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Form 10-Q     [X]
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIESEXCHANGE ACT OF 1934
 For the quarter ended March 31, 2004 OR [   ]
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIESEXCHANGE ACT OF 1934
 For the transition period from ______________ to ______________ Commission file number 333-102511 BRAND INTERMEDIATE HOLDINGS, INC.  Delaware
(State or other jurisdiction of
incorporation or organization)
    
    13-3909682
(I.R.S. employer
identification no.)
 15450 South Outer 40, #270, Chesterfield, MO
(Address of principal executive offices)
    
    63017
(Zip Code)
 Registrants telephone number, including area code: (636) 519-1000   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 whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act). Yes: [   ] No: [X] Indicate the number of shares outstanding of each of the Registrants classes
of Common Stock as of the latest practicable date. Class of Common Stock
$.01 Par Value
    
    Outstanding at April 30, 2004
1,000 shares




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INDEX  
 PagePART I  FINANCIAL INFORMATIONItem 1. Financial StatementsConsolidated Statements of Operations for the Three Months Ended March 31, 2003 and 2004
    
    
    3Consolidated Balance Sheets as of December 31, 2003 and March 31, 2004
    
    
    4-5Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2004
    
    
    6-7Notes to the Consolidated Financial Statements
    
    
    8-19Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    20-25Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    25Item 4. Controls and Procedures
    
    
    25PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    26Item 2. Changes in Securities and Use of Proceeds
    
    
    26Item 3. Defaults Upon Senior Securities
    
    
    26Item 4. Submission of Matters to a Vote of Security Holders
    
    
    26Item 5. Other Information
    
    
    26Item 6. Exhibits and Reports on Form 8-K
    
    
    26SIGNATURES
    
    
    27Certification of Chief Executive OfficerCertification of Chief Financial Officer906 Certification of Chief Executive Officer906 Certification of Chief Financial Officer
  Page -2-




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PART I. FINANCIAL INFORMATION 
 ITEM 1. FINANCIAL STATEMENTS BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES 
    For the Three MonthsEnded March 31,2003
    
    2004Revenues:Labor
    
    $
    77,076
    
    
    $
    80,636Equipment rental
    
    
    19,247
    
    
    
    18,093Equipment sales
    
    
    1,906
    
    
    
    1,606Total revenues
    
    
    98,229
    
    
    
    100,335Operating expenses:Labor
    
    
    63,381
    
    
    
    66,188Equipment rental
    
    
    9,984
    
    
    
    6,930Equipment sales
    
    
    1,243
    
    
    
    1,228Divisional operating expenses
    
    
    4,089
    
    
    
    4,158Total operating expenses
    
    
    78,697
    
    
    
    78,504Gross profit
    
    
    19,532
    
    
    
    21,831Selling and administrative expenses
    
    
    11,431
    
    
    
    11,715Operating income
    
    
    8,101
    
    
    
    10,116Interest expense
    
    
    7,955
    
    
    
    8,281Interest income
    
    
    (43
    )
    
    
    (80
    )Income before provision for income tax
    
    
    189
    
    
    
    1,915Income tax provision
    
    
    76
    
    
    
    1,140Net income
    
    $
    113
    
    
    $
    775
 The accompanying notes to the consolidated financial statements are an
integral part of the consolidated financial statements. Page -3-




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BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES 
   December 31,
    
    March 31, 20042003
    
    (unaudited)ASSETSCURRENT ASSETS:Cash and cash equivalents
    
    
    23,100
    
    
    $
    4,139Trade accounts receivable, net of allowance for doubtful
Accounts of $1,365 in 2003 and $1,600 in 2004
    
    
    54,005
    
    
    
    68,189Accrued revenue
    
    
    3,137
    
    
    
    5,257Notes receivable
    
    
    621
    
    
    
    467Other current assets
    
    
    9,421
    
    
    
    7,834Total current assets
    
    
    90,284
    
    
    
    85,886PROPERTY AND EQUIPMENT:Land
    
    
    1,237
    
    
    
    1,243Buildings and leasehold improvements
    
    
    3,354
    
    
    
    3,401Vehicles and other equipment
    
    
    25,736
    
    
    
    26,073Scaffolding equipment
    
    
    188,489
    
    
    
    191,814Total property and equipment, at cost
    
    
    218,816
    
    
    
    222,531LessAccumulated depreciation and amortization
    
    
    39,857
    
    
    
    45,439Total property and equipment, net
    
    
    178,959
    
    
    
    177,092GOODWILL
    
    
    248,347
    
    
    
    248,347CUSTOMER RELATIONSHIPS
    
    
    48,286
    
    
    
    47,163OTHER ASSETS AND INTANGIBLES
    
    
    24,783
    
    
    
    25,099TOTAL ASSETS
    
    $
    590,659
    
    
    $
    583,587
 (Continued on following page) Page -4-




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BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES   December 31,
    
    March 31, 20042003
    
    (unaudited)LIABILITIES AND STOCKHOLDERS EQUITYCURRENT LIABILITIES:Current maturities of long-term debt
    
    $
    1,250
    
    
    $
    1,047Notes payable and capital lease obligations, current portion
    
    
    660
    
    
    
    742Accounts payable and accrued expenses
    
    
    33,302
    
    
    
    43,206Deferred revenue
    
    
    1,448
    
    
    
    1,497Total current liabilities
    
    
    36,660
    
    
    
    46,492LONG-TERM DEBT
    
    
    305,282
    
    
    
    286,699NOTES PAYABLE AND CAPITAL LEASE OBLIGATIONS
    
    
    165
    
    
    
    160DEFERRED INCOME TAXES
    
    
    29,173
    
    
    
    30,188STOCKHOLDERS EQUITY:Common stock, $0.01 par value, 1,000 shares authorized,
issued and outstanding
    
    
    
    
    
    
    Paid-in capital
    
    
    224,212
    
    
    
    224,254Cumulative translation adjustment
    
    
    2,853
    
    
    
    2,706Accumulated deficit
    
    
    (7,686
    )
    
    
    (6,912
    )Total stockholders equity
    
    
    219,379
    
    
    
    220,048Total liabilities and stockholders equity
    
    $
    590,659
    
    
    $
    583,587
 The accompanying notes to the consolidated financial statements are an
integral part of the consolidated balance sheets. Page -5-




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BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES 
    For the Three Months EndedMarch 31,2003
    
    2004CASH FLOWS FROM OPERATING ACTIVITIES:Net income
    
    
    113
    
    
    
    775Adjustments to reconcile net income to net cash from
Operating activities:Depreciation and amortization
    
    
    10,626
    
    
    
    7,184Deferred income taxes
    
    
    76
    
    
    
    1,015Non-cash interest
    
    
    1,358
    
    
    
    1,864Non-cash compensation
    
    
    
    
    
    
    42Gain on sale of scaffolding equipment
    
    
    (197
    )
    
    
    (149
    )Changes in operating assets and liabilities:Trade accounts receivable, net
    
    
    (5,808
    )
    
    
    (15,515
    )Accrued revenue
    
    
    843
    
    
    
    (2,120
    )Notes receivable
    
    
    336
    
    
    
    172Other current assets
    
    
    1,505
    
    
    
    2,918Accounts payable and accrued expenses
    
    
    1,121
    
    
    
    9,904Deferred revenue
    
    
    (177
    )
    
    
    49Other
    
    
    (17
    )
    
    
    (83
    )Net cash flows from operating activities
    
    
    9,779
    
    
    
    6,056CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment
    
    
    (2,897
    )
    
    
    (4,284
    )Proceeds from sales of property and equipment
    
    
    461
    
    
    
    438Net cash flows from investing activities
    
    
    (2,436
    )
    
    
    (3,846
    )CASH FLOWS FROM FINANCING ACTIVITIES:Repayments of long-term debt
    
    
    (325
    )
    
    
    (20,312
    )Payments of deferred financing fees
    
    
    
    
    
    
    (677
    )Payments on capital lease obligations
    
    
    (842
    )
    
    
    (182
    )Net cash flows from financing activities
    
    
    (1,167
    )
    
    
    (21,171
    )NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
    
    
    6,176
    
    
    
    (18,961
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    4,817
    
    
    
    23,100CASH AND CASH EQUIVALENTS, end of period
    
    $
    10,993
    
    
    $
    4,139
 (Continued on following page) Page -6-




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BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited) For the Three Months EndedMarch 31,2003
    
    2004SUPPLEMENTAL CASH FLOW DISCLOSURES:Interest paid
    
    $
    2,401
    
    
    $
    1,955Income taxes paid
    
    
    54
    
    
    
    122NONCASH
INVESTING AND FINANCING ACTIVITIESCapital lease obligations
    
    
    
    
    
    
    259
 The accompanying notes to the consolidated financial statements are an
integral part of the consolidated financial statements. Page -7-




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BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES 
 Notes to the Consolidated Financial Statements  The financial statements included herein for the periods ended March 31, 2003
and 2004 have been prepared by the Company without audit. In the opinion of
management, all adjustments have been made which are of a normal recurring
nature necessary to present fairly the Companys financial position as of March
31, 2004, and the results of operations and cash flows for the three months
ended March 31, 2003 and 2004. Certain information and footnote disclosures
have been condensed or omitted for these periods. The results for interim
periods are not necessarily indicative of results for the entire year.
Reference is made to the notes to the consolidated financial statements
contained in the Companys Annual Report on Form 10-K for the year ended
December 31, 2003, filed with the Securities and Exchange Commission. 1. Organization and Business Brand Intermediate Holdings, Inc. and its subsidiaries (Brand) are 100% owned
by Brand Holdings LLC (the LLC). As of March 31, 2004, the voting equity
interests of the LLC are owned 74.1% by J.P. Morgan Partners and its affiliates
(JPMP) and 25.9% by other equity investors on a fully diluted basis. Brand
Services, Inc. is a wholly owned subsidiary of Brand Intermediate Holdings,
Inc. All references to the Company, we, us, or our mean Brand
Intermediate Holdings, Inc. and its subsidiaries. The Company operates in one segment and provides scaffolding services primarily
to refining, petrochemical, chemical, utility and pulp and paper industries,
and to a lesser extent general commercial clients. Scaffolding services are
typically provided in connection with periodic, routine maintenance of
refineries, chemical plants and utilities, as well as for new construction and
renovation projects. The Company provides personnel to erect and dismantle
scaffolding structures, transport scaffolding to project sites and supervise
and manage such activities. In addition, the Company rents and occasionally
sells scaffolding that is classified as property and equipment on the
consolidated balance sheets. The Company maintains a substantial inventory of
scaffolding in the United States and Canada. 2. Summary of Significant Accounting Policies The accompanying financial statements are prepared on a consolidated basis and
include those assets, liabilities, revenues and expenses directly attributable
to the operations of the Company. All significant intercompany balances and
transactions have been eliminated. The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management to make
estimates Page -8-




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and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. 3. Stock Based Employee Compensation Effective January 1, 2004, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation. The Company selected the modified
prospective transition method under the provisions of SFAS No. 148, Accounting
for Stock-Based Compensation-Transition and Disclosure, which requires
expensing options prospectively, beginning in the year of adoption. The
Company expensed $42,000 for the three-month period ended March
31, 2004, recorded in the caption Selling and Administrative expenses. Prior to 2004, the company accounted for stock-based compensation under the
recognition and measurement provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, and related
interpretations. No stock-based employee compensation expense was reflected in
2003, as all options granted under those plans had an exercise price
greater than
the fair market value of the underlying equity on the date of grant. The following table illustrates the effect on net income if the fair value
based method had been applied to all outstanding and unvested awards in each
period: Three Months Ended
    
    Three Months EndedMarch 31, 2003
    
    March 31, 2004(unaudited)
    
    (unaudited)Net income as reported
    
    $
    113
    
    
    $
    775Add: stock based compensation
expense included in
reported net income
    
    
    
    
    
    
    42Less: stock-based compensation
expense determined under
fair value method for all
awards
    
    
    44
    
    
    
    42Pro forma net income
    
    $
    69
    
    
    $
    775
 4. Accrued Revenue Accrued revenue represents work performed which either due to billing cycles,
contract stipulations or lacking contractual documentation requirements, could
not be billed. Substantially all unbilled amounts are expected to be billed and
collected within one year. 5. Debt and Borrowing Arrangements Page -9-




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At December 31, 2003 and March 31, 2004, long-term debt consisted of the
following (in thousands): December 31,
    
    March 31, 20042003
    
    (unaudited)Credit Facility, due 2009
    
    $
    123,713
    
    
    $
    103,40012% Senior Subordinated Notes, due 2012
    
    
    150,000
    
    
    
    150,00013% Intermediate Subordinated Notes,
due 2013
    
    
    40,638
    
    
    
    42,052314,351
    
    
    
    295,452LessCurrent portion
    
    
    1,250
    
    
    
    1,047Unamortized discount
    
    
    7,819
    
    
    
    7,706$
    305,282
    
    
    $
    286,699
 For the three months ended March 31, 2003, the weighted-average interest rate
of loans outstanding under the Credit Facility was 5.4%. For the three months
ended March 31, 2004, the weighted-average interest rate of loans outstanding
under the Credit Facility was 4.6%. The credit facility was amended on February
3, 2004. The amendment added an additional $15 million letter of credit
facility and lowered the interest rate margin on the term debt by 0.75%. As of March 31, 2004, JPMP holds $18.0 million of the $42.1 million
Intermediate Subordinated Notes. 6. Deferred Revenue Deferred revenue represents amounts collected from customers at a faster rate
than work was performed on these contracts. Substantially all of the costs
related to these amounts will be incurred within one year. 7. Commitments and Contingencies In the ordinary course of conducting its business, the Company becomes involved
in various pending claims and lawsuits. These primarily relate to employee
matters. The outcome of these matters is not presently determinable. However,
in the opinion of management, based on the advice of legal counsel, the
resolution of these matters is not anticipated to have a material adverse
effect on the financial position or results of operations of the Company. 8. Comprehensive Income For the three months ended March 31, 2003 and 2004, comprehensive income was
$1.0 million and $0.6 million, respectively. 9. Income Taxes Deferred income taxes reflect the tax effects of temporary differences between
the carrying amounts of assets and liabilities for financial reporting purposes
and the amounts used for income tax purposes. The effective tax rate
of 59.5%
for the Page -10-




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three months ended March 31, 2004 is greater than the federal statutory rate of
35%, primarily due to state income taxes and the impact of a portion of the
interest on the 13% Intermediate Notes not being deductible. The provision for
income taxes for the three months ended March 31, 2003 and 2004,
is principally attributable to deferred income taxes. 1. Supplemental Consolidating Information The 12% Senior Subordinated Notes, which are an obligation of Brand Services,
Inc., are fully and unconditionally guaranteed on a senior subordinated, joint,
and several basis by the other domestic subsidiaries of Brand Intermediate
Holdings, Inc. (which are all 100% owned by Brand Intermediate Holdings, Inc.)
and by Brand Intermediate Holdings, Inc. Supplemental consolidating information
of Brand Intermediate Holdings, Inc., Brand Services, Inc., the guarantor
subsidiaries, and its foreign non-guarantor subsidiary is presented below.
Investments in subsidiaries are presented on the equity method of accounting.
Separate financial statements are not provided because management has concluded
that the summarized financial information below provides sufficient information
to allow investors to separately determine the nature of the assets held by and
the operations of the guarantor and non-guarantor subsidiaries. Page -11-




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BRAND INTERMEDIATE
HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Brand Intermediate Holdings, Inc.
Condensed Consolidating Balance Sheet
December 31, 2003 Brand
    
    
    
    
    
    BrandIntermediate
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Non-Guarantor
    
    Holdings,
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Inc.
    
    Eliminations
    
    ConsolidatedAssetsCurrent Assets:Cash and cash equivalents
    
    $
    21,154
    
    
    $
    
    
    
    $
    2,236
    
    
    $
    
    
    
    $
    (290
    )
    
    $
    23,100Trade accounts receivable
    
    
    
    
    
    
    52,383
    
    
    
    1,622
    
    
    
    
    
    
    
    
    
    
    
    54,005Accrued revenue
    
    
    
    
    
    
    3,102
    
    
    
    35
    
    
    
    
    
    
    
    
    
    
    
    3,137Notes receivable, current portion
    
    
    27
    
    
    
    594
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    621Other current assets
    
    
    2,491
    
    
    
    6,672
    
    
    
    608
    
    
    
    
    
    
    
    (350
    )
    
    
    9,421Due from affiliates
    
    
    44,139
    
    
    
    1,409
    
    
    
    207
    
    
    
    
    
    
    
    (45,755
    )
    
    
    Total current assets
    
    
    67,811
    
    
    
    64,160
    
    
    
    4,708
    
    
    
    
    
    
    
    (46,395
    )
    
    
    90,284Property and Equipment:Land
    
    
    
    
    
    
    855
    
    
    
    382
    
    
    
    
    
    
    
    
    
    
    
    1,237Buildings and leasehold improvements
    
    
    11
    
    
    
    2,953
    
    
    
    390
    
    
    
    
    
    
    
    
    
    
    
    3,354Vehicles and other equipment
    
    
    6,202
    
    
    
    15,618
    
    
    
    3,916
    
    
    
    
    
    
    
    
    
    
    
    25,736Scaffolding equipment
    
    
    174,752
    
    
    
    
    
    
    
    13,737
    
    
    
    
    
    
    
    
    
    
    
    188,489Total property and equipment, at cost
    
    
    180,965
    
    
    
    19,426
    
    
    
    18,425
    
    
    
    
    
    
    
    
    
    
    
    218,816Less accumulated depreciation and amortization
    
    
    26,066
    
    
    
    8,681
    
    
    
    5,110
    
    
    
    
    
    
    
    
    
    
    
    39,857Total property and equipment, net
    
    
    154,899
    
    
    
    10,745
    
    
    
    13,315
    
    
    
    
    
    
    
    
    
    
    
    178,959Due from affiliates
    
    
    9,750
    
    
    
    
    
    
    
    
    
    
    
    40,894
    
    
    
    (50,644
    )
    
    
    Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,375
    
    
    
    (2,375
    )
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    211,900
    
    
    
    (211,900
    )
    
    
    Goodwill
    
    
    248,347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,347Customer relationships
    
    
    48,286
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    48,286Intangibles and other assets
    
    
    23,828
    
    
    
    
    
    
    
    
    
    
    
    955
    
    
    
    
    
    
    
    24,783Total assets
    
    $
    552,921
    
    
    $
    74,905
    
    
    $
    18,023
    
    
    $
    256,124
    
    
    $
    (311,314
    )
    
    $
    590,659
 Page -12-




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BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Brand Intermediate Holdings, Inc.
Condensed Consolidating Balance Sheet
December 31, 2003 (continued) BrandNon-
    
    Brand
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Intermediate
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiaries
    
    Holdings, Inc.
    
    Eliminations
    
    ConsolidatedLiabilities and Stockholders Equity (Deficit)Current Liabilities:Current maturities of long-term debt
    
    $
    1,250
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,250Notes payable and capital lease obligations, current portion
    
    
    660
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    660Accounts payable and accrued expenses
    
    
    26,075
    
    
    
    7,553
    
    
    
    314
    
    
    
    
    
    
    
    (640
    )
    
    
    33,302Deferred revenue
    
    
    
    
    
    
    1,448
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,448Due to affiliates
    
    
    1,409
    
    
    
    37,519
    
    
    
    6,827
    
    
    
    
    
    
    
    (45,755
    )
    
    
    Total current liabilities
    
    
    29,394
    
    
    
    46,520
    
    
    
    7,141
    
    
    
    
    
    
    
    (46,395
    )
    
    
    36,660Long-term debt
    
    
    268,537
    
    
    
    
    
    
    
    
    
    
    
    36,745
    
    
    
    
    
    
    
    305,282Notes payable and capital lease obligations
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    165Deferred income taxes
    
    
    29,076
    
    
    
    
    
    
    
    2,472
    
    
    
    
    
    
    
    (2,375
    )
    
    
    29,173Due to affiliates
    
    
    40,894
    
    
    
    
    
    
    
    9,750
    
    
    
    
    
    
    
    (50,644
    )
    
    
    Total stockholders equity (deficit)
    
    
    184,855
    
    
    
    28,385
    
    
    
    (1,340
    )
    
    
    219,379
    
    
    
    (211,900
    )
    
    
    219,379Total liabilities and stockholders equity (deficit)
    
    $
    552,921
    
    
    $
    74,905
    
    
    $
    18,023
    
    
    $
    256,124
    
    
    $
    (311,314
    )
    
    
    590,659
 Page -13-




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##### Table of Contents



BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Brand Intermediate Holdings, Inc.
Condensed Consolidating Balance Sheet
March 31, 2004 Brand
    
    
    
    
    
    BrandNon-
    
    Intermediate
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Holdings,
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Inc.
    
    Eliminations
    
    ConsolidatedAssetsCurrent Assets:Cash and cash equivalents
    
    $
    3,288
    
    
    $
    
    
    
    $
    1,063
    
    
    $
    
    
    
    $
    (212
    )
    
    $
    4,139Trade accounts receivable
    
    
    
    
    
    
    66,473
    
    
    
    1,716
    
    
    
    
    
    
    
    
    
    
    
    68,189Accrued revenue
    
    
    
    
    
    
    5,088
    
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    5,257Notes receivable, current portion
    
    
    15
    
    
    
    452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    467Other current assets
    
    
    2,512
    
    
    
    5,197
    
    
    
    474
    
    
    
    
    
    
    
    (349
    )
    
    
    7,834Due from affiliates
    
    
    47,592
    
    
    
    1,644
    
    
    
    1,283
    
    
    
    
    
    
    
    (50,519
    )
    
    
    Total current assets
    
    
    53,407
    
    
    
    78,854
    
    
    
    4,705
    
    
    
    
    
    
    
    (51,080
    )
    
    
    85,886Property and Equipment:Land
    
    
    
    
    
    
    864
    
    
    
    379
    
    
    
    
    
    
    
    
    
    
    
    1,243Buildings and leasehold improvements
    
    
    11
    
    
    
    3,003
    
    
    
    387
    
    
    
    
    
    
    
    
    
    
    
    3,401Vehicles and other equipment
    
    
    6,331
    
    
    
    15,858
    
    
    
    3,884
    
    
    
    
    
    
    
    
    
    
    
    26,073Scaffolding equipment
    
    
    178,024
    
    
    
    
    
    
    
    13,790
    
    
    
    
    
    
    
    
    
    
    
    191,814Total property and equipment, at cost
    
    
    184,366
    
    
    
    19,725
    
    
    
    18,440
    
    
    
    
    
    
    
    
    
    
    
    222,531Less accumulated depreciation and amortization
    
    
    30,793
    
    
    
    9,346
    
    
    
    5,300
    
    
    
    
    
    
    
    
    
    
    
    45,439Total property and equipment, net
    
    
    153,573
    
    
    
    10,379
    
    
    
    13,140
    
    
    
    
    
    
    
    
    
    
    
    177,092Due from affiliates
    
    
    9,750
    
    
    
    
    
    
    
    
    
    
    
    42,367
    
    
    
    (52,117
    )
    
    
    Deferred tax asset
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    2,375
    
    
    
    (2,375
    )
    
    
    Investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    212,820
    
    
    
    (212,820
    )
    
    
    Goodwill
    
    
    248,347
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    248,347Customer relationships
    
    
    47,163
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    47,163Intangibles and other assets
    
    
    24,155
    
    
    
    
    
    
    
    
    
    
    
    944
    
    
    
    
    
    
    
    25,099Total assets
    
    $
    536,395
    
    
    $
    89,233
    
    
    $
    17,845
    
    
    $
    258,506
    
    
    $
    (318,392
    )
    
    $
    583,587
 Page -14-




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##### Table of Contents



BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Brand Intermediate Holdings, Inc.
Condensed Consolidating Balance Sheet
March 31, 2004 BrandNon-
    
    Brand
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Intermediate
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Holdings, Inc.
    
    Eliminations
    
    ConsolidatedLiabilities and Stockholders Equity (Deficit)Current Liabilities:Current maturities of long-term debt
    
    $
    1,047
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    1,047Notes payable and capital lease obligations, current portion
    
    
    660
    
    
    
    82
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    742Accounts payable and accrued expenses
    
    
    33,964
    
    
    
    9,283
    
    
    
    520
    
    
    
    
    
    
    
    (561
    )
    
    
    43,206Deferred revenue
    
    
    
    
    
    
    1,496
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,497Due to affiliates
    
    
    1,644
    
    
    
    42,048
    
    
    
    6,827
    
    
    
    
    
    
    
    (50,519
    )
    
    
    Total current liabilities
    
    
    37,315
    
    
    
    52,909
    
    
    
    7,348
    
    
    
    
    
    
    
    (51,080
    )
    
    
    46,492Long-term debt
    
    
    248,492
    
    
    
    
    
    
    
    
    
    
    
    38,207
    
    
    
    
    
    
    
    286,699Notes payable and capital lease obligations
    
    
    
    
    
    
    160
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    160Deferred income taxes
    
    
    30,235
    
    
    
    
    
    
    
    2,328
    
    
    
    
    
    
    
    (2,375
    )
    
    
    30,188Due to affiliates
    
    
    42,367
    
    
    
    
    
    
    
    9,750
    
    
    
    
    
    
    
    (52,117
    )
    
    
    Total stockholders equity (deficit)
    
    
    177,986
    
    
    
    36,164
    
    
    
    (1,581
    )
    
    
    220,299
    
    
    
    (212,820
    )
    
    
    220,048Total liabilities and stockholders equity (deficit)
    
    $
    536,395
    
    
    $
    89,233
    
    
    $
    17,845
    
    
    $
    258,506
    
    
    $
    (318,392
    )
    
    $
    583,587
 Page -15-




---



##### Table of Contents



BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Brand Intermediate Holdings, Inc.
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2003 BrandNon-
    
    Brand
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Intermediate
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Holdings, Inc.
    
    Eliminations
    
    ConsolidatedRevenue:Labor
    
    $
    
    
    
    $
    75,525
    
    
    $
    1,551
    
    
    $
    
    
    
    $
    
    
    
    $
    77,076Equipment rental

    
    
    
    
    
    
    18,781
    
    
    
    466
    
    
    
    
    
    
    
    
    
    
    
    19,247Equipment sales
    
    
    
    
    
    
    2,370
    
    
    
    33
    
    
    
    
    
    
    
    (497
    )
    
    
    1,906Intercompany revenue
    
    
    2,066
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (2,073
    )
    
    
    Total revenues
    
    
    2,066
    
    
    
    96,683
    
    
    
    2,050
    
    
    
    
    
    
    
    (2,570
    )
    
    
    98,229Operating expenses:Labor
    
    
    124
    
    
    
    61,791
    
    
    
    1,466
    
    
    
    
    
    
    
    
    
    
    
    63,381Equipment rental
    
    
    7,464
    
    
    
    1,012
    
    
    
    1,508
    
    
    
    
    
    
    
    
    
    
    
    9,984Equipment sales
    
    
    
    
    
    
    1,803
    
    
    
    25
    
    
    
    
    
    
    
    (585
    )
    
    
    1,243Divisional operating expenses
    
    
    18
    
    
    
    3,962
    
    
    
    109
    
    
    
    
    
    
    
    
    
    
    
    4,089Intercompany operating expenses
    
    
    
    
    
    
    2,066
    
    
    
    7
    
    
    
    
    
    
    
    (2,073
    )
    
    
    Total operating expenses
    
    
    7,606
    
    
    
    70,634
    
    
    
    3,115
    
    
    
    
    
    
    
    (2,658
    )
    
    
    78,697Gross profit
    
    
    (5,540
    )
    
    
    26,049
    
    
    
    (1,065
    )
    
    
    
    
    
    
    88
    
    
    
    19,532Selling and administrative expenses
    
    
    4,438
    
    
    
    6,746
    
    
    
    247
    
    
    
    
    
    
    
    
    
    
    
    11,431Operating income (loss)
    
    
    (9,978
    )
    
    
    19,303
    
    
    
    (1,312
    )
    
    
    
    
    
    
    88
    
    
    
    8,101Interest expense
    
    
    6,770
    
    
    
    
    
    
    
    
    
    
    
    1,185
    
    
    
    
    
    
    
    7,955Interest income
    
    
    (36
    )
    
    
    
    
    
    
    (7
    )
    
    
    
    
    
    
    
    
    
    
    (43
    )Intercompany interest
    
    
    1,185
    
    
    
    
    
    
    
    
    
    
    
    (1,185
    )
    
    
    
    
    
    
    Equity in loss (income) of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (113
    )
    
    
    113
    
    
    
    Income (loss) before provision for
Income tax
    
    
    (17,897
    )
    
    
    19,303
    
    
    
    (1,305
    )
    
    
    113
    
    
    
    (25
    )
    
    
    189Provision (benefit) for income tax
    
    
    (7,084
    )
    
    
    7,721
    
    
    
    (561
    )
    
    
    
    
    
    
    
    
    
    
    76Net income (loss)
    
    $
    (10,813
    )
    
    $
    11,582
    
    
    $
    (744
    )
    
    $
    113
    
    
    $
    (25
    )
    
    $
    113
 Page -16-




---



##### Table of Contents



BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) DLJ Brand Holdings, Inc. (Predecessor)
Condensed Consolidating Statement of Operations
For the Three Months Ended March 31, 2004 BrandNon-
    
    Brand
    

    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Intermediate
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Holdings, Inc.
    
    Eliminations
    
    ConsolidatedRevenue:Labor
    
    $
    
    
    
    $
    78,816
    
    
    $
    1,820
    
    
    $
    
    
    
    $
    
    
    
    $
    80,636Equipment rental
    
    
    
    
    
    
    17,648
    
    
    
    445
    
    
    
    
    
    
    
    
    
    
    
    18,093Equipment sales
    
    
    
    
    
    
    2,000
    
    
    
    44
    
    
    

    
    
    
    
    (438
    )
    
    
    1,606Intercompany revenue
    
    
    4,930
    
    
    
    15
    
    
    
    
    
    
    
    
    
    
    
    (4,945
    )
    
    
    Total revenues
    
    
    4,930
    
    
    
    98,479
    
    
    
    2,309
    
    
    
    
    
    
    
    (5,383
    )
    
    
    100,335Operating expenses:Labor
    
    
    
    
    
    
    65,964
    
    
    
    1,699
    
    
    
    
    
    
    
    (1,475
    )
    
    
    66,188Equipment rental
    
    
    5,496
    
    
    
    1,112
    
    
    
    322
    
    
    
    
    
    
    
    
    
    
    
    6,930Equipment sales
    
    
    
    
    
    
    1,718
    
    
    
    18
    
    
    
    
    
    
    
    (508
    )
    
    
    1,228Divisional operating expenses
    
    
    28
    
    
    
    3,990
    
    
    
    140
    
    
    
    
    
    
    
    
    
    
    
    4,158Intercompany operating expenses
    
    
    
    
    
    
    4,930
    
    
    
    15
    
    
    
    
    
    
    
    (4,945
    )
    
    
    Total operating expenses
    
    
    5,524
    
    
    
    77,714
    
    
    
    2,194
    
    
    
    
    
    
    
    (6,928
    )
    
    
    78,504Gross profit
    
    
    (594
    )
    
    
    20,765
    
    
    
    115
    
    
    
    
    
    
    
    1,545
    
    
    
    21,831Selling and administrative expenses
    
    
    4,542
    
    
    
    6,832
    
    
    
    341
    
    
    
    
    
    
    
    
    
    
    
    11,715Operating income (loss)
    
    
    (5,136
    )
    
    
    13,933
    
    
    
    (226
    )
    
    
    
    
    
    
    1,545
    
    
    
    10,116Interest expense
    
    
    6,808
    
    
    
    
    
    
    
    
    
    
    
    1,473
    
    
    
    
    
    
    
    8,281Interest income
    
    
    (70
    )
    
    
    
    
    
    
    (10
    )
    
    
    
    
    
    
    
    
    
    
    (80
    )Intercompany interest
    
    
    1,473
    
    
    
    
    
    
    
    
    
    
    
    (1,473
    )
    
    
    
    
    
    
    Equity in loss (income) of subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (775
    )
    
    
    775
    
    
    
    Income (loss) before provision for
income tax
    
    
    (13,347
    )
    
    
    13,933
    
    
    
    (216
    )
    
    
    775
    
    
    
    770
    
    
    
    1,915Provision (benefit) for income tax
    
    
    (7,027
    )
    
    
    8,290
    
    
    
    (123
    )
    
    
    
    
    
    
    
    
    
    
    1,140Net income (loss)
    
    $
    (6,320
    )
    
    $
    5,643
    
    
    $
    (93
    )
    
    $
    775
    
    
    $
    770
    
    
    $
    775
 Page -17-




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##### Table of Contents



BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Brand Intermediate Holdings, Inc.
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2003 BrandNon-
    
    Brand
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Intermediate
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Holdings, Inc.
    
    Eliminations
    
    ConsolidatedCASH FLOWS FROM OPERATING ACTIVITIES:Net cash provided by (used for) operating activities
    
    $
    9,278
    
    
    $
    666
    
    
    $
    (579
    )
    
    $
    
    
    
    $
    414
    
    
    $
    9,779CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (2,171
    )
    
    
    (666
    )
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    (2,897
    )Proceeds from sales of property and equipment
    
    
    461
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    461Net cash used for investing activities
    
    
    (1,710
    )
    
    
    (666
    )
    
    
    (60
    )
    
    
    
    
    
    
    
    
    
    
    (2,436
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments of long-term debt
    
    
    (325
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (325
    )Payments on capital lease obligations
    
    
    (842
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (842
    )Net cash used for financing activities
    
    
    (1,167
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,167
    )INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    
    6,401
    
    
    
    
    
    
    
    (639
    )
    
    
    
    
    
    
    414
    
    
    
    6,176CASH AND CASH EQUIVALENTS, beginning of period
    
    
    3,931
    
    
    
    
    
    
    
    1,480
    
    
    
    
    
    
    
    (594
    )
    
    
    4,817CASH AND CASH EQUIVALENTS, end of period
    
    $
    10,332
    
    
    $
    
    
    
    $
    841
    
    
    $
    
    
    
    $
    (180
    )
    
    $
    10,993
 Page -18-




---



##### Table of Contents



BRAND INTERMEDIATE HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) Brand Intermediate Holdings, Inc.
Condensed Consolidating Statement of Cash Flows
For the Three Months Ended March 31, 2004 BrandNon-
    
    Brand
    
    Adjustments
    
    IntermediateBrand
    
    Guarantor
    
    Guarantor
    
    Intermediate
    
    and
    
    Holdings, Inc.Services, Inc.
    
    Subsidiaries
    
    Subsidiary
    
    Holdings, Inc.
    
    Eliminations
    
    ConsolidatedCASH FLOWS FROM OPERATING ACTIVITIES:Net cash provided by (used for) operating activities
    
    $
    6,482
    
    
    $
    423
    
    
    $
    (927
    )
    
    $
    
    
    
    $
    78
    
    
    $
    6,056CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment
    
    
    (3,632
    )
    
    
    (406
    )
    
    
    (246
    )
    
    
    
    
    
    
    
    
    
    
    (4,284
    )Proceeds from sales of property and equipment
    
    
    438
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    438Investment in subsidiaries
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Net cash used for investing activities
    
    
    (3,194
    )
    
    
    (406
    )
    
    
    (246
    )
    
    
    
    
    
    
    
    
    
    
    (3,846
    )CASH FLOWS FROM FINANCING ACTIVITIES:Payments of long-term debt
    
    
    (20,312
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (20,312
    )Payments of deferred financing fees
    
    
    (677
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (677
    )Payments on capital lease obligations
    
    
    (165
    )
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (182
    )Net cash provided by/(used for) financing activities
    
    
    (21,154
    )
    
    
    (17
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (21,171
    )INCREASE (DECREASE) IN CASH AND CASH
EQUIVALENTS
    
    
    (17,866
    )
    
    
    
    
    
    
    (1,173
    )
    
    
    
    
    
    
    78
    
    
    
    (18,961
    )CASH AND CASH EQUIVALENTS, beginning of period
    
    
    21,154
    
    
    
    
    
    
    
    2,236
    
    
    
    
    
    
    
    (290
    )
    
    
    23,100CASH AND CASH EQUIVALENTS, end of period
    
    $
    3,288
    
    
    $
    
    
    
    $
    1,063
    
    
    $
    
    
    
    $
    (212
    )
    
    $
    4,139
 Page -19-




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ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS The matters discussed in this Form 10-Q of Brand Intermediate Holdings, Inc.
and subsidiaries (the Company) contain forward looking statements that
involve a number of risks and uncertainties. A number of factors could cause
actual results, performance, achievements of the Company, or industry results,
to be materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. These factors
include, but are not limited to, the competitive environment in the industrial
and commercial scaffolding industry in general and in the Companys specific
market areas; changes in prevailing interest rates and the availability of and
terms of financing to fund the anticipated growth of the Companys business;
inflation; changes in costs of goods and services; economic conditions in
general and in the Companys specific market areas; demographic changes;
changes in or failure to comply with federal, state and/or local government
regulations; liability and other claims asserted against the Company; changes
in operating strategy or development plans; the ability to attract and retain
qualified personnel; the significant indebtedness of the Company; labor
disturbances; changes in the Companys acquisition and capital expenditure
plans; and other factors referenced herein. The forward looking statements
contained herein reflect the Companys current beliefs and specific assumptions
with respect to future business decisions and are based on information
currently available. Accordingly, the statements are subject to significant
risks, uncertainties and contingencies, which could cause the Companys actual
operating results, performance or business prospects to differ from those
expressed in, or implied by, these statements. The following discussion and analysis should be read in conjunction with the
attached condensed consolidated financial statements and notes thereto. Overview The Company is the one of the largest North American providers of industrial
scaffolding services which facilitate access to tall structures for
maintenance, turnarounds and capital projects, principally in the refining,
petrochemical, chemical, utility and pulp and paper industries. The Company
provides turnkey services, which include equipment rental, labor for the
erection and dismantlement of the scaffolding and scaffolding design services.
The Company also provides scaffolding services to the commercial market
(primarily nonresidential construction and renovation) and sells a small amount
of scaffolding. The Company typically provides on-going maintenance services under long-term
contracts; the duration of these contracts is usually one to five years.
Turnarounds occur every one to four years depending on the industry and the
type of turnaround being performed. Although some turnarounds may be postponed
for a period of time, they are a necessary component of maintaining industrial
facilities and are required to ensure the safe and efficient operation of such
facilities. While the postponement of scheduled turnarounds causes fluctuations
in the Companys Page -20-




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##### Table of Contents



quarterly and annual results, the Company believes the necessity for on-going
maintenance and turnarounds provides a stable, recurring revenue base. The Companys business is seasonal. End-use industries such as the refining
and utility industries experience increased demand for their products during
the summer months. Consequently, turnarounds are generally scheduled during
the first and fourth quarters of the year. Brand Intermediate Holdings, Inc. and its subsidiaries (Brand) are 100% owned
by Brand Holdings LLC (the LLC). As of March 31, 2004, the voting equity
interests of the LLC are owned 74.1% by J.P. Morgan Partners and its affiliates
(JPMP) and 25.9% by other equity investors on a fully diluted basis. Brand
Services, Inc. is a wholly owned subsidiary of Brand Intermediate Holdings,
Inc. and its subsidiaries. Results of Operations Revenue  Total revenue increased by 2.1%, from $98.2 million to $100.3
million, for the three months ended March 31, 2004 as compared to the three
months ended March 31, 2003. Labor revenues increased by $3.6 million for the
three months ended March 31, 2004 as compared to the three months ended March
31, 2003, offset by decreases in equipment rental revenue and equipment sales
revenue of $1.2 million and $0.3 million, respectively. Overall, revenue
increased due to a large number of turnarounds in the refinery and chemical
sector in the first quarter 2004. This more than offset a decrease in the
utility capital sector. The revenue mix has shifted more towards labor from
equipment rental primarily due to a significant amount of overtime work related
to the turnarounds, as well as the impact of the shift to refinery turnaround
work from utility capital work. Gross Profit  Gross profit increased by $2.3 million, or 11.8%, for the three
months ended March 31, 2004 as compared to the three months ended March 31,
2003. The percentage of labor gross profit to labor revenue remained relatively
flat at 17.9% for the three months ended March 31, 2004 compared to 17.8% for
the three months ended March 31, 2003. Equipment rental gross profit increased
by $1.9 million for the three months ended March 31, 2004 as compared to the
three months ended March 31, 2003, despite the $1.2 million decrease in rental
revenue. This increase is almost entirely due to a $3.1 million decrease in
depreciation expense that resulted from groups of assets that became fully
depreciated at the end of 2003. Selling and administrative expenses  Selling and administrative expenses
increased by $0.2 million for the three months ended March 31, 2004 as compared
to the three months ended March 31, 2003. As a percentage of revenue these
expenses remained flat at 11.6%. Operating income  As a result of the above events, operating income increased
by $2.0 million, or 24.9%, for the three months ended March 31, 2004 as
compared to the three months ended March 31, 2003. Page -21-




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Interest expense  Interest expense increased by $0.3 million from for the
three months ended March 31, 2004 compared to the three months ended March 31,
2003, primarily due to the compounding effect of interest on the 13%
Intermediate pay-in-kind notes. Income tax provision  The income tax provision of $76,000 for the three months
ended March 31, 2003, represents an effective rate of 40.2%, which is greater
than the federal statutory rate of 35% primarily due to state income taxes.
The income tax provision of $1.1 million for the three months ended March 31,
2004, represents an effective rate of 59.5%, which is greater than the federal
statutory rate of 35% primarily due to state income taxes and the determination
that a portion of the interest on the pay in kind Intermediate Notes is not
deductible. Liquidity and Capital Resources The Company has historically utilized internal cash flow from operations and
borrowings under its credit facility to fund its operations, capital
expenditures and working capital requirements. As of December 31, 2003 and
March 31, 2004, the Company had working capital of $53.6 million and $39.4
million and cash of $23.1 million and $4.1 million, respectively. One of the Companys major uses of cash is capital expenditures. The Companys
capital expenditure requirements are comprised of maintenance and expansion
expenditures. The Companys maintenance capital expenditure requirements are
generally for scaffolding planks and other items used in the business, such as
trucks and equipment. Expansion capital expenditures are for new scaffolding
and vehicles, are discretionary and vary annually based on the Companys level
of scaffolding rental activity and managements growth expectations. During the
three months ended March 31, 2003 and 2004, capital expenditures were $2.9
million and $4.5 million, respectively. Our Credit Facility (the Credit Facility) provides for $130.0 million of term
loans, a $50.0 million revolving loan facility and $35.0 million of
letter of
credit facilities. Up to $20.0 million of the $50.0 million revolving loan
facility may be used for letters of credit. The Credit Facility was amended on
February 3, 2004. The amendment increased the letter of credit facilities from
$20 million to the $35 million mentioned above, and lowered the interest rate
margin on the term loans by 0.75%. As of March 31, 2004, the Company had no
borrowings outstanding under the revolving credit facility and had total
outstanding letters of credit of $35.1 million. The interest rate on the $130.0 million of term loans under the Credit Facility
is variable. For the three months ended March 31, 2004, the weighted average
interest rate on the term loans was 4.6%. We are required to make semi-annual interest payments on our 12%, $150.0
million Senior Subordinated Notes in the amount of $9.0 million in April and
October of every year until the Senior Notes mature in October 2012. We are
also required to make quarterly interest payments on loans under our Credit
Facility, which bears interest at a floating rate based upon either the base
rate (as defined Page -22-




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##### Table of Contents



in our credit agreement, for base rate loans) or the LIBOR rate (for LIBOR
loans) plus a spread of 1.75% to 3.25%, depending on the ratio of our
consolidated debt to EBITDA. As of March 31, 2004, the interest rate on our
term loans was 4.4%. We are not required to make interest payments on our 13%,
Intermediate Notes, until 2008 as these are pay-in-kind notes. The Credit Facility requires financial and operating covenants, including among
other things, that the Company maintain certain financial ratios, and imposes
limitations on the Companys ability to make capital expenditures, to incur
indebtedness, and to pay dividends. The Company was in compliance with all loan
covenants at March 31, 2004. A summary of the sources and uses of cash for the three months ended March 31,
2003 and 2004, follows: Three Months EndedMarch 31,2003
    
    2004Net cash provided by (used for):Operating activities
    
    $
    9,779
    
    
    $
    6,056Investing activities
    
    
    (2,436
    )
    
    
    (4,105
    )Financing activities
    
    
    (1,167
    )
    
    
    (20,912
    )
 Contractual Obligations The following is a summary of contractual cash obligations as of March 31, 2004
(dollars in thousands): Payments due in:Total
    
    2004
    
    2005
    
    2006
    
    2007
    
    2008
    
    After 2008Term Loan
    
    $
    103,400
    
    
    $
    785
    
    
    $
    1,047
    
    
    $
    1,047
    
    
    $
    1,047
    
    
    $
    1,047
    
    
    $
    98,427Expected Interest
Payments
on Term
Loan
    
    
    23,045
    
    
    
    3,368
    
    
    
    4,451
    
    
    
    4,406
    
    
    
    4,360
    
    
    
    4,314
    
    
    
    2,146Senior Notes
    
    
    150,000
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    150,000Expected Interest
Payments
on Senior Notes
    
    
    162,000
    
    
    
    18,000
    
    
    
    18,000
    
    
    
    18,000
    
    
    
    18,000
    
    
    
    18,000
    
    
    
    72,000Intermediate Notes
    
    
    42,052
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    42,052Expected Interest
Payments on
Intermediate Notes
    
    
    75,401
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    8,657
    
    
    
    66,744Capital Leases
    
    
    278
    
    
    
    86
    
    
    
    95
    
    
    
    92
    
    
    
    5
    
    
    
    
    
    
    
    Operating Leases
    
    
    8,463
    
    
    
    2,192
    
    
    
    2,285
    
    
    
    1,852
    
    
    
    1,267
    
    
    
    607
    
    
    
    260Notes Payable
    
    
    660
    
    
    
    495
    
    
    
    165
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Total Contractual
Cash Obligations
    
    $
    565,299
    
    
    $
    24,926
    
    
    $
    26,043
    
    
    $
    25,397
    
    
    $
    24,679
    
    
    $
    32,625
    
    
    $
    431,629
 Critical Accounting Policies Certain of our accounting policies as discussed below require the application
of significant judgement by management in selecting the appropriate assumptions
for calculating amounts to record in our financial statements. By their nature,
these judgements are subject to an inherent degree of uncertainty. Page -23-




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Labor revenues are recognized when the services are performed. Equipment rental
revenue is recognized based on the number of days the equipment is rented
beginning with the first day the equipment is under rental. The Company
periodically sells new scaffolding directly to third parties. The Company
recognizes revenue upon shipment and records as operating expense, the average
cost of the scaffolding sold. The Company periodically sells scaffolding to
third parties, primarily to its rental customers. The Company recognizes
revenue for the proceeds of such sales and records as operating expense, the
net book value of the scaffolding. Net book value is determined assuming the
oldest scaffolding is sold first, as the Company maintains inventory records on
a group basis. As part of our ongoing business, we make payments for workers compensation and
health benefit claims. We have purchased insurance coverage for large claims.
Our workers compensation and health benefit liabilities are developed using
actuarial methods based upon historical data for payment patterns, cost trends,
utilization of healthcare services and other relevant factors. These estimates
take into account incurred but not reported (IBNR) claims. While we believe
our liabilities for workers compensation, general liability, automobile, and
health benefit claims of $14.5 million as of March 31, 2004, are adequate and
that the judgement applied is appropriate, such estimated liabilities could
differ materially from what will actually transpire in the future. The Company accounts for its long-lived assets excluding goodwill and
tradenames, in accordance with Statement of Financial Accounting Standards
(SFAS) No. 144, which requires the Company to assess the recoverability of
these assets when events or changes in circumstances indicate that the carrying
amount of the long-lived asset (group) might not be recoverable. If impairment
indicators exist, the Company determines whether the projected undiscounted
cash flows will be sufficient to cover the carrying value of such assets. This
requires the Company to make significant judgements about the expected future
cash flows of the asset group. The future cash flows are dependent on general
and economic conditions and are subject to change. The Company accounts for its goodwill and tradenames in accordance with SFAS
No. 142, which requires the Company to test goodwill and tradenames for
impairment annually and whenever events occur or circumstances change that
would more likely than not reduce the fair value of the reporting unit below
its carrying value. For purposes of applying the provisions, the Company has
determined that it will perform its impairment analysis on a consolidated
enterprise level. Because quoted market prices do not exist for the Company,
management uses the present value of expected future cash flows to estimate
fair value. Management must make significant judgements and estimates about
future conditions to estimate future cash flows. Unforeseen events and changes
in circumstances and market conditions including general economic and
competitive conditions, could result in significant changes in those estimates
and material charges to income. Page -24-




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Change in Accounting Principle Effective January 1, 2004, the Company adopted the fair value recognition
provisions of Statement of Financial Accounting Standards (SFAS) No. 123,
Accounting for Stock-Based Compensation. The Company selected the modified
prospective transition method under the provisions of SFAS No. 148, Accounting
for Stock-Based Compensation-Transition and Disclosure, which requires
expensing options prospectively, beginning in the year of adoption. The
Company expensed $42,000 for the three-month period ended March
31, 2004, recorded in the caption Selling and Administrative expenses. Prior to 2004, the company accounted for stock-based compensation under the
recognition and measurement provisions of Accounting Principles Board Opinion
No. 25, Accounting for Stock Issued to Employees, and related
interpretations. No stock-based employee compensation expense was reflected in
2003, as all options granted under those plans had an exercise price
greater than
the fair market value of the underlying equity on the date of grant. 
 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The Company is exposed to market risk from changes in interest rates and
foreign exchange rates. The Companys net exposure to interest rate risk
consists of variable-rate instruments based on LIBOR. 
 ITEM 4. CONTROLS AND PROCEDURES An evaluation was carried out under the supervision and with the participation
of our management, including our Chief Executive Officer and Chief Financial
Officer, of the effectiveness of our disclosure controls and procedures (as
defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act
of 1934) as of the end of the quarter covered by this report. Based on their
evaluation, our Chief Executive Officer and Chief Financial Officer have
concluded that the companys disclosure controls and procedures are effective
to ensure that information required to be disclosed by our company in reports
that it files or submits under the Exchange Act is recorded, processed,
summarized and reported within the time periods specified in Securities and
Exchange Commission rules and forms. There were no changes in the internal
control over financial reporting that occurred during the first quarter of 2004
that have materially affected, or are likely to materially affect, our internal
control over financial reporting. Page -25-




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PART II  OTHER INFORMATION 
 ITEM 1. LEGAL PROCEEDINGS From time to time, the Company is subject to legal proceedings and other claims
arising in the ordinary course of its business. There are no material pending
legal proceedings, other than routine litigation incidental to the business, to
which the Company is a party or of which any of the Companys property is the
subject. 
 ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS None. 
 ITEM 3. DEFAULTS UPON SENIOR SECURITIES None. 
 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. 
 ITEM 5. OTHER INFORMATION None. 
 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits 31.1
    
    Certification of Chief Executive Officer under Section 302 of the
Sarbanes-Oxley Act of 2002.31.2
    
    Certification of Chief Financial Officer under Section 302 of the
Sarbanes-Oxley Act of 2002.32.1
    
    Certification of Chief Executive Officer under Section 906 of the
Sarbanes-Oxley Act of 2002.32.2
    
    Certification of Chief Financial Officer under Section 906 of the
Sarbanes-Oxley Act of 2002.
 (b) Reports on Form 8-K None. Page -26-




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SIGNATURES Pursuant to the requirement 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. BRAND INTERMEDIATE HOLDINGS, INC.Date: May 17, 2004
    
    /s/ John M. MonterJohn M. MonterChief Executive Officer, PresidentDate: May 17, 2004
    
    /s/ Jeffrey W. PetersonJeffrey W. PetersonChief Financial Officer,Vice President, Finance
 Page -27-