<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 March 31, 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: 033-78954
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, 2000, 6,196,674 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, 2000 1
and December 31, 1999
Consolidated Statements of Operations for the three 2
months ended March 31, 2000 and 1999
Consolidated Statements of Cash Flows for the three 3
months ended March 31, 2000 and 1999
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of 7
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 10
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements.
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31,
2000 December 31,
Assets (Unaudited) 1999
------ ----------- ------------
(dollars in thousands)
<S> <C> <C>
Cash $ 659 $ 644
Trade accounts receivable, less allowance for
doubtful accounts 47,425 56,989
Prepaid expenses and other current assets 19,404 17,484
Rental equipment, net of accumulated depreciation of
$133,894 in 2000 and $127,154 in 1999 731,771 726,924
Property and equipment, net 57,261 54,074
Deferred financing costs, net 19,106 20,339
Goodwill and other intangible assets, net 170,996 172,273
Other assets 15,481 17,740
---------- ----------
$1,062,103 $1,066,467
========== ==========
Liabilities and Stockholders' Equity
------------------------------------
Accounts payable $ 15,387 $ 20,587
Accrued expenses 36,578 31,858
Rents billed in advance 22,734 23,035
Long-term debt 907,511 915,823
Deferred income taxes 116,071 113,847
---------- ----------
Total liabilities 1,098,281 1,105,150
---------- ----------
Stockholders' equity:
Common stock, $.01 par value. Authorized 10,000,000
shares; issued 9,507,407 shares 95 95
Additional paid-in capital 234,010 233,725
Retained earnings 25,573 23,353
---------- ----------
259,678 257,173
Less treasury stock, at cost - 3,310,733 common shares (295,856) (295,856)
---------- ----------
Net stockholders' deficit (36,178) (38,683)
---------- ----------
$1,062,103 $1,066,467
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
1
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARY
Consolidated Statements of Operations
Three months ended March 31, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
(in thousands except
share and per share amounts)
<S> <C> <C>
Revenues:
Leasing $ 52,446 $ 47,575
Sales:
New units 13,478 15,023
Rental equipment 4,377 5,056
Delivery and installation 16,872 13,660
Other 8,560 7,280
----- -----
Total revenues 95,733 88,594
------ ------
Costs of sales and services:
Leasing:
Depreciation and amortization 8,627 8,600
Other direct leasing costs 7,898 6,544
Sales:
New units 10,861 12,248
Rental equipment 3,228 3,785
Delivery and installation 12,240 9,965
Other 1,314 1,111
------ ------
Total costs of sales and services 44,168 42,253
------ ------
Gross profit 51,565 46,341
------ ------
Selling, general and administrative expenses 20,869 18,277
Other depreciation and amortization 4,189 3,732
Interest, including amortization of deferred
financing costs 22,012 20,274
------ ------
Total operating expenses 47,070 42,283
------ ------
Income before income taxes 4,495 4,058
Income tax expense 2,277 2,043
------ ------
Net Income $ 2,218 $ 2,015
====== ======
Earnings per common share $ 0.36 $ 0.33
====== ======
Earnings per common share, assuming dilution $ 0.34 $ 0.31
====== ======
Weighted average shares outstanding 6,196,674 6,196,674
========= =========
</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, 2000 and 1999
(Unaudited)
<TABLE>
<CAPTION>
2000 1999
---- ----
(dollars in thousands)
<S> <C> <C>
Cash flows from operating activities:
Net income $ 2,218 $ 2,015
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,049 13,559
Provision for bad debts 1,298 871
Deferred income tax expense 2,224 1,989
Non-cash option compensation expense 285 351
Gain on sale of rental equipment (1,149) (1,271)
Decrease (increase) in net trade accounts
receivable 8,266 (918)
Decrease in other assets 2,259 3,286
Increase in accrued expenses 4,720 11,607
Other (8,136) (3,693)
-------- --------
Net cash provided by operating activities 26,034 27,796
-------- --------
Cash flows from investing activities:
Rental equipment additions (17,032) (18,823)
Proceeds from sales of rental equipment 4,377 5,056
Purchases of property and equipment, net (5,053) (2,796)
Purchase of Evergreen Mobile Company, net of cash acquired --- (37,000)
-------- --------
Net cash used in investing activities (17,708) (53,563)
-------- --------
</TABLE>
(continued)
3
<PAGE>
SCOTSMAN HOLDINGS, 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 $ 100,630 $119,822
Repayment of long-term debt (108,941) (94,231)
Increase in deferred financing costs --- (15)
--------- --------
Net cash (used in) provided by financing activities (8,311) 25,576
--------- --------
Net increase (decrease) in cash 15 (191)
Cash at beginning of period 644 800
--------- --------
Cash at end of period $ 659 $ 609
========= ========
Supplemental cash flow information:
Cash paid for income taxes $ 157 $ 169
========= ========
Cash paid for interest $ 13,256 $ 8,951
========= ========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(Unaudited)
(Dollars in thousands, except share amounts)
(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, 2000 and
1999 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 31,2000 and its operating results and cash
flows for the three months ended March 31, 2000 and 1999. The results of
operations for the periods ended March 31, 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, covenant not to compete and
customer base, which are being amortized on a straight line basis over
periods of 21 to 228 months. As of March 31, 2000 and 1999, accumulated
amortization was $8,094 and $2,970, 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>
SCOTSMAN HOLDINGS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
(4) 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.
The following table sets forth the components of the weighted-average
shares outstanding for the basic and diluted earnings per share
computations:
<TABLE>
<CAPTION>
March 31,
2000 1999
---- ----
<S> <C> <C>
Weighted-average shares - basic earnings per share 6,196,674 6,196,674
Effect of employee stock options 345,364 356,568
--------- ----------
Weighted-average shares - diluted earnings per share 6,542,038 6,553,242
========= =========
</TABLE>
(5) INCOME TAXES
The difference between the Company's reported tax provision for the three
months ended March 31, 2000 and the tax provision computed based on U.S.
statutory rates is primarily attributed to non-deductible goodwill
amortization expense of $1,277.
6
<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 March 31, 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, undue reliance should not be placed 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.
Results of Operations
Three Months Ended March 31, 2000 Compared with Three Months Ended
March 31, 1999.
Revenues in the quarter ended March 31, 2000 were $95.7 million, a $7.1
million or 8.1% increase from revenues of $88.6 million in the same period of
1999. The increase resulted from a $4.8 million or 10.2% increase in leasing
revenue, a $3.2 million or 23.5% increase in delivery and installation revenue,
and a $1.2 million or 17.6% increase in other revenue, offset in part by a $1.5
million or 10.3% decrease in new unit sales. The increase in leasing revenue is
attributable to a 11.1% increase in the average lease fleet to approximately
79,900 units at March 31, 2000, combined with an increase of $2 in the average
monthly rental rate, offset by a slight decrease in the average fleet
utilization of approximately one percentage point to 84%. The increase in the
average monthly rental rate is a result of overall rate improvement in the
Company's products combined with changes in fleet mix. The increase in delivery
and installation revenue is attributable to the increases in the leasing revenue
described above. Other revenue rose as a result of increases in the rental of
steps, furniture and other miscellaneous revenue related to products and
services provided for leased units. The decrease in new sales revenue is
primarily due to carryover of sales revenue from the fourth quarter of 1998 into
the first quarter of 1999 due to delays in the completion of delivery and
installation of certain larger projects.
7
<PAGE>
Gross profit for the quarter ended March 31, 2000 was $51.6 million, a $5.2
million or 11.3% increase from the first quarter 1999 gross profit of $46.3
million. This increase is primarily a result of an increase in leasing gross
profit of $3.5 million or 10.8%, delivery and installation gross profit of $1.0
million or 25.4% and other gross profit of $1.1 million or 17.5%. The increase
in leasing gross profit is a result of the increase in leasing revenue described
above combined with a slight increase in leasing margins from 68.2% in 1999 to
68.5% in 2000. Excluding depreciation and amortization, leasing margins
decreased from 86.2% in 1999 to 84.9% in 2000 due to the concerted effort by the
Company to accelerate the refurbishment of units in the existing fleet prior to
its busier summer season. The increase in delivery and installation gross profit
relates to the 23.5% increase in revenue discussed above. The increase in other
gross profit is attributable to the increases in related revenue noted above.
Selling, general and administrative (SG&A) expenses for the quarter ended
March 31, 2000 were $20.9 million, a $2.6 million or 14.2% increase from the
first quarter of 1999 SG&A expenses of $18.3 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 82 branches at March 31, 1999 to 85
branches at March 31, 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 branch expansion and fleet growth.
Interest expense increased by $1.7 million or 8.6% to $22.0 million in 2000
from 1999. This increase is the result of increased borrowings to finance fleet
and branch growth.
Liquidity and Capital Resources
During the three months ended March 31, 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 $26.0 million and
$27.8 million for the three months ended March 31, 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, 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 $2.6 million or 7.0% to $39.6 million for the first quarter
of 2000 compared to $37.0 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 increases in average monthly
rental rates due to rate increases and changes in fleet mix, 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 quarter of 2000.
Cash flow used in investing activities was $17.7 million and $53.6 million
for the three months ended March 31, 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
8
<PAGE>
growth and established unit demand. The difference between March, 1999
to March, 2000 is primarily attributable to the February 1, 1999 purchase of
Evergreen Mobile Company for approximately $37 million. Cash used in financing
activities of $8.3 million for the three months ended March 31, 2000 reflects
the reduction of the Company's debt balance versus the $25.6 million in cash
provided by financing activities for the same period in 1999, which was
primarily from borrowings under the Company's line of credit.
Availability under the Credit Agreement was $79.1 million. 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.
9
<PAGE>
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
None
(b) Reports on Form 8-K.
None
10
<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. Keefe
----------------------------
Gerard E. Keefe
Senior Vice President and
Chief Financial Officer
Dated: May 12, 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 May 12, 2000
- ----------------------------- Chief Financial Officer
Gerard E. Keefe
/s/ Glenn A. Schultz Controller May 12, 2000
- -----------------------------
Glenn A. Schultz
11
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 659
<SECURITIES> 0
<RECEIVABLES> 48,434
<ALLOWANCES> 1,009
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 941,014
<DEPRECIATION> 151,982
<TOTAL-ASSETS> 1,062,103
<CURRENT-LIABILITIES> 0
<BONDS> 907,511
0
0
<COMMON> 95
<OTHER-SE> (36,178)
<TOTAL-LIABILITY-AND-EQUITY> 1,062,103
<SALES> 95,733
<TOTAL-REVENUES> 95,733
<CGS> 44,168
<TOTAL-COSTS> 44,168
<OTHER-EXPENSES> 25,058
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 22,012
<INCOME-PRETAX> 4,495
<INCOME-TAX> 2,277
<INCOME-CONTINUING> 2,218
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,218
<EPS-BASIC> 0.36
<EPS-DILUTED> 0.34
</TABLE>
