SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
[x]THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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 March 31, 1997, 3,472,968 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 March 31, 1997 1
and December 31, 1996
Consolidated Statements of Operations for the three 2
months ended March 31, 1997 and 1996
Consolidated Statements of Cash Flows for the three 3
months ended March 31, 1997 and 1996
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 6
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 9
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31,
1997 December 31,
Assets (Unaudited) 1996
------ ----------- ----
(dollars in thousands)
<S> <C> <C>
Cash and temporary investments $ 360 426
Trade accounts receivable, less allowance for
doubtful accounts 24,412 23,145
Prepaid expenses and other current assets 10,751 9,295
Rental equipment, at cost 441,867 423,703
Less accumulated depreciation 75,874 67,520
------- -------
Net rental equipment 365,993 356,183
------- -------
Property, plant and equipment, net 31,140 29,032
Deferred financing costs, net 5,633 6,268
Other assets 4,930 5,197
------- -------
$443,219 429,546
======= =======
Liabilities and Stockholders' Equity
Accounts payable $ 7,736 9,826
Accrued expenses 14,513 9,957
Rents billed in advance 10,699 10,621
Long-term debt 302,900 294,827
Deferred compensation 3,575 3,300
Deferred income taxes 55,658 54,572
------- -------
Total liabilities 395,081 383,103
------- -------
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 11,044 9,333
------- -------
50,143 48,432
------- -------
Less treasury stock, at cost - 97,654 common shares at
March 31, 1997 and 97,354 common shares at
December 31, 1996 2,005 1,989
------- -------
Net stockholders' equity 48,138 46,443
------- -------
$443,219 429,546
======= =======
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations
Three months ended March 31, 1997 and 1996
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
(in thousands except share and per share amounts)
Revenues:
<S> <C> <C>
Leasing $ 31,239 26,515
Sales of new units 8,545 6,009
Delivery and installation 8,173 6,503
Other 4,759 3,617
Total revenues 52,716 42,644
--------- ---------
Costs of sales and services:
Leasing:
Depreciation and amortization 7,942 7,071
Other direct leasing costs 7,039 5,998
New units 7,198 5,040
Delivery and installation 6,125 5,121
Other 1,243 647
--------- ---------
Total costs 29,547 23,877
--------- ---------
Gross profit 23,169 18,767
--------- ---------
Selling, general and administrative expenses 12,132 10,879
Other depreciation and amortization 612 555
Interest, including amortization of deferred
financing costs 7,589 6,981
--------- ---------
Total operating expenses 20,333 18,415
--------- ---------
Earnings before income taxes 2,836 352
Income tax expense 1,125 169
--------- ---------
Net earnings $ 1,711 183
========= =========
Earnings per common share $ 0.51 0.05
========= =========
Weighted average shares outstanding 3,375,591 3,470,406
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Three months ended March 31, 1997 and 1996
<TABLE>
<CAPTION>
(Unaudited)
1997 1996
---- ----
(dollars in thousands)
Cash flows from operating activities:
<S> <C> <C>
Net earnings $ 1,711 183
Adjustments to reconcile net earnings to net cash
provided by operating activities:
Depreciation and amortization 9,252 8,287
Non-cash charges for interest 1,527 1,372
Provision for bad debts 680 424
Deferred income tax expense 1,086 144
Provision for deferred compensation 275 275
Gain on sale of rental equipment (655) (521)
Increase in net trade accounts receivable (1,947) (1,370)
Increase in accrued expenses 4,556 3,295
Other (3,219) (915)
------ ------
Net cash provided by operating activities 13,266 11,174
------- ------
Cash flows from investing activities:
Redemption of certificates of deposit --- 250
Rental equipment additions (20,318) (7,674)
Proceeds from sales of rental equipment 3,221 2,596
Purchases of property, plant and equipment, net (2,703) (1,464)
------ ------
Net cash used in investing activities $(19,800) (6,292)
------ ------
</TABLE>
(continued)
3
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Unaudited)
<TABLE>
<CAPTION>
1997 1996
---- ----
Cash flows from financing activities:
<S> <C> <C>
Proceeds from long-term debt 59,824 38,903
Repayment of long-term debt (53,315) (43,260)
Increase in deferred financing costs (25) ---
Payments to acquire treasury stock (16) (600)
------ ------
Net cash provided by (used in) financing activities 6,468 (4,957)
------ ------
Net decrease in cash (66) (75)
Cash at beginning of period 413 471
------ ------
Cash at end of period $ 347 396
====== ======
Supplemental cash flow information:
Cash paid for income taxes $ 93 61
====== ======
Cash paid for interest $ 2,197 1,789
====== ======
</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 Williams Scotsman, 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 three months ended March 31, 1997 and
1996 has not been audited. In the opinion of management, the unaudited
financial statements contain all adjustments (consisting only of normal,
recurring adjustments) necessary to present fairly the Company's
financial position as of March 31,1997 and its operating results and cash
flows for the three months ended March 31, 1997 and 1996. The results of
operations for the periods ended March 31, 1997 and 1996 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 March 31, 1997 Compared with Three Months Ended March
31, 1996. Revenues in the quarter ended March 31, 1997 were $52.7 million, a
$10.1 million or 23.6% increase from revenues of $42.6 million in the same
period of 1996. This increase resulted from a $4.7 million or 17.8% increase in
leasing revenue, a $2.5 million or 42.2% increase in new sales revenue, a $1.7
million or 25.7% increase in revenue from delivery and installation and a $1.1
million or 31.6% increase in other revenue. The increase in leasing revenue is
attributable to an increase in the average number of units in the fleet of 10.3%
to approximately 41,200 for the first quarter of 1997, and increase in fleet
utilization of approximately four percentage points to 86% and an increase of
approximately $6 in the average monthly rental rate. The increase in new sales
revenue is due to a large volume of classroom sales occurring in the Western
region during the first quarter of 1997. The increase in delivery and
installation revenue is due to the increases in leasing activity and new sales
activity 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 for the quarter was $23.2 million, a $4.4 million or 23.5%
increase from the first quarter of 1996. This increase is primarily due to an
increase in leasing gross profit of $2.8 million or 20.9% and an increase in
gross profit from delivery and installation of $0.7 million or 48.2%. The
increase in leasing gross profit is due to the increases in leasing activity
described above as well as an increase in the leasing margins from 50.7% in the
first quarter of 1996 to 52.0% in the first quarter of 1997. Excluding
depreciation and amortization, leasing margins increased from 77.4% in 1996 to
77.5% in 1997. The increase in gross profit from delivery and installation is
due to the increases in the leasing and new sales activity described above.
Selling, general and administrative (SG&A) expenses increased by $1.3
million or 11.5% from the first quarter of 1996. This increase is a result of
the growth experienced by the Company, both in terms of the number of branches
and the size of the fleet. The Company's branch network has expanded from 51
branches at March 31, 1996 to 60 branches at March 31, 1997 while the fleet has
grown by approximately 3,900 units from March 31, 1996. Of the overall increase
in SG&A expenses, $0.7 million represents field related expenses, primarily
payroll expenses, incurred in connection with this branch expansion.
Interest expense increased by $0.6 million or 8.7% in the first quarter of
1997. This relatively minor increase was due to increases in the average balance
outstanding on the line of credit during the quarter of $29.8 million, as
compared to the first quarter of 1996, offset by a decrease in the average
effective interest rate from 8.2% to 8.0%.
Liquidity and Capital Resources
During the three months ended March 31, 1997 and 1996, the Company's
principal source of funds consisted of cash flow from operating and financing
sources. Cash flow from operating activities of $13.3 million and $11.2 million
for the quarter ended March 31, 1997 and 1996, respectively, was largely
generated by the Company's leasing operations, which includes the rental and
sale of units from its lease fleet.
6
<PAGE>
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 $4.1 million or 26.4% to $19.3 million in the first three
months of 1997 compared to $15.2 million in the same period of 1996. The
increase in EBITDA is a result of increased leasing activity resulting from the
overall increase in the number of units in the fleet, offset by increased SG&A
expenses to support the increased activities during the first quarter of 1997.
Cash flow used in investing activities of $19.8 million and $6.3 million in
the three months ended March 31, 1997 and 1996, respectively, was primarily for
net additions to the Company's lease fleet, including the acquisition of two
lease fleets in 1997 of approximately 1,400 units. Cash provided by financing
activities of $6.5 million in the quarter ended March 31, 1997 was primarily
from the funding of the fleet expansion previously described, while cash used in
financing activities of $5.0 million in the quarter ended March 31, 1996 was
primarily for the repayment of borrowings under the line of credit.
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.
7
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
In a report on form 8-K dated April 14, 1997, the Company
reported the following:
The execution of an agreement for the purchase of
approximately 90% of its common stock.
Certain changes in senior management.
8
<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 and Chief Executive Officer
Dated: April __, 1997
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 Executive April __, 1997
- --------------------------- Officer and Director
Gerard E. Holthaus
/s/ Katherine K. Giannelli Controller April __, 1997
- ---------------------------
Katherine K. Giannelli
9
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> Financial Data Schedule/Scotsman Holdings, Inc.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 360
<SECURITIES> 0
<RECEIVABLES> 24,879
<ALLOWANCES> 467
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 473,007
<DEPRECIATION> 75,874
<TOTAL-ASSETS> 443,219
<CURRENT-LIABILITIES> 0
<BONDS> 302,900
0
0
<COMMON> 35
<OTHER-SE> 48,103
<TOTAL-LIABILITY-AND-EQUITY> 443,219
<SALES> 52,716
<TOTAL-REVENUES> 52,716
<CGS> 29,547
<TOTAL-COSTS> 29,547
<OTHER-EXPENSES> 12,744
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 7,589
<INCOME-PRETAX> 2,836
<INCOME-TAX> 1,125
<INCOME-CONTINUING> 1,711
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,711
<EPS-PRIMARY> .51
<EPS-DILUTED> .51
</TABLE>
