Page 1 of 8
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, 1997
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 December 31, 1997 was 40,894,740.
FORM 10-Q Page 2 of 8
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 ended December 31, 1997 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
December 31,
1997 1996
Basic EPS 40,957 42,742
Effect of assumed option
exercises 535 368
Diluted EPS 41,492 43,110
No adjustments to net income available to common stockholders were
required during the periods presented.
<PAGE>
FORM 10-Q Page 3 of 8
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Quarter Ended
December 31,
1997 1996
Revenues $149,022 $133,697
Expenses:
Operating 59,813 54,646
Depreciation 44,502 41,774
Gain on sale of property and equipment (2,151) (2,429)
Selling and administrative 13,186 11,498
115,350 105,489
Operating earnings 33,672 28,208
Interest expense 12,499 12,104
Earnings before income taxes 21,173 16,104
Income taxes 8,276 6,281
Net earnings $ 12,897 $ 9,823
Earnings per share
Basic $ .31 $ .23
Diluted $ .31 $ .23
Average common shares outstanding (000)
Basic 40,957 42,742
Diluted 41,492 43,110
Dividends paid per common share $ .055 $ .05
<PAGE>
FORM 10-Q Page 4 of 8
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
December 31, September 30,
ASSETS 1997 1997
Current assets
Cash $ 14,064 $ 17,637
Accounts receivable, net of allowance for
doubtful accounts of: December-$2,153;
September-$2,126 68,518 71,165
Inventories 8,200 8,659
Prepaid expenses 19,278 15,465
Refundable income taxes - 965
Deferred income taxes 7,152 7,152
Total current assets 117,212 121,043
Equipment on operating leases, at cost,
net of accumulated depreciation of:
December-$436,764; September-$417,497 845,243 847,910
Other property and equipment, at cost,
net of accumulated depreciation of:
December-$79,085; September-$75,964 207,224 204,745
Excess of cost over net assets of
businesses acquired 12,071 12,156
Other assets 5,708 5,937
Total assets $1,187,458 $1,191,791
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (excluding equipment
financing obligations)
Accounts payable $ 9,949 $ 10,451
Accrued liabilities 50,951 51,952
Income taxes payable 3,850 -
Total current liabilities 64,750 62,403
Equipment financing obligations 654,321 671,822
Other liabilities 14,922 13,955
Deferred income taxes 158,269 154,937
Commitments and contingent liabilities
See Part II Legal Proceedings
Shareholders' equity
Common stock, $1 par value,
100,000,000 shares authorized; issued
and outstanding: December-40,894,740;
September-41,067,408 40,895 41,067
Additional paid-in capital 220 274
Retained earnings 254,081 247,333
Total shareholders' equity 295,196 288,674
Total liabilities and shareholders' equity $1,187,458 $1,191,791
FORM 10-Q Page 5 of 8
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Quarter Ended
December 31,
1997 1996
Cash flows from operating activities:
Net earnings $ 12,897 $ 9,823
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 44,587 41,859
Net gain on sale of property and equipment (2,151) (2,429)
Changes in assets and liabilities:
Accounts receivable 2,648 (6,055)
Accounts payable and accrued liabilities (1,504) 3,137
Current and deferred income taxes 8,147 6,367
Other, net (2,158) (2,622)
Net cash provided by operating activities 62,466 50,080
Cash flows from investing activities:
Purchase of property and equipment (55,793) (49,391)
Proceeds from sales of equipment 13,630 12,803
Net cash used in investing activities (42,163) (36,588)
Cash flows from financing activities:
Proceeds of equipment financing obligations 6,500 6,385
Repayment of equipment financing obligations (23,999) (26,962)
Payments of dividends (2,257) (2,142)
Proceeds of stock options exercised 822 204
Common stock acquired and retired (4,942) (11,244)
Net cash used in financing activities (23,876) (33,759)
Net decrease in cash (3,573) (20,267)
Cash beginning of period 17,637 31,207
Cash end of period $ 14,064 $ 10,940
Supplemental information:
Interest paid $ 7,003 $ 9,057
Income taxes (recovered) $ 129 $ (86)
<PAGE>
FORM 10-Q Page 6 of 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Quarter Ended December 31, 1997 vs. Quarter Ended
December 31, 1996
Revenues increased by $15,325,000 (11.5%) as full-service lease,
logistics and commercial rental revenues all improved over the same quarter
last year. The Company's long-term full-service lease business experienced
continued growth during the quarter principally as a result of signing new
accounts. Additionally, short-term commercial rental utilization remained
strong during the quarter.
Operating expenses increased by $5,167,000 (9.5%) 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 $2,774,000 and vehicle expenses increased by
$1,146,000. The remainder of the operating expense increase, amounting to
$1,247,000, resulted principally from the overall increased level of
business. Operating expenses as a percentage of revenues were 40.1% and
40.9% in 1997 and 1996, respectively.
Depreciation expense increased by $2,728,000 (6.5%) due to the increased
investment in equipment on operating leases and related transportation
service facilities required to support the higher level of business.
Gain on the sale of property and equipment decreased by $278,000 (11.5%)
principally due to the realization of lower average selling prices and a
change in the mix of equipment sold.
Selling and administrative expenses increased by $1,688,000 (14.7%) and
reflected increased advertising expense of $573,000 and increased
compensation costs of $740,000 required to support the higher level of
business. As a percent of revenues, selling and administrative expenses
increased to 8.9% in 1997 from 8.6% in 1996.
Interest expense increased by $395,000 (3.3%) due to the increased level
of borrowings when compared with the same fiscal quarter last year. The
increase in interest expense associated with the higher borrowing level was
offset in part by lower interest rates.
The effective income tax rates for the first fiscal quarter of 1998 and
1997 were 39.1% and 39.0%, respectively.
Net earnings increased by $3,074,000 (31.3%) to $12,897,000 or $.31 per
diluted share from $9,823,000 or $.23 per diluted share in fiscal 1997.
The increased net earnings resulted from the higher revenues. The net
earnings increase was offset in part by the incremental costs associated
with such revenues.
Liquidity and Capital Resources
Cash flows from operating activities of $62,466,000 were generated
principally from net earnings of $12,897,000 and noncash depreciation and
amortization expenses of $44,587,000. Investing activities used
$42,163,000 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 $20,303,000
and available cash balances were used to pay dividends, repurchase 306,200
FORM 10-Q Page 7 of 8
shares of the Company's $1 par value common stock and to reduce equipment
financing obligations by $17,499,000.
The Company's principal subsidiary, Rollins Leasing Corp. ("Leasing"),
has a $100,000,000 revolving credit facility of which $98,500,000 was
available at December 31, 1997. This credit facility requires Leasing to
maintain specified financial ratios and restricts payments to the Company.
At December 31, 1997, 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 pages 3 through 5 of the Company's 1997
Annual Report to Shareholders 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.
FORM 10-Q Page 8 of 8
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
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 28, 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
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-END> DEC-31-1997
<CASH> 14,064
<SECURITIES> 0
<RECEIVABLES> 70,671
<ALLOWANCES> 2,153
<INVENTORY> 8,200
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<PP&E> 1,568,316
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<TOTAL-ASSETS> 1,187,458
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0
<COMMON> 40,895
<OTHER-SE> 254,301
<TOTAL-LIABILITY-AND-EQUITY> 1,187,458
<SALES> 149,022
<TOTAL-REVENUES> 149,022
<CGS> 0
<TOTAL-COSTS> 104,315
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<INCOME-TAX> 8,276
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<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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