Page 1 of 8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
/___/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
AND EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8368
ROLLINS ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0228924
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Rollins Plaza, Wilmington, Delaware 19803
(Address of principal executive offices) (Zip Code)
(302) 426-3314
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
The number of shares of the registrant's common stock outstanding as of
March 31, 1994 was 60,375,811.
FORM 10-Q Page 2 of 8
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three months and six months ended March 31, 1994 are not necessarily indicative
of the results that may be expected for the year ending September 30, 1994.
These statements should be read in conjunction with the financial statements and
notes thereto included in the Company's Annual Report to Shareholders and Form
10-K for the year ended September 30, 1993.
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
($000 Omitted Except for Per Share Amounts)
Three Months Ended Six Months Ended
March 31, March 31,
1994 1993 1994 1993
Operating revenues $ 41,363 $54,614 $ 88,878 $113,599
Operating expenses 33,631 37,431 68,232 74,409
Special charge 14,500 - 14,500 -
Depreciation 5,925 5,213 11,455 10,348
Selling and administrative expenses 6,914 7,160 13,929 14,448
Interest expense 83 119 225 239
61,053 49,923 108,341 99,444
Earnings (loss) before income taxes
(benefit) and cumulative effect
of change in accounting principle (19,690) 4,691 (19,463) 14,155
Income taxes (benefit) (7,317) 1,810 (7,196) 5,208
Earnings (loss) before cumulative
effect of change in accounting
principle (12,373) 2,881 (12,267) 8,947
Cumulative effect (to September 30,
1993) of adoption of SFAS No. 109 - - 543 -
Net earnings (loss) $(12,373) $ 2,881 $(11,724) $ 8,947
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of change in accounting
principle $ (.20) $ .05 $ (.20) $ .15
Cumulative effect of adoption of
SFAS No. 109 - - .01 -
$ (.20) $ .05 $ (.19) $ .15
Average common shares and equivalents
outstanding (000) 60,376 60,498
Dividends paid per common share None $ .02 1/2 None $ .05
FORM 10-Q Page 3 of 8
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
March 31, September 30,
ASSETS 1994 1993
Current assets
Cash and cash equivalents (includes short-term
investments of: $42,801-March;
$44,218-September) $ 44,121 $ 47,487
Accounts receivable, net 29,494 30,311
Deferred income taxes 5,033 3,514
Income taxes recoverable 4,539 1,446
Other current assets 8,556 6,612
Total current assets 91,743 89,370
Property and equipment, at cost
Land 28,606 27,861
Buildings 30,085 28,150
Equipment and vehicles 186,533 186,075
Site improvements 27,153 25,406
Construction in progress 10,361 20,409
Accumulated depreciation (116,611) (106,903)
166,127 180,998
Other assets 7,697 8,273
$265,567 $278,641
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 7,657 $ 7,067
Accrued liabilities 11,242 12,119
Accrued remediation and other costs 5,066 4,697
Current maturities of long-term debt 662 623
Total current liabilities 24,627 24,506
Long-term debt 4,141 4,632
Deferred income taxes 12,982 15,374
Accrued remediation and other costs 15,350 16,358
Other liabilities 7,296 4,964
Commitments and contingent liabilities
See Part II, Item 1 Legal Proceedings
Shareholders' equity
Preferred stock, $1 par value,
1,000,000 shares authorized; issued and
outstanding - None
Common stock, $1 par value, 120,000,000 shares
authorized; issued and outstanding:
March-60,375,811; September-60,350,254 60,376 60,350
Capital in excess of par value 4,650 4,588
Retained earnings 136,145 147,869
Total shareholders' equity 201,171 212,807
$265,567 $278,641
FORM 10-Q Page 4 of 8
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Six Months Ended
March 31,
1994 1993
Cash flows from operating activities:
Net (loss) earnings $(11,724) $ 8,947
Reconciliation of net (loss) earnings to
net cash flows from operating activities:
Special charge 14,500 -
Expenditures charged to accrued remediation
and other costs, net (639) (2,181)
Depreciation 11,455 10,348
Current and deferred income taxes (7,004) (1,772)
Decrease in accounts receivable 817 4,212
(Decrease) in accounts payable and accrued
liabilities (287) (4,424)
Other, net (2,968) (856)
Net cash flows from operating activities 4,150 14,274
Cash flows from investing activities:
Purchase of property and equipment (7,209) (20,622)
Proceeds from sale of equipment 57 67
Net cash flows (used in) investing activities (7,152) (20,555)
Cash flows from financing activities:
Repayment of long-term debt (452) (1,205)
Dividend payments - (3,015)
Exercise of stock options 88 221
Net cash flows (used in) financing activities (364) (3,999)
Net (decrease) in cash and cash equivalents (3,366) (10,280)
Cash and cash equivalents:
Beginning of period 47,487 55,120
End of period $ 44,121 $ 44,840
Supplemental information:
Interest paid $ 511 $ 517
Income taxes (recovered) paid $ (733) $ 6,798
FORM 10-Q Page 5 of 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Six Months Ended March 31, 1994 vs. Six Months Ended
March 31, 1993
Revenues for the first six months decreased by $24,721,000 (21.8%) due
mainly to the continued weak conditions in the hazardous waste treatment
market and the extreme winter weather in the Northeast and Midwest during
January and February of 1994. The reduced revenues reflect a lower volume
processed at lower average prices.
A review was made of the Company's assets at March 31, 1994. As a
result of this review, a Special Charge before taxes of $14,500,000
($9,031,000 after taxes) was recorded in the second quarter for: (1)
various engineering and other expenditures on capital projects no longer
considered viable in the current business climate ($8,200,000); (2) future
estimated expenditures for landfill capping and related activities
($5,000,000); and (3) miscellaneous items ($1,300,000).
Operating expenses decreased by $6,177,000 (8.3%) reflecting the
reduced level of revenues along with the impact of personnel cutbacks and
other cost reduction efforts. Operating costs as a percentage of revenues
increased to 76.8% in 1994 from 65.5% in 1993 due mainly to the decrease in
revenues.
Depreciation increased by $1,107,000 (10.7%) due to the Company's
capital expenditure program to upgrade equipment, improve operating
efficiency and comply with changing regulations.
Selling and administrative expenses decreased by $519,000 (3.6%) due
mainly to lower commissions and other compensation expenses related to the
lower level of revenues and personnel cutbacks under the Company's cost
reduction program. As a percentage of revenues, selling and administrative
expenses were 15.7% in 1994 and 12.7% in 1993 due mainly to the lower
revenues.
The income tax benefit recorded for the six months ended March 31, 1994
was based on an estimated effective rate of 37.0%. The income tax charge
for 1993 was based on an estimated effective rate of 36.8%.
The net loss for the first six months of 1994 was $11,724,000 or $.19
per share compared to net earnings of $8,947,000 or $.15 per share in 1993.
The Special Charge of $14,500,000 ($9,031,000 after taxes) included in the
net loss for the quarter and the six months ended March 31, 1994 amounted to
$.15 per share. The cumulative effect to September 30, 1993 of the adoption
of SFAS No. 109, Accounting For Income Taxes, in the first quarter of 1994
resulted in a favorable adjustment to net earnings of $543,000 or $.01 per
share. Exclusive of the Special Charge and the cumulative effect of the
change in accounting principle, the Company had a net loss of $3,236,000 or
$.05 per share.
FORM 10-Q Page 6 of 8
Results of Operations: Three Months Ended March 31, 1994 vs. Three Months
Ended March 31, 1993
Revenues decreased by $13,251,000 (24.3%) due to the continued weak
conditions in the hazardous waste treatment market and the extreme winter
weather in the Northeast and Midwest. The reduced revenues reflect lower
volume processed at lower average prices.
As discussed above, a Special Charge of $14,500,000 ($9,031,000 after
taxes) was recorded in the second quarter ended March 31, 1994.
Operating expenses decreased by $3,800,000 (10.2%) reflecting the
reduced level of revenues along with the impact of personnel cutbacks and
other cost reduction efforts. As a percentage of revenues, operating
expenses were 81.3% in 1994 compared to 68.5% in 1993 due mainly to the
reduction in revenues.
Depreciation increased by $712,000 (13.7%) due to the Company's capital
expenditure program to upgrade its equipment, improve operating efficiency
and comply with changing regulations.
Selling and administrative expenses decreased by $246,000 (3.4%) due
mainly to lower compensation costs resulting from the Company's cost
reduction efforts. Selling and administrative expenses were 16.7% of
revenues in 1994 compared to 13.1% in 1993 due mainly to the lower revenues.
The income tax benefit recorded for the quarter ended March 31, 1994
was based on an estimated annual effective rate of 37.0%. The income tax
charge for the quarter ended March 31, 1993 was based on an estimated annual
effective rate of 36.8%.
The net loss for the second quarter was $12,373,000 or $.20 per share
compared with net earnings of $2,881,000 or $.05 per share in 1993. The
1994 net loss included the Special Charge of $14,500,000 ($9,031,000 after
taxes) or $.15 per share. Exclusive of the Special Charge, the net loss
from operations was $3,342,000 or $.05 per share.
Earnings from operations continue to be adversely affected by the weak
conditions in the hazardous waste treatment market. The Company is
continuing its comprehensive program to improve its competitive position and
its profitability. This program includes Company-wide cost reductions
including elimination of salary increases and personnel cutbacks where
appropriate. In addition, the Company is directing capital expenditures at
improving material handling and other capabilities.
Liquidity and Capital Resources
The Company's financial condition continues to be strong despite the
reduced earnings of the last several quarters. The Special Charge of
$14,500,000 in the second quarter did not affect current cash flow. The
accruals for landfill capping and other costs included in the Special Charge
will require cash outlays in future periods.
FORM 10-Q Page 7 of 8
The Company's reduced capital expenditures were financed with the cash
flow from operations and funds on hand.
The Board of Directors of the Company suspended the payment of
dividends on its common stock at its October 29, 1993 meeting to retain
these funds within the Company for use in its capital improvement program.
The Board of Directors will periodically review the resumption of future
dividend payments.
Otherwise, there have been no material changes in the Company's
financial condition and its liquidity and capital resources since September
30, 1993. For further details, see page 14 of the Company's 1993 Annual
Report to Shareholders.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no additional significant legal proceedings nor any
material changes in the legal proceedings reported on pages 3 through 5 of
the Company's Form 10-K for the fiscal year ended September 30, 1993.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 28,
1994. The Company's 1993 Stock Option Plan was approved as proposed by
Proposal No. 2 of the NOTICE OF ANNUAL MEETING OF SHAREHOLDERS TO BE HELD ON
JANUARY 28, 1994. At the meeting, 48,029,202 affirmative votes and
3,032,038 negative votes were cast on Proposal No. 2, while 1,570,244 shares
abstained.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
FORM 10-Q Page 8 of 8
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.
DATE: April 27, 1994 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
_________________________________________
Nicholas Pappas
President and Chief Operating Officer
_________________________________________
Leo F. Rattigan, Jr.
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
FORM 10-Q Page 8 of 8
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.
DATE: April 27, 1994 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
/s/ Nicholas Pappas
Nicholas Pappas
President and Chief Operating Officer
/s/ Leo F. Rattigan, Jr.
Leo F. Rattigan, Jr.
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
