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 June 30, 1999
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, 1999 was 57,367,114.
<PAGE>
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 nine months ended June 30, 1999 are
not necessarily indicative of the results that may be expected for the year
ended September 30, 1999. 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, 1998.
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,
1999 1998 1999 1998
Basic EPS 57,403 59,676 57,998 60,782
Effect of assumed option
exercises 482 834 548 832
Diluted EPS 57,885 60,510 58,546 61,614
No adjustments to net earnings available to common shareholders were
required during the periods presented.
<PAGE>
FORM 10-Q Page 3 of 10
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF EARNINGS
($000 Omitted Except for Per Share Amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
1999 1998 1999 1998
Revenues $156,617 $155,215 $462,891 $449,287
Expenses:
Operating 57,959 61,137 178,880 181,257
Depreciation 49,780 46,243 147,820 135,547
Gain on sale of property
and equipment (4,358) (1,896) (13,006) (6,525)
Selling and administrative 14,111 13,985 41,765 40,769
117,492 119,469 355,459 351,048
Operating earnings 39,125 35,746 107,432 98,239
Interest expense 14,103 13,176 41,128 38,237
Earnings before income taxes 25,022 22,570 66,304 60,002
Income taxes 9,866 8,724 25,925 23,323
Net earnings $ 15,156 $ 13,846 $ 40,379 $ 36,679
Earnings per share
- Basic $ .26 $ .23 $ .70 $ .60
- Diluted $ .26 $ .23 $ .69 $ .60
Average common shares
outstanding (000)
- Basic 57,403 59,676 57,998 60,782
- Diluted 57,885 60,510 58,546 61,614
Dividends paid per
common share $ .05 $ .04 $ .15 $ .113
<PAGE>
FORM 10-Q Page 4 of 10
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1999 1998
Current assets
Cash $ 63,836 $ 27,015
Accounts receivable, net of allowance for
doubtful accounts of: June-$2,405;
September-$2,452 74,274 75,227
Inventories 7,653 7,394
Prepaid expenses 16,158 18,056
Deferred income taxes 7,034 7,034
Total current assets 168,955 134,726
Equipment on operating leases, at cost,
net of accumulated depreciation of:
June-$501,415; September-$477,380 978,337 924,887
Other property and equipment, at cost,
net of accumulated depreciation of:
June-$96,506; September-$87,734 222,008 219,343
Excess of cost over net assets of
businesses acquired 11,561 11,816
Other assets 5,974 5,761
Total assets $1,386,835 $1,296,533
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (excluding equipment
financing obligations)
Accounts payable $ 10,276 $ 12,246
Accrued liabilities 52,485 52,023
Income taxes payable 2,189 1,292
Total current liabilities 64,950 65,561
Equipment financing obligations 812,974 749,876
Other liabilities 14,498 14,144
Deferred income taxes 185,965 174,908
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-57,367,114;
September-58,799,281 57,367 58,799
Additional paid-in capital 23 11
Retained earnings 251,058 233,234
Total shareholders' equity 308,448 292,044
Total liabilities and shareholders' equity $1,386,835 $1,296,533
FORM 10-Q Page 5 of 10
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months Ended
June 30,
1999 1998
Cash flows from operating activities:
Net earnings $ 40,379 $ 36,679
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 148,075 135,802
Net gain on sale of property and equipment (13,006) (6,525)
Changes in assets and liabilities:
Accounts receivable 953 (261)
Accounts payable and accrued liabilities (1,516) (2,205)
Current and deferred income taxes 11,954 14,877
Other, net 1,780 1,268
Net cash provided by operating activities 188,619 179,635
Cash flows from investing activities:
Purchase of property and equipment (259,702) (238,154)
Proceeds from sales of equipment 68,773 45,211
Net cash used in investing activities (190,929) (192,943)
Cash flows from financing activities:
Proceeds of equipment financing obligations 175,004 88,171
Repayment of equipment financing obligations (111,898) (40,297)
Payment of dividends (8,702) (6,887)
Proceeds of stock options exercised 824 1,816
Common stock acquired and retired (16,097) (34,596)
Other - (93)
Net cash provided by financing activities 39,131 8,114
Net increase (decrease) in cash 36,821 (5,194)
Cash beginning of period 27,015 17,637
Cash end of period $ 63,836 $ 12,443
Supplemental information:
Interest paid $ 30,722 $ 31,475
Income taxes paid $ 13,971 $ 8,446
FORM 10-Q Page 6 of 10
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Nine Months Ended June 30, 1999 vs. Nine Months
Ended June 30, 1998
Revenues for the nine months ended June 30, 1999 increased by
$13,604,000 (3.0%) to $462,891,000 compared with $449,287,000 for the same
period last year. Full-service lease, guaranteed maintenance and
commercial rental revenues all improved over the same period last year.
Logistics and dedicated revenues declined by 9.0% due to the loss of two
large accounts at the end of the last fiscal year and higher than normal
customer turnover during the current fiscal year.
Operating expenses decreased by $2,377,000 (1.3%). The decrease
resulted in large part from the Company's completion of its underground
storage tank replacement program by the end of calendar 1998. Increased
vehicle license and tax expenses and insurance costs were offset by a
reduction in driver payroll and fuel costs associated with the decline in
logistics and dedicated revenues. Operating expenses as a percentage of
revenues were 38.6% and 40.3% in 1999 and 1998, respectively.
Depreciation expense increased by $12,273,000 (9.1%) due to the
increased investment in equipment on operating leases, as well as the
commercial rental fleet 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 increased by $6,481,000
(99.3%) principally due to higher average selling prices realized on
transportation equipment and an increase in the number of units sold.
Selling and administrative expenses increased by $996,000 (2.4%) to
$41,765,000 during the current fiscal year from $40,769,000 last year and
reflected the increase in revenue. Increased salaries, wages and related
benefits and office expenses were offset in large part by reductions in
advertising and insurance costs. As a percent of revenues, selling and
administrative expenses decreased to 9.0% in 1999 from 9.1% in 1998.
Interest expense increased by $2,891,000 (7.6%) due to the increased
level of borrowings when compared with the same period last year. Interest
rates decreased slightly when compared with the prior year.
The effective income tax rate for the first nine months of 1999 and
1998 was 39.1% and 38.9%, respectively.
Net earnings increased by $3,700,000 (10.1%) to $40,379,000 or $.69 per
diluted share from $36,679,000 or $.60 per diluted share in fiscal 1998.
The increased net earnings resulted from the higher revenues and the
increased gain on the sale of property and equipment. The net earnings
increase was offset in part by the incremental costs associated with such
revenues.
FORM 10-Q Page 7 of 10
Results of Operations: Quarter Ended June 30, 1999 vs. Quarter Ended June
30, 1998
Revenues for the quarter ended June 30, 1999 increased by $1,402,000
(.9%) to $156,617,000 compared with $155,215,000 reported for the third
fiscal quarter last year. Full-service lease revenues increased by 6.1%
while commercial rental revenues increased by 5.8%. Logistics and
dedicated revenues decreased by 15.8% in the third fiscal quarter
principally due to the loss of two large accounts late in fiscal 1998 and
higher than normal customer turnover in the current year. Overall revenue
growth continued to be negatively affected during the third fiscal quarter
by higher than normal customer turnover and the industry-wide delays
experienced in receiving transportation equipment from manufacturers.
Operating expenses decreased by $3,178,000 (5.2%) to $57,959,000 during
the third fiscal quarter from $61,137,000 last year. Broad-based expense
increases which reflected the Company's modest revenue increase were more
than offset by a reduced level of operating expenses associated with the
lower level of logistics and dedicated business discussed previously.
Operating expenses as a percentage of revenues decreased to 37.0% in 1999
from 39.4% in 1998.
Depreciation expense increased by $3,537,000 (7.6%) due to the
increased investment in equipment on operating leases and related
transportation service facilities. As a percent of revenues, depreciation
expense increased to 31.8% in 1999 from 29.8% in 1998.
Gain on the sale of property and equipment increased by $2,462,000
(129.9%) principally due to an increase in the number of units sold and the
realization of larger per unit gains which resulted from lower net carrying
values per unit.
Selling and administrative expenses remained essentially flat during
the third fiscal quarter and as a percent of revenues were 9.0% in both
1999 and 1998.
Interest expense increased by $927,000 (7.0%) 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 1999 and
1998 were 39.4% and 38.7%, respectively.
Operating earnings increased by $3,379,000 (9.5%) to $39,125,000
compared with $35,746,000 reported for the third fiscal quarter last year.
Tight operating controls and additional productivity programs enabled the
Company to increase its operating margin by almost 2.0% during the quarter.
Net earnings increased by $1,310,000 (9.5%) to $15,156,000 or $.26 per
diluted share from $13,846,000 or $.23 per diluted share in fiscal 1998.
Liquidity and Capital Resources
Cash flows from operating activities of $188,619,000 were generated
principally from net earnings of $40,379,000 and the noncash depreciation
and amortization totaling $148,075,000. The net cash provided by operating
activities plus the proceeds of equipment financing obligations of
$175,004,000 and cash proceeds received from the sale of equipment of
$68,773,000 were used to purchase property and equipment for $259,702,000,
reduce equipment financing obligations by $111,898,000, repurchase and
FORM 10-Q Page 8 of 10
retire common stock for $16,097,000, pay dividends of $8,702,000 and to
temporarily increase cash balances.
The Company's principal subsidiary, Rollins Leasing Corp., has a
$100,000,000 revolving credit facility all of which was available at June
30, 1999. This credit facility requires the maintenance of specified
financial ratios and restricts payments to the Company.
On April 5, 1999, the Company sold $100,000,000 of its 6.75% Collateral
Trust Debentures, Series T, due April 5, 2006. At June 30, 1999, the
Company could sell an additional $55,000,000 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, 1998. For further details, see the Company's 1998 Annual Report on
Form 10-K for the year ended September 30, 1998.
Year 2000 ("Y2K") Readiness Disclosure
The Company is aware of the issues related to the approach of the year
2000 and continued its program to ensure that critical systems and
equipment will function appropriately after the turn of the century.
By June 30, 1999, essentially all host-based coding and testing was
completed. Additionally, with regard to the remediated systems, full
production implementation was completed.
As part of the Company's remediation efforts, the field data collection
systems were rewritten. Essentially all of this effort was completed by
June 30, 1999.
With the exception of remediation and implementation consequences not
known to the Company at this time, the Company believes that all systems
should be fully implemented by October 31, 1999.
While it is not possible for the Company to predict all future outcomes
and eventualities, the Company is not aware, at this time, of any Y2K non-
compliant situations with regard to any of its purchased software or its
use of suppliers and outside service providers which would have a material
adverse effect upon the Company.
The Company estimates that it will spend approximately $2,000,000, of
which approximately $1,700,000 has been expended through June 30, 1999, to
fully implement its Y2K compliance program. All Y2K costs have been and
will continue to be funded from operations.
FORM 10-Q Page 9 of 10
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.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
FORM 10-Q Page 10 of 10
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit 4(a) Instrument defining rights of security holders.
Nineteenth Supplemental Indenture dated as of April 5, 1999 to the
Collateral Trust Indenture dated as of March 21, 1983, as
supplemented and amended by a Third Supplemental Indenture thereto
dated as of February 20, 1986, the Eighth Supplemental Indenture
dated as of May 15, 1990 and the Seventeenth Supplemental Indenture
dated as of March 10, 1997, between the Registrant and First Union
National Bank, as Trustee, as filed with the Company's current
report on Form 8-K dated April 5, 1999, is incorporated herein by
reference.
Exhibit 4(b) Instrument defining rights of security holders.
Rollins Truck Leasing Corp. Rights Agreement dated as of June 1,
1999 as filed as an Exhibit to Registration Statement on Form 8-A
filed by the Company on June 30, 1999 is incorporated herein by
reference.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On April 5, 1999, a report on Form 8-K was filed in connection with
the sale of $100,000,000 of the Company's 6.75% Collateral Trust
Debentures, Series T, due April 5, 2006, which were sold through
Merrill Lynch, Pierce, Fenner & Smith Incorporated, sole underwriter
under the terms of an Underwriting Agreement which was filed as an
Exhibit to the Form 8-K and pursuant to Registration Statement No.
333-21835 filed with the Securities and Exchange Commission on
February 14, 1997 and which became effective on February 18, 1997.
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: July 27, 1999 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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<FISCAL-YEAR-END> SEP-30-1999
<PERIOD-END> JUN-30-1999
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<RECEIVABLES> 76,679
<ALLOWANCES> 2,405
<INVENTORY> 7,653
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<PP&E> 1,798,266
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<COMMON> 57,367
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