<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[x] THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2000
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)
(410) 931-6000
(Registrant's telephone number, including area code)
None
(Former name, former address and former fiscal year - if
changed since last report)
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
--- ---
The Registrant is a wholly-owned subsidiary of Scotsman Holdings, Inc.,
a Delaware corporation. As of June 30, 2000, Scotsman Holdings, Inc. owned
3,320,000 shares of common stock ("Common Stock") of the Registrant.
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WILLIAMS SCOTSMAN, INC.
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
----
Item 1. Financial Statements
Consolidated Balance Sheets at June 30, 2000 1
and December 31, 1999
Consolidated Statements of Operations for the three and six 2
months ended June 30, 2000 and 1999
Consolidated Statements of Cash Flows for the six 3
months ended June 30, 2000 and 1999
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 8
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 11
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
June 30, 2000 December 31,
Assets (Unaudited) 1999
------ ----------- ------------
(dollars in thousands)
<S> <C> <C>
Cash $ 589 $ 641
Trade accounts receivable, less allowance for
doubtful accounts 54,028 56,989
Prepaid expenses and other current assets 22,029 17,484
Rental equipment, net of accumulated depreciation of
$140,903 in 2000 and $127,154 in 1999 754,122 726,924
Property and equipment, net 59,893 54,074
Deferred financing costs, net 17,874 20,339
Goodwill and other intangible assets, net 169,730 172,273
Other assets 15,716 17,740
---------- ----------
$1,093,981 $1,066,464
========== ==========
Liabilities and Stockholders' Equity
Accounts payable $ 21,658 $ 20,587
Accrued expenses 35,263 31,847
Rents billed in advance 24,731 23,035
Long-term debt 924,773 915,823
Deferred income taxes 124,908 119,279
---------- ----------
Total liabilities 1,131,333 1,110,571
---------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 10,000,000
shares; issued and outstanding 3,320,000 shares 33 33
Additional paid-in capital 126,658 126,088
Retained deficit (164,043) (170,228)
---------- ----------
Total stockholders' deficit (37,352) (44,107)
---------- ----------
$1,093,981 $1,066,464
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
1
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WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------ ----------------
2000 1999 2000 1999
------ ------ ------ ------
(in thousands except share and per share amounts)
<S> <C> <C> <C> <C>
Revenues:
Leasing $ 53,762 $ 50,022 $106,208 $ 97,597
Sales:
New units 16,828 16,186 30,306 31,209
Rental equipment 5,358 6,475 9,735 11,531
Delivery and installation 17,927 15,895 34,799 29,555
Other 9,257 10,172 17,817 17,452
-------- -------- -------- --------
Total revenues 103,132 98,750 198,865 187,344
-------- -------- -------- --------
Costs of sales and services:
Leasing:
Depreciation and amortization 8,975 8,397 17,602 16,997
Other direct leasing costs 8,497 7,395 16,395 13,939
Sales:
New units 13,701 13,286 24,562 25,534
Rental equipment 4,111 4,995 7,339 8,780
Delivery and installation 13,088 11,302 25,328 21,267
Other 1,670 2,904 2,984 4,015
-------- -------- -------- --------
Total costs of sales and services 50,042 48,279 94,210 90,532
-------- -------- -------- --------
Gross profit 53,090 50,471 104,655 96,812
-------- -------- -------- --------
Selling, general and administrative expenses 19,053 17,652 39,908 35,915
Other depreciation and amortization 4,317 4,012 8,506 7,744
Interest, including amortization of deferred
financing costs 22,242 20,475 44,254 40,749
-------- -------- -------- --------
Total operating expenses 45,612 42,139 92,668 84,408
-------- -------- -------- --------
Income before income taxes 7,478 8,332 11,987 12,404
Income tax expense 3,465 3,901 5,747 5,949
-------- -------- -------- --------
Net Income $ 4,013 $ 4,431 $ 6,240 $ 6,455
======== ======== ======== ========
Earnings per common share $ 1.21 $ 1.33 $ 1.88 $ 1.94
======== ======== ======== ========
Dividends per common share $ --- $ 0.02 $ 0.02 $ 0.02
======== ======== ======== ========
Weighted average shares outstanding 3,320,000 3,320,000 3,320,000 3,320,000
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
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WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Six months ended June 30, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,240 $ 6,455
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 28,572 27,196
Provision for bad debts 2,604 1,904
Deferred income tax expense 5,629 5,504
Non-cash option compensation expense 569 703
Gain on sale of rental equipment (2,396) (2,751)
Decrease (increase) in net trade accounts receivable 357 (7,892)
Decrease in other assets 2,024 132
Increase in accrued expenses 3,416 1,784
Other (3,137) 1,775
-------- --------
Net cash provided by operating activities 43,878 34,810
-------- --------
Cash flows from investing activities:
Rental equipment additions (52,871) (56,428)
Proceeds from sales of rental equipment 9,735 11,531
Purchases of property and equipment, net (9,689) (8,462)
Purchase of Evergreen Mobile Company, net of cash acquired --- (37,000)
-------- --------
Net cash used in investing activities $(52,825) $(90,359)
-------- --------
</TABLE>
(continued)
3
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WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows (continued)
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
Cash flows from financing activities:
Proceeds from long-term debt $ 223,308 $ 247,232
Repayment of long-term debt (214,358) (191,658)
Increase in deferred financing costs --- (46)
Payment of dividends (55) (55)
--------- ---------
Net cash provided by financing activities 8,895 55,473
--------- ---------
Net decrease in cash (52) (76)
Cash at beginning of period 641 796
--------- ---------
Cash at end of period $ 589 $ 720
========= =========
Supplemental cash flow information:
Cash paid for income taxes $ 173 $ 175
========= =========
Cash paid for interest $ 39,711 $ 38,066
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
4
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WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in thousands, except share and per share amounts)
(1) ORGANIZATION AND BASIS OF PRESENTATION
The financial information for the six months ended June 30, 2000 and 1999
includes the accounts of Williams Scotsman, Inc. (the Company) and its
two wholly owned subsidiaries, Willscot Equipment, LLC (Willscot) and
Williams Scotsman of Canada, Inc., whose operations have not been
significant to date. Willscot, a special purpose subsidiary, was formed
in May 1997 and is a guarantor of the Company's credit facility and acts
as a full, unconditional and joint and several subordinated guarantor of
the Company's 9 7/8% Senior Notes. The operations of Willscot are limited
to the leasing of its mobile office units to the Company under a master
lease and issuing the guarantee.
(2) FINANCIAL STATEMENTS
The financial information referred to above has not been audited. In the
opinion of management, the unaudited financial statements contain all
adjustments (consisting only of normal, recurring adjustments) necessary
to present fairly the Company's financial position as of June 30, 2000
and its operating results and cash flows for the six month periods ended
June 30, 2000 and 1999. The results of operations for the periods ended
June 30, 2000 and 1999 are not necessarily indicative of the operating
results for the full year.
Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial statements
and notes thereto included in the Company's latest Form 10-K.
(3) GOODWILL AND OTHER INTANGIBLE ASSETS
The excess of cost over fair values of net assets acquired in purchase
transactions has been recorded as goodwill and is being amortized on a
straight line basis over 20 to 40 years. Other identifiable intangibles
acquired include assembled workforce and covenants not to compete, which
are being amortized on a straight line basis over periods of 21 to 228
months. As of June 30, 2000 and 1999, accumulated amortization was $9,360
and $4,389, respectively.
On a periodic basis, the Company evaluates the carrying value of its
intangible assets to determine if the facts and circumstances suggest
that intangible assets may be impaired. If this review indicates that
intangible assets may not be recoverable, as determined by the
undiscounted cash flow of the entity acquired over the remaining
amortization period, the Company's carrying value of intangible assets is
reduced by the estimated shortfall of cash flows.
5
<PAGE>
WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(4) INCOME TAXES
The difference between the Company's reported tax provision for the three
and six months ended June 30, 2000 and the tax provision computed based
on U.S. statutory rates is primarily attributed to non-deductible
goodwill amortization expense of $1,266 and $2,543, respectively.
(5) EARNINGS AND DIVIDENDS PER SHARE
Earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the periods.
Dividends per common share is computed by dividing dividends paid by the
weighted average number of common shares outstanding during the periods.
6
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WILLIAMS SCOTSMAN, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(6) SUMMARIZED FINANCIAL INFORMATION OF SUBSIDIARY
The Company's 9 7/8% Senior Notes are guaranteed by Willscot, a wholly
owned subsidiary. The guarantee is full, unconditional and joint and
several. The operations of Willscot are limited to leasing its mobile
office units to the Company under a master lease and paying the Company a
fee to manage its mobile office units. Accordingly, based on the terms of
these agreements, it has recorded no net income for the applicable
periods. Full separate financial statements of the guarantor subsidiary
have not been included because management has determined that they are
not material to investors. Summarized financial statements of Willscot
are as follows:
<TABLE>
<CAPTION>
June 30, December 31,
2000 1999
-------- ------------
<S> <C> <C>
Balance Sheet
Assets:
Rental equipment, at cost $648,497 $622,526
Less accumulated depreciation 87,673 78,054
-------- --------
Net rental equipment 560,824 544,472
Other assets 3,751 4,894
-------- --------
Total assets $564,575 $549,366
======== ========
Total liabilities and stockholder's equity $564,575 $549,366
======== ========
<CAPTION>
Three months ended Six months ended
June 30, June 30,
------------------- --------------------
Statement of Operations 2000 1999 2000 1999
----------------------- ---- ---- ---- ----
<S> <C> <C> <C> <C>
Revenue:
Leasing $16,120 $14,909 $31,867 $29,110
Other 102 153 179 238
------- ------- ------- -------
16,222 15,062 32,046 29,348
------- ------- ------- -------
Expenses:
Selling, general and administrative 4,133 4,374 7,950 8,414
Depreciation 5,546 4,867 10,925 9,822
Interest 6,543 5,821 13,171 11,112
------- ------- ------- -------
16,222 15,062 32,046 29,348
------- ------- ------- -------
Net Income $ --- $ --- $ --- $ ---
======= ======= ======= =======
</TABLE>
7
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Forward Looking Statements
Certain statements in this Form 10-Q for the quarter ended June 30, 2000
constitute "forward-looking statements" within the meaning of Section 27A of the
Securities Act of 1933, as amended (the "Securities Act") and Section 21E of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). Such
forward-looking statements involve known and unknown risks, uncertainties and
other factors, which may cause actual results to differ materially from future
results expressed or implied by such forward-looking statements. Such factors
include, among others, the following: substantial leverage and the ability to
service debt; changing market trends in the mobile office industry; general
economic and business conditions including a prolonged or substantial recession;
the ability to finance fleet and branch expansion and to locate and finance
acquisitions; the ability of the Company to implement its business and growth
strategy and maintain and enhance its competitive strengths; the ability of the
Company to obtain financing for general corporate purposes; intense industry
competition; availability of key personnel; industry over-capacity; and changes
in, or the failure to comply with, government regulations. No assurance can be
given as to future results and neither the Company nor any other person assumes
responsibility for the accuracy and completeness of these forward-looking
statements. Consequently, you should not place undue reliance on such
forward-looking statements, which speak only as of the date hereof. The Company
undertakes no obligation to publicly release the result of any revision to these
forward-looking statements that may be made to reflect events or circumstances
after the date hereof or to reflect the occurrence of unanticipated events.
Three Months Ended June 30, 2000 Compared with Three Months Ended June
30, 1999.
Revenues in the quarter ended June 30, 2000 were $103.1 million, a $4.4
million or 4.4% increase from revenues of $98.7 million in the same period of
1999. The increase resulted primarily from a $3.7 million or 7.5% increase in
leasing revenue, and a $2.0 million or 12.8% increase in delivery and
installation revenue. The increase in leasing revenue is attributable to an 9.8%
increase in average lease fleet to 81,500 units at June 30, 2000, combined with
a slight increase in the average monthly rental rate of $1, offset by a slight
decrease in the average fleet utilization of approximately one percentage point
to 84%. The increase in delivery and installation revenue is primarily
attributable to the increases in the leasing revenue described above.
Gross profit for the quarter was $53.1 million, a $2.6 million or 5.2%
increase from the second quarter 1999 of $50.5 million. This increase is
primarily a result of an increase in leasing gross profit of $2.1 million or
6.0% due to the increase in leasing revenue described above. Excluding
depreciation and amortization, leasing margins decreased from 85.2% in 1999 to
84.2% in 2000 due to a concerted effort by the Company to accelerate the
refurbishment of units in the existing fleet prior to its busier summer season.
Selling, general and administrative (SG&A) expenses for the quarter ended
June 30, 2000 were $19.1 million, a $1.4 million or 7.9% increase from the
second quarter of 1999 of $17.7 million. This increase is the result of the
growth experienced by the Company, both in terms of fleet size as described
above and number of branches, which expanded from 83 branches at June 30, 1999
to 86 branches at June 30, 2000. The overall increases in SG&A expenses are due
to increases in field related expenses, primarily payroll and occupancy,
incurred in connection with this fleet growth and branch expansion.
8
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Interest expense increased $1.8 million or 8.6% to $22.2 million in the
second quarter of 2000 from the same period in 1999. This increase is a result
of increased borrowings to finance fleet and branch growth, as well as an
increase in the interest rate charged on the variable portion of our bank debt.
Six Months Ended June 30, 2000 Compared with Six Months Ended June 30,
1999.
Revenues in the six months ended June 30, 2000 were $198.9 million, an
$11.5 million or 6.1% increase from revenues of $187.3 million in the same
period of 1999. The increase resulted primarily from an $8.6 million or 8.8%
increase in leasing revenue, and a $5.2 million or 17.7% increase in delivery
and installation revenue. The increase in leasing revenue is attributable to an
10.4% increase in average lease fleet to 80,750 units for the six months ended
June 30, 2000, combined with a slight increase in the average monthly rental
rate of $1, offset by a slight decrease in the average fleet utilization of
approximately one percentage point to 84%. The increase in delivery and
installation revenue is primarily attributable to the increases in the leasing
revenue described above.
Gross profit for the six months ended June 30, 2000 was $104.6 million, a
$7.8 million or 8.1% increase from the same period of 1999 of $96.8 million.
This increase is primarily a result of an increase in leasing gross profit of
$5.6 million or 8.3%, an increase in delivery and installation gross profit of
$1.2 million or 14.3%, and an increase in gross profit from other revenue of
$1.4 million or 10.4%. The increase in leasing and delivery and installation
gross profit is due to the increase in leasing revenue described above.
Excluding depreciation and amortization, leasing margins decreased from 85.7% in
1999 to 84.6% in 2000 due to a concerted effort by the Company to accelerate the
refurbishment of units in the existing fleet prior to its busier summer season.
Although other revenue was essentially flat, the increase in related gross
profit was attributed to a favorable mix of higher margin ancillary products, as
1999 results included revenue associated with a large project to relocate
customer-owned units.
SG&A expenses for the six months ended June 30, 2000 were $39.9 million, a
$4.0 million or 11.1% increase from 1999 expenses of $35.9 million. This
increase is the result of the growth experienced by the Company, both in terms
of fleet size and number of branches, which expanded from 83 branches at June
30, 1999 to 86 branches at June 30, 2000. The overall increases in SG&A expenses
are due to increases in field related expenses, primarily payroll and occupancy,
incurred in connection with this fleet growth and branch expansion.
Interest expense increased $3.5 million or 8.6% to $44.2 million to date in
2000 from the same period in 1999. This increase is a result of increased
borrowings to finance fleet and branch growth as well as an increase in the
interest rate charged on the variable portion of our bank debt.
Liquidity and Capital Resources
During the six months ended June 30, 2000 and 1999, the Company's principal
sources of funds consisted of cash flow from operating and, in 1999, financing
sources. Cash flow from operating activities of $43.9 million and $34.8 million
for the six months ended June 30, 2000 and 1999, respectively, were largely
generated by the rental of units from the Company's lease fleet.
The Company has increased its EBITDA and believes that EBITDA provides the
best indication of its financial performance and provides the best measure of
its ability to meet historical debt service requirements. The Company defines
EBITDA as net income before interest, taxes, depreciation,
9
<PAGE>
amortization and non-cash compensation expense. EBITDA as defined by the Company
does not represent cash flow from operations as defined by generally accepted
accounting principles and should not be considered as an alternative to cash
flows as a measure of liquidity, nor should it be considered as an alternative
to net income as an indicator of the Company's operating performance. The
Company's EBITDA increased by $4.3 million or 5.5% to $82.9 million for the
first half of 2000 compared to $78.6 million for the same period of 1999. This
increase in EBITDA is a result of increased leasing activity resulting from the
overall growth in the number of units in the fleet and a slight increase in
average monthly rental rates, partially offset by a slight decrease in
utilization and increased SG&A expenses required to support the expanded
activities of the Company during the first half of 2000.
Cash flow used in investing activities was $52.8 million and $90.4 million
for the six months ended June 30, 2000 and 1999, respectively. The Company's
primary capital expenditures are for the discretionary purchase of new units for
the lease fleet and units purchased through acquisitions. 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 and established unit demand. The difference between June, 1999
and June, 2000 is primarily attributable to the February 1, 1999 purchase of
Evergreen Mobile Company for approximately $37 million. Cash provided by
financing activities of $8.9 million and $55.5 million for the six months ended
June 30, 2000 and 1999, respectively was primarily from borrowings under the
Company's line of credit.
Availability under the Credit Agreement was $71.1 million at June 30, 2000.
The Company believes it will have, for the next 12 months, sufficient liquidity
under its revolving line of credit and from cash generated from operations to
meet its expected obligations as they arise.
10
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PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLIAMS SCOTSMAN, INC.
By: /s/ Gerard E. Keefe
--------------------------
Gerard E. Keefe
Senior Vice President and
Chief Financial Officer
Dated: August 14, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Capacity Date
/s/ Gerard E. Keefe Senior Vice President and August 14, 2000
-------------------------- Chief Financial Officer
Gerard E. Keefe
/s/ Glenn A. Schultz Controller August 14, 2000
--------------------------
Glenn A. Schultz
12
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
WILLIAMS SCOTSMAN, INC.
By:
--------------------------
Gerard E. Keefe
Senior Vice President and
Chief Financial Officer
Dated: August 14, 2000
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
Senior Vice President and August 14, 2000
-------------------------- Chief Financial Officer
Gerard E. Keefe
Controller August 14, 2000
--------------------------
Glenn A. Schultz
12
