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 March 31, 1996
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
March 31, 1996 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 and six months ended March 31, 1996 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 Six Months Ended
March 31, March 31,
1996 1995 1996 1995
Revenues $ 58,731 $ 43,354 $120,167 $ 93,261
Operating expenses 54,259 37,662 106,997 73,265
Depreciation 8,419 5,668 15,949 11,289
Selling and administrative expenses 8,720 7,445 17,934 14,174
Interest expense 2,311 87 4,674 165
73,709 50,862 145,554 98,893
Loss before income tax benefit (14,978) (7,508) (25,387) (5,632)
Income tax benefit (5,417) (2,931) (9,153) (2,275)
Net loss $ (9,561) $ (4,577) $(16,234) $ (3,357)
Loss per share $ (.16) $ (.08) $ (.27) $ (.06)
Average common shares and equivalents
outstanding (000) 60,378 60,406
Dividends paid per common share None None None None
<PAGE>
FORM 10-Q Page 3 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
March 31, September 30,
ASSETS 1996 1995
Current assets
Cash and cash equivalents (includes short-term
investments of: $20,540-March;
$32,108-September) $ 26,613 $ 38,691
Accounts receivable, net 42,266 42,774
Income taxes recoverable 3,790 10,637
Deferred income taxes 4,846 4,948
Other current assets 12,538 12,122
Total current assets 90,053 109,172
Property and equipment, at cost
Land 31,323 31,324
Buildings 72,216 72,169
Equipment and vehicles 300,375 299,035
Site improvements 31,957 30,250
Construction in progress 19,380 17,277
Accumulated depreciation (166,763) (151,382)
288,488 298,673
Excess of cost over net assets of
businesses acquired 9,645 10,054
Other assets 10,655 11,585
Total assets $398,841 $429,484
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 19,015 $ 23,705
Accrued liabilities 27,298 29,283
Accrued remediation and other costs 4,340 3,723
Current maturities of long-term debt 1,728 1,689
Total current liabilities 52,381 58,400
Long-term debt 133,157 134,181
Accrued remediation and other costs 9,805 11,959
Other liabilities 11,464 10,456
Deferred income taxes 23,598 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:
March-60,375,811; September-60,375,811 60,376 60,376
Capital in excess of par value 4,650 4,650
Retained earnings 103,410 119,643
Total shareholders' equity 168,436 184,669
Total liabilities and shareholders' equity $398,841 $429,484
FORM 10-Q Page 4 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Six Months Ended
March 31,
1996 1995*
Cash flows from operating activities:
Net loss $ (16,234) $ (3,357)
Reconciliation of net loss to net cash flows
from operating activities, net of acquisition;
Expenditures charged to accrued remediation
and other costs (1,537) (1,051)
Depreciation and amortization 16,362 11,289
Changes in assets and liabilities:
Current and deferred income taxes 728 1,355
Accounts receivable 508 (1,150)
Accounts payable and accrued liabilities (6,675) 2,156
Other, net 1,423 (2,725)
Net cash (used in) provided by
operating activities (5,425) 6,517
Cash flows from investing activities:
Acquisition of Aptus, Inc., net of cash acquired - (6,492)
Purchase of property and equipment (5,788) (9,255)
Proceeds from sale of equipment 119 135
Net cash used in investing activities (5,669) (15,612)
Cash flows from financing activities:
Repayment of long-term debt (984) (452)
Net cash used in financing activities (984) (452)
Net (decrease) in cash and cash equivalents (12,078) (9,547)
Cash and cash equivalents:
Beginning of period 38,691 54,772
End of period $ 26,613 $ 45,225
Supplemental information:
Interest paid $ 4,862 $ 374
Income taxes (recovered) $ (9,880) $ (3,633)
Noncash investing and financing activities:
Acquisition of business:
Fair value of assets acquired $ - $159,544
Cash paid - 6,500
Liabilities assumed and incurred $ - $153,044
* Certain amounts have been restated to reflect the purchase of Aptus, Inc.
FORM 10-Q Page 5 of 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Six Months Ended March 31, 1996 vs. Six Months Ended
March 31, 1995
Revenues increased by $26,906,000 (28.9%) to $120,167,000 from the
$93,261,000 reported last year. The increase in revenues was the result of
acquisitions made during fiscal 1995 offset in part by lower average prices
and a change in incineration mix. The Company's incineration revenues were
adversely affected by industry-wide overcapacity, waste minimization and
intense price competition.
Operating expenses increased by $33,732,000 (46.0%) to $106,997,000
from the $73,265,000 reported last year. The increase reflects the increase
in revenues and higher fixed operating costs as the result of acquisitions
made during fiscal 1995. Operating costs as a percentage of revenues
increased to 89.0% in 1996 from 78.6% in 1995 mainly due to the large
component of the Company's cost structure which is fixed.
Depreciation increased by $4,660,000 (41.3%) mainly due to the impact
of the 1995 acquisitions offset in part by lower capital expenditures during
the last few years.
Selling and administrative expenses increased $3,760,000 (26.5%) as the
result of higher payroll, data processing and other costs associated with
acquisitions made during the third quarter of fiscal 1995. As a percentage
of revenues, selling and administrative expenses decreased to 14.9% in 1996
from 15.2% in 1995.
Interest expense increased by $4,509,000 as a result of acquisition-
related debt incurred or assumed in the third quarter of fiscal 1995.
The effective income tax benefits for the six months ended March 31,
1996 and 1995 were 36.1% and 40.4%, respectively.
Results of Operations: Quarter Ended March 31, 1996 vs. Quarter Ended March
31, 1995.
Revenues increased by $15,377,000 (35.5%) to $58,730,000 from the
$43,354,000 reported last year. The increase in revenues was the result of
acquisitions made during the third quarter of fiscal 1995 offset in part by
lower average prices and a change in incineration mix. The Company's second
quarter has traditionally been the slowest quarter because of decreased
market demand. In addition, unusually harsh weather conditions
significantly impacted revenues and earnings as companies reduced operating
schedules causing a reduction in available waste volumes and a decrease in
demand for related transportation services. Although overall business
conditions remain very competitive, the Company experienced an upturn in
business late in the second quarter that is expected to continue into the
third quarter.
Operating expenses increased by $16,597,000 (44.1%) reflecting the
increase in revenues and higher fixed operating costs as the result of
acquisitions made during the third quarter of fiscal 1995. Operating costs
as a percentage of revenues increased to 92.4% in 1996 from 86.9% in 1995
mainly due to the large component of the Company's cost structure which is
fixed.
FORM 10-Q Page 6 of 7
Depreciation increased $2,751,000 (48.5%) mainly due to an increase in
the amortization of airspace for a recently completed landfill cell and the
impact of the 1995 acquisitions offset in part by lower capital expenditures
during the past few years.
Selling and administrative expenses increased $1,275,000 (17.1%) as the
result of higher payroll, data processing and other costs associated with
acquisitions made during the third quarter of fiscal 1995. As a percentage
of revenues, selling and administrative expenses decreased to 14.8% in 1996
from 17.2% in 1995.
Interest expense increased $2,224,000 as a result of acquisitions-
related debt incurred or assumed in the third quarter of fiscal 1995.
The effective income tax benefits for the three months ended March 31,
1996 and 1995 were 36.2% and 39.0%, respectively.
Liquidity and Capital Resources
During the first six months of fiscal 1996 and 1995, expenditures for
property and equipment were $5,788,000 and $9,255,000, respectively. In
addition, expenditures on remediation projects at the Company's facilities
for the first six months of fiscal 1996 and 1995 were $1,537,000 and
$1,051,000, respectively. The Company financed its capital and remediation
expenditures from available cash resources.
The Company's projected capital and remediation expenditures for the
remainder of fiscal 1996 are approximately $6,000,000. Capital and
remediation expenditures are expected to be financed from available cash
balances and proceeds from the sale of certain nonstrategic assets.
The Company continues its efforts to reduce operating losses through
cost reductions and increased operating efficiencies. In addition, the
Company continues its emphasis on expanding the scope of customer services
in order to enhance revenues and improve cash flows.
For the remainder of fiscal year 1996, the Company anticipates lower
operating cash requirements as it realizes the benefits of cost reductions
and a lower level of planned capital spending. The Company believes that
existing cash balances 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.
FORM 10-Q Page 7 of 7
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 4 and 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.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 26,
1996. With regard to Proposal No. 1 of the NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JANUARY 26, 1996 to elect three Class II
Directors to the Board of Directors, Patrick J. Bagley, John W. Rollins, Jr.
and Henry B. Tippie were elected. At the meeting, 46,541,979, 46,535,130
and 46,538,985 affirmative votes were cast for Patrick J. Bagley, John W.
Rollins, Jr. and Henry B. Tippie, respectively. There were no votes cast
against any nominee and 1,292,603, 1,299,452 and 1,295,597 votes were
withheld from Patrick J. Bagley, John W. Rollins, Jr. and Henry B. Tippie,
respectively.
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: April 24, 1996 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> MAR-31-1996
<CASH> 26,613
<SECURITIES> 0
<RECEIVABLES> 42,952
<ALLOWANCES> (686)
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<PP&E> 455,251
<DEPRECIATION> (166,763)
<TOTAL-ASSETS> 398,841
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<COMMON> 60,376
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<OTHER-SE> 108,060
<TOTAL-LIABILITY-AND-EQUITY> 398,841
<SALES> 120,167
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<CGS> 0
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<INCOME-PRETAX> (25,387)
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