Page 1 of 7
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 December 31, 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) 426-2784
(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 December 31, 1995 was 60,375,811.
FORM 10-Q Page 2 of 7
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 quarter ended December 31, 1995 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 1996. 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, 1995.
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
($000 Omitted Except for Per Share Amounts)
Quarter Ended
December 31,
1995 1994
Revenues $61,436 $49,907
Operating expenses 52,738 35,603
Depreciation 7,530 5,621
Selling and administrative expenses 9,214 6,729
Interest expense 2,363 78
71,845 48,031
Earnings (loss) before income tax (benefit) (10,409) 1,876
Income tax (benefit) (3,736) 656
Net earnings (loss) $(6,673) $ 1,220
Earnings (loss) per share $ (.11) $ .02
Average common shares and equivalents
outstanding (000) 60,421 60,381
Dividends paid per common share None None
FORM 10-Q Page 3 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
December 31, September 30,
ASSETS 1995 1995
Current assets
Cash and cash equivalents (includes
short-term investments of:
$23,305-December; $32,108-September) $ 29,176 $ 38,691
Accounts receivable, net 44,478 42,774
Income taxes recoverable 12,335 10,637
Deferred income taxes 4,215 4,948
Other current assets 12,605 12,122
Total current assets 102,809 109,172
Property and equipment, at cost
Land 31,324 31,324
Buildings 72,129 72,169
Equipment and vehicles 298,901 299,035
Site improvements 30,618 30,250
Construction in progress 19,424 17,277
Accumulated depreciation (158,565) (151,382)
293,831 298,673
Excess of cost over net assets of
businesses acquired 9,802 10,054
Other assets 11,183 11,585
$417,625 $429,484
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 23,023 $ 23,705
Accrued liabilities 29,575 29,283
Accrued remediation and other costs 3,163 3,723
Current maturities of long-term debt 1,238 1,689
Total current liabilities 56,999 58,400
Long-term debt 133,648 134,181
Accrued remediation and other costs 11,359 11,959
Other liabilities 10,511 10,456
Deferred income taxes 27,112 29,819
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:
December-60,375,811; September-60,375,811 60,376 60,376
Capital in excess of par value 4,650 4,650
Retained earnings 112,970 119,643
Total shareholders' equity 177,996 184,669
$417,625 $429,484
FORM 10-Q Page 4 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Quarter Ended
December 31,
1995 1994
Cash flows from operating activities:
Net earnings (loss) $(6,673) $ 1,220
Reconciliation of net earnings (loss) to net
cash flows from operating activities:
Expenditures charged to accrued remediation
and other costs (1,160) (619)
Depreciation and amortization 7,781 5,621
Changes in assets and liabilities:
Current and deferred income taxes (3,672) 898
Accounts receivable (1,704) (6,845)
Accounts payable and accrued liabilities (390) 2,673
Other, net (30) (3,488)
Net cash flows used in operating activities (5,848) (540)
Cash flows from investing activities:
Purchase of property and equipment (2,687) (4,744)
Proceeds from sale of equipment 4 127
Net cash flows used in investing activities (2,683) (4,617)
Cash flows from financing activities:
Repayment of long-term debt (984) -
Net cash flows used in financing activities (984) -
Net (decrease) in cash and cash equivalents (9,515) (5,157)
Cash and cash equivalents:
Beginning of period 38,691 54,772
End of period $29,176 $49,615
Supplemental information:
Interest paid $ 1,363 $ 71
Income taxes Paid (recovered) $ 64 $ (242)
<PAGE>
FORM 10-Q Page 5 of 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Three Months Ended December 31, 1995 vs. Three
Months Ended December 31, 1994
Revenues increased by $11,529,000 (23.1%) to $61,436,000 from the
$49,907,000 reported last year. Acquisitions made during fiscal 1995
contributed $16,699,000 to the 1996 revenue, while existing business
revenues decreased by $5,170,000. The existing business revenues decreased
due to lower average prices, lower incineration volumes and a change in
incineration mix. The Company's incineration revenues were adversely
affected by industry-wide overcapacity, intense price competition (which
resulted in significantly lower selling prices) and lower volumes of
available waste.
Operating expenses increased by $17,135,000 (48.1%) to $52,738,000
from the $35,603,000 reported last year. Acquisitions in 1995 contributed
approximately $17,823,000 of this expense increase, while existing business
expenses decreased by $688,000. Operating costs as a percentage of
revenues increased to 85.8% in 1995 from 71.3% in 1994. Since a large
component of the Company's cost structure is fixed, operating expenses
increased as a percentage of revenues. The Company continues to reduce
expenses and streamline the organization.
Depreciation increased by $1,909,000 (34.0%) due mainly to the
impact of the 1995 acquisitions offset in part by lower capital
expenditures during the past few years.
Selling and administrative expenses increased $2,485,000 (36.9%) as
a result of higher payroll, data processing and other costs incurred in
connection with acquisitions in the third quarter of fiscal 1995. As a
percentage of revenues, selling and administrative expenses increased to
15.0% in 1995 from 13.5% in 1994.
Interest expense increased by $2,285,000 as a result of acquisition-
related debt incurred or assumed in the third quarter of fiscal 1995.
The effective income tax benefit for the first quarter of fiscal
year 1996 was 35.6%. The effective income tax rate for the first quarter
of fiscal year 1995 was 35.0%.
Liquidity and Capital Resources
The cash used in operations during the first fiscal quarter of 1996
is not representative of the Company's expectations for future quarters due
to the unfavorable working capital changes experienced. Depreciation
expense represents a significant non-cash charge to operations.
During the first fiscal quarter of 1996 and 1995, expenditures for
property and equipment were $2,687,000 and $4,744,000, respectively. In
addition, expenditures on remediation projects at the Company's facilities
during the first fiscal quarter of 1996 and 1995 were $1,160,000 and
$619,000, respectively. The Company financed its capital and remediation
expenditures during the first fiscal quarter of 1996 from available cash
resources.
FORM 10-Q Page 6 of 7
The Company's projected capital and remediation expenditures for the
remainder of fiscal 1996 are approximately $11,600,000. Capital and
remediation expenditures are expected to be financed from available cash
balances, income taxes refunded and proceeds from the sale of certain
nonstrategic assets.
The Company continues its efforts designed to reduce operating
losses through cost reductions and increased operating efficiencies. In
addition, the Company reorganized its sales and marketing force with
emphasis on expanding its scope of customer services in order to enhance
revenues and improve cash flows.
Results of operations for the quarter ended December 31, 1994 do not
include the effects of acquisitions made during the latter part of fiscal
year 1995. Set forth below is a more relevant comparison between the
Company's first quarter of fiscal 1996 and the fourth quarter of fiscal
1995. The comparative operating information reflecting the impact of the
Company's ongoing cost containment efforts is as follows:
Quarter Ended Quarter Ended
December 31, 1995 September 30, 1995
$ % of Revenue $ % of Revenue
Revenues $61,436 100.0 $60,819 100.0
Expenses
Operating 52,738 85.8 54,230 89.2
Depreciation 7,530 12.3 7,624 12.5
Selling and
administration 9,214 15.0 9,357 15.4
Interest 2,363 3.8 2,537 4.2
$71,845 116.9 $73,748 121.3
For the remainder of fiscal year 1996, the Company anticipates lower
operating cash requirements as it realizes the benefits of cost reductions
and lower capital spending. The Company believes that existing cash
balances, a federal income tax refund of $9,811,767 received during the
Company's second fiscal quarter and cash expected to be generated from
future operations will be sufficient to meet the Company's cash
requirements for the remainder of fiscal 1996. For further details, see
page 8 of the Company's 1995 Annual Report on Form 10-K.
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, 1995.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
FORM 10-Q Page 7 of 7
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
None.
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: January 24, 1995 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
/s/ John V. Flynn, Jr.
John V. Flynn, Jr.
President and Chief Operating Officer
/s/ Frank H. Minner, Jr.
Frank H. Minner, Jr.
Group Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
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<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> DEC-31-1995
<CASH> 29,176
<SECURITIES> 0
<RECEIVABLES> 45,111
<ALLOWANCES> (633)
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<OTHER-SE> 117,620
<TOTAL-LIABILITY-AND-EQUITY> 417,625
<SALES> 61,436
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<EXTRAORDINARY> 0
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<NET-INCOME> (6,673)
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