provision for bad debts 2,209 1,509 1,207
Deferred income tax expense 5,654 2,763 600
Provision for deferred compensation 1,400 1,375 525
Gain on sale of rental equipment (2,618) (2,080) (1,620)
Increase in net trade accounts receivable (7,982) (4) (2,072)
Other 2,721 (1,087) 513
-----------------------------
Net cash provided by operating activities 46,027 33,904 21,817
-----------------------------
Cash flows from investing activities
Redemption of certificates of deposit 250 1,255 1,267
Rental equipment additions (72,277) (72,096) (45,174)
Proceeds from sales of rental equipment 12,331 9,733 8,045
Purchase of property, plant and equipment, net (10,284) (6,871) (1,286)
Net assets of business acquired, including rental
equipment of $16,648 (Note 1) - - (9,538)
=============================
Net cash used in investing activities $(69,980) $(67,979) $(46,686)
=============================
</TABLE>
22
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Consolidated Statements of Cash Flows (continued)
<TABLE>
<CAPTION>
Year ended December 31
1996 1995 1994
-----------------------------------
(In Thousands)
Cash flows from financing activities
<S> <C> <C> <C>
Proceeds from long-term debt $ 219,420 $ 204,389 $ 173,401
Repayment of long-term debt (193,362) (168,040) (148,968)
Increase in deferred financing costs (113) (2,555) (281)
Cash dividends paid (2,070) - -
-----------------------------------
Net cash provided by financing activities 23,875 33,794 24,152
-----------------------------------
Net decrease in cash (78) (281) (717)
Cash at beginning of period 416 697 1,414
===================================
Cash at end of period $ 338 $ 416 $ 697
===================================
Supplemental cash flow information:
Cash paid for (received from) income taxes $ 110 $ (5) $ (453)
===================================
Cash paid for interest $ 23,888 $ 21,068 $ 17,086
===================================
</TABLE>
See accompanying notes to consolidated financial statements.
23
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements
(Dollars in thousands, except per share amounts)
1. Organization and Basis of Presentation
Williams Scotsman, Inc. (the Company) is a wholly-owned subsidiary of Scotsman
Holdings, Inc. (Holdings), a corporation which was organized in November 1993
for the purpose of acquiring the Company. The Company changed its name from The
Scotsman Group, Inc. to Williams Scotsman, Inc. effective January 1, 1997.
The operations of the Company consist of the leasing and sale of mobile offices
and, to a lesser extent, modular structures (equipment) and their delivery and
installation. Leasing operations account for a majority of the Company's
revenues and gross profits and are primarily comprised of the leasing of mobile
office and storage units and the sale of units from the Company's lease fleet.
1994 Acquisition
On September 14, 1994, the Company purchased all of the outstanding shares of
common stock of Mobile Holdings, Inc. (Mobile) for an aggregate cost of $9,538.
The acquisition, which was effective as of August 31, 1994, was accounted for
under the purchase method of accounting and, accordingly, the total cost has
been allocated to the assets acquired and liabilities assumed based on their
estimated fair values as follows:
Rental equipment $ 16,648
Property, plant and equipment 2,055
Long-term debt assumed (5,505)
Deferred income taxes recorded (4,313)
Other net liabilities assumed (702)
--------
Net assets acquired 8,183
--------
Excess of cost over net assets acquired (goodwill) 1,355
--------
Total cost $ 9,538
========
The long-term debt was repaid subsequent to the acquisition. A deferred income
tax liability was recorded for the tax effect of differences between the bases
of Mobile's assets and liabilities for tax and financial reporting purposes.
24
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Organization and Basis of Presentation (continued)
Unaudited pro forma results of operations for the year ended December 31, 1994
assuming that the acquisition of Mobile had occurred on January 1, 1994, are
presented below:
Total revenue $140,365
Net income 1,242
Net income per share $ 0.37
The pro forma results include the historical accounts of the Company and the
historical accounts for the acquired business adjusted to reflect (1)
depreciation and amortization of the acquired identifiable tangible and
intangible assets based on the new cost basis of the acquisition, (2) interest
on acquisition financing and (3) the elimination of non-recurring expenses. The
pro forma results of operations are not necessarily indicative of actual results
which might have occurred had the operations and management teams of the Company
and the acquired company been combined in prior years.
Summary of Significant Accounting Policies
The accompanying consolidated financial statements include the accounts of the
Company and its wholly owned subsidiary. Significant intercompany accounts and
transactions have been eliminated in consolidation.
(a) Use of Estimates
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements
and accompanying notes. Actual results could differ from these estimates.
(b) Leasing Operations
Equipment is leased generally under operating leases and, occasionally,
under sales-type lease arrangements. Operating lease terms generally
range from 3 months to 36 months, and contractually averaged
approximately 12 months at December 31, 1996. Rents billed in advance are
initially deferred and recognized as revenue over the term of the
operating leases. Rental equipment is depreciated by the straight-line
method
25
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Organization and Basis of Presentation (continued)
(b) Leasing Operations (continued)
using an estimated economic useful life of 10 to 20 years and an
estimated residual value of either $1,000 or 20%. Costs of improvements
and betterments are capitalized, whereas costs of replacement items,
repairs and maintenance are expensed as incurred. Costs incurred for
equipment to meet particular lease specifications are capitalized and
depreciated over the lease term. However, costs aggregating less than
$1,000 per unit are generally expensed as incurred.
(c) Deferred Financing Costs
Costs of obtaining long-term debt are amortized over the term of the
debt by the interest method.
(d) Property, Plant and Equipment
Depreciation is computed by the straight-line method over estimated
useful lives ranging from 20 to 40 years for buildings and improvements
and 3 to 12 years for furniture and equipment.
Maintenance and repairs are charged to expense as incurred.
(e) Income Taxes
Deferred tax assets and liabilities are recognized for the estimated
future tax consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and their
respective tax bases. Deferred tax assets and liabilities are measured
using enacted tax rates in effect for the year in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date. The
Company is included in the consolidated federal income tax return of
Holdings. Income taxes are included in the accompanying financial
statements on a separate return basis.
26
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
1. Organization and Basis of Presentation (continued)
(f) Earnings Per Share
Earnings per share is computed based on weighted average number of common
shares outstanding of 3,320,000 shares for 1996, 1995, and 1994.
2. Property, Plant and Equipment
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------
Land $ 6,889 $ 5,018
<S> <C> <C>
Buildings and improvements 12,820 11,052
Furniture and equipment 13,870 7,428
------------------------
33,579 23,498
Less accumulated depreciation 4,547 2,410
------------------------
Net property, plant and equipment $ 29,032 $ 21,088
========================
</TABLE>
3. Long-Term Debt
Long-term debt consists of the following:
<TABLE>
<CAPTION>
December 31
1996 1995
------------------------
<S> <C> <C>
Borrowings under revolving credit facility $103,753 $ 77,695
9.5% senior secured notes 165,000 165,000
------------------------
$268,753 $242,695
========================
</TABLE>
The loan agreement for the revolving credit facility, as amended, provides for a
$120,000 revolving credit facility which matures December 16, 1997 and can be
extended for an additional year at the option of the Company. Interest is
payable at a rate of either prime plus .25% or LIBOR plus 2.50% at the option of
the Company. The weighted average interest rate was 8.18% at December 31, 1996.
Borrowings under the credit facility are secured by a first priority lien on and
27
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
3. Long Term Debt (continued)
security interest in the Company's rental equipment, accounts receivable and
property, plant and equipment. In addition to the restrictions and limitations
described under the note agreement, the credit facility loan agreement requires
compliance with certain financial covenants including maintenance of minimum net
worth, working capital, number of units in the lease fleet and fleet
utilization.
The 9.5% senior secured notes are due December 15, 2000 with interest payable
semi-annually on June 15 and December 15 of each year. On or after December 15,
1997, the notes are redeemable at the option of the Company, at redemption
prices of 103.167% and 101.583% during the 12 month periods beginning December
15, 1997 and 1998, respectively, and 100% thereafter (subject to price
adjustment under certain events). Upon the occurrence of a change of control,
the holders of the notes have the right to require the Company to repurchase the
notes at a purchase price of 101%. The notes are secured by a second priority
lien on and security interest in the collateral under the revolving credit
facility loan agreement. The note agreement limits or restricts the Company's
ability to incur additional indebtedness, issue preferred stock, make
distributions of capital in an amount not to exceed 50% of accumulated earnings,
dispose of property, incur liens on property and merge with or acquire other
companies.
At December 31, 1996 and 1995, the fair value of long-term debt was
approximately $274,000 and $246,000, respectively, based on the quoted market
price of the senior secured notes and the book value of the revolving credit
facility, which is an adjustable rate note.
4. Obligations of Parent Company
On March 2, 1994, Holdings completed a private placement of 21,250 securities
consisting of $21,250 principal amount of 11% Series A senior notes due March 1,
2004 and 173,648 shares of Holdings common stock. The common stock was assigned
a value of $2,042 based on a per share price of $11.76. The remaining proceeds
of $19,208 were assigned to the notes. The discount on the notes of $2,042 is
being accreted over the maturity period. The proceeds of this offering were used
to retire unsecured convertible notes payable to a stockholder of Holdings of
$20,000. Interest on the 11% notes is payable semi-annually in additional notes
or cash through March 1, 1999, and payable in cash thereafter. Holdings elected
to pay all interest payments due under the notes in additional notes payable
aggregating $6,514. These notes bear interest at 11% and are due March 1, 2004.
28
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
4. Obligations of Parent Company (continued)
On or after March 1, 1999, the notes are redeemable at the option of Holdings at
redemption prices of 104.125%, 102.750% and 101.375%, during the twelve month
periods beginning March 1, 1999, 2000 and 2001 respectively, and 100%
thereafter. Upon the occurrence of a change in control, the holders of the notes
have the right to require Holdings to repurchase the notes at a purchase price
of 101%.
Effective, August 12, 1994, Holdings completed the registration of 11% Series B
notes. Such notes have been exchanged for all of the outstanding 11% Series A
senior notes. The form and terms of the Series B notes are identical to the form
and terms of the Series A notes except that the Series B notes have been
registered under the Securities Act of 1933, as amended, and do not bear any
legends restricting the transfer thereof.
The Holdings notes are not secured by the Company's assets or common stock and
the Company has no plans to assume or otherwise become liable with respect to
the notes.
5. Income Taxes
Deferred income taxes related to temporary differences between the tax bases of
assets and liabilities and the respective amounts reported in the financial
statements are summarized as follows:
<TABLE>
<CAPTION>
December 31
1996 1995
-------------------
Deferred tax liabilities:
Cost basis in excess of tax basis of assets and
accelerated tax depreciation:
<S> <C> <C>
Rental equipment $94,050 $86,718
Property, plant and equipment 983 983
-------------------
Total deferred tax liabilities 95,033 87,701
-------------------
Deferred tax assets:
Allowance for doubtful accounts 100 177
Rents billed in advance 3,317 2,759
Pre-acquisition separate company net operating
loss carryovers 25,816 26,273
Net operating loss carryovers 3,547 2,728
Alternative minimum tax credit carryovers 1,465 1,296
Investment tax credit carryovers 860 860
Other 2,288 1,622
-------------------
Total deferred tax assets 37,393 35,715
-------------------
Net deferred tax liabilities $57,640 $51,986
===================
</TABLE>
29
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
In December 1993, Holdings purchased all of the issued and outstanding shares of
common stock of the Company. For financial statement purposes, the acquisition
was accounted for under the purchase method of accounting by Holdings, and the
Company restated its balance sheet to "push down" the effects of the purchase
accounting adjustments. In connection with the acquisition of the Company, the
tax bases of the assets and liabilities of the Company prior to the acquisition
are carried over and continue as the tax bases of the Company. As a result, the
Company recorded deferred income tax liabilities of $13,455 representing the tax
effect of the differences between such tax bases and the related amounts
recorded as the cost of the acquisition for financial reporting purposes.
At December 31, 1996, the Company had net operating loss carryovers available
for federal income tax purposes of approximately $76,120, including
pre-acquisition separate company loss carryovers available for federal income
tax purposes of approximately $67,315 and investment tax credit carryovers of
approximately $860. These carryovers expire at various dates from 2000 to 2009.
Also, alternative minimum tax credit carryovers of approximately $1,465 are
available without expiration limitations. The annual utilization of the
preacquisition net operating loss carryovers is subject to certain limitations
under the Internal Revenue Code.
The income tax expense consists of the following:
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1994
-----------------------------
<S> <C> <C> <C>
Current $ 326 $ 100 $ 100
Deferred 5,654 2,763 600
-----------------------------
$ 5,980 $ 2,863 $ 700
=============================
Federal $ 5,145 $ 2,453 $ 600
State 835 408 100
-----------------------------
$ 5,980 $ 2,863 $ 700
=============================
</TABLE>
30
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
5. Income Taxes (continued)
The provision for income taxes is reconciled to the amount computed by applying
the Federal corporate tax rate of 34% to income before income taxes as follows:
<TABLE>
<CAPTION>
Years ended December 31
1996 1995 1994
--------------------------
<S> <C> <C> <C>
Income tax at statutory rate $5,311 $2,524 $602
State income taxes, net of federal tax benefit 543 308 66
Other 126 31 32
--------------------------
$5,980 $2,863 $700
==========================
</TABLE>
6. Commitments
The Company is obligated under noncancellable operating leases of certain
equipment, vehicles and parcels of land. At December 31, 1996 approximate future
minimum rental payments are as follows:
1997 $1,525
1998 883
1999 758
2000 495
2001 and thereafter 126
-------
$3,787
=======
Rent expense was $2,875 in 1996, $2,605 in 1995 and $2,288 in 1994.
7. Employee Benefit Plans
The Company has adopted a defined contribution plan (the 401(k) Plan) which is
intended to satisfy the tax qualification requirements of Sections 401(a),
401(k), and 401(m) of the Internal Revenue Code of 1986 (the Code). The 401(k)
Plan covers substantially all employees and permits participants to contribute
the lessor of (i) 15% of their annual compensation from the Company and (ii) the
dollar limit described in Section 402(g) of the Code ($9,500 in 1996). All
amounts under this salary reduction feature are fully vested.
31
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
7. Employee Benefit Plans (continued)
The 401(k) Plan has a "matching" contribution feature under which the Company
may contribute a percentage of the amount deferred by each participant. The Plan
also has a "profit sharing" feature, under which the Company may contribute, at
its discretion, an additional amount allocable to the accounts of active
participants meeting the aforementioned eligibility requirements.
Contributions by the Company to the 401(k) Plan were approximately $243 in 1996,
$129 in 1995, and $54 in 1994.
The Company recorded $1,800, $1,775, and $925 of management incentive
compensation in 1996, 1995, and 1994 respectively, including deferred
compensation of $1,400 in 1996, $1,375 in 1995 and $525 in 1994, in connection
with the Incentive Compensation Plan (the Plan). The Plan covers approximately
40 management members of the Company. Under the terms of the Plan, incentive
compensation is payable annually to members of the Plan, based upon the Company
achieving certain earnings before interest, income taxes, provision for deferred
compensation, depreciation and amortization (EBITDA) targets. In addition, if
certain cumulative EBITDA targets are met over the five year period ending
December 31, 1998, additional compensation will be payable in 1999.
In March 1995, the Company adopted a stock option plan for certain key
employees. Under the plan, employees may be granted options to purchase up to a
total of 7.5% of Holdings' outstanding common stock. The options are granted
with an exercise price equal to the fair value of the shares as of the date of
grant. The options vest ratably over 5 years and expire 10 years from the date
of the grant. The Company accounts for stock option grants in accordance with
APB Opinion No. 25, "Accounting for Stock Issued to Employees", and,
accordingly, recognizes no compensation expense for the stock option grants.
Pro forma information regarding net income and earnings per share is required by
Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation," and has been determined as if the Company had accounted for its
employee stock options under the minimum value method of that Statement. The
minimum value for these options was estimated at the date of grant by
calculating the excess of the fair value of the stock at the date of grant over
32
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
7. Employee Benefit Plans (continued)
the present value of both the
exercise price and the expected dividend payments, each discounted at the risk
free rate, over the expected exercise life of the option. The following weighted
average assumptions were used for 1996 and 1995: risk-free interest rate of 6%;
weighted average expected life of the options of 5 years; and no dividends.
For purposes of pro forma disclosures, the estimated minimum value of the
options is amortized to expense over the options' vesting period. Note that the
effects of applying SFAS 123 for pro forma disclosure in the current year are
not necessarily representative of the effects on pro forma net income for future
years. The Company's pro forma information follows:
<TABLE>
<CAPTION>
1996 1995
----------------------
<S> <C> <C>
Pro forma net income $9,076 $4,543
Pro forma earnings per share $ 2.73 $ 1.37
</TABLE>
A summary of stock option activity and related information for the years ended
December 31 follows:
<TABLE>
<CAPTION>
1996 1995
------------------------------------------
Weighted Weighted
Average Average
Exercise Exercise
Options Price Options Price
------------------- ------------------
<S> <C> <C> <C> <C>
Beginning balance 38,200 $13.78 - -
Granted 115,050 28.80 38,200 $13.78
Exercised - - - -
Forfeited (2,200) 20.61 - -
------------------------------------------
Ending balance 151,050 $25.12 38,200 $13.78
Exercisable at end of year 37,610 $22.89 7,640 $13.78
Weighted average minimum value
of options granted during year
$ 7.28 $ 3.48
</TABLE>
33
<PAGE>
Williams Scotsman, Inc.
(formerly The Scotsman Group, Inc.) and Subsidiary
Notes to Consolidated Financial Statements (continued)
7. Employee Benefit Plans (continued)
Exercise prices for options outstanding as of December 31, 1996 are $13.78 and
$28.80. The weighted-average remaining contractual life of those options is 8.75
years.
8. Related Party Transactions
In connection with the acquisition of the Company by Holdings, the Company
entered into a management agreement with a subsidiary of the principal
stockholder of Holdings. The agreement provides that the Company will pay an
annual fee of up to $250 in consideration for certain management, consulting and
financial advisory services. The Company incurred expenses of $250 for these
services in 1996, 1995 and 1994.
9. Other
Holdings is considering various strategic alternatives, including a sale of the
Company. There can be no assurance that any transaction will be consummated.
34
<PAGE>
Item 9. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
None.
35
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant
Directors and Officers
The Company's directors and executive officers are as follows:
Name Age Position
- ---- --- --------
Barry P. Gossett.......... 56 Chairman and Chief Executive Officer; Director
Gerard E. Holthaus......... 47 President and Chief Operating Officer; Director
Marietta F. Adamo......... 46 Executive Vice President-- Administration
Stephen Berger............. 57 Director
Muzzafar Mirza............. 39 Director
Brian Kwait................ 35 Director
- --------
The directors are elected annually and serve until their successors are
duly elected and qualified. No director of the Company receives any fee for
attendance at Board of Directors meetings or meetings of Committees of the Board
of Directors. Outside directors are reimbursed for their expenses for any
meeting attended.
Executive officers of the Company are elected by the Board of Directors and
serve at the discretion of the Board of Directors.
In addition to the executive officers of the Company identified above, the
following persons are instrumental to the management of the Company:
Name Age Position
- ---- --- --------
J. Collier Beall....... 49 Senior Vice President and Southern Division Manager
Joseph F. Donegan....... 46 Senior Vice President and Northern Division Manager
James D. Funk.......... 52 Vice President - Midwestern Regional Manager
Katherine K. Giannelli. 36 Vice President and Controller
Robert W. Hansen........ 40 Vice President - Western Regional Manager
Gerard E. Keefe......... 40 Vice President - Fleet and Finance
William C. LeBuhn....... 34 Vice President - Human Resources
John B. Ross............ 48 Vice President and Corporate Counsel
William H. Ryan......... 51 Vice President - Customer Development Services
William J. Wyatt........ 57 Vice President - Marketing and Sales Support
- ---------
Mr. Gossett was elected Chairman and Chief Executive Officer in October
1995. Prior to this, he served as President and Chief Executive Officer of the
Company from 1990 to October 1995. Mr. Gossett has been a director and employee
36
<PAGE>
of the Company or its predecessor for over twenty-five years. Before joining the
Company, Mr. Gossett was a partner at Buchanan and Company, a Washington, D.C.
accounting firm. Mr. Gossett was one of the founders of the Modular Building
Institute, an industry trade group which represents 160 member companies.
Mr. Holthaus was appointed President and Chief Operating Officer of the
Company in October 1995. Prior to this, he served as the Executive Vice
President, Chief Financial Officer of the Company from June 1994 to October
1995. He has been a director of the Company since June 1994. Before joining the
Company, Mr. Holthaus served as Senior Vice President of MNC Financial, Inc.
from April 1988 to June 1994. From 1971 to 1988, Mr. Holthaus was associated
with the accounting firm of Ernst and Young (Baltimore), where he served as a
partner from 1982 to 1988.
Ms. Adamo has been the Executive Vice President--Administration since 1990,
and was Vice President of Administration of Williams from 1988 to 1990. Ms.
Adamo is responsible for corporate and branch office administrative services, as
well as the Company's Productivity Improvement initiatives.
Mr. Berger has been a director of the Company since December 1993. Mr.
Berger has been a General Partner of Odyssey Partners, a private New York
investment firm, since July 1993. From July 1990 to July 1993, he was employed
by General Electric Capital Corporation, most recently as Executive Vice
President and as Chairman of a subsidiary of such company. From October 1985 to
June 1990, he served as the Executive Director of the New York and New Jersey
Port Authority. Mr. Berger is also a director of Forstmann & Co. Inc. and
Hugoton Energy Corporation.
Mr. Mirza has been a director of the Company since December 1993. Mr. Mirza
has been a principal of Odyssey Partners since July 1993. From May 1988 to June
1993, he was employed by General Electric Capital Corporation, as Managing
Director of Merchant Banking for the GE Capital Corporate Finance Group. From
1983 to 1988, he was a Vice President of Marine Midland Bank, N.A. Mr. Mirza is
also a director of JPS Textile Group, Inc.
Mr. Kwait has been a director of the Company since December 1993. Mr. Kwait
has been a principal of Odyssey Partners since August 1989. From July 1988 to
August 1989, he was an associate with Bear, Stearns & Company. From 1986 to
1988, he attended the Wharton Business School at the University of Pennsylvania.
Mr. Kwait is also a director of CellNet Data Systems.
Mr. Beall was appointed Senior Vice President and Southern Division Manager
in October 1996. In addition, he serves as the Southeastern Regional Manager of
the Company. Mr. Beall's responsibilities include the implementation of
corporate policies, attainment of branch profitability, fleet utilization
management and development of personnel. Prior to joining Williams in 1977, Mr.
37
<PAGE>
Beall was a Regional Manager for Modular Sales and Leasing Company based in
Georgia. Mr. Donegan was appointed Senior Vice President and Northern Division
Manager in October 1996. In addition, he serves as the Northeastern Regional
Manager of the Company, a position he has held since June 1994, and also prior
to 1991. Mr. Donegan's responsibilities include the implementation of corporate
policies, attainment of branch profitability, fleet utilization management and
development of personnel. Mr. Donegan has over 20 years of experience within the
industry. From 1991 through May 1994, Mr. Donegan held similar positions with
Space Master Buildings, Kullman Industries and Bennett Mobile Offices.
Mr. Funk is the Midwestern Regional Manager of the Company. Mr. Funk's
responsibilities include the implementation of corporate policies, attainment of
branch profitability, fleet utilization management and development of personnel.
Prior to joining the Company in 1986, Mr. Funk was a branch manager for IISCOM,
a distributor of computer products based in Florida.
Ms. Giannelli has served as Controller of the Company since 1990, with
responsibilities for the Company's accounting department including regulatory
reporting. Prior to joining the Company, Ms. Giannelli was a Senior Manager of
KPMG Peat Marwick in Baltimore, Maryland where she had been employed since 1982.
Mr. Hansen is the Western Regional Manager of the Company. Mr. Hansen's
responsibilities include the implementation of corporate policies, attainment of
branch profitability, fleet utilization management and development of personnel.
Prior to joining the Company in 1983, Mr. Hansen was General Manager of Duracite
Mfg., a cabinetwork and construction firm in the San Francisco Bay Area.
Mr. Keefe was appointed Vice President, Fleet and Finance in February,
1995, with responsibilities including overall fleet management and purchasing,
treasury functions, planning and budgeting. Prior to joining the Company, Mr.
Keefe was with The Ryland Group, a national homebuilder headquartered in
Columbia, Maryland, from 1993 to 1995. From 1991 to 1993, he was a management
consultant serving the manufacturing, distribution and financial services
industries, and from 1977 to 1991, he was with Ernst & Young in Baltimore,
Maryland, most recently as a Senior Manager.
Mr. LeBuhn has served as Vice President of Human Resources since January
1994. Mr. LeBuhn's responsibilities include the management of human resources
related programs. Prior to joining the Company, Mr. LeBuhn was Human Resources
Manager for Sherwin-Williams Eastern Division from 1992 to January 1994 and
Director of Human Resources for Consolidated International Insurance Group, Inc.
from 1985 to 1992.
Mr. Ross has been Corporate Counsel for the Company since February 1995.
Prior to joining on, Mr. Ross was Corporate Counsel for MNC Leasing Corporation
38
<PAGE>
from 1983 to 1991 and Special Assets Counsel for MNC Financial, Inc. from 1991
to 1993. He has engaged in the private practice of law in both North Carolina
and Maryland.
Mr. Ryan has served as Vice President of Customer Development Services
since October 1994, responsible for the rental and sales of revenue enhancement
products to Scotsman's existing customer base and national accounts. From 1990
to 1994, Mr. Ryan was Vice President of Scotsman Buildings, responsible for the
Company's Modular Structures Division. Prior to joining on, Mr. Ryan was
employed as Vice President of Sales for Cardinal Industries, Inc., a
manufacturer and builder of modular buildings.
Mr. Wyatt has served as Director of Marketing and Sales Support since
February 1994, was Director of Sales and Marketing for the Mobile Offices
Division from 1990 to 1994 and was National Sales Manager of Williams from 1988
to 1990. Before joining on, Mr. Wyatt operated W.J. Wyatt and Company, Inc., a
consulting firm providing sales development, market planning, convention and
meeting management and publishing services.
39
<PAGE>
Item 11.
Executive Compensation
Summary Compensation Table
The following table sets forth certain information concerning the
compensation for the last three completed fiscal years of the five highest paid
officers of the Company who received total compensation in excess of $100,000
during 1996.
<TABLE>
<CAPTION>
Long Term
Compensation
Awards
------
Securities
Annual Compensation Underlying All Other
------------------- ---------- ---------
Year Salary Bonus Options Compensation
---- ------ ----- ------- ------------
<S> <C> <C> <C> <C> <C>
Barry P.
Gossett Chairman and Chief Executive Officer.......... 1996 $225,000 $51,000 --- $ 20,374(2)
1995 205,770 51,000 --- 18,066(2)
1994 200,000 52,000 --- 3,287(2)
Gerard E. Holthaus
President and Chief Operating Officer.................. 1996 200,000 50,500 27,000(1) 15,422(2)
1995 180,769 50,500 7,800(1) 12,968(2)
1994 78,327 50,000 --- 8,297(2)
J. Collier Beall
Senior Vice President and Southern Division Manager.... 1996 216,881 20,000 10,000(1) 9,825(2)
1995 171,390 28,000 2,300(1) 7,200(2)
1994 155,901 23,750 --- 7,200(2)
Joseph F. Donegan
Senior Vice President and Northern Division Manager.... 1996 200,557 20,000 10,000(1) 9,625(2)
1995 148,635 25,000 1,950(1) 8,138(2)
1994 54,609 15,000 --- 3,600(2)
James D. Funk
Vice President - Midwestern Regional Manager........... 1996 147,357 20,000 7,000(1) 9,144(2)
1995 158,338 20,000 1,950(1) 7,875(2)
1994 166,018 21,875 -- 7,450(2)
(1) Represents options granted to purchase shares of Holdings pursuant to the
Scotsman Holdings, Inc. 1994 Employee Stock Option Plan.
(2) Represents disability insurance premium, key man life insurance premium,
car allowance or lease amounts and employer match under the 401(k) Plan.
</TABLE>
40
<PAGE>
1994 Management Equity Offering
In 1994, certain management employees were offered the opportunity to
purchase up to 1.6% of Holdings' common stock at a purchase price of $11.76 per
share, representing fair market value of the shares. A total of 54,082 shares
were offered and purchased under this plan. See a description of the restriction
on these shares in "Item 13 - Stockholders' Agreement".
Scotsman Holdings, Inc. 1994 Employee Stock Option Plan
In March 1995, a stock option plan was adopted for certain key employees.
In February 1997, options for 107,530 shares of Holdings were granted at an
offer price of $55.18 per share. Under this plan, certain key employees may be
granted options to purchase up to a total of 7.5% of Holdings' outstanding
common stock. The options are exercisable for a period of 10 years from date of
grant and have a five year vesting schedule.
Long Term Incentive Plan
The Company adopted a long term incentive plan (the "Incentive Compensation
Plan") under which certain management employees will be entitled to receive, for
each of fiscal years 1994 through 1998, cash compensation, if certain operating
targets (EBITDA) are met. Each participant under the Incentive Compensation Plan
may be entitled to an additional lump sum payment following the end of the
Company's 1998 fiscal year, depending on the extent to which cumulative EBITDA
of the Company for the five year period beginning in fiscal 1994 and ending in
fiscal 1998 exceeds the EBITDA target amount for the same period. In February
1997, $400,000 was paid to approximately 40 management employees based upon the
Company's 1996 operating performance.
401(k)/Defined Contribution Plan
On May 1, 1993 the Company adopted a defined contribution plan (the "401(k)
Plan") which is intended to satisfy the tax qualification requirements of
Sections 401(a), 401(k), and 401(m) of the Internal Revenue Code of 1986, as
amended (the "Code"). Each employee of the Company who completes one hour of
service with the Company is eligible to participate in the salary reduction
feature of the 401(k) Plan. The 401(k) Plan permits participants to contribute
the lesser of (i) 15% of their annual compensation from the Company and (ii) the
dollar limit described in Section 402(g) of the Code ($9,500 in 1996). All
amounts deferred under the 401(k) Plan's salary reduction feature by a
participant are fully vested.
The 401(k) Plan has a "matching" contribution feature under which the
Company may contribute a percentage of the amount deferred by each participant
who makes salary reduction deferrals to the 401(k) Plan, has been employed for
41
<PAGE>
12 consecutive months by the Company, completes 1,000 hours of service with the
Company during the Plan year and is employed by the Company on the last day of
the year. This percentage, if any, is determined by the Board of Directors at
their discretion and is communicated to 401(k) Plan participants during the year
for which the matching contribution will be made. Matching contributions made on
behalf of a 401(k) Plan participant are subject to a deferred vesting schedule
based on the number of years a participant has been employed by the Company. A
participant becomes 20%, 40%, 60%, and 100% vested in the matching contributions
made to the 401(k) Plan on his or her behalf after completion of 2, 3, 4 and 5
years of service with the Company, respectively.
The 401(k) Plan also has a "profit sharing" feature, under which the
Company may contribute, in its discretion, an additional amount which is
allocated to the accounts of active participants who have been employed for 12
consecutive months by the Company, who have completed 1,000 hours of service
during the Plan Year and who are employed on the last day of the year, based on
such participants' compensation for the year.
A participant's 401(k) Plan benefits generally are payable upon the
participant's death, disability, retirement, or other termination of employment.
Payments under the 401(k) Plan are made in a lump sum.
In 1996, the Company made matching contributions to the 401(k) Plan
participants in an aggregate amount of $242,913.
Compensation Committee Interlocks and Insider Participation
No director or executive officer of the Company was or is a director or
executive officer of any corporation, other than Holdings, that has a director
or executive officer who is also a director of the Company or a member of a
committee of the Board of Directors. During 1996, no officers or employees of
the Company other than Messrs. Gossett and Holthaus participated in
deliberations of the Company's Board of Directors concerning executive officer
compensation.
42
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the issued and outstanding shares of Common Stock of the Company are
owned by Holdings. The following table sets forth certain information regarding
the ownership of Holding's Common Stock as of the date of this Report by (i) all
persons owning of record or beneficially to the knowledge of the Company 5% or
more of the issued and outstanding Common Stock of Holdings, (ii) each director
individually and (iii) all executive officers and directors as a group:
<TABLE>
<CAPTION>
Percentage
Name Shares Owned
---- ------ -----
<S> <C> <C>
Odyssey Partners, L.P. (1)
Stephen Berger (2)
Brian Wruble (2)
Leon Levy (2)
Jack Nash (2) 2,989,201(3) 88.6%
Joshua Nash (2)
31 West 52nd Street
New York, New York 10019......................
Barry P. Gossett (1)(4)........................ 259,469 7.7%
Gerard E. Holthaus (1)(4)...................... 12,700 0.4%
All executive officers and directors as a group 3,285,020 97.3%
---------------------
</TABLE>
(1) Deemed a beneficial owner of the Company's Common Stock by virtue of
ownership of shares of common stock of Holdings, the parent company of the
Company.
(2) The shares of common stock beneficially owned by Odyssey Partners may be
deemed to be beneficially owned by the general partners of Odyssey
Partners: Stephen Berger, Brian Wruble, Leon Levy, Jack Nash and Joshua
Nash (collectively, the "General Partners"), who will share voting and
investing control over such shares. The General Partners disclaim such
beneficial ownership. The address of each of the General Partners is the
address of Odyssey Partners.
(3) Does not include shares beneficially owned by Mr. Gossett, as to which
Odyssey Partners has an irrevocable proxy. See "Item 13 -- Stockholders'
Agreement."
(4) Mr. Gossett's and Mr. Holthaus' address is the address of the Company's
principal executive offices.
43
<PAGE>
Item 13. Certain Relationships and Related Transactions
Odyssey Investors Management Agreement
The Company and Odyssey Investors, Inc. ("Odyssey Investors"), a wholly
owned subsidiary of Odyssey Partners, entered into a management agreement (the
"Management Agreement"), dated as of December 16, 1993, which provides that the
Company will pay Odyssey Investors an annual fee of up to $250,000 in
consideration of certain management, consulting, and financial advisory services
to be rendered by Odyssey Investors, until such time, if any, as the Company has
outstanding publicly-held shares of Common Stock. The terms of the Management
Agreement were not the result of arms' length bargaining and have not been
reviewed as to fairness by any independent party and no determination has been
made as to whether the terms of the Management Agreement were as favorable as
those which might have been obtained from unaffiliated parties. The Company
incurred expense of $250,000 for these services in 1996.
Stockholders' Agreement
Odyssey Partners, the Management Stockholders and the Company are parties
to an Amended and Restated Management Stockholders' and Optionholders' Agreement
dated as of June 6, 1994 (the "Stockholders' Agreement"), which amends and
restates the Management Stockholders' and Optionholders' Agreement dated as of
November 9, 1993, and which contains certain rights and restrictions with
respect to the transfer of each Management Stockholder's shares of Common Stock.
The Stockholders' Agreement prohibits the transfer of any shares of Common Stock
by each Management Stockholder (other than sales required in connection with the
disposition of all shares of Common Stock owned by Odyssey Partners and its
affiliates) until the earlier of fifteen months after an initial public offering
of the equity of the Company or the day after Odyssey Partners and its
affiliates have disposed of more than 33-1/3% of the shares of Common Stock
originally acquired by Odyssey Partners, and thereafter, the aggregate number of
shares which may be transferred by each Management Stockholder in any calendar
year (other than certain required sales) may not exceed 25% of the number of
shares acquired in connection with the Acquisition plus the number of any shares
acquired pursuant to the exercise of stock purchase options. In addition, the
Stockholders' Agreement restricts the transfer of shares of Common Stock by each
Management Stockholder for a period of five years from the date of purchase of
such shares, except certain permitted transfers and transfers pursuant to an
effective registration statement or in accordance with Rule 144 under the
Securities Act. Upon the expiration of such five-year period, subject to the
foregoing restrictions, each Management Stockholder may transfer his shares
after giving to Odyssey Partners and the Company, respectively, a right of first
refusal to purchase such shares.
Each Management Stockholder has the right (and in limited circumstances the
obligation) to sell his shares in connection with certain dispositions of shares
44
<PAGE>
by Odyssey Partners and the right to cause his shares to be included in certain
registrations of Common Stock on behalf of Odyssey Partners. Each Management
Stockholder has granted to Odyssey Partners an irrevocable proxy that permits
Odyssey partners to vote his shares. In addition, upon termination of any
Management Stockholder's employment, the Company may elect to require such
Management Stockholder to sell to the Company all of his shares.
45
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K.
(a) Financial Statements and Financial Statement Schedules (1) and (2) See
Index to Financial Statements and Supplemental Schedules at Item 8 of
this Annual Report on Form 10-K.
(b) Reports on Form 8-K filed in the fourth quarter of 1996.
In a report on Form 8-K dated November 27, 1996, the Company reported
a change in the Registrant's name from The Scotsman Group, Inc. to
Williams Scotsman, Inc., effective January 1, 1997.
(c) Exhibits
Exhibit Number
3.1 -- Certificate of Incorporation of Williams Scotsman, Inc.,
as amended. (Incorporated by reference to Exhibit 3(i) of
Form 8-K dated November 27, 1996).
3.2 -- By-laws of Williams Scotsman, Inc. (Incorporated by
reference to Exhibit 3.2 of Registration Statement on
Form S-l, Commission File No. 33-68444).
4.1 -- Indenture dated as of December 16, 1993 between
The Scotsman Group, Inc. and Continental Bank
National Association, as trustee (Incorporated
by reference to Exhibit 10.1 to the annual report
on Form 10-K of The Scotsman Group, Inc.for the
year ended December 31, 1993 (the "Scotsman 1993 10-K")).
10.1 -- Loan and Security Agreement dated December 16, 1993
between Congress Financial Corporation and
The Scotsman Group, Inc. (Incorporated by reference
to Exhibit 10.2 to the Scotsman 1993 10-K).
10.2 -- Amendment No. 1 to Loan and Security Agreement dated
June 15, 1994 between Congress Financial Corporation
and The Scotsman Group, Inc. (Incorporated by reference
to Exhibit 10.2 to the annual report on Form 10-K of
46
<PAGE>
The Scotsman Group, Inc. for the year ended December 31,
1994 (the "Scotsman 1994 10-K")).
10.3 -- Amendment No. 2 to Loan and Security Agreement dated
September 14, 1994 between Congress Financial
Corporation and The Scotsman Group, Inc. (Incorporated
by reference to Exhibit 10.3 to the Scotsman 1994 10-K).
10.4 -- Amendment No. 3 to Loan and Security Agreement dated
March 24, 1995 between Congress Financial
Corporation and The Scotsman Group, Inc. (Incorporated
by reference to Exhibit 10.4 to the Scotsman 1994 10-K).
10.5 -- Amendment No. 4 to Loan and Security Agreement dated
March 28, 1995 between Congress Financial Corporation
and The Scotsman Group, Inc. (Incorporated by reference
to Exhibit 10.5 to the annual report on Form 10-K of
The Scotsman Group, Inc. for the year ended December 31,
1995 (the "Scotsman 1995 10-K")).
10.6 -- Amendment No.5 to Loan and Security Agreement dated
August 1, 1995 between Congress Financial Corporation
and The Scotsman Group, Inc. (Incorporated by reference
to Exhibit 10.6 to the Scotsman 1995 10-K).
10.7 -- Amendment No.6 to Loan and Security Agreement dated
October 13, 1995 between Congress Financial Corporation
and The Scotsman Group, Inc. (Incorporated by reference
to Exhibit 10.7 to the Scotsman 1995 10-K).
10.8 -- Amendment No. 7 to Loan and Security Agreement dated
January 30, 1996 between Congress Financial Corporation
and The Scotsman Group, Inc. (Incorporated by reference
to Exhibit 10.8 to the Scotsman 1995 10-K).
10.9 -- Amendment No.8 to Loan and Security Agreement dated
September 30, 1996 between Congress Financial
Corporation and The Scotsman Group, Inc.
47
<PAGE>
10.10 -- Amendment No. 9 to Loan and Security Agreement
dated January 31, 1997 between Congress Financial
Corporation and Williams Scotsman, Inc.
10.11 -- Intercreditor Agreement dated December 16, 1993
among The Scotsman Group, Inc., Congress Financial
Corporation and Continental Bank National Association,
as trustee (Incorporated by reference to Exhibit 10.3
to the Scotsman 1993 10-K).
10.12 -- Amended and Restated Management Stockholders'
and Optionholders' Agreement dated as of June 6, 1994,
amending and restating the Management Stockholders'
and Optionholders' Agreement dated as of November 9,
1993 by and among Scotsman Holdings, Inc., Odyssey
Partners, L.P. and the parties identified as management
stockholders on the signature pages thereto.
(Incorporated by reference to Exhibit 10.4 of
Registration Statement on Form S-l of Scotsman Holdings,
Inc., Commission File No. 33-68444).
10.13 -- Management Agreement, dated as of December 16, 1993
between The Scotsman Group, Inc. and Odyssey Investors,
Inc. (Incorporated by reference to Exhibit 10.5 of
Registration Statement on Form S-l of Scotsman Holdings,
Inc., Commission File No. 33-68444).
10.14 -- Agreement, dated as of June 30, 1993 by and among
The Scotsman Group, Inc., Simon E. Dragan and Whitley
Manufacturing Co., Inc. (Incorporated by reference
to Exhibit 10.6 of Registration Statement on Form S-l,
Commission File No. 33-68444).
10.15 -- Supply Agreement, dated as of August 25, 1993, by
and between Whitley Manufacturing Co., Inc. and
The Scotsman Group, Inc.(Incorporated by reference
to Exhibit 10.7 of Registration Statement on Form S-l,
Commission File No.3-68444).
48
<PAGE>
10.16 -- Scotsman Holdings, Inc. Employee Stock Purchase Plan.
(Incorporated by reference to Exhibit 10.8 of
Registration Statement on Form S-l of Scotsman Holdings,
Inc., Commission File No. 33-68444).
10.17 -- Scotsman Holdings, Inc. 1994 Employee Stock Option Plan.
(Incorporated by reference to Exhibit 10.11 of the Scotsman
1994 10-K).
12. -- Statement regarding computation of ratios.
21. -- Subsidiaries of Registrant: Mobile Field Office Company
49
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Amendment to be signed
on its behalf by the undersigned, thereunto duly authorized.
WILLIAMS SCOTSMAN, INC.
By: /s/ Gerard E. Holthaus
--------------------------
Gerard E. Holthaus
President
Dated: March 28, 1997
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Gerard E. Holthaus, his or her attorney-in-fact,
with the power of substitution, for him or her in any and all capacities, to
sign any amendments to this Report, and to file the same with exhibits thereto
and other documents in connection therewith, with the Securities and Exchange
Commission, hereby ratifying and confirming all that each of said
attorney-in-fact, or his substitute or substitute or substitutes, may do or
cause to be done by virtue hereof.
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/ Barry P. Gossett Chief Executive Officer March 28, 1997
- -------------------------- and Director
Barry P. Gossett
/s/ Gerard E. Holthaus President, Chief Operating March 28, 1997
- -------------------------- Officer and Director
Gerard E. Holthaus
/s/ Katherine K. Giannelli Controller March 28, 1997
- --------------------------
Katherine K. Giannelli
/s/ Stephen Berger Director March 28, 1997
- --------------------------
Stephen Berger
/s/ Muzzafar Mirza Director March 28, 1997
- --------------------------
Muzzafar Mirza
/s/ Brian Kwait Director March 28, 1997
- --------------------------
Brian Kwait
50
<PAGE>
WILLIAMS SCOTSMAN, INC. AND SUBSIDIARY
Schedule II - Valuation and Qualifying Accounts
Years ended December 31, 1996, 1995 and 1994
(In thousands)
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
Allowance for Doubtful Accounts:
<S> <C> <C> <C>
Balance at beginning of the period $ 447 $ 444 $ 416
Provision charged to expense 2,209 1,509 1,207
Purchase of Mobile Holdings, Inc. --- --- 65
Accounts receivable written-off (net of
recoveries) (2,398) (1,468) (1,282)
----- ----- -----
Balance at end of the period $ 258 $ 447 $ 406
===== ===== =====
</TABLE>
51
<PAGE>
EXHIBITS TO FORM 10-K
WILLIAMS SCOTSMAN, INC.
EXHIBIT INDEX
Sequentially
Numbered
Exhibit No. Description of Document Page
- ----------- ----------------------- ----
10.9 -- Amendment No.8 to Loan and Security Agreement 53
dated September 30, 1996 between Congress
Financial Corporation and The Scotsman Group,
Inc.
10.10 -- Amendment No.9 to Loan and Security Agreement 56
dated January 31, 1997 between Congress
Financial Corporation and Williams Scotsman,
Inc.
12. -- Statement regarding computation of ratios. 60
52
Exhibit 10.9
AMENDMENT NO. 8 TO LOAN AND SECURITY AGREEMENT
THE SCOTSMAN GROUP, INC.
8211 Town Center Drive
Baltimore, Maryland 21236
September 30, 1996
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation, a California corporation (together
with its successors and assigns, "Lender") and The Scotsman Group, Inc., a
Maryland corporation (together with its successors and assigns, "Borrower") have
entered into certain financing arrangements as set forth in the Loan and
Security Agreement, dated as of December 16, 1993, between Lender and Borrower,
as amended pursuant to Amendment No. 1 to Loan and Security Agreement, dated
June 15, 1994, Amendment No. 2 to Loan and Security Agreement, dated as of
September 14, 1994, Amendment No. 3 to Loan and Security Agreement, dated March
24, 1995, Amendment No. 4 to Loan and Security Agreement, dated as of March 28,
1995, Amendment No. 5 to Loan and Security Agreement, dated as of August 1,
1995, Amendment No. 6 to Loan and Security Agreement, dated as of October 13,
1995 and Amendment No. 7 to Loan and Security Agreement, dated as of January 30,
1996 (as amended hereby and as the same may be further amended, modified,
supplemented, extended, renewed, restated or replaced, the "Loan Agreement", and
together with all agreements, documents and instruments at any time executed
and/or delivered in connection therewith or related thereto, collectively, the
"Financing Agreements").
Borrower has requested that the rate of interest payable by Borrower
to Lender be decreased effective October 1, 1996, and Lender is willing to agree
to such decrease, subject to the terms and conditions contained herein. By this
Amendment, Lender and Borrower desire and intend to evidence such amendment.
In consideration of the foregoing and the agreements and covenants
contained herein, the parties hereto agree as follows:
Definitions.
1. Amendment to Definition. Subject to the terms and conditions
contained herein, effective as of October 1, 1996, all references to the term
"Interest Rate" in the Loan Agreement and the other Financing Agreements shall
be deemed and each such reference is hereby amended to mean, as to Prime Rate
1
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Loans, a rate of one-quarter (.25%)percent per annum in excess of the Prime Rate
and, as to Eurodollar Rate Loans, a rate of two and one-half (2.50%) percent per
annum in excess of the Adjusted Eurodollar Rate (based on the Eurodollar Rate
applicable for the Interest Period selected by Borrower as in effect three (3)
Business Days after the date of receipt by Lender of the request of Borrower for
such Eurodollar Rate Loans in accordance with the terms hereof, whether such
rate is higher or lower than any rate previously quoted to Borrower); provided,
that, (a) the Interest Rate shall mean the rate of two and one quarters (2.25%)
percent per annum in excess of the Prime Rate as to Prime Rate Loans and the
rate of four and one-half (4.50%) percent per annum in excess of the Adjusted
Eurodollar Rate as to Eurodollar Rate Loans, at Lender's option, without notice,
(i) for the period on and after the date of termination or non-renewal hereof,
or the date of the occurrence of any Event of Default, and for so long as such
Event of Default is continuing or until such time as all Obligations are fully
and finally paid and satisfied (notwithstanding entry of any judgment against
Borrower) and (ii) on the Loans at any time outstanding in excess of the amounts
available to borrower under Sections 2.1, 2.2 or 2.3, as applicable (whether or
not such excess(es), arise or are made with or without Lender's knowledge or
consent and whether made before or after an Event of Default) and (b) the
amendment to the definition of the term "Interest Rate" as to Eurodollar Rate
Loans provided for herein shall only be effective as to Eurodollar Rate Loans
requested by Borrower after October 1, 1996.
1.2 Interpretation. All capitalized terms used in this
Amendment, unless otherwise defined herein, shall have the respective meanings
assigned thereto in the Loan Agreement.
2. Conditions to Effectiveness. The amendment contained herein shall
be effective October 1, 1996, provided, that, (a) no Event of Default, or act,
condition or event which with notice or passage of time or both would constitute
an Event of Default shall exist or have occurred and (b) Lender shall have
received an original of this Amendment, duly authorized, executed and delivered
by Borrower and Mobile.
3. Effect of this Amendment. Except as modified pursuant hereto, no
other changes or modifications to the Financing Agreements are intended or
implied, and in all other respects the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control. The Loan Agreement and this Amendment shall be read and construed as
one agreement.
4. Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be necessary or
2
<PAGE>
desirable to effectuate the provisions and purposes of this Amendment.
5. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws (as opposed to the conflicts of law provisions) of the
State of New York.
6. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
7. Headings. The headings listed herein are for convenience only and
do not constitute matters to be construed in interpreting this Letter Agreement.
8. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
Please sign the enclosed counterpart of this Amendment in the space
provided below, whereupon this Amendment, as so accepted by Lender, shall become
a binding agreement between Borrow and Lender.
Very truly yours,
THE SCOTSMAN GROUP, INC.
By: /s/Gerald E. Keefe
----------------------------------
Gerald E. Keefe
Title: Vice President Fleet & Finance
AGREED:
CONGRESS FINANCIAL CORPORATION
By: /s/Lawrence S. Forte
-----------------------------
Lawrence S. Forte
Title: Vice President
ACKNOWLEDGED AND AGREED:
MOBILE FIELD OFFICE COMPANY
By: /s/John B. Ross
-----------------------------
John B. Ross
Title: Secretary
3
Exhibit 10.10
AMENDMENT NO. 9 TO LOAN AND SECURITY AGREEMENT
WILLIAMS SCOTSMAN, INC.
8211 Town Center Drive
Baltimore, Maryland 21236
January 31, 1997
Congress Financial Corporation
1133 Avenue of the Americas
New York, New York 10036
Gentlemen:
Congress Financial Corporation, a California corporation (together
with its successors and assigns, "Lender") and Williams Scotsman, Inc., a
Maryland corporation (together with its successors and assigns, "Borrower") have
entered into certain financing arrangements pursuant to the Loan and Security
Agreement, dated as of December 16, 1993, between Lender and Borrower, as
amended pursuant to Amendment No. 1 to Loan and Security Agreement, dated June
15, 1994, Amendment No. 2 to Loan and Security Agreement, dated as of September
14, 1994, Amendment No. 3 to Loan and Security Agreement, dated March 24, 1995,
Amendment No. 4 to Loan and Security Agreement, dated as of March 28, 1995, and
Amendment No. 5 to Loan and Security Agreement, dated as of August 1, 1995,
Amendment No. 6 to Loan and Security Agreement, dated as of October 13, 1995,
Amendment No. 7 to Loan and Security Agreement, dated as of January 30, 1996 and
Amendment No. 8 to Loan and Security Agreement, dated September 30, 1996 (as
amended hereby and as the same may be further amended, modified, supplemented,
extended, renewed, restated or replaced, the "Loan Agreement", and together with
all agreements, documents and instruments at any time executed and/or delivered
in connection therewith or related thereto, collectively, the "Financing
Agreements").
Borrower has requested that the line of credit provided by Lender to
Borrower be increased and various other amendments to the Loan Agreement, and
Lender is willing to agree to such increase and other amendments, subject to the
terms and conditions contained herein. By this Amendment, Lender and Borrower
desire and intend to evidence such amendment.
In consideration of the foregoing and the agreements and covenants
contained herein, the parties hereto agree as follows:
1
<PAGE>
1. Definitions.
1.1. Additional Definition. "Amendment No. 9" shall mean this
Amendment No. 9 to Loan and Security Agreement by and between Borrower and
Lender.
1.2. Amendments to Definition.
(a) All references to the term "Acquisition Loan Limit" in
the Loan Agreement or any of the other Financing Agreements shall be deemed, and
each such reference is hereby amended to mean the amount equal to $110,000,000
or such lesser amount then in effect with respect thereto pursuant to the terms
of Sections 2.6 or 2.7 of the Loan Agreement.
(b) All references to the term "Maximum Credit" in the Loan
Agreement or any of the other Financing Agreements shall be deemed, and each
such reference is hereby amended to mean the amount equal to $140,000,000 or
such lesser amount then in effect with respect thereto pursuant to the terms of
Sections 2.6 or 2.7 of the Loan Agreement.
1.3. Interpretation. All capitalized terms used in this
Amendment, unless otherwise defined herein, shall have the respective meanings
assigned thereto in the Loan Agreement.
2. Sublimits. Sections 2.6(d)(ii) and 2.6(d)(iii) of the Loan
Agreement are hereby deleted in their entirety and the following substituted
therefor:
"(ii) in no event shall the Working Capital Loan Limit, the
Acquisition Loan Limit or the Swing Loan Limit exceed $20,000,000,
$110,000,000 or $10,000,000, respectively, and
(iii) in the event of an increase in the Maximum Credit, the
corresponding increases in the Working Capital Loan Limit, Acquisition
Loan Limit and the Swing Loan Limit shall be in such amounts so as to
maintain the same proportion of each such limit to the Maximum Credit
as in effect on the date of Amendment No. 9."
3. Name Change. Borrower hereby confirms to Lender that Borrower has
changed its name from "The Scotsman Group, Inc." to "Williams Scotsman, Inc.,"
effective as of January 1, 1997 and all references to Borrower in the Loan
Agreement and the other Financing Agreements shall refer to Williams Scotsman,
Inc., a Maryland corporation, formerly known as The Scotsman Group, Inc., and
its successors and assigns.
4. Line Increase Fee. In consideration of the amendments set forth
herein, Borrower shall pay to Lender a line increase fee in the amount of
$25,000, which fee shall be fully earned and payable as of the date hereof.
2
<PAGE>
5. Conditions Precedent for Amendment. The effectiveness of the
amendments contained herein shall be subject to the satisfaction of each of the
following, in a manner satisfactory to Lender and its counsel:
5.1. Lender shall have received, in form and substance
satisfactory to Lender, evidence that Borrower and Mobile have obtained all
required consents or approvals of any persons other than Lender to the terms and
conditions provided for herein;
5.2. Lender shall have received this Amendment No. 9 to Loan and
Security Agreement duly authorized, executed and delivered by the parties
hereto; and
5.3. no Event of Default, or event, act or condition which with
notice or passage of time or both would constitute an Event of Default, shall
exist or have occurred.
6. Effect of this Amendment. Except as modified pursuant hereto, no
other changes or modifications to the Financing Agreements are intended or
implied, and in all other respects the Financing Agreements are hereby
specifically ratified, restated and confirmed by all parties hereto as of the
effective date hereof. To the extent of conflict between the terms of this
Amendment and the other Financing Agreements, the terms of this Amendment shall
control. The Loan Agreement and this Amendment shall be read and construed as
one agreement.
7. Further Assurances. The parties hereto shall execute and deliver
such additional documents and take such additional action as may be necessary or
desirable to effectuate the provisions and purposes of this Amendment.
8. Governing Law. The rights and obligations hereunder of each of the
parties hereto shall be governed by and interpreted and determined in accordance
with the internal laws (as opposed to the conflicts of law provisions) of the
State of New York.
9. Binding Effect. This Amendment shall be binding upon and inure to
the benefit of each of the parties hereto and their respective successors and
assigns.
10. Headings. The headings listed herein are for convenience only and
do not constitute matters to be construed in interpreting this Letter Agreement.
11. Counterparts. This Amendment may be executed in any number of
counterparts, but all of such counterparts shall together constitute but one and
the same agreement. In making proof of this Amendment, it shall not be necessary
3
<PAGE>
to produce or account for more than one counterpart thereof signed by each of
the parties hereto.
Please sign the enclosed counterpart of this Amendment in the space
provided below, whereupon this Amendment, as so accepted by Lender, shall become
a binding agreement between Borrow and Lender.
Very truly yours,
WILLIAMS SCOTSMAN, INC.
By: /s/ Gerald E. Keefe
--------------------------------
Gerald E. Keefe
Title: Vice President Fleet & Finance
AGREED:
CONGRESS FINANCIAL CORPORATION
By: /s/ Lawrence S. Forte
-----------------------------
Lawrence S. Forte
Title: Vice President
ACKNOWLEDGED AND AGREED:
MOBILE FIELD OFFICE COMPANY
By: /s/ John B. Ross
------------------------------
John B. Ross
Title: Secretary
4
WILLIAMS SCOTSMAN, INC.
Computation of Ratio of Earnings to Fixed Charges
(Dollars in thousands)
<TABLE>
<CAPTION>
Fiscal Years Ended
1992 1993 1994 1995 1996
------------------------------------------
(Dollars in thousands)
Earnings:
Earnings (loss) from continuing
<S> <C> <C> <C> <C> <C>
operations before income taxes $ (918) $ (6,377) $ 1,772 $ 7,422 $15,175
Fixed charges from below 22,400 22,322 19,468 23,353 26,755
------ ------ ------ ------ ------
Total earnings $21,482 $ 15,945 $21,240 $30,775 $41,930
------ ------ ------ ------ ------
Fixed Charges:
Interest $21,330 $ 21,530 $18,705 $22,485 $25,797
Interest component of rent expense:
Total rent expense $ 3,210 $ 2,375 $ 2,288 $ 2,605 $ 2,875
Portion considered interest expense 33% 33% 33% 33% 33%
------ ------- ------ ------ ------
Interest component $ 1,070 $ 792 $ 763 $ 868 $ 958
------ ------- ------ ------ ------
Total fixed charges $22,400 $ 22,322 $19,468 $23,353 $26,755
------ ------- ------ ------ ------
Earnings to Fixed Charges 1.0x 0.7x 1.1x 1.3x 1.6x
Excess Fixed Charges $ 918 $ 6,377 --- --- ---
====== ====== ====== ====== ======
</TABLE>
