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 December 31, 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 December 31, 1999 was 56,717,725.
FORM 10-Q Page 2 of 9
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
A. Basis of Presentation
The accompanying unaudited 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, 1999 are not necessarily
indicative of the results that may be expected for the year ended September
30, 2000. 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, 1999.
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,
1999 1998
Basic EPS 56,804 58,464
Effect of assumed option
exercises 451 649
Diluted EPS 57,255 59,113
No adjustments to net income available to common stockholders were
required during the periods presented.
FORM 10-Q Page 3 of 9
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF EARNINGS
In Thousands, Except Per Share Amounts
Quarter Ended
December 31,
1999 1998
Revenues $169,622 $155,345
Expenses
Operating 66,341 60,327
Depreciation 53,832 49,066
Gain on sale of property and equipment (4,855) (4,202)
Selling and administrative 14,366 13,303
129,684 118,494
Operating earnings 39,938 36,851
Interest expense 15,728 13,817
Earnings before income taxes 24,210 23,034
Income taxes 9,440 8,960
Net earnings $ 14,770 $ 14,074
Earnings per share
Basic $ .26 $ .24
Diluted $ .26 $ .24
Average common shares outstanding
Basic 56,804 58,464
Diluted 57,255 59,113
Dividends paid per common share $ .055 $ .05
Comprehensive income $ 13,991 $ 14,348
FORM 10-Q Page 4 of 9
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED BALANCE SHEET
In Thousands, Except Share and Per Share Amounts
December 31, September 30,
ASSETS 1999 1999
Current assets
Cash $ 29,963 $ 34,280
Accounts receivable, net of allowance for
doubtful accounts of: December-$2,555;
September-$2,479 100,697 84,482
Inventories 9,951 8,074
Prepaid expenses 20,365 18,021
Deferred income taxes 5,199 5,189
Total current assets 166,175 150,046
Equipment on operating leases, at cost,
net of accumulated depreciation of:
December-$539,988; September-$526,406 1,089,432 1,012,307
Other property and equipment, at cost,
net of accumulated depreciation of:
December-$103,625; September-$100,067 241,757 228,445
Excess of cost over net assets of
businesses acquired 26,206 16,117
Other assets 6,179 5,972
Total assets $1,529,749 $1,412,887
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities (excluding equipment
financing obligations)
Accounts payable $ 23,010 $ 30,077
Accrued liabilities 50,961 48,372
Income taxes payable 5,390 1,574
Total current liabilities 79,361 80,023
Equipment financing obligations 911,655 802,458
Other liabilities 14,541 15,849
Deferred income taxes 198,066 194,171
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-56,717,725;
September-57,214,551 56,718 57,215
Additional paid-in capital 312 -
Accumulated other comprehensive income (loss) (261) 518
Retained earnings 269,357 262,653
Total shareholders' equity 326,126 320,386
Total liabilities and shareholders' equity $1,529,749 $1,412,887
FORM 10-Q Page 5 of 9
ROLLINS TRUCK LEASING CORP.
CONSOLIDATED STATEMENT OF CASH FLOWS
In Thousands
Quarter Ended
December 31,
1999 1998
Cash flows from operating activities:
Net earnings $ 14,770 $ 14,074
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 54,042 49,152
Net gain on sale of property and equipment (4,855) (4,202)
Changes in assets and liabilities:
Accounts receivable (16,124) 4,825
Accounts payable and accrued liabilities (4,639) (1,000)
Current and deferred income taxes 7,989 8,145
Other, net (5,462) (1,871)
Net cash provided by operating activities 45,721 69,123
Cash flows from investing activities:
Purchase of property and equipment (131,493) (76,515)
Proceeds from sales of equipment 22,840 18,119
Business combination, net of cash acquired (42,047) -
Net cash used in investing activities (150,700) (58,396)
Cash flows from financing activities:
Proceeds of equipment financing obligations 199,546 34,866
Repayment of equipment financing obligations (90,652) (47,341)
Payments of dividends (3,117) (2,923)
Proceeds of stock options exercised 424 402
Common stock acquired and retired (5,559) (4,987)
Net cash provided by (used in)
financing activities 100,642 (19,983)
Effect of exchange rate changes on cash 20 -
Net decrease in cash (4,317) (9,256)
Cash beginning of period 34,280 27,015
Cash end of period $ 29,963 $ 17,759
Supplemental information:
Interest paid $ 9,705 $ 6,447
Income taxes paid $ 1,466 $ 815
FORM 10-Q Page 6 of 9
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Quarter Ended December 31, 1999 vs. Quarter Ended
December 31, 1998
Revenues for the quarter ended December 31, 1999 increased by $14,277,000
(9.2%) to $169,622,000 compared with $155,345,000 reported for the first
fiscal quarter last year. Full-service lease, guaranteed maintenance,
commercial rental, logistics and dedicated revenues all improved over the
same quarter of the preceding year.
Long-term full-service lease business grew by 10.9% during the quarter.
Strong commercial rental utilization of a larger fleet during the first
fiscal quarter generated a 7.5% increase in commercial rental revenue over
the prior year.
Operating expenses increased by $6,014,000 (10.0%) to $66,341,000 in the
first fiscal quarter compared with $60,327,000 last year. Driver, branch and
shop payrolls increased by $3,327,000 and reflected the higher level of
business. Vehicle license and tax expenses increased by $811,000 and
reflected both the expanded fleet size and increased registration fees in
certain jurisdictions. Overall operating cost increases were broad-based and
reflected the higher level of business. Operating expenses as a percent of
revenues were 39.1% and 38.8% in 1999 and 1998, respectively.
Depreciation increased by $4,766,000 (9.7%) due to the increased
investment in equipment on operating leases, as well as the expanded
commercial rental fleet and related transportation service facilities
required to support the higher level of business.
Gain on the sale of property and equipment increased by $653,000 (15.5%)
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 $1,063,000 (8.0%) when
compared with the same quarter of the preceding year. Data processing costs
increased by $343,000 in large part due to final Y2K compliance expenditures.
Advertising costs increased by $329,000 and salaries and wages increased by
$294,000 during the quarter. As a percent of revenues, selling and
administrative expenses decreased to 8.5% in 1999 from 8.6% in 1998.
Interest expense increased by $1,911,000 (13.8%) due to the increased
level of borrowings when compared with the same fiscal quarter last year.
The effective income tax rates for the first fiscal quarter of 2000 and
1999 were 39.0% and 38.9%, respectively.
Net earnings increased by $696,000 (4.9%) to $14,770,000 or $.26 per
diluted share from $14,074,000 or $.24 per diluted share in fiscal 1999.
Liquidity and Capital Resources
Cash flows from operating activities of $45,721,000 were generated
principally from net earnings of $14,770,000 and noncash depreciation and
amortization of $54,042,000. Investing activities used $150,700,000 of cash
for the purchase of the assets of Keen Leasing on October 29, 1999 for
$42,047,000 and the purchase of property and equipment of $131,493,000 less
FORM 10-Q Page 7 of 9
the cash proceeds of $22,840,000 received from the sale of equipment. Cash
dividends of $3,117,000 and the repurchase of 563,600 shares for $5,559,000
used an additional $8,676,000 of cash. The principal source of financing the
above activities was the revolving credit facility in the name of the
Company's principal subsidiary, Rollins Leasing Corp. This facility was
amended and expanded on December 11, 1999 to an aggregate limit of
$170,000,000 of which $83,000,000 was available at December 31, 1999. This
facility, used primarily to finance vehicle purchases on an interim basis
pending placement of long-term financing, requires the maintenance of
specific financial ratios and restricts payments to the Company. At the
option of the banks who provide the facility, the Company's Collateral Trust
Debentures and outstanding balances under this facility may be secured by
certain leasing equipment.
Equipment purchases and acquisitions are permanently financed through the
Company's Collateral Trust Debenture program. On December 15, 1999, the
Company issued $85,000,000 of Series U, 7.77% Collateral Trust Debentures.
Additionally, at December 31, 1999, the Company could sell an additional
$55,000,000 of Collateral Trust Debentures under its current shelf
registration statement. Another shelf registration statement was filed on
January 27,2000, which provides a total of $350,000,000 of available
capacity. This shelf registration statement was declared effective on
January 31, 2000. The Company intends to draw down on this shelf
registration during its second fiscal quarter. 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 continue 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 Collateral Trust Indenture 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, 1999.
For further details, see pages 4 through 7 of the Company's 1999 Annual
Report to Shareholders on Form 10-K for the year ended September 30, 1999.
Acquisitions and Disposition of Assets
On January 3, 2000, the Company, through its wholly owned and principal
operating subsidiary Rollins Leasing Corp., acquired all of the issued and
outstanding shares of capital stock of UPS Truck Leasing from the UPS
Logistics Group, a unit of United Parcel Service,Inc. UPS Truck Leasing
provides full-service lease and rental services on more than 10,000 vehicles
to 4,000 customers throughout the United States. The Company intends to
continue the business of UPS Truck Leasing.
The purchase price of $208,016,323 consisted of a cash payment of
$188,016,323 and the issuance of 2,000,000 shares of the Company's $1.00 par
value common stock, which were valued pursuant to the terms of the stock
purchase agreement at $20,000,000.
Financing for the cash portion of the transaction was provided from
borrowings under the Company's revolving credit facilities and the proceeds
from the sale of the assets and business of Rollins Logistics Inc., as more
fully described below.
FORM 10-Q Page 8 of 9
On January 3, 2000, Rollins Logistics Inc., the Company's dedicated
carriage and logistics subsidiary, sold its assets and business to Worldwide
Dedicated Services, Inc., a UPS Logistics Group company, for cash of
$67,220,000.
In connection with the acquisition and disposition of assets as more fully
described above, on January 1, 2000 the Company and Rollins Leasing Corp.
entered into a strategic alliance agreement with Worldwide Dedicated
Services, Inc. and UPS Logistics Group, Inc. The alliance is for an initial
term of five years.
Under the terms of the agreement, Rollins Leasing Corp. becomes the
preferred provider of lease and rental vehicles and other ancillary services
to Worldwide Dedicated Services, Inc. In turn, Worldwide Dedicated Services,
Inc. becomes the preferred provider of logistics management and dedicated
logistics services to Rollins Leasing Corp. and its customers.
Year 2000 ("Y2K") Issues
As of the filing date of this Form 10-Q, the Company's business operations
have not been materially impacted by Y2K matters. The Company will continue
to monitor its operations for possible Y2K information technology programming
issues.
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, efficient integration or
utilization of newly acquired business, facilities, equipment and personnel,
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 9 of 9
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.
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
On November 22, 1999, the Company filed a report on Form 8-K,
which, as an Item 5 - Other Event, reported the text of the
Company's November 15, 1999 press release concerning the
acquisition of UPS Truck Leasing, the sale of the assets and
business of Rollins Logistics Inc. and a strategic alliance
agreement with the UPS Logistics Group.
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: February 7, 2000 Rollins Truck Leasing Corp.
(Registrant)
/s/ John W. Rollins, Jr.
John W. Rollins, Jr.
President and Chief Executive 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> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 29,963
<SECURITIES> 0
<RECEIVABLES> 103,252
<ALLOWANCES> 2,555
<INVENTORY> 9,951
<CURRENT-ASSETS> 166,175
<PP&E> 1,974,802
<DEPRECIATION> 643,613
<TOTAL-ASSETS> 1,529,749
<CURRENT-LIABILITIES> 79,361
<BONDS> 911,655
0
0
<COMMON> 56,718
<OTHER-SE> 269,408
<TOTAL-LIABILITY-AND-EQUITY> 1,529,749
<SALES> 169,622
<TOTAL-REVENUES> 169,622
<CGS> 0
<TOTAL-COSTS> 120,173
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,728
<INCOME-PRETAX> 24,210
<INCOME-TAX> 9,440
<INCOME-CONTINUING> 14,770
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,770
<EPS-BASIC> .26
<EPS-DILUTED> .26
</TABLE>
