Page 1 of 9
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 June 30, 1995
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)
(Former name of registrant)
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 June 30, 1995 was 60,375,811.
FORM 10-Q Page 2 of 9
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
(a) Basis of Preparation.
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 quarter and nine months ended June 30,
1995 are not necessarily indicative of the results that may be expected for
the year ending September 30, 1995. These statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Annual Report on Form 10-K for the year ended September 30, 1994.
(b) Acquisition of Assets.
As of the close of business on March 31, 1995, the Company acquired
from Westinghouse Electric Corporation ("Seller") all of the issued and
outstanding shares of capital stock of National Electric, Inc., ("NEI"), a
wholly owned subsidiary of the Seller. NEI owns all of the issued and
outstanding shares of capital stock of Aptus, Inc. ("Aptus"). NEI is not
conducting any business operations. Aptus is engaged in the sale of
services related to the transportation, storage, laboratory analysis and
incineration of certain types of hazardous waste. The major facilities are
located in Aragonite, Utah; Coffeyville, Kansas; Denver, Colorado; Houston,
Texas and Lakeville, Minnesota. The Company is continuing the business of
Aptus.
The adjusted purchase price of the Aptus acquisition was $132,039,000
which consisted of a cash payment of $6,500,000, the assumption of the
Seller's obligations and duties in connection with the $45,700,000 of
Tooele County, Utah Variable Rate Hazardous Waste Treatment Revenue Bonds,
Series A and the issuance to the Seller of $13,839,000 of 7.75% Senior
Unsecured Debentures and $66,000,000 of 7.25% Convertible Subordinated
Debentures.
On April 28, 1995, the Company acquired all of the issued and
outstanding shares of capital stock of Allworth of Tennessee, Inc., a waste
processing facility located in Mount Pleasant, Tennessee. The purchase
price consisted of a cash payment of $2,320,000 and the assumption of
$6,400,000 of variable rate debt.
These acquisitions were accounted for as purchases and, accordingly,
the respective purchase prices were allocated to the acquired assets and
assumed liabilities based upon management's estimate of their fair value.
The financial information presented herein includes the results of
operations of the acquired companies since their respective dates of
acquisition.
<PAGE>
FORM 10-Q Page 3 of 9
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
($000 Omitted Except for Per Share Amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
1995 1994 1995 1994
Operating revenues $ 63,287 $46,650 $156,548 $135,528
Operating expenses 54,271 32,284 127,536 100,516
Special charge - - - 14,500
Depreciation 7,797 5,670 19,086 17,125
Selling and administrative
expenses 9,032 6,138 23,206 20,067
Interest expense 2,281 79 2,446 304
73,381 44,171 172,274 152,512
Earnings (loss) before income
taxes (benefit) and cumulative
effect of change in accounting
principle (10,094) 2,479 (15,726) (16,984)
Income taxes (benefit) (3,488) 911 (5,763) (6,285)
Earnings (loss) before cumulative
effect of change in accounting
principle (6,606) 1,568 (9,963) (10,699)
Cumulative effect (to September 30,
1993) of adoption of
SFAS No. 109 - - - 543
Net earnings (loss) $ (6,606) $ 1,568 $ (9,963) $(10,156)
Earnings (loss) per share:
Earnings (loss) before
cumulative effect of change
in accounting principle $ (.11) $ .02 $ (.17) $ (.18)
Cumulative effect of adoption
of SFAS No. 109 - - - $ .01
$ (.11) $ .02 $ (.17) $ (.17)
Average common shares and
equivalents outstanding (000) 60,376 60,376
Dividends paid per common share None None None None
<PAGE>
FORM 10-Q Page 4 of 9
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1995 1994
Current assets
Cash and cash equivalents (includes
short term investments of: June-$34,165;
September-$45,437) $ 39,424 $ 54,772
Accounts receivable, net 45,212 28,727
Deferred income taxes 6,663 6,170
Income taxes recoverable 4,876 3,827
Other current assets 10,565 6,538
Total current assets 106,740 100,034
Property and equipment, at cost
Land 36,750 28,790
Buildings 67,615 32,360
Equipment and vehicles 283,433 190,785
Site improvements 29,753 29,072
Construction in progress 22,662 13,063
Accumulated depreciation (144,377) (127,687)
295,836 166,383
Excess of cost over net assets of
business acquired 14,476 -
Other assets 11,568 6,969
Total assets $ 428,620 $ 273,386
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 19,822 $ 9,591
Accrued liabilities 27,106 17,556
Accrued remediation and other costs 6,206 5,895
Current maturities of long-term debt 1,689 623
Total current liabilities 54,823 33,665
Long-term debt 133,719 3,970
Accrued remediation and other costs 10,737 13,516
Other liabilities 5,813 5,331
Deferred income taxes 30,530 13,943
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:
June-60,375,811; September-60,375,811 60,376 60,376
Capital in excess of par value 4,650 4,650
Retained earnings 127,972 137,935
Total shareholders' equity 192,998 202,961
Total liabilities and
shareholder's equity $ 428,620 $ 273,386
<PAGE>
FORM 10-Q Page 5 of 9
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months
Ended June 30,
1995 1994
Cash flows from operating activities:
Net loss $ (9,963) $(10,156)
Reconciliation of net loss to net cash flows
from operating activities:
Depreciation and amortization 19,281 17,125
Special charge - 14,500
Expenditures charged to accrued remediation
and other costs, net (2,676) (1,131)
Current and deferred income taxes (2,157) (6,384)
(Increase) decrease in accounts receivable (3,212) 1,313
Increase in accounts payable and
accrued liabilities 9,125 1,199
Other, net (1,362) (3,251)
Net cash flows from operating activities 9,036 13,215
Cash flows from investing activities:
Acquisition of businesses (140,759) -
Purchase of property and equipment (15,261) (10,811)
Proceeds from sale of equipment 359 58
Net cash flows (used in) investing
activities (155,661) (10,753)
Cash flows from financing activities:
Acquisition debt 131,939 -
Repayment of long-term debt (662) (623)
Exercise of stock options - 89
Net cash flows from (used in) financing
activities 131,277 (534)
Net (decrease) increase in cash
and cash equivalents (15,348) 1,928
Cash and cash equivalents:
Beginning of period 54,772 47,487
End of period $ 39,424 $ 49,415
Supplemental information:
Interest paid $ 941 $ 580
Income taxes recovered $ (3,605) $ (444)
<PAGE>
FORM 10-Q Page 6 of 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Introduction
As more fully described in Part I, Item 1(b) (Acquisition of Assets),
the financial information for both the quarter and nine months ended June
30, 1995 includes the results of operations of the acquired companies.
Results of Operations: Nine Months Ended June 30, 1995 vs. Nine Months
Ended June 30, 1994
Revenues for the first nine months increased by $21,020,000 (15.5%) due
mainly to recent acquisitions. The Company's operations continue to be
adversely affected by overcapacity and lower business volumes available in
the commercial hazardous waste treatment market.
Operating expenses increased by $27,020,000 (26.9%) reflecting the
increase in revenues, higher operating costs as the result of recent
acquisitions, higher transportation costs and higher plant maintenance.
Operating costs as a percentage of revenues increased to 81.5% in 1995 from
74.2% in 1994.
Depreciation increased by $1,961,000 (11.5%) due mainly to the impact
of recent acquisitions offset in part by lower leasehold improvements which
have become fully depreciated and the impact of lower capital expenditures
during the past few years.
Selling and administrative expenses increased by $3,139,000 (15.6%)
principally as a result of higher payroll, data processing, legal and other
transitional costs incurred in connection with recent acquisitions. As a
percentage of revenues, selling and administrative expenses were 14.8% in
both 1995 and 1994.
Interest expense increased by $2,142,000 as a result of acquisition-
related debt incurred.
The income tax benefits recorded for the nine months ended June 30,
1995 and 1994 were based on estimated annual effective rates of 36.6% and
37.0%, respectively.
The net loss for the first nine months of 1995 was $9,963,000 or $.17
per share compared with the net loss of $10,156,000 or $.17 per share in
1994. The prior year results include a special charge before income taxes
of $14,500,000 ($9,031,000 after taxes or $.15 per share) and a favorable
adjustment in the first quarter of $543,000 or $.01 per share representing
the cumulative effect to September 30, 1993 of the adoption of SFAS No.
109-Accounting For Income Taxes.
Results of Operations: Quarter Ended June 30, 1995 vs. Quarter Ended June
30, 1994
Revenues increased by $16,637,000 (35.7%) mainly due to recent
acquisitions. The third quarter results were adversely affected by
overcapacity and lower business volumes available in the commercial
hazardous waste treatment market.
FORM 10-Q Page 7 of 9
Operating expenses increased by $21,987,000 (68.1%) reflecting higher
operating costs as the result of recent acquisitions, higher transportation
costs and increased plant maintenance. The Company is proceeding rapidly
to consolidate recent acquisitions in order to achieve greater operational
and administrative efficiencies.
Depreciation increased by $2,127,000 (37.5%) due mainly to the impact
of the recent acquisitions offset in part by lower capital expenditures
during the past few years.
Selling and administrative expenses increased by $2,894,000 (47.1%)
principally as a result of higher payroll, data processing, legal and other
transitional costs incurred in connection with recent acquisitions.
Selling and administrative expenses were 14.3% of revenues in 1995 compared
with 13.2% in 1994.
Interest expense increased by $2,202,000 as a result of acquisition-
related debt incurred.
The income tax benefit recorded in the third quarter of 1995 resulted
from the use of an estimated annual effective income tax rate of 36.6%.
The effective income tax rate for the third quarter of 1994 was 36.7%.
Liquidity and Capital Resources
The Company's June 30, 1995 financial position is sound as evidenced by
its cash position of $39,424,000 and its working capital ratio of 1.9 to
1.0.
The Company's purchases of property and equipment (exclusive of
acquisition-related items) have been financed with the cash flows from
operations and available cash balances.
As more fully discussed in Part I, Item 1(b) and in connection with the
Company's recent acquisitions, various forms of additional debt have been
incurred in an aggregate amount of $131,477,000.
For additional information on the Company's liquidity and capital
resources, see page 8 of the Company's 1994 Annual Report on Form 10-K.
<PAGE>
FORM 10-Q Page 8 of 9
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 Annual Report on Form 10-K for the fiscal year ended
September 30, 1994.
Item 2. Changes in Securities
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 - None.
(b) Reports on Form 8-K
(1) On April 13, 1995, a report on Form 8-K was filed covering
the following items:
(a) Item 2. Acquisition of Assets
The acquisition of National Electric, Inc. and its
wholly owned subsidiary, Aptus, Inc., was reported.
(b) Item 5. Other Events
In connection with the acquisition described in
Item 2, an amendment to the Company's Rights Agreement
was reported.
(c) Item 7. Financial Statements and Exhibits
The following financial statements of the business
acquired were filed:
(1) Consolidated Financial Statements - National
Electric, Inc.
Consolidated Balance Sheet at December 31, 1994
and 1993
Consolidated Statement of Income for the Years
ended December 31, 1994 and 1993
Consolidated Statement of Cash Flows for the Years
ended December 31, 1994 and 1993
Notes to the Financial Statements
(2) Report of Independent Accountants
<PAGE>
FORM 10-Q Page 9 of 9
(2) On June 13, 1995, a report on Form 8-K/A was filed which
amended the Form 8-K filed on April 13, 1995 and covered the
following items:
(a) Item 2. Acquisition of Assets
A purchase price reduction related to the March
31, 1995 acquisition was reported.
(b) Item 7. Financial Statements and Exhibits
(1) The following additional financial statements of
the business acquired were filed:
(a) Consolidated Balance Sheet at March 31, 1995
(Unaudited)
(b) Consolidated Statement of Income for the
Six Months ended March 31, 1995 and 1994
(Unaudited)
(c) Consolidated Statement of Cash Flows for the
Six Months ended March 31, 1995 and 1994
(Unaudited)
(2) In connection with the acquisition of assets,the
following pro forma financial statements were filed:
(a) Pro Forma Consolidated Balance Sheet at
March 31, 1995 (Unaudited)
(b) Pro Forma Consolidated Statement of
Operations for the Year ended September 30,
1994 (Unaudited)
(c) Pro Forma Consolidated Statement of
Operations for the Six Months ended
March 31, 1995 (Unaudited)
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: July 27, 1995 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
__________________________________________
Nicholas Pappas
President and Chief Operating Officer
__________________________________________
Frank H. Minner
Group Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
FORM 10-Q Page 9 of 9
(2) On June 13, 1995, a report on Form 8-K/A was filed which
amended the Form 8-K filed on April 13, 1995 and covered the
following items:
(a) Item 2. Acquisition of Assets
A purchase price reduction related to the March
31, 1995 acquisition was reported.
(b) Item 7. Financial Statements and Exhibits
(1) The following additional financial statements of
the business acquired were filed:
(a) Consolidated Balance Sheet at March 31, 1995
(Unaudited)
(b) Consolidated Statement of Income for the
Six Months ended March 31, 1995 and 1994
(Unaudited)
(c) Consolidated Statement of Cash Flows for the
Six Months ended March 31, 1995 and 1994
(Unaudited)
(2) In connection with the acquisition of assets,the
following pro forma financial statements were filed:
(a) Pro Forma Consolidated Balance Sheet at
March 31, 1995 (Unaudited)
(b) Pro Forma Consolidated Statement of
Operations for the Year ended September 30,
1994 (Unaudited)
(c) Pro Forma Consolidated Statement of
Operations for the Six Months ended
March 31, 1995 (Unaudited)
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: July 27, 1995 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
/s/ Nicholas Pappas
Nicholas Pappas
President and Chief Operating Officer
/s/ Frank H. Minner
Frank H. Minner
Group Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
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<FISCAL-YEAR-END> SEP-30-1995
<PERIOD-END> JUN-30-1995
<CASH> 39,424
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<RECEIVABLES> 46,090
<ALLOWANCES> (878)
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<CURRENT-ASSETS> 106,740
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<OTHER-SE> 132,622
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<SALES> 156,548
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