Page 1 of 10
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, 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 March 31, 1998 was 60,272,336.
FORM 10-Q Page 2 of 10
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 six months ended March 31, 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 Six Months Ended
March 31, March 31,
1998 1997 1998 1997
Basic EPS 61,233 63,099 61,334 63,614
Effect of assumed option
exercises 863 611 833 661
Diluted EPS 62,096 63,710 62,167 64,275
No adjustments to net income available to common stockholders were
required during the periods presented.
C. Stock Split Adjustments
Throughout this report, share data has 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 10
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, 1998 are
not necessarily indicative of the results that may be expected for the year
ending 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.
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Quarter Ended Six Months Ended
March 31, March 31,
1998 1997 1998 1997
Revenues $145,050 $132,376 $294,072 $266,073
Expenses:
Operating 60,307 56,884 120,120 111,530
Depreciation 44,802 41,960 89,304 83,734
Gain on sale of property
and equipment (2,478) (3,220) (4,629) (5,649)
Selling and administrative 13,598 12,373 26,784 23,871
116,229 107,997 231,579 213,486
Operating earnings 28,821 24,379 62,493 52,587
Interest expense 12,562 11,876 25,061 23,980
Earnings before income taxes 16,259 12,503 37,432 28,607
Income taxes 6,323 4,875 14,599 11,156
Net earnings $ 9,936 $ 7,628 $ 22,833 $ 17,451
Earnings per share
- Basic $ .16 $ .12 $ .37 $ .27
- Diluted $ .16 $ .12 $ .37 $ .27
Average common shares
outstanding (000)
- Basic 61,233 63,099 61,334 63,614
- Diluted 62,096 63,710 62,167 64,275
Dividends paid per
common share $ .037 $ .033 $ .073 $ .067
FORM 10-Q Page 4 of 7
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
March 31, September 30,
ASSETS 1998 1997
Current assets
Cash $ 16,385 $ 17,637
Accounts receivable, net of allowance for
doubtful accounts of: March-$1,995;
September-$2,126 65,144 71,165
Inventories 7,452 8,659
Prepaid expenses 19,056 15,465
Refundable income taxes - 965
Deferred income taxes 7,151 7,152
Total current assets 115,188 121,043
Equipment on operating leases, at cost,
net of accumulated depreciation of:
March-$445,417; September-$417,497 865,086 847,910
Other property and equipment, at cost,
net of accumulated depreciation of:
March-$82,060; September-$75,964 209,901 204,745
Excess of cost over net assets of
businesses acquired 11,986 12,156
Other assets 5,611 5,937
Total assets $1,207,772 $1,191,791
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (excluding equipment
financing obligations)
Accounts payable $ 11,560 $ 10,451
Accrued liabilities 42,949 51,952
Income taxes payable 2,094 -
Total current liabilities 56,603 62,403
Equipment financing obligations 688,113 671,822
Other liabilities 14,891 13,955
Deferred income taxes 161,465 154,937
Commitments and contingent liabilities
See Part II Legal Proceedings
Shareholders' equity
Common stock, $1 par value,
100,000,000 shares authorized; issued
and outstanding: March-60,272,336;
September-61,601,112 60,272 41,067
Additional paid-in capital - 274
Retained earnings 226,428 247,333
Total shareholders' equity 286,700 288,674
Total liabilities and shareholders' equity $1,207,772 $1,191,791
FORM 10-Q Page 5 of 10
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Six Months Ended
March 31,
1998 1997
Cash flows from operating activities:
Net earnings $ 22,833 $ 17,451
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 89,474 83,903
Net gain on sale of property and equipment (4,629) (5,649)
Changes in assets and liabilities:
Accounts receivable 6,022 (3,166)
Accounts payable and accrued liabilities (7,900) 854
Current and deferred income taxes 9,588 7,803
Other, net (1,122) (3,399)
Net cash provided by operating activities 114,266 97,797
Cash flows from investing activities:
Purchase of property and equipment (137,693) (134,671)
Proceeds from sales of equipment 30,686 31,420
Net cash used in investing activities (107,007) (103,251)
Cash flows from financing activities:
Proceeds of equipment financing obligations 45,593 84,536
Repayment of equipment financing obligations (29,297) (25,120)
Payment of dividends (4,506) (4,243)
Proceeds of stock options exercised 1,456 391
Common stock acquired and retired (21,664) (17,217)
Other (93) -
Net cash (used in) provided by
financing activities (8,511) 38,347
Net (decrease) increase in cash (1,252) 32,893
Cash beginning of period 17,637 31,207
Cash end of period $ 16,385 $ 64,100
Supplemental information:
Interest paid $ 24,339 $ 23,114
Income taxes paid $ 5,011 $ 3,353
FORM 10-Q Page 6 of 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Six Months Ended March 31, 1998 vs. Six Months
Ended March 31, 1997
Revenues increased by $27,999,000 (10.5%) as full-service lease,
logistics and commercial rental revenues all improved over the same period
last year. Revenues from long-term contracts for full-service leasing and
dedicated logistics services continued to expand as demand for
transportation services remained strong. The size of the commercial rental
fleet as well as its utilization rate increased over the prior year and
reflected steady demand for rental trucks.
Operating expenses increased by $8,590,000 (7.7%) reflecting the
increase in revenues. Continued growth in the Company's logistics business
increased drivers' payroll by $5,026,000 while shop and other operating
payrolls increased by $2,098,000. Fuel costs related to the logistics
business increased by $1,336,000 reflecting the higher level of business.
Operating expenses as a percent of revenues were 40.8% and 41.9% in 1998
and 1997, respectively.
Depreciation expense increased by $5,570,000 (6.7%) 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 $1,020,000
(18.1%) principally due to the combination of lower unit selling prices and
higher net book values on the units sold.
Selling and administrative expenses increased by $2,913,000 (12.2%),
reflecting increased salaries, wages and commissions of $1,577,000,
increased advertising expenses of $614,000 and increased data processing
costs of $486,000. As a percent of revenues, selling and administrative
expenses increased to 9.1% in 1998 from 9.0% in 1997.
Interest expense increased by $1,081,000 (4.5%) 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 six months of both 1998 and
1997 was 39.0%.
Net earnings increased by $5,382,000 (30.8%) to $22,833,000 or $.37 per
diluted share from $17,451,000 or $.27 per diluted share in fiscal 1997.
The increased net earnings resulted from higher revenues which were reduced
in part by the incremental costs associated with such revenues.
Results of Operations: Quarter Ended March 31, 1998 vs. Quarter Ended
March 31, 1997
Revenues for the quarter ended March 31, 1998 were $145,050,000
compared with $132,376,000 for the same quarter last year. The increase of
$12,674,000 (9.6%) was broad-based as full-service lease, logistics and
commercial rental revenues all improved over last year.
FORM 10-Q Page 7 of 10
Operating expenses increased by $3,423,000 (6.0%) 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 $2,252,000 and fuel expense increased by
$783,000 reflecting the higher level of business. Operating expenses as a
percent of revenues improved from 43.0% for the quarter ended March 31,
1997 to 41.6% for the quarter ended March 31, 1998.
Depreciation expense increased by $2,842,000 (6.8%) due to the
increased investment in equipment on operating leases and related
transportation service facilities. As a percent of revenues, depreciation
expense decreased to 30.9% in 1998 from 31.7% in 1997.
Gain on the sale of property and equipment decreased by $742,000
(23.0%) principally due to the realization of lower unit selling prices.
Selling and administrative expenses increased by $1,225,000 (9.9%).
The most significant fluctuations resulted from increased compensation
costs, reflecting the higher level of business, of $654,000 and increased
data processing costs of $246,000. As a percent of revenues, selling and
administrative expenses increased to 9.4% in 1998 from 9.3% in 1997.
Interest expense increased by $686,000 (5.8%) and reflected the
increased level of borrowings during the second quarter when compared with
the same period last year.
The effective income tax rates for the second fiscal quarter of 1998
and 1997 were 38.9% and 39.0%, respectively.
Net earnings increased by $2,308,000 (30.3%) to $9,936,000 or $.16 per
diluted share from $7,628,000 or $.12 per diluted share in fiscal 1997.
The increased net earnings resulted from the higher revenues which were
reduced in part by the incremental costs associated with such revenues.
Also, the relatively mild winter throughout most of the United States
contributed to the improved results.
Liquidity and Capital Resources
Cash flows from operating activities of $114,266,000 were generated
principally from net earnings of $22,833,000 and the noncash depreciation
and amortization expenses totaling $89,474,000. Investing activities used
$107,007,000 of cash for the purchase of property and equipment net of the
cash proceeds received from the sale of equipment. The net cash flow from
operating activities less cash used for investing activities of $7,259,000
plus $45,593,000 of proceeds from equipment financing obligations and
available cash balances were used to pay dividends, repurchase 1,230,250
shares of the Company's $1 par value common stock and to reduce equipment
financing obligations by $29,297,000.
The Company's principal subsidiary, Rollins Leasing Corp., has a
$100,000,000 revolving credit facility of which $69,000,000 was available
at March 31, 1998. This credit facility requires the maintenance of
specified financial ratios and restricts payments to the Company.
FORM 10-Q Page 8 of 10
At March 31, 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.
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.
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.
Item 4. Submission of Matters to a Vote of Security Holders
The Company's Annual Meeting of Shareholders was held on January 29,
1998. With regard to Proposal No. 1 of the NOTICE OF ANNUAL MEETING OF
SHAREHOLDERS TO BE HELD ON JANUARY 29, 1998 to elect one Class I Director
to the Board of Directors, Patrick J. Bagley was elected; and two Class III
Directors to the Board of Directors, Henry B. Tippie and John W. Rollins
were elected. At the meeting, 33,107,826 affirmative votes were cast for
Patrick J. Bagley. There were no votes cast against the nominee and
810,064 were withheld. Also at the meeting, 33,105,544 and 33,102,535
affirmative votes were cast for Henry B.Tippie and John W. Rollins,
respectively. There were no votes cast against the nominees and 812,346
and 815,355 votes were withheld from Henry B. Tippie and John W. Rollins,
respectively.
Additionally, the Company's 1997 Stock Option Plan was approved as
proposed by Proposal No. 2. At the meeting, 25,922,949 affirmative votes
and 7,820,544 negative votes were cast on Proposal No. 2 while 174,397
shares abstained.
<PAGE>
FORM 10-Q Page 9 of 10
Item 5. Other Information
The unaudited condensed consolidated statement of earnings for the
twelve months ended March 31, 1998 shown below has been included in
accordance with provisions of the Securities Act of 1933. This statement
has been prepared in accordance with the instructions to Form 10-Q and does
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.
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Twelve Months Ended
March 31, 1998
Revenues $584,703
Expenses:
Operating 237,547
Depreciation 175,609
Gain on sale of property
and equipment (11,210)
Selling and administrative 53,370
455,316
Operating earnings 129,387
Interest expense 50,351
Earnings before income taxes 79,036
Income taxes 30,860
Net earnings $ 48,176
Earnings per share - basic and diluted $ .78
Dividends paid per common share $ .147
<PAGE>
FORM 10-Q Page 10 of 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 4 - Amendment to Rights Agreement
Exhibit 27 - Financial Data Schedule
(b) 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 29, 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> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> MAR-31-1998
<CASH> 16,385
<SECURITIES> 0
<RECEIVABLES> 67,139
<ALLOWANCES> 1,995
<INVENTORY> 7,452
<CURRENT-ASSETS> 115,188
<PP&E> 1,602,464
<DEPRECIATION> 527,477
<TOTAL-ASSETS> 1,207,772
<CURRENT-LIABILITIES> 56,603
<BONDS> 688,113
0
0
<COMMON> 60,272
<OTHER-SE> 226,428
<TOTAL-LIABILITY-AND-EQUITY> 1,207,772
<SALES> 294,072
<TOTAL-REVENUES> 294,072
<CGS> 0
<TOTAL-COSTS> 209,424
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 25,061
<INCOME-PRETAX> 37,432
<INCOME-TAX> 14,599
<INCOME-CONTINUING> 22,833
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 22,833
<EPS-PRIMARY> .37
<EPS-DILUTED> .37
</TABLE>
AMENDMENT NO. 1
TO
RIGHTS AGREEMENT
BETWEEN
ROLLINS TRUCK LEASING CORP.
AND
REGISTRAR AND TRANSFER COMPANY
This Amendment No. 1 dated as of the 13th day of February, 1998
amending that certain Rights Agreement (the "Rights Agreement") dated
as of June 14, 1989 between Rollins Truck Leasing Corp. (the "Company")
and Registrar and Transfer Company (the "Rights Agent").
WHEREAS, Section 26 to the Rights Agreement provides that as long
as the Rights defined in and created by the Rights Agreement (the
"Rights") are redeemable, the Company may in its sole and absolute
discretion, and the Rights Agent shall if the Company so directs,
supplement or amend any provision of the Rights Agreement without the
approval of any holders of the Rights or the Common Stock of the
Company (the "Common Stock"), provided that no such supplement or
amendment shall be made which changes the Redemption Price (as defined
in the Rights Agreement), the Final Expiration Date (as defined in the
Rights Agreement) or the number of shares of Common Stock for which a
Right is exercisable; and
WHEREAS, the Company wishes to provide the Board of Directors with
discretion in redeeming the Rights; and
WHEREAS, the Company and the Rights Agent wish to amend the
Agreement to reflect the foregoing desire:
NOW, THEREFORE, in consideration of the premises and for other
good and valuable consideration, receipt of which is hereby
acknowledged, the parties hereto hereby agree as follows:
1. Definitions. Unless otherwise defined herein, terms used
herein which are defined in the Agreement shall have the meanings given
them in the Agreement.
2. Amendments.
(a) Section 1 of the Agreement is hereby amended by
inserting a new clause "(ll)," reading as follows:
"Exempt Transaction" shall mean a
share exchange, consolidation, merger or
other transaction in respect of which
the Board of Directors has waived the
application of either Section 13 or
Section 11 (a) (ii), whichever is
applicable, pursuant to the provisions
of Section 23 (c)."
(b) Section 1(bb) of the Agreement is hereby amended by
inserting the following language after the word "hereof":
", provided however that a Section 11
(a) (ii) Event shall not include an
Exempt Transaction."
(c) Section 1 (dd) of the Agreement is hereby amended by
inserting the following language after the word "hereof":
", provided however that a Section 13
Event shall not include an Exempt
Transaction."
(d) Section 23 of the Agreement is hereby amended by adding
a new clause (c) to the end of the Section, reading as follows:
"The Board of Directors may, until
a Triggering Event shall have occurred,
upon written notice (including notice by
telecopy) to the Rights Agent, determine
to waive the application of either
Section 13 or Section 11 (a) (ii),
whichever is applicable, to a Triggering
Event."
3. Representations and Warranties of the Company.
The Company represents and warrants to the Rights Agent that
(i) this Amendment No. 1 is permitted under the terms of the Rights
Agreement, and (ii) this Amendment No. 1 does not change the Redemption
Price, the Final Execution Date or the number of shares of Common Stock
for which a Right is exercisable under the Rights Agreement.
4. Effect. Except as expressly modified hereby, all terms and
provisions of the Agreement remain unamended and in full force and
effect.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
No. 1 to the Rights Agreement to be duly executed, all as of the day
and year first above written.
Rollins Truck Leasing Corp.
By: /s/ John W. Rollins, Jr.
President and COO
Registrar and Transfer Company
By: /s/ Thomas L. Montrone
President and CEO
