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 September 30, 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
SCOTSMAN HOLDINGS, INC.
(Exact name of Registrant as specified in its Charter)
Delaware 52-1862719
(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 __
As of September 30, 1996, 3,375,814 shares of common stock ("Common
Stock") of the Registrant were outstanding.
<PAGE>
SCOTSMAN HOLDINGS, INC.
INDEX
FORM 10-Q
PART I - FINANCIAL INFORMATION Page
Item 1. Financial Statements
Consolidated Balance Sheets at September 30, 1996 1
and December 31, 1995
Consolidated Statements of Operations for the three 2
months and nine months ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows for the nine 3
months ended September 30, 1996 and 1995
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 5. Other Information 9
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
September 30,
1996 December 31,
Assets (Unaudited) 1995
------ ----------- ----
(dollars in thousands)
<S> <C> <C>
Cash and temporary investments $ 536 734
Trade accounts receivable, less allowance for
doubtful accounts 28,440 17,372
Prepaid expenses and other current assets 10,026 7,048
Rental equipment, at cost 406,481 364,369
Less accumulated depreciation 60,764 40,162
-------- --------
Net rental equipment 345,717 324,207
-------- --------
Property, plant and equipment, net 25,549 21,088
Deferred financing costs, net 6,840 8,712
Other assets 5,347 5,455
$ 422,455 384,616
======== ========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 8,115 6,667
Accrued expenses 15,734 9,078
Rents billed in advance 10,448 9,809
Long-term debt 288,448 265,812
Deferred compensation 2,875 1,900
Deferred income taxes 52,914 50,004
-------- --------
Total liabilities 378,534 343,270
-------- --------
Stockholder's equity:
Common stock, $.01 par value. Authorized
10,000,000 shares; issued and outstanding
3,472,968 shares 35 35
Additional paid-in capital 39,064 39,064
Retained earnings 6,802 2,247
-------- --------
45,901 41,346
-------- --------
Less treasury stock - 97,154 common shares at cost 1,980 ---
-------- --------
Net stockholders' equity 43,921 41,346
-------- --------
$ 422,455 384,616
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
(1)
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
(Unaudited)
<TABLE>
<CAPTION>
Three months ended Nine months ended
September 30, September 30,
1996 1995 1996 1995
---- ---- ---- ----
(in thousands except share and per share amounts)
Revenues:
<S> <C> <C> <C> <C>
Leasing $ 31,522 25,333 86,062 70,516
Sales of new units 10,274 7,567 21,217 18,030
Delivery and installation 11,106 7,954 25,059 20,974
Other 4,729 2,903 12,817 7,757
--------- --------- --------- ---------
Total revenues 57,631 43,757 145,155 117,277
--------- --------- --------- ---------
Costs of sales and services:
Leasing:
Depreciation and amortization 7,983 6,048 22,983 16,732
Other 8,044 6,819 20,359 17,009
New units 8,422 6,411 17,478 14,954
Delivery and installation 8,610 5,958 19,051 16,490
Other 1,181 745 2,752 1,957
--------- --------- --------- ---------
Total costs 32,240 25,981 82,623 67,142
--------- --------- --------- ---------
Gross profit 23,391 17,776 62,532 50,135
--------- --------- --------- ---------
Selling, general and administrative
expenses 10,478 8,953 31,868 26,727
Other depreciation and amortization 517 352 1,610 1,126
Interest, including amortization
of deferred financing costs 7,515 6,294 21,514 8,232
--------- --------- --------- ---------
Total operating expenses 18,510 15,599 54,992 46,085
--------- --------- --------- ---------
Earnings before income taxes 4,881 2,177 7,540 4,050
Income tax expense 1,905 903 2,985 1,626
--------- --------- --------- ---------
Net earnings $ 2,976 1,274 4,555 2,424
========= ========= ========= =========
Earnings per common share $ 0.88 0.37 1.34 0.70
Weighted average shares outstanding 3,375,814 3,472,968 3,411,396 3,472,968
========= ========= ========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
(2)
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Nine months ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
(dollars in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 4,555 2,424
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 26,594 18,967
Non-cash charges for interest 2,819 2,532
Provision for bad debts 1,210 1,095
Deferred income tax expense 2,910 1,551
Provision for deferred compensation 975 825
Gain on sale of rental equipment (1,946) (1,580)
Increase in net trade accounts
receivable (12,278) (2,415)
Increase in accrued expenses 6,656 4,885
Other (836) (3,427)
------- -------
Net cash provided by operating activities 30,659 24,857
------- -------
Cash flows from investing activities:
Redemption of certificates of deposit 250 1,255
Rental equipment additions (52,160) (45,567)
Proceeds from sales of rental equipment 9,612 7,595
Purchases of property, plant and equipment, net (6,018) (3,592)
------- -------
Net cash used in investing activities $ (48,316) (40,309)
------- -------
</TABLE>
(continued)
(3)
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Nine months ended September 30, 1996 and 1995
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
1996 1995
---- ----
Cash flows from financing activities:
<S> <C> <C>
Proceeds from long-term debt 152,380 135,992
Repayment of long-term debt (132,656) (120,804)
Increase in deferred financing costs (35) (75)
Payments to acquire treasury stock (1,980) ---
-------- --------
Net cash provided by financing activities 17,709 15,113
Net increase (decrease) in cash 52 (339)
Cash at beginning of period 471 861
-------- --------
Cash at end of period $ 523 522
======== ========
Supplemental cash flow information:
Cash paid (received) for income taxes $ 144 (42)
======== ========
Cash paid for interest $ 13,334 11,375
======== ========
</TABLE>
See accompanying notes to consolidated financial statements.
(4)
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(1) ORGANIZATION AND BASIS OF PRESENTATION
Scotsman Holdings, Inc. (Holdings or the Company) was organized in
November, 1993 for the purpose of acquiring The Scotsman Group, Inc.
(Scotsman). The Company conducts business solely as a holding
company, the only significant asset of which is the capital stock of
Scotsman. Therefore, any cash dividends to be paid on the Company's
common stock, or cash interest to be paid on notes of the Company,
are dependent upon the cash flow of Scotsman.
(2) FINANCIAL STATEMENTS
The financial information for the nine months ended September 30,
1996 and 1995 has not been audited. In the opinion of management, the
unaudited financial statements contain all adjustments (consisting
only of normal, recurring adjustments) necessary to present fairly
the Company's financial position as of September 30,1996 and its
operating results and cash flows for the three and nine month periods
ended September 30, 1996 and 1995. The results of operations for the
periods ended September 30, 1996 and 1995 are not necessarily
indicative of the operating results for the full year.
Certain information and footnote disclosure normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been omitted. It is suggested that these
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's latest Form
10-K.
(3) EARNINGS PER SHARE
Earnings per common share is computed by dividing net earnings by the
weighted average number of common shares outstanding during the
periods.
(5)
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Results of Operations
Three Months Ended September 30, 1996 Compared with Three Months Ended
September 30, 1995.
Revenues in the quarter ended September 30, 1996 were $57.6 million, a $13.9
million or 31.7% increase from revenues of $43.8 million in the same period of
1995. The increase resulted primarily from a $6.2 million or 24.4% increase
in leasing revenue, a $2.7 million or 35.8% increase in new sales revenue, a
$3.2 million or 39.6% increase in revenue from delivery and installation
and a $1.8 million or 62.9% increase in other revenue. The increase in leasing
revenue is attributable to a 10.2% increase in the average number of units in
the fleet to approximately 39,000 units for the third quarter of 1996 from
approximately 35,000 for the same period of 1995, an increase in fleet
utilization of approximately six percentage points to 87% and an increase of
approximately $12 in the average monthly rental rate. New sales revenue
increased primarily as a result of a sales contract in excess of $1.0 million
that was billed in August 1996. The increase in delivery and installation
revenue is a result of increases in leasing and new sales revenue described
above. Other revenue increased as a result of increases in the rental of steps
as well as miscellaneous revenue related to services provided for customer-owned
units.
Gross profit in the third quarter of 1996 was $23.4 million, a $5.6 million or
31.6% increase from the third quarter of 1995. This increase is primarily due to
an increase in leasing gross profit of $3.0 million or 24.3% and an increase in
gross profit from other revenue of $1.4 million. The increase in leasing gross
profit reflects the increase in leasing revenue described above and stable
leasing margins of 49.2% for the third quarter of 1996 and 1995. Excluding
depreciation and amortization, leasing margins increased from 73.1% in 1995 to
74.5% in 1996. The increase in gross profit from other revenue is due to the
increase in other revenue described above.
Selling, general and administrative expenses (SG&A) increased by $1.5 million
or 17.0% from the third quarter of 1995. This increase is primarily due to a
$1.4 million increase in field costs which is primarily the result of a $0.9
million increase in personnel costs. These expenses were incurred in conjunction
with the branch expansion that the Company has experienced as well as the
overall increases described above.
Interest expense increased by $1.2 million or 19.4% in the third quarter of
1996 from the same period of 1995. This increase is due primarily to the
increase in the average balance outstanding under Scotsman's revolving line of
credit during the quarter compared to the comparable period of 1995. This
increase is the result of financing the fleet and branch expansion by the
Company as described above.
Nine Months Ended September 30, 1996 Compared with Nine Months Ended
September 30, 1995.
Revenues in the nine months ended September 30, 1996 were $145.2 million, a
$27.9 million or 23.8% increase from revenues of $117.3 million in the nine
months ended September 30, 1995. The increase resulted primarily from a
$15.5 million or 22.0% increase in leasing revenue, a $4.1 million or 19.5%
increase in delivery and installation revenue and a $5.0 million or 65.2%
increase in other revenue. The increase in leasing revenue is attributable to
an increase in the average number of units in the lease fleet of 10.8% to
approximately 38,000 units for the first nine months of 1996 from
approximately 34,000 units for the same period in 1995, an increase in
utilization of approximately four percentage points to 85% combined with an
increase of approximately $11 in the average monthly rental rate for the
comparable periods. The increase in delivery and installation revenue is a
result of the increased leasing activity described above. Other revenue
increased as a result of increases in the rental of steps and furniture as well
as miscellaneous revenue related to services provided for customer-owned units.
(6)
<PAGE>
Gross profit in the nine months ended September 30, 1996 was $62.5 million, a
$12.4 million or 24.7% increase from the same period in 1995. This increase is
primarily due to an increase in leasing gross profit of $5.9 million or 16.2%,
an increase in gross profit from delivery and installation of $1.5 million or
34.0% and an increase in gross profit from other revenue of $4.3 million. The
increase in leasing gross profit is due to the increase in leasing revenue
described above while leasing margins decreased to 49.6% from 52.2%. This
decrease is due to the increases in depreciation and amortization expense in the
nine months ended September 30, 1996. Excluding depreciation and amortization,
leasing margins increased from 75.9% for the nine months ended September 30,
1995 to 76.3% for the same period of 1996. Gross profit from delivery and
installation and other revenue increased primarily as a result of the increases
in the related revenues described above.
Selling, general and administrative expenses increased by $5.1 million or
19.2% from the nine months ended September 30, 1995. This increase is comprised
of a $3.9 million increase in field related expenses and a $1.3 million increase
in other SG&A expenses. The increase in field related expenses is due to branch
expansion experienced by the Company through the third quarter of 1996 and is
comprised primarily of a $2.7 million increase in personnel costs and a $0.6
million increase in occupancy expenses.
Interest expense increased by $3.3 million or 18.0% in the nine months ended
September 30, 1996 from the same period in 1995 primarily as a result of an
increase in the average balances outstanding under the revolving line of credit
during 1996. This increase is due to financing the fleet and branch expansion
discussed above.
Liquidity and Capital Resources
During the nine months ended September 30, 1996 and 1995, the Company's
principal source of funds consisted of cash flow from operating and financing
sources. Cash flow from operating activities of $30.6 million and $24.8 million
for the nine months ended September 30, 1996 and 1995, respectively, was largely
generated by the Company's leasing operation, which includes the rental and sale
of units from its 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 depreciation, amortization, provision for deferred
compensation, interest and taxes. 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 $13.6 million or 33.3% to $54.6 million for the nine months
ended Septrember 30, 1996 compared to $41.0 million for the same period of 1995.
This increase in EBITDA is a result of increased leasing activity resulting from
the overall increase in the number of units in the fleet as well as the increase
in the monthly rental rate, offset by the increased SG&A expenses to support the
increased activities during the nine months ended September 30, 1996.
(7)
<PAGE>
Cash flow used in investing activities of $48.3 million and $40.3 million in
the nine months ended September 30, 1996 and 1995, respectively, was primarily
for net additions to the Company's lease fleet. Cash provided by financing
activities of $17.7 million and $15.1 million for the nine month periods ended
September 30, 1996 and 1995, respectively, resulted primarily from the funding
of the fleet expansion discussed above.
The Company believes it will have, for the next 12 months, sufficient
liquidity under Scotsman's revolving line of credit and from cash generated from
operations to meet its expected obligations as they arise.
(8)
<PAGE>
PART II - OTHER INFORMATION
Item 5. Other Information
The Company announced that it 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.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
(9)
<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.
SCOTSMAN HOLDINGS, INC.
By: /s/ Gerard E. Holthaus
-----------------------------------
Gerard E. Holthaus
President
Dated: November 13, 1996
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Name Capacity Date
---- -------- ----
/s/ Gerard E. Holthaus President, Chief Operating November 13, 1996
- -------------------------- Officer and Director
Gerard E. Holthaus
/s/ Katherine K. Giannelli Controller November 13, 1996
- ---------------------------
Katherine K. Giannelli
(10)
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-Mos
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<CASH> 536
<SECURITIES> 0
<RECEIVABLES> 28,996
<ALLOWANCES> 556
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 432,030
<DEPRECIATION> 60,764
<TOTAL-ASSETS> 422,455
<CURRENT-LIABILITIES> 0
<BONDS> 288,448
0
0
<COMMON> 35
<OTHER-SE> 43,886
<TOTAL-LIABILITY-AND-EQUITY> 422,455
<SALES> 145,155
<TOTAL-REVENUES> 145,155
<CGS> 82,623
<TOTAL-COSTS> 82,623
<OTHER-EXPENSES> 33,478
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 21,514
<INCOME-PRETAX> 7,540
<INCOME-TAX> 2,985
<INCOME-CONTINUING> 4,555
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 4,555
<EPS-PRIMARY> 1.34
<EPS-DILUTED> 1.34
</TABLE>
