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, 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 December 31, 1996 was 60,375,811.<PAGE>
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, 1996 are not
necessarily indicative of the results that may be expected for the year
ending September 30, 1997. 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, 1996.
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
($000 Omitted Except for Per Share Amounts)
Quarter Ended
December 31,
1996 1995
Revenues $59,384 $61,436
Operating expenses 49,147 52,738
Depreciation 8,114 7,530
Selling and administrative expenses 7,847 9,214
Interest expense 2,236 2,363
67,344 71,845
Loss before income tax benefit (7,960) (10,409)
Income tax benefit (2,792) (3,736)
Net loss $(5,168) $(6,673)
Loss per share $ (.09) $ (.11)
Average common shares and equivalents
outstanding (000) 60,376 60,421
Dividends paid per common share None None
<PAGE>
FORM 10-Q Page 3 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
December 31, September 30,
ASSETS 1996 1996
Current assets
Cash and cash equivalents (includes
short-term investments of:
$9,277-December; $18,166-September) $ 11,768 $ 27,231
Accounts receivable, net 44,028 42,302
Income taxes recoverable 3,880 7,059
Deferred income taxes 4,901 5,616
Other current assets 8,985 11,356
Total current assets 73,562 93,564
Property and equipment, at cost
Land 31,324 31,324
Buildings 76,082 75,661
Equipment and vehicles 303,171 303,305
Site improvements 40,763 39,978
Construction in progress 5,385 5,525
Accumulated depreciation (190,594) (182,982)
266,131 272,811
Excess of cost over net assets of
businesses acquired 9,205 9,331
Other assets 8,718 9,261
Total assets $357,616 $384,967
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 17,909 $ 21,369
Accrued liabilities 21,573 34,432
Accrued remediation and other costs 2,369 1,970
Current maturities of long-term debt 1,238 1,728
Total current liabilities 43,089 59,499
Long-term debt 131,918 132,453
Accrued remediation and other costs 8,369 9,829
Other liabilities 8,143 7,396
Deferred income taxes 16,782 21,307
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
Additional paid-in capital 4,650 4,650
Retained earnings 84,289 89,457
Total shareholders' equity 149,315 154,483
Total liabilities and shareholders' equity $357,616 $384,967
<PAGE>
FORM 10-Q Page 4 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Quarter Ended
December 31,
1996 1995
Cash flows from operating activities:
Net loss $(5,168) $(6,673)
Adjustments to reconcile net loss to net cash
provided by (used in) operating activities:
Expenditures charged to accrued remediation
and other costs (1,061) (1,160)
Depreciation and amortization 8,246 7,781
Changes in assets and liabilities:
Current and deferred income taxes (301) (3,672)
Accounts receivable (1,726) (1,704)
Accounts payable and accrued liabilities (16,319) (390)
Other, net 3,325 (30)
Net cash used in operating activities (13,004) (5,848)
Cash flows from investing activities:
Purchase of property and equipment (1,434) (2,687)
Proceeds from sale of equipment - 4
Net cash used in investing activities (1,434) (2,683)
Cash flows from financing activities:
Repayment of long-term debt (1,025) (984)
Net cash used in financing activities (1,025) (984)
Cash and cash equivalents:
Net decrease in cash and cash equivalents (15,463) (9,515)
Beginning of period 27,231 38,691
End of period $11,768 $29,176
Supplemental information:
Interest paid $ 999 $ 1,363
Income taxes (recovered) paid $(2,491) $ 64
<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, 1996 vs. Three
Months Ended December 31, 1995
Revenues decreased by $2,052,000 (3.3%) to $59,384,000 from the
$61,436,000 reported last year. The decrease in revenues was the result of
higher incineration volumes processed at lower average prices and lower
transportation revenues offset in part by an increase in landfill and other
service revenues. The Company's incineration revenues continue to be
adversely affected by industry-wide overcapacity and intense price
competition.
Operating expenses decreased by $3,591,000 (6.8%) primarily as the
result of lower transportation, payroll, insurance and maintenance costs
offset in part by higher costs related to the increased incineration
volumes and the use of subcontractors to dispose of various waste streams
outside the Company's permitted capabilities.
Depreciation expense increased by $584,000 (7.8%) due mainly to an
increase in amortization of airspace for a completed landfill cell.
Selling and administrative expenses decreased by $1,367,000 (14.8%).
The decrease is attributable to the continued integration of various
acquisitions into the existing business and continued Company-wide costs
containment efforts. As a percentage of revenues, selling and
administrative expenses decreased to 13.2% in 1996 from 15.0% in 1995.
Interest expense decreased by $127,000 (5.4%) as a result of the
reduction in long-term debt from the same period last year.
The effective rate of income tax benefit for the quarters ended
December 31, 1996 and 1995 were 35.1% and 35.9%, respectively.
Liquidity and Capital Resources
The cash used in operations during the first fiscal quarter of 1997 is
not representative of the Company's expectations for future quarters due to
the unfavorable working capital changes experienced. The decrease in cash
was mainly due to RES (NJ) and the EPA settling the outstanding claims with
the Bridgeport Rental & Oil Services Superfund Site for a payment of
$13,035,000.
During the first fiscal quarter of 1997 and 1996, expenditures for
property and equipment were $1,434,000 and $2,687,000, respectively. In
addition, expenditures on remediation projects at the Company's facilities
during the first fiscal quarter of 1997 and 1996 were $1,061,000 and
$1,160,000, respectively. The Company financed its capital and remediation
expenditures during the first fiscal quarter of 1997 from available cash
resources.
The Company's capital and remediation expenditures for the remainder
of fiscal 1997 are projected to be approximately $5,636,000. Capital and
remediation expenditures are expected to be financed from available cash
balances, income tax refunds and proceeds from the sale of certain
nonstrategic assets.
FORM 10-Q Page 6 of 7
For the remainder of fiscal year 1997, 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, cash expected to be generated from operations, which includes
income tax refunds, and proceeds from the sale of certain nonstrategic
assets will be sufficient to meet the Company's cash requirements for the
remainder of fiscal 1997. For further details, see pages 8 and 9 of the
Company's 1996 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 4 and 5 of the
Company's Annual Report on Form 10-K for the fiscal year ended September
30, 1996.
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
No reports on Form 8-K were filed by the Company during the
quarter ended December 31, 1996. However, on January 6, 1997, the Company
filed a report on Form 8-K wherein under Item 5 - Other Events the full
text of the letter of intent between Laidlaw, Inc. and the Company,
providing for the sale to the Company of 100% of the hazardous and
industrial waste operations of Laidlaw, was reported.
<PAGE>
FORM 10-Q Page 7 of 7
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, 1997 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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<PERIOD-END> DEC-31-1996
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