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, 1998
OR
___
|___| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-5728
ROLLINS TRUCK LEASING CORP.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0074022
(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) 426-2700
(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, 1998 was 59,327,221.
<PAGE>
FORM 10-Q Page 2 of 9
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
A. Basis of Presentation
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, 1998 are
not necessarily indicative of the results that may be expected for the year
ended September 30, 1998. 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, 1997.
B. Earnings Per Share
Pursuant to the provisions of Statement of Financial Accounting
Standards No. 128, "Earnings Per Share," the number of weighted average
shares used in computing basic and diluted earnings per share (EPS) are as
follows (in thousands):
Three Months Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Basic EPS 59,676 61,935 60,782 63,054
Effect of assumed option
exercises 834 693 832 635
Diluted EPS 60,510 62,628 61,614 63,689
No adjustments to net earnings available to common shareholders were
required during the periods presented.
C. Stock Split Adjustments
Throughout this report, share data have been adjusted, where
appropriate, to reflect the three-for-two common stock split distributed on
March 16, 1998.
<PAGE>
FORM 10-Q Page 3 of 9
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
1998 1997 1998 1997
Revenues $155,215 $142,095 $449,287 $408,168
Expenses:
Operating 61,137 57,971 181,257 169,501
Depreciation 46,243 42,449 135,547 126,183
Gain on sale of property
and equipment (1,896) (3,066) (6,525) (8,715)
Selling and administrative 13,985 12,799 40,769 36,670
119,469 110,153 351,048 323,639
Operating earnings 35,746 31,942 98,239 84,529
Interest expense 13,176 12,729 38,237 36,709
Earnings before income taxes 22,570 19,213 60,002 47,820
Income taxes 8,724 7,446 23,323 18,602
Net earnings $ 13,846 $ 11,767 $ 36,679 $ 29,218
Earnings per share
- Basic $ .23 $ .19 $ .60 $ .46
- Diluted $ .23 $ .19 $ .60 $ .46
Average common shares
outstanding (000)
- Basic 59,676 61,935 60,782 63,054
- Diluted 60,510 62,628 61,614 63,689
Dividends paid per
common share $ .04 $ .033 $ .113 $ .10
<PAGE>
FORM 10-Q Page 4 of 9
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1998 1997
Current assets
Cash $ 12,443 $ 17,637
Accounts receivable, net of allowance for
doubtful accounts of: June-$2,318;
September-$2,126 71,427 71,165
Inventories 7,165 8,659
Prepaid expenses 16,648 15,465
Refundable income taxes - 965
Deferred income taxes 7,151 7,152
Total current assets 114,834 121,043
Equipment on operating leases, at cost,
net of accumulated depreciation of:
June-$464,704; September-$417,497 903,545 847,910
Other property and equipment, at cost,
net of accumulated depreciation of:
June-$84,738; September-$75,964 213,031 204,745
Excess of cost over net assets of
businesses acquired 11,901 12,156
Other assets 5,456 5,937
Total assets $1,248,767 $1,191,791
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (excluding equipment
financing obligations)
Accounts payable $ 9,952 $ 10,451
Accrued liabilities 50,253 51,952
Income taxes payable 2,569 -
Total current liabilities 62,774 62,403
Equipment financing obligations 719,689 671,822
Other liabilities 14,431 13,955
Deferred income taxes 166,279 154,937
Commitments and contingent liabilities
See Part II Legal Proceedings
Shareholders' equity
Common stock, $1 par value,
100,000,000 shares authorized; issued
and outstanding: June-59,327,221;
September-61,601,112 59,327 41,067
Additional paid-in capital 101 274
Retained earnings 226,166 247,333
Total shareholders' equity 285,594 288,674
Total liabilities and shareholders' equity $1,248,767 $1,191,791
FORM 10-Q Page 5 of 9
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months Ended
June 30,
1998 1997
Cash flows from operating activities:
Net earnings $ 36,679 $ 29,218
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 135,802 126,438
Net gain on sale of property and equipment (6,525) (8,715)
Changes in assets and liabilities:
Accounts receivable (261) (5,346)
Accounts payable and accrued liabilities (2,205) 2,584
Current and deferred income taxes 14,877 11,704
Other, net 1,268 755
Net cash provided by operating activities 179,635 156,638
Cash flows from investing activities:
Purchase of property and equipment (238,154) (215,643)
Proceeds from sales of equipment 45,211 54,917
Net cash used in investing activities (192,943) (160,726)
Cash flows from financing activities:
Proceeds of equipment financing obligations 88,171 120,553
Repayment of equipment financing obligations (40,198) (89,783)
Repayment of long-term debt (99) (91)
Payment of dividends (6,887) (6,301)
Proceeds of stock options exercised 1,816 498
Common stock acquired and retired (34,596) (28,892)
Other (93) -
Net cash provided by (used in)
financing activities 8,114 (4,016)
Net (decrease) in cash (5,194) (8,104)
Cash beginning of period 17,637 31,207
Cash end of period $ 12,443 $ 23,103
Supplemental information:
Interest paid $ 31,475 $ 31,667
Income taxes paid $ 8,446 $ 6,898
FORM 10-Q Page 6 of 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Nine Months Ended June 30, 1998 vs. Nine Months
Ended June 30, 1997
Revenues increased by $41,119,000 (10.1%) as full-service lease,
logistics and commercial rental revenues all improved over the same period
last year.
Operating expenses increased by $11,756,000 (6.9%) reflecting the
increase in revenues. The more significant operating expense increases
resulted from the continued growth in the logistics business in which
drivers' wages increased by $6,986,000 and vehicle expenses increased by
$4,287,000. Operating expenses as a percentage of revenues were 40.3% and
41.5% in 1998 and 1997, respectively.
Depreciation expense increased by $9,364,000 (7.4%) due to the
increased investment in equipment on operating leases and related
transportation service facilities. The increased investment in revenue-
producing equipment and related service facilities continued to reflect the
increased level of business.
Gain on the sale of property and equipment decreased by $2,190,000
(25.1%) principally due to lower unit selling prices realized on fewer
units of transportation equipment sold.
Selling and administrative expenses increased by $4,099,000 (11.2%),
reflecting increased salaries, wages and commissions of $2,149,000,
increased information technology costs of $988,000 and increased
advertising expenses of $635,000 As a percent of revenues, selling and
administrative expenses increased to 9.1% in 1998 from 9.0% in 1997.
Interest expense increased by $1,528,000 (4.2%) due to the increased
level of borrowings when compared with the same period last year. Interest
rates remained essentially unchanged during both periods.
The effective income tax rate for the first nine months of both 1998
and 1997 was 38.9%.
Net earnings increased by $7,461,000 (25.5%) to $36,679,000 or $.60 per
diluted share from $29,218,000 or $.46 per diluted share in fiscal 1997.
Higher revenues, which were reduced in part by the incremental costs
associated with such revenues, produced the increased net earnings.
Results of Operations: Quarter Ended June 30, 1998 vs. Quarter Ended June
30, 1997
Revenues for the quarter ended June 30, 1998 were $155,215,000 compared
with $142,095,000 for the same quarter last year. The increase of
$13,120,000 (9.2%) was broad-based as full-service lease, logistics and
commercial rental revenues all improved over last year.
Operating expenses increased by $3,166,000 (5.5%) reflecting the
increase in revenues. Drivers' wages associated with the logistics
business increased by $1,960,000 and shop payroll increased by $766,000
reflecting the overall higher level of business. Operating expenses as a
percentage of revenues decreased to 39.4% in 1998 from 40.8% in 1997.
FORM 10-Q Page 7 of 9
Depreciation expense increased by $3,794,000 (8.9%) due to the
increased investment in equipment on operating leases and related
transportation service facilities. As a percent of revenues, depreciation
expense decreased to 29.8% in 1998 from 29.9% in 1997.
Gain on the sale of property and equipment decreased by $1,170,000
(38.2%) principally due to the sale of fewer units and the realization of
lower unit selling prices.
Selling and administrative expenses increased by $1,186,000 (9.3%)
reflecting increased salaries, wages and commissions of $573,000 and
increased information technology costs of $322,000. As a percent of
revenues, selling and administrative expenses were 9.0% in both 1998 and
1997.
Interest expense increased by $447,000 (3.5%) due to the increased
level of borrowings compared with the same period last year.
The effective income tax rates for the third fiscal quarter of 1998 and
1997 were 38.7% and 38.8%, respectively.
Net earnings increased by $2,079,000 (17.7%) to $13,846,000 or $.23 per
diluted share from $11,767,000 or $.19 per diluted share in fiscal 1997.
Higher revenues, which were reduced in part by the incremental costs
associated with such revenues, produced the increased net earnings.
Liquidity and Capital Resources
Cash flows from operating activities of $179,635,000 were generated
principally from net earnings of $36,679,000 and the noncash depreciation
and amortization totaling $135,802,000. The net cash provided by operating
activities plus the proceeds of equipment financing obligations of
$88,171,000 and cash proceeds received from the sale of equipment of
$45,211,000 were used to purchase property and equipment for $238,154,000,
reduce equipment financing obligations by $40,198,000, repurchase and
retire common stock for $34,596,000 and pay dividends.
The Company's principal subsidiary, Rollins Leasing Corp., has a
$100,000,000 revolving credit facility of which $51,500,000 was available
at June 30, 1998. This credit facility requires the maintenance of
specified financial ratios and restricts payments to the Company.
On May 27, 1998, the Company arranged for the private placement of
$75,000,000 of 6.52% Series S Collateral Trust Debentures due July 15,
2005. Closing occurred on July 16, 1998.
At June 30, 1998, the Company could sell an additional $155,000,000 of
Collateral Trust Debentures under its current shelf registration statement.
Based on its access to the debt markets and relationships with current
lending institutions and others who have expressed an interest in providing
financing, the Company expects to be able to obtain financing for its
equipment and facility purchases at market rates and under satisfactory
terms and conditions. Covenants in the Company's outstanding Collateral
Trust Debentures restrict the Company's dividend payments to consolidated
net earnings subsequent to September 30, 1984 subject to certain
adjustments.
FORM 10-Q Page 8 of 9
Otherwise, there have been no material changes in the Company's
financial condition and its liquidity and capital resources since September
30, 1997. For further details, see the Company's 1997 Annual Report on
Form 10-K for the year ended September 30, 1997.
Forward-Looking Statements
The Company may make forward-looking statements relating to anticipated
financial performance, business prospects, acquisitions or divestitures,
new products, market forces, commitments and other matters. The Private
Securities Litigation Reform Act of 1995 provides a safe harbor for
forward-looking statements. In order to comply with the terms of the safe
harbor, the Company notes that a variety of factors could cause the
Company's actual results and experience to differ materially from the
anticipated results or other expectations expressed in the Company's
forward-looking statements. Forward-looking statements typically contain
words such as "anticipates", "believes", "estimates", "expects",
"forecasts", "predicts", or "projects", or variations of these words,
suggesting that future outcomes are uncertain.
Various risks and uncertainties may affect the operations, performance,
development and results of the Company's business and could cause future
outcomes to differ materially from those set forth in forward-looking
statements, including the following factors: general economic conditions,
competitive factors and pricing pressures, shift in market demand, the
performance and needs of industries served by the Company, equipment
utilization, management's success in developing and introducing new
services and lines of business, potential increases in labor costs,
potential increases in equipment, maintenance and fuel costs, uncertainties
of litigation, the Company's ability to finance its future business
requirements through outside sources or internally generated funds, the
availability of adequate levels of insurance, success or timing of
completion of ongoing or anticipated capital or maintenance projects,
management retention and development, changes in Federal, State and local
laws and regulations, including environmental regulations, as well as the
risks, uncertainties and other factors described from time to time in the
Company's SEC filings and reports.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There are no material legal proceedings to which the Company or any of
its subsidiaries is a party. Certain subsidiaries of the Company are
involved in ordinary routine litigation incidental to the operation of its
business.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
FORM 10-Q Page 9 of 9
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: August 4, 1998 Rollins Truck Leasing Corp.
(Registrant)
/s/ John W. Rollins, Jr.
John W. Rollins, Jr.
President and Chief Operating Officer
/s/ Patrick J. Bagley
Patrick J. Bagley
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> JUN-30-1998
<CASH> 12,443
<SECURITIES> 0
<RECEIVABLES> 73,745
<ALLOWANCES> 2,318
<INVENTORY> 7,165
<CURRENT-ASSETS> 114,834
<PP&E> 1,666,018
<DEPRECIATION> 549,442
<TOTAL-ASSETS> 1,248,767
<CURRENT-LIABILITIES> 62,774
<BONDS> 719,689
0
0
<COMMON> 59,327
<OTHER-SE> 226,267
<TOTAL-LIABILITY-AND-EQUITY> 1,248,767
<SALES> 449,287
<TOTAL-REVENUES> 449,287
<CGS> 0
<TOTAL-COSTS> 316,804
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 38,237
<INCOME-PRETAX> 60,002
<INCOME-TAX> 23,323
<INCOME-CONTINUING> 36,679
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 36,679
<EPS-PRIMARY> .60
<EPS-DILUTED> .60
</TABLE>
