_____________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_____________________________________________________________________
FORM 10-K
(Mark One)
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 2000
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
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 of Incorporation) (I.R.S. Employer Identification Number)
ONE ROLLINS PLAZA, WILMINGTON, DELAWARE 19803
(Address of principal executive offices)
Registrant's telephone number including area code (302) 426-2700
Securities registered pursuant to Section 12(b) of the Act:
Title of Class Name of each exchange on which registered
Common Stock, $1 Par Value NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 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
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. / /
The aggregate market value of the voting stock held by non-affiliates
of the registrant was $247,616,000 as of October 31, 2000.
The number of shares of registrant's common stock outstanding as of
October 31, 2000 was 57,979,616.
The following documents are incorporated by reference:
Document Part of this form into which incorporated
Proxy Statement in connection with
Annual Meeting of Shareholders to be
held January 25, 2001 III
PART I
ITEM I. BUSINESS.
The Registrant, Rollins Truck Leasing Corp., together with its
subsidiaries, is referred to as the "Company" unless the context
clearly indicates otherwise.
(a) General Development of Business
The business of the Company was substantially unchanged prior to the
year ending September 30, 2000.
Significant events during the current fiscal year are as follows:
(1) On October 29, 1999, a subsidiary of the Company acquired the
net assets and business of Keen Leasing, Inc. ("Keen") for a
purchase price of $42,437,000. Keen is a truck rental and leasing
business headquartered in Harrisburg, Pennsylvania, which currently
services approximately 1,800 vehicles from 13 locations in
Pennsylvania, Maryland and Virginia.
(2) On January 3, 2000, a subsidiary of the Company acquired 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 purchase price of $216,911,000
consisted of cash payments of $189,589,000 and the issuance of
2,000,000 shares of the Company's $1.00 par value common stock with
a fair value of $20,000,000 with the balance related to working
capital adjustments to be settled in fiscal year 2001.
(3) On January 3, 2000, the Company's dedicated carriage and
logistics subsidiary, Rollins Logistics Inc., sold its assets and
business to Worldwide Dedicated Services, Inc., a UPS Logistics
Group company, for a purchase price of $69,103,000, which consisted
of a cash payment of $67,220,000 with the balance related to working
capital adjustments to be settled in fiscal year 2001.
In connection with the transactions described in (2) and (3)
above, the Company entered into a Strategic Alliance Agreement (the
"Alliance") with UPS Logistics. The Alliance is for an initial term
of five years. Under the terms of the Alliance, Rollins became the
preferred provider of lease and rental vehicles and other ancillary
services to Worldwide Dedicated Services, Inc., a unit of the UPS
Logistics Group. In turn, the UPS Logistics Group became the
preferred provider of logistics management and dedicated logistics
services to Rollins and its customers.
(b) Financial Information about Industry Segments
The Company operates principally in one industry segment and through
its principal subsidiary, Rollins Leasing Corp. ("Rollins"), is engaged
primarily in full-service truck leasing and rentals. All of the
Company's operations currently are conducted within the United States
and Canada. The financial information concerning this business is
included in this 2000 Annual Report on Form 10-K.
(c) Narrative Description of Business
Full-service leasing accounts for the major portion of Rollins'
revenues. Under these leases, Rollins purchases vehicles and
components that are custom-engineered to the customer's requirements.
This equipment is then leased to the customer for periods usually
ranging from three to eight years. Rollins provides fuel, oil, tires,
washing and regularly scheduled maintenance and repairs at its
facilities. In addition, Rollins arranges for licenses and insurance,
pays highway and use taxes and supplies a 24-hour-a-day emergency road
service to its customers.
The commercial rental fleet, which at September 30, 2000 consisted
of approximately 11,200 units with payload capacities ranging from
4,000 to 45,000 pounds, offers tractors, trucks and trailers to
customers for short periods of time ranging from one day to several
months. The Company's commercial rental fleet also provides additional
vehicles to full service lease customers to handle their peak or
seasonal business needs. The rental fleet's average age is
approximately two years. The utilization rate of the rental fleet
during fiscal year 2000 averaged approximately 85%. Rollins does not
offer services in the consumer one-way truck rental market.
Rollins also furnishes a guaranteed maintenance service to private
fleet customers who choose to own their vehicles. This service includes
preventive maintenance, fuel procurement, tax reporting, permitting,
licensing and access to the Rollins 24-hour-a-day emergency road
service.
There are many companies engaged in all aspects of vehicle rental
and leasing, some of which also operate on a nationwide basis and are
larger than the Company's business. Ryder System, Inc. and Penske
Truck Leasing Co., L.P., Inc. are respectively the largest and second
largest competitors in the truck leasing industry. The Company
believes Rollins is the third largest competitor in the field of full-
service leasing and short-term rental of heavy-duty trucks in the
United States. Since the unit cost of vehicles and the cost of the
borrowed funds used to purchase such vehicles are believed to be
similar for most vehicle leasing companies, successful competition is
based in part on service.
At September 30, 2000, a total of 4,357 persons were employed by the
Company.
ITEM 2. PROPERTIES.
The Company's headquarters is located in a modern 15-story office
building of approximately 245,000 square feet owned by the Company at
One Rollins Plaza, Wilmington, DE 19803. In addition to providing
administrative office space to the Company and its subsidiaries, a
lesser portion of the building is leased to Matlack Systems, Inc. for
its use as administrative offices and corporate headquarters.
The Company's principal operating properties consist of land and
buildings used in its truck leasing and rental business. These
properties generally consist of an equipment repair facility and
administrative offices. Rollins owns or leases 267 facilities in 40
states and one Canadian province.
ITEM 3. LEGAL PROCEEDINGS.
Neither the Company nor any of its subsidiaries is a party to any
material legal proceedings. The Company and its subsidiaries are
engaged in ordinary routine litigation incidental to the business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER MATTERS.
STOCK PRICES AND DIVIDENDS
At September 30, 2000, there were 1,958 holders of record of the
Common Stock.
The range of share prices for the Common Stock on the New York and
Pacific Stock Exchanges and per share dividends paid on Common Stock
for the fiscal years ended September 30, 2000 and 1999 are as follows:
Prices Dividends
2000 1999 2000 1999
High Low High Low
Fiscal Quarter
First ...... $12 3/16 $ 9 7/16 $15 1/4 $10 3/16 $.055 $.05
Second ..... 11 7/8 7 5/8 14 1/2 9 1/16 .055 .05
Third ...... 10 1/4 6 15/16 11 3/4 9 5/16 .055 .05
Fourth ..... 8 5/16 6 12 1/4 10 1/16 .055 .05
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
FIVE-YEAR SELECTED FINANCIAL DATA
(Dollars in Millions, Except Per Share Amounts)
Fiscal Year Ended September 30,
2000 1999 1998 1997 1996
Revenues 720.3 627.4 610.2 556.7 513.8
Earnings before
income taxes 134.0(1)(2) 92.7 85.1 70.2 55.9
Net earnings 81.9(2) 56.5 52.0 42.8 34.1
Earnings per share:
Basic 1.42(2) .98 .86 .68 .52
Earnings per share:
Diluted 1.41(2) .97 .85 .68 .52
Dividends per
common share .22 .20 .15 .13 .12
At September 30,
Total assets 1,999.2 1,407.7 1,290.4(3) 1,186.0(3) 1,120.3(3)
Equipment on
operating
leases, net 1,449.6 1,012.3 924.9 847.9 784.3
Equipment
financing
obligations 1,273.6 802.5 749.9 671.8 641.4
Deferred income
taxes 220.3 189.0 167.9 147.8 128.9
Shareholders'
equity 395.4 320.4 293.0 290.0 285.1
(1)Includes acquisition-related one-time expenses in 2000 of $9.7
million.
(2)Includes gain on sale of logistics business in 2000 of $56.7
million (after-tax of $34.5 million or $.60 and $.59 per basic and
diluted share, respectively).
(3)Reflects unclassified presentation.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OFOPERATIONS
Results of Operations
Revenues increased in 2000 by $92.9 million (14.8%) to $720.3
million compared with $627.4 million in 1999. The increase reflected
a substantial improvement in internal growth as well as the impact
resulting from three acquisitions made since August 1999. Full-service
lease revenues improved by 41.1% in 2000, as a record amount of new
lease sales was recorded during 2000, which provided more than one-half
of the revenue increase. The acquisitions of UPS Truck Leasing, Keen
Leasing and Range Transportation contributed to the remainder of the
full-service lease revenue improvement. Commercial rental revenues
increased by 15.1% in 2000, despite weaker demand for trucks throughout
the year. Additional vehicles from the acquisitions mentioned above
contributed to the improvement in rental revenue, despite lower
utilization of the rental fleet in 2000. The Company is continuing to
adjust the size of the rental fleet to meet current demand. Currently,
there are approximately 11,200 vehicles in the rental fleet. Revenues
and operating expenses included in the consolidated results related to
the logistics business, which was sold on January 3, 2000, were $33.2
million and $20.6 million, respectively, in 2000 and $121.6 million and
$62.9 million, respectively, in 1999.
Operating expenses increased by $36.1 million (15.1%) to $275.3
million from $239.2 million last year. Operating expenses as a percent
of revenues were 38.2% and 38.1% in 2000 and 1999, respectively. The
increase in shop payroll, parts, tires and outside repairs, defined as
controllable costs, caused the largest increase in operating expenses.
In 2000, these costs were $117.2 million compared with $85.6 million in
1999, a 36.9% increase. The integration of UPS Truck Leasing as well
as the two other smaller acquisitions represented a substantial portion
of the increase in controllable costs. Approximately $8.1 million of
controllable expenses were incurred to bring these acquired vehicles up
to the Company's maintenance standards.
Vehicle licenses and taxes increased by $10.8 million (39.4%) in
2000 to $38.2 million compared with $27.4 million in the prior year.
Acquisition-related third-party lease expenses accounted for $12.0
million of the operating expense increase. Other shop-related costs,
such as rent, environmental and utility expenses increased by $2.4
million in 2000 to $6.7 million. Substantially all of the above
expense changes resulted from the impact of the 8,900-vehicle increase
in the full-service lease portfolio during 2000. All other operating
expenses increased on a broad basis as a result of the overall higher
level of business. At September 30, 2000, a total of 30,600 vehicles
were included in the full-service lease fleet.
Depreciation increased by $44.3 million (22.2%) in 2000 primarily
due to the increased investment in equipment on operating leases from
internal sales and capital spending for related transportation service
facilities. The recent acquisitions, principally UPS Truck Leasing,
also contributed to the increase in depreciation in 2000. As a percent
of revenues, depreciation increased to 33.8% in 2000 from 31.8% in 1999
primarily as a result of weaker demand for rental trucks, which caused
lower than normal commercial rental revenues.
Selling and administrative expenses increased by $14.8 million
(25.6%) to $72.6 million in 2000 from $57.8 million last year and
reflected both the increase in revenue and the effect of acquisitions,
most notably UPS Truck Leasing. Sales-related wages and commissions of
$23.4 million in 2000 increased by 19.3% over the prior year. The
Company has 50 additional branches in 2000 with salespeople in each one
and the record level of sales resulted in a substantial increase in
commissions. Additional technology costs, both from Y2K and
acquisitions represented $1.7 million of the year-to-year change in
administrative expenses. As a percent of revenues, selling and
administrative expenses increased to 10.1% in 2000 from 9.2% in 1999.
Earnings before interest, taxes, depreciation and amortization,
exclusive of the pre-tax gain on the sale of the logistics business of
$56.7 million, increased by 17.1% to $407.5 million in 2000 compared
with $347.8 million in 1999. Gain on the sale of property and equipment
increased by $15.2 million, principally due to the significantly larger
number of units sold during the last nine months of fiscal 2000, as the
Company reduced the size of its commercial rental fleet. Although used
truck prices declined in 2000, the Company's contractual commitments
enabled it to dispose of vehicles at prices similar to the prior year.
Earnings before interest and taxes (EBIT) increased by 8.7% to
$161.0 million in 2000.
Interest expense increased by $28.3 million (51.1%) due to the
increased level of borrowings and slightly higher interest rates when
compared with last year. Higher borrowings resulted from the
substantial increase in the purchase of trucks due to improved internal
full-service lease growth, acquisitions and higher facility capital
spending.
The effective income tax rate was 38.9% in 2000 and 39.1% in 1999.
Net earnings for the year was $81.9 million, which included a net
gain of $34.5 million from the sale of the logistics business. The
Company incurred approximately $9.7 million ($5.9 million after taxes)
of acquisition-related integration costs during 2000.
Fiscal Year 1999 vs. 1998
Revenues increased by $17.2 million (2.8%) as full-service lease
and commercial rental revenues improved over the prior year. Full-
service lease, guaranteed maintenance and logistics revenues
represented approximately 72% of total revenues. Logistics and
dedicated revenues declined by 9.0% due to the loss of two large
accounts at the end of the last fiscal year. Commercial rental
revenues, which represented the remainder of total revenues, increased
by 8.9% due in large part to the increased level of rental business.
Operating expenses decreased by $5.1 million (2.1%). The decrease
resulted from a reduction in driver payroll of $2.9 million and a
reduction in fuel costs of $.8 million both related to the decline in
logistics and dedicated revenues. Other operating expenses on a broad
basis increased as a result of the overall higher level of business,
however, the increase was more than offset by a decrease in
environmental costs as the Company completed its underground storage
tank replacement program by the end of calendar 1998. Operating
expenses as a percent of revenues were 38.1% and 40.0% in 1999 and
1998, respectively.
Depreciation expense increased by $15.9 million (8.7%) as a result
of the Company's increased investment in equipment on operating leases
and related transportation service facilities required to support the
current level of business. As a percent of revenues, depreciation
expense increased to 31.8% in 1999 from 30.1% in 1998.
Gain on sale of property and equipment increased by $7.2 million
(73.8%) and reflected both higher average selling prices realized on
transportation equipment and an increase in the number of units sold.
Selling and administrative expenses increased by $2.3 million
(4.1%) to $57.8 million from $55.5 million in 1998 and reflected the
higher level of business. Increased employee compensation 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 were 9.2% and 9.1% in 1999 and 1998,
respectively.
Interest expense increased by $3.8 million (7.3%) due to the
increased level of borrowings experienced during the current year.
Interest rates decreased slightly when compared with the prior year.
The effective income tax rate was 39.1% in 1999 and 38.9% in 1998.
Net earnings increased by $4.5 million (8.6%) to $56.5 million or
$.97 per diluted share from $52.0 million or $.85 per diluted share in
1998. The increased net earnings resulted from the higher revenues and
the increased gain realized from the sale of property and equipment.
Liquidity and Capital Resources
The Company's primary operation is the full-service leasing and
rental of tractors, trucks and trailers, which requires substantial
amounts of capital and access to financing sources. At September 30,
2000, equipment on operating leases had increased by $437.3 million to
$1,449.6 million and represented 72.5% of the Company's assets. Funds
for the acquisition of this equipment are provided principally by the
cash flows from operations, the proceeds from the sale of used
equipment and borrowings under the Company's revolving credit
facilities. Cash flows from operating activities of $240.1 million were
generated principally from net earnings of $47.4 million, excluding the
net gain on the sale of the logistics business of $34.5 million, and
the noncash depreciation and amortization totaling $246.5 million.
Because existing leases provide the primary source of funds from
operations, the Company expects a similar amount of funds to be
generated in 2001.
Investing activities reflect the Company's capital expenditures of
$697.0 million in 2000 and $355.2 million in 1999. Proceeds from the
sale of equipment amounted to $167.4 million in 2000 and $88.0 million
in 1999. At September 30, 2000, the Company's commitment for the
purchase of revenue equipment was $100.7 million. Based on the current
level of business and including commitments already made at September
30, 2000, the Company anticipates spending approximately $400.0 million
for equipment and facilities in 2001.
Equipment financing obligations increased to $1,273.6 million at
September 30, 2000 from $802.5 million a year earlier. Borrowings from
external sources included equipment term loans, capitalized leases and
the following issuances and redemption under the Company's Collateral
Trust Debenture program.
Interest Due Amount
Date Series Rate Date (000s)
12/15/99 U 7.770% 12/15/04 $85,000 Issued
2/15/00 V 8.000% 2/15/03 75,000 Issued
2/15/00 W 8.375% 2/15/07 75,000 Issued
5/03/00 X 8.250% 5/01/02 150,000 Issued
5/15/00 I 10.350% 5/15/00 (50,000) Redeemed
Net increase in Collateral Trust Debentures
outstanding during fiscal 2000 $ 335,000
The net proceeds from these debenture offerings were used by the
Company to purchase transportation equipment and repay existing
revolving credit facility indebtedness incurred to acquire
transportation equipment.
At September 30, 2000, the Company could sell an additional $50.0
million 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
continue to be able to obtain financing for its equipment and facility
purchases at market rates and under satisfactory terms and conditions.
The Company's principal subsidiary, Rollins Leasing Corp., has
revolving credit facilities available which aggregate $175.0 million,
of which $100.0 million matures in March 2001. At September 30, 2000,
there was $87.0 million remaining available. Rollins Leasing Corp.
expects to renew the expiring portion of these facilities on
essentially the same terms, none of which are expected to be less
favorable than those currently in place. These facilities, used
primarily to finance vehicle purchases on an interim basis pending
placement of long-term financing, require the maintenance of specified
financial ratios and restrict payments to the Company. At the option
of the banks that provide the aforementioned facilities, certain
leasing equipment may secure the facilities and the Company's
Collateral Trust Debentures.
During 2000, the Company's financing activities included an
increase in equipment financing obligations of $471.1 million, payment
of dividends of $12.7 million and the purchase and retirement of
1,373,600 shares of $1 par value common stock for $12.6 million. At
September 30, 2000, the Company was authorized to purchase 359,700
additional shares of its stock.
At September 30, 2000 and 1999, the debt to equity ratio of the
Company was 3.2 to 1 and 2.5 to 1, respectively.
Year 2000 ("Y2K") Readiness Disclosure
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.
Market Risks
The Company has minimal market risk exposure related to interest
rates. The Company is exposed to market risks related to fluctuations
in interest rates for its variable rate borrowings of $88,000,000 at
September 30, 2000. A change in interest rates of 1% on the balance
outstanding at September 30, 2000 would cause a change in the total
annual interest costs of $880,000. At September 30, 2000,
approximately 93% of the Company's equipment financing obligations were
at fixed rates with maturity schedules designed to match the cash flows
of the corresponding full-service lease portfolio.
A small portion of the Company's operations is conducted in Canada,
thereby exposing the Company to foreign exchange rate risk. However,
due to this operations' relative size, the risk is not deemed to be
material.
Forward-Looking Statements
The Company may make certain forward-looking statements in this
Form 10-K within the meaning of Section 21E of the Securities Exchange
Act of 1934, as amended, relating to the Company's financial condition,
profitability, liquidity, resources, business outlook, proposed
acquisitions, market forces, corporate strategies, consumer
preferences, contractual commitments, legal matters, capital
requirements and other matters. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking
statements. 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 substantially from the anticipated
results or other expectations expressed in the Company's forward-
looking statements. When words and expressions such as: "believes,"
"expects," "anticipates," "estimates," "plans," "intends,"
"objectives," "goals," "aims," "projects," "forecasts," "possible,"
"seeks," "may," "could," "should," "might," "likely," "enable," or
similar words or expressions are used in this Form 10-K, as well as
statements containing phrases such as: "in the Company's view," "there
can be no assurance," "although no assurance can be given," or "there
is no way to anticipate with certainty," forward-looking statements are
being made in all of these instances.
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: the
Company's growth strategies; the ability to successfully integrate
acquired companies and businesses; the Company's development and
potential acquisition of new facilities; potential increases in
interest rates; softness in the used vehicle market; general economic
conditions; competitive factors and pricing pressures; shifts 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.
The Company undertakes no obligation to update publicly or revise
any forward-looking statements as a result of future developments,
events or conditions. New risk factors emerge from time to time and it
is not possible for the Company to predict all such risk factors, nor
can the Company assess the impact of all such risk factors on its
business or the extent to which any factor, or combination of factors,
may cause actual results to differ significantly from those forecast in
any forward-looking statements. Given these risks and uncertainties,
investors should not overly rely or attach undue weight to the
Company's forward-looking statements as an indication of its actual
future results.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of the Company, the
Independent Auditors' Report and the financial statement schedules
included in this report are shown on the Index to the Consolidated
Financial Statements and Schedules.
ITEM 9. DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Except as presented below, the information called for by this Item
10 is incorporated by reference from the Company's Proxy Statement to
be filed pursuant to Regulation 14A for the Annual Meeting of
Shareholders to be held on January 25, 2001.
Executive Officers of the Registrant. As of October 31, 2000, the
Executive Officers of the registrant were:
Name Position Age Term of Office
Patrick J. Bagley Vice President-Finance and 53 7/87 to date
Treasurer 1/87 to date
I. Larry Brown President and 55 1994 to date
Chief Executive Officer, 1996 to date
Rollins Leasing Corp.
Klaus M. Belohoubek Vice President-General
Counsel and Secretary 41 7/99 to date
John W. Rollins, Jr. Director 58 1967 to date
President 9/75 to date
Chief Executive Officer 1/00 to date
Henry B. Tippie Chairman of the Executive
Committee 73 3/74 to date
Chairman of the Board 4/00 to date
Klaus M. Belohoubek has been Vice President-General Counsel and
Secretary to the Company since 1999 and was Assistant General Counsel
from 1990 to 1999. Mr. Belohoubek also serves as Vice President-
General Counsel and Secretary to Matlack Systems, Inc. and Vice
President-General Counsel to Dover Downs Entertainment, Inc.
The Company's Executive Officers are elected for the ensuing year
and until their successors are elected.
ITEM 11. EXECUTIVE COMPENSATION.
The information called for by this Item 11 is incorporated by
reference from the Company's Proxy Statement to be filed pursuant to
Regulation 14A for the Annual Meeting of Shareholders to be held on
January 25, 2001.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The information called for by this Item 12 is incorporated by
reference from the Company's Proxy Statement to be filed pursuant to
Regulation 14A for the Annual Meeting of Shareholders to be held on
January 25, 2001.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended September 30, 2000, the following officers
and/or directors of the Company were also officers and/or directors of
Matlack Systems, Inc.; Patrick J. Bagley, Klaus M. Belohoubek, William
L. Medford, Jr., William B. Philipbar, Jr., John W. Rollins, Jr. and
Henry B. Tippie. The Estate of John W. Rollins owns directly and of
record 11.4% of the outstanding shares of Common Stock of Matlack
Systems, Inc. at October 31, 2000. Henry B. Tippie is the executor of
the Estate.
The following officers and/or directors of the Company were also
officers and/or directors of Dover Downs Entertainment, Inc.; Patrick
J. Bagley, Klaus M. Belohoubek, John W. Rollins, Jr. and Henry B.
Tippie. The Estate of John W. Rollins owns directly and of record
29.9% of the outstanding shares of Common Stock of Dover Downs
Entertainment, Inc. at October 31, 2000. Henry B. Tippie is the
executor of the Estate.
The description of transactions between the Company and Matlack
Systems, Inc. and between the Company and Dover Downs Entertainment,
Inc. appears under the caption "Transactions with Related Parties" of
this 2000 Annual Report on Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K.
(a) Financial Statements, Financial Statement Schedules and
Exhibits.
(1) Financial Statements - See accompanying Index to Consolidated
Financial Statements and Schedules.
(2) Financial Statements Schedules - See accompanying Index to
Consolidated Financial Statements and Schedules.
(3)Exhibits:
(3) (a) Restated Certificate of Incorporation of Rollins Truck
Leasing Corp. as last amended on May 23, 2000.
(3) (b) By-Laws of Rollins Truck Leasing Corp. as last amended on
July 17, 2000.
(4) (a) Collateral Trust Indenture dated March 21, 1983, between RLC
CORP. (now known as Rollins Truck Leasing Corp.) and Bank
of America Illinois (formerly Continental Illinois National
Bank and Trust Company of Chicago), as Trustee, as filed
with the Company's Registration Statement No. 33-40476 on
Form S-3 dated May 10, 1991, is incorporated herein by
reference.
(4) (b) Third Supplemental Collateral Trust Indenture dated February
20, 1986 to the Collateral Trust Indenture dated March 21,
1983 between RLC CORP. (now known as Rollins Truck Leasing
Corp.) and Bank of America Illinois (formerly Continental
Illinois National Bank and Trust Company of Chicago), as
Trustee, as filed with the Company's Registration Statement
No. 33-40476 on Form S-3 dated May 10, 1991, is incorporated
herein by reference.
(4) (c) Eighth Supplemental Collateral Trust Indenture dated May 15,
1990 to the Collateral Trust Indenture dated March 21, 1983
as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 33-67682 on Form S-3
dated August 20, 1993 is incorporated herein by reference.
(4) (d) Eleventh Supplemental Collateral Trust Indenture dated March
15, 1993 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (e) Twelfth Supplemental Collateral Trust Indenture dated March
15, 1994 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (f) Thirteenth Supplemental Collateral Trust Indenture dated
March 15, 1995 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (g) Fourteenth Supplemental Collateral Trust Indenture dated May
15, 1995 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (h) Fifteenth Supplemental Collateral Trust Indenture dated
March 15, 1996 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and First Trust of Illinois, National
Association, as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated
February 14, 1997 is incorporated herein by reference.
(4) (i) Sixteenth Supplemental Collateral Trust Indenture dated
August 7, 1996 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and First Trust of Illinois, National
Association, as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated
February 14, 1997 is incorporated herein by reference.
(4) (j) Seventeenth Supplemental Collateral Trust Indenture dated
March 10, 1997 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by the Eighth
Supplemental Indenture dated May 15, 1990 between Rollins
Truck Leasing Corp. and First Union National Bank, as
Trustee, as filed with the Company's Registration Statement
No. 333-95501 on Form S-3 dated January 27, 2000 is
incorporated herein by reference.
(4) (k) Eighteenth Supplemental Collateral Trust Indenture dated
July 16, 1998 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, an Eighth
Supplemental Indenture thereto dated May 15, 1990 and by the
Seventeenth Supplemental Indenture dated March 10, 1997
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee, as filed with the Company's Registration
Statement No. 333-95501 on Form S-3 dated January 27, 2000
is incorporated herein by reference.
(4) (l) Nineteenth Supplemental Collateral Trust Indenture dated
April 5, 1999 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, an Eighth
Supplemental Indenture thereto dated May 15, 1990 and by the
Seventeenth Supplemental Indenture dated March 10, 1997
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee, as filed with the Company's Registration
Statement No. 333-95501 on Form S-3 dated January 27, 2000
is incorporated herein by reference.
(4) (m) Twentieth Supplemental Collateral Trust Indenture dated
December 15, 1999 to the Collateral Trust Indenture dated
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated February 20, 1986, an
Eighth Supplemental Indenture thereto dated May 15, 1990 and
by the Seventeenth Supplemental Indenture dated March 10,
1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee, as filed with the Company's
Registration Statement No. 333-95501 on Form S-3 dated
January 27, 2000 is incorporated herein by reference.
(4) (n) Twenty-first Supplemental Collateral Trust Indenture dated
February 15, 2000 to the Collateral Trust Indenture dated
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated February 20, 1986, an
Eighth Supplemental Indenture thereto dated May 15, 1990 and
by the Seventeenth Supplemental Indenture dated March 10,
1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee.
(4) (o) Twenty-second Supplemental Collateral Trust Indenture dated
February 15, 2000 to the Collateral Trust Indenture dated
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated February 20, 1986, an
Eighth Supplemental Indenture thereto dated May 15, 1990 and
by the Seventeenth Supplemental Indenture dated March 10,
1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee.
(4) (p) Twenty-third Supplemental Collateral Trust Indenture dated
May 3, 2000 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, an Eighth
Supplemental Indenture thereto dated May 15, 1990 and by the
Seventeenth Supplemental Indenture dated March 10, 1997
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee.
(4) (q) 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.
(4) (r) Asset Purchase Agreement by and among Worldwide Dedicated
Services, Inc., Rollins Truck Leasing Corp., Rollins
Logistics Inc., Rollins Dedicated Carriage Services, Inc.
and Rollins Transportation Systems, Inc. as of November 12,
1999 as filed with the Company's Annual Report on Form 10-K
for the year ended September 30, 1999, is incorporated
herein by reference.
(4) (s) Stock Purchase Agreement by and between UPS Logistics Group,
Inc., UPS Truck Leasing, Inc., Rollins Truck Leasing Corp.
and Rollins Leasing Corp. as of November 12, 1999 as filed
with the Company's Annual Report on Form 10-K for the year
ended September 30, 1999, is incorporated herein by
reference.
(4) (t) Strategic Alliance Agreement to be entered into as of
December 31, 1999 in connection with the closing under the
Stock Purchase Agreement filed as Exhibit (4)(s), above, as
filed with the Company's Annual Report on Form 10-K for the
year ended September 30, 1999, is incorporated herein by
reference.
(10) (a) RLC CORP. (now known as Rollins Truck Leasing Corp.) 1982
Incentive Stock Option Plan, as filed with the Company's
Proxy Statement for the Annual Meeting of Shareholders held
on January 27, 1983, is incorporated herein by reference.
(10) (b) RLC CORP. (now known as Rollins Truck Leasing Corp.) 1986
Stock Option Plan, as filed with the Company's Proxy
Statement for the Annual Meeting of Shareholders held on
January 29, 1987, is incorporated herein by reference.
(10) (c) Rollins Truck Leasing Corp. 1993 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual Meeting
of Shareholders held on January 27, 1994, is incorporated
herein by reference.
(10) (d) Rollins Truck Leasing Corp. 1997 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual Meeting
of Shareholders held on January 29, 1998, is incorporated
herein by reference.
(10) (e) Revolving Credit Agreement dated March 29, 2000 among
Rollins Leasing Corp., the Lending Institutions Party
Hereto, Fleet National Bank, as Administrative Agent, First
Union National Bank, as Syndication Agent, National City
Bank, as Documentation Agent and FleetBoston Robertson
Stephens Inc., as Syndication Agent and Arranger.
(18) Letter from Ernst & Young LLP dated December 5, 2000
concerning change in accounting principle.
(21) Rollins Truck Leasing Corp. Subsidiaries at September 30,
2000.
(23) (a) Consent of Ernst & Young LLP, Independent Auditors.
(23) (b) Consent of KPMG LLP, Independent Auditors.
(27) (a) Rollins Truck Leasing Corp. Financial Data Schedule at
September 30, 2000.
(99) Independent Auditors' Report of KPMG LLP.
(b) Reports on Form 8-K.
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
DATED: December 6, 2000 ROLLINS TRUCK LEASING CORP.
(Registrant)
BY: /s/ John W. Rollins, Jr.
John W. Rollins, Jr.
President and Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates
indicated:
/s/Patrick J. Bagley Vice President-Finance December 6, 2000
Patrick J. Bagley Chief Financial Officer
Chief Accounting Officer
Director
/s/Gary W. Rollins Director December 6, 2000
Gary W. Rollins
/s/Henry B. Tippie Chairman of the Board December 6, 2000
Henry B. Tippie and Chairman of the
Executive Committee
/s/William B. Philipbar, Jr. Director December 6, 2000
William B. Philipbar, Jr.
/s/William L. Medford, Jr. Director December 6, 2000
William L. Medford, Jr.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULES
(1) Consolidated Financial Statements
Page(s)
Independent Auditors' Report on Financial Statements and
Financial Statement Schedules 13
Consolidated Statement of Earnings for the years ended
September 30, 2000, 1999 and 1998 14
Consolidated Balance Sheet at September 30, 2000 and 1999 15
Consolidated Statement of Cash Flows for the years ended
September 30, 2000, 1999 and 1998 16
Consolidated Statement of Shareholders' Equity for the
years ended September 30, 2000, 1999 and 1998 17
Notes to the Consolidated Financial Statements 18 to 27
(2) Financial Statement Schedules
Schedule I - Condensed Financial Information of
Rollins Truck Leasing Corp. (Parent)
Balance Sheet at September 30, 2000 and 1999 28
Statement of Earnings for the years ended
September 30, 2000, 1999 and 1998 29
Statement of Cash Flows for the years ended
September 30, 2000, 1999 and 1998 30
Notes to the Financial Statements 31
Schedule II - Valuation and Qualifying Accounts
for the years ended September 30,
2000, 1999 and 1998 32
Any financial statement schedules otherwise required have been omitted
because they are not applicable or the required information is shown in
the financial statements or notes thereto.
<PAGE>
Report of Independent Auditors
The Board of Directors and Shareholders
Rollins Truck Leasing Corp.
We have audited the accompanying consolidated balance sheet of
Rollins Truck Leasing Corp. and subsidiaries as of September 30, 2000,
and the related consolidated statements of earnings, cash flows, and
shareholders' equity for the year then ended. Our audit also included
the financial statement schedules as of and for the year ended September
30, 2000 listed in the index at Item 14(a). These financial statements
and schedules are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
schedules based on our audit. The financial statements and schedules of
Rollins Truck Leasing Corp. and subsidiaries for the years ended
September 30, 1999 and 1998 were audited by other auditors whose report
dated October 27, 1999, except for the note "Subsequent Events" which is
as of November 12, 1999, expressed an unqualified opinion on those
statements.
We conducted our audit in accordance with auditing standards
generally accepted in the United States. Those standards require that
we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable
basis for our opinion.
In our opinion, the 2000 consolidated financial statements referred
to above present fairly, in all material respects, the consolidated
financial position of Rollins Truck Leasing Corp. and subsidiaries as of
September 30, 2000, and the consolidated results of their operations and
their cash flows for the year ended September 30, 2000, in conformity
with accounting principles generally accepted in the United States.
Also, in our opinion, the related 2000 financial statement schedules,
when considered in relation to the basic financial statements taken as
a whole, present fairly, in all material respects, the information set
forth therein.
As discussed in the Organization and Accounting Policies Note to the
financial statements, in 2000 the Company changed its balance sheet
presentation from classified to unclassified.
ERNST & YOUNG LLP
Philadelphia, Pennsylvania
October 24, 2000
CONSOLIDATED STATEMENT OF EARNINGS
(In thousands, except per share amounts)
Year Ended September 30,
2000 1999 1998
Revenues $720,291 $627,397 $610,157
Expenses
Operating 275,323 239,162 244,260
Depreciation 243,605 199,342 183,465
Gain on sale of property
and equipment (32,196) (17,007) (9,787)
Selling and administrative 72,553 57,805 55,530
559,285 479,302 473,468
Operating earnings 161,006 148,095 136,689
Interest expense, net (83,633) (55,364) (51,586)
Gain on sale of business 56,664 - -
Earnings before income taxes 134,037 92,731 85,103
Income taxes 52,140 36,258 33,080
Net earnings $ 81,897 $ 56,473 $ 52,023
Earnings per share
Basic $ 1.42 $ .98 $ .86
Diluted $ 1.41 $ .97 $ .85
Average shares outstanding
Basic 57,872 57,833 60,340
Diluted 58,127 58,369 61,130
The Notes to the Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED BALANCE SHEET
(In thousands, except per share amounts)
September 30,
2000 1999
ASSETS
Cash $ 23,419 $ 34,280
Accounts receivable, net of
allowance for doubtful
accounts: 2000-$3,501; 1999-$2,479 120,762 84,482
Refundable income taxes 8,037 -
Equipment on operating leases, net 1,449,636 1,012,307
Other property and equipment, net 282,619 228,445
Excess of cost over net assets of
businesses acquired 74,290 16,117
Prepaid expenses and other assets 40,483 32,067
Total assets $1,999,246 $1,407,698
LIABILITIES AND SHAREHOLDERS' EQUITY
Accounts payable $ 21,923 $ 30,077
Accrued liabilities 88,146 64,221
Income taxes payable - 1,574
Equipment financing obligations 1,273,550 802,458
Deferred income taxes 220,264 188,982
Commitments and contingent liabilities
(see Notes to the Consolidated
Financial Statements)
Shareholders' equity
Common stock, $1 par value,
outstanding: 2000-57,979,616 shares;
1999-57,214,551 shares 57,980 57,215
Additional paid-in capital 12,386 -
Accumulated other comprehensive
income (loss) (1,876) 518
Retained earnings 326,873 262,653
Total shareholders' equity 395,363 320,386
Total liabilities and shareholders' equity $1,999,246 $1,407,698
The Notes to the Consolidated Financial Statements are an integral
part of these statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended September 30,
2000 1999 1998
Cash flows from operating activities
Net earnings $ 81,897 $ 56,473 $ 52,023
Adjustments to reconcile net earnings
to net cash provided by operating
activities:
Depreciation and amortization 246,459 199,732 183,805
Gain on sale of property and
equipment (32,196) (17,007) (9,787)
Provision for bad debts 4,980 1,326 1,529
Gain on sale of business (56,664) - -
Changes in assets and liabilities,
net of effects from acquisitions
and sale of business:
Accounts receivable (26,838) (7,773) (5,591)
Accounts payable and accrued
liabilities 4,864 15,141 2,056
Current and deferred income taxes 22,430 19,582 22,346
Other, net (4,788) (262) (1,151)
Net cash provided by operating
activities 240,144 267,212 245,230
Cash flows from investing activities
Purchase of property and equipment (697,020) (355,191) (332,779)
Proceeds from sales of property
and equipment 167,422 88,021 67,526
Proceeds from sale of business 67,220 - -
Business combinations, net of
cash acquired (231,979) (6,935) -
Net cash used in investing
activities (694,357) (274,105) (265,253)
Cash flows from financing activities
Proceeds of equipment financing
obligations 764,587 179,992 186,930
Repayment of equipment financing
obligations (296,641) (137,186) (108,876)
Payment of dividends (12,728) (11,569) (9,244)
Proceeds from stock options
exercised 851 1,225 2,051
Common stock acquired and retired (12,649) (18,305) (41,367)
Other - - (93)
Net cash provided by financing
activities 443,420 14,157 29,401
Effect of exchange rate changes
on cash (68) 1 -
Net increase (decrease) in cash (10,861) 7,265 9,378
Cash at beginning of year 34,280 27,015 17,637
Cash at end of year $ 23,419 $ 34,280 $ 27,015
Supplemental information
Interest paid $ 76,627 $ 53,978 $ 48,549
Income taxes paid $ 29,704 $ 15,995 $ 10,734
Noncash investing and financing
activities
Liabilities assumed in business
combinations $ 9,220 $ - $ -
Common stock issued as consideration
in business combination $ 20,000 $ - $ -
The Notes to the Consolidated Financial Statements are an integral part
of these statements.
CONSOLIDATED STATEMENT OF SHAREHOLDERS' EQUITY
(In thousands)
<TABLE>
<CAPTION> Accumulated
$1 Par Value Additional Other Total
Common Paid-in Comprehensive Comprehensive Retained Shareholders'
Stock Capital Income (Loss) Income Earnings Equity
<S> <C> <C> <C> <C> <C> <C>
Balance at October 1, 1997 $ 41,067 $ 274 $ 1,308 $247,333 $289,982
Net earnings $ 52,023 52,023 52,023
Other comprehensive income (loss):
Unrealized loss on securities
(net of tax benefit of $233) (367) (367) (367)
Dividends on common stock, $.15 per share (9,244) (9,244)
Common stock acquired and retired (3,091) (1,937) (36,339) (41,367)
Exercise of stock options 377 1,674 2,051
Three-for-two common stock split 20,446 (20,539) (93)
Comprehensive income $ 51,656
Balance at September 30, 1998 58,799 11 941 233,234 292,985
Net earnings $ 56,473 56,473 56,473
Other comprehensive income (loss):
Unrealized loss on securities
(net of tax benefit of $455) (708) (708) (708)
Foreign currency translation adjustments 285 285 285
Dividends on common stock, $.20 per share (11,569) (11,569)
Common stock acquired and retired (1,776) (1,044) (15,485) (18,305)
Exercise of stock options 192 1,033 1,225
Comprehensive income $ 56,050
Balance at September 30, 1999 57,215 - 518 262,653 320,386
Net earnings 81,897 81,897 81,897
Other comprehensive income (loss):
Unrealized loss on securities
(net of tax benefit of $892) (1,395) (1,395) (1,395)
Foreign currency translation adjustments (999) (999) (999)
Dividends on common stock, $.22 per share (12,728) (12,728)
Common stock acquired and retired (1,374) (6,326) (4,949) (12,649)
Common stock issued 2,000 18,000 20,000
Exercise of stock options 139 712 851
Comprehensive income $ 79,503
Balance at September 30, 2000 $57,980 $12,386 $ (1,876) $326,873 $395,363
The Notes to the Consolidated Financial Statements are an integral part of these statements.
</TABLE>
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Organization and Accounting Policies
Organization - Rollins Truck Leasing Corp. is engaged primarily in
full-service truck leasing and rentals. All of the Company's operations
currently are conducted within the United States and Canada.
Consolidation - The consolidated financial statements include the
accounts of all subsidiaries. Intercompany transactions and balances
among these subsidiaries have been eliminated.
Revenue recognition - Lease, rental and other revenues including
contingent rentals, which represent the mileage charges on full-service
leases, are recognized over the terms of the respective contracts.
Contingent rentals were $264,827,000, $232,912,000 and $220,483,000
during 2000, 1999 and 1998, respectively.
Earnings per share - The number of weighted average shares used in
computing basic and diluted earnings per share (EPS) are as follows:
2000 1999 1998
Basic EPS 57,872,000 57,833,000 60,340,000
Effect of options 255,000 536,000 790,000
Diluted EPS 58,127,000 58,369,000 61,130,000
No adjustments to net earnings available to common shareholders were
required during the periods presented.
Property and equipment - Property and equipment is carried at cost,
net of applicable allowances. Tires placed in service on new equipment
are capitalized as part of the original equipment cost. Depreciation is
provided on a straight-line basis. Depreciable lives for equipment on
operating leases and other property and equipment range from 3 to 12
years and 3 to 45 years, respectively. The cost and related accumulated
depreciation of property and equipment sold or retired are eliminated
from the property accounts and the resulting gain or loss is reflected
in the Consolidated Statement of Earnings. Repairs and maintenance are
expensed as incurred. Replacement tires are expensed when placed in
service. Major additions and improvements are capitalized and written
off over the remaining depreciable lives of the assets.
Goodwill - The excess of cost over net assets of businesses acquired
prior to October 30, 1970 amounting to $4,588,000 is not being amortized
since its value, in management's opinion, has not diminished. The excess
of cost over net assets of businesses acquired subsequently is being
amortized on a straight-line basis over 15 to 40 years. The
recoverability of goodwill is evaluated by an analysis of operating
results and consideration of other significant events or changes in the
business environment. If an operating loss or other impairment indicator
is noted, the Company will evaluate whether impairment exists on the
basis of undiscounted expected future cash flows from operations before
interest for the remaining amortization period. If impairment exists,
the carrying amount of the goodwill is reduced by the estimated shortfall
of cash flows on a discounted basis. Accumulated amortization was
$6,681,000 and $3,898,000 at September 30, 2000 and 1999, respectively.
Leasing operations - Leasing operations consist of the long-term
leasing and short-term rental of transportation equipment. All leases
are classified as operating leases and expire on various dates during the
next eleven years.
Claims and insurance reserves - The Company retains a specific
portion of insurable risks with regard to public liability and workers'
compensation claims. Retention levels are currently $500,000 per
occurrence. Reserves are established for claims incurred plus an
estimate for claims incurred but not reported. Reserve requirements are
evaluated and established utilizing historical trends, the Company's
experience, claim severity and other factors.
Use of estimates - The preparation of financial statements in
conformity with accounting principles generally accepted in the United
States requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
Fair values of financial instruments - The carrying amounts reported
in the balance sheet for cash, accounts receivable, accounts payable and
accrued liabilities approximate their fair value at September 30, 2000.
Stock-based compensation - SFAS No. 123, "Accounting for Stock-Based
Compensation," defines a fair- value based method of accounting for
stock-based compensation plans, however, it allows the continued use of
the intrinsic value method under Accounting Principles Board Opinion
("APB"), No. 25, "Accounting for Stock Issued to Employees." The Company
has elected to continue to use the intrinsic value method. Pro-forma
results of operations, as if SFAS No. 123 had been used to account for
stock-based compensation plans, are presented in the footnote for Stock
Option Plans.
Accumulated other comprehensive income (loss) - Accumulated other
comprehensive income (loss) reflects cumulative unrealized gains and
(losses) on securities, net of taxes, of $(1,162,000), $233,000 and
$941,000 at September 30, 2000, 1999 and 1998, respectively. Also
included are cumulative foreign currency translation adjustments of
$(714,000) and $285,000 at September 30, 2000 and 1999, respectively.
Foreign currency translation - Assets and liabilities of the
Company's Canadian subsidiary are translated at the rate of exchange in
effect on the balance sheet date; revenues and expenses are translated
at the average rates of exchange prevailing during the year. The related
translation adjustments are reflected as a separate component of
accumulated other comprehensive income (loss).
Recent accounting pronouncements - The Company does not expect the
adoption of recently issued accounting pronouncements to have a
significant impact on its results of operations, financial position or
cash flows.
Change in accounting method - At September 30, 2000, the Company
changed its balance sheet presentation from classified to unclassified.
In connection with the sale of Rollins Logistics on January 3, 2000, the
Company is now exclusively an equipment leasing company. As such, an
unclassified presentation is considered preferable because it provides
a more meaningful presentation of financial position and is generally
accepted practice within the leasing industry. The consolidated balance
sheet at September 30, 1999 has been reclassified to reflect an
unclassified presentation.
Reclassification - Certain prior-year amounts have been reclassified
to conform with the current-year presentation.
Equipment on Operating Leases
The Company's investment in equipment on operating leases is as
follows:
September 30,
2000 1999
Transportation equipment $1,975,847,000 $1,538,713,000
Less accumulated depreciation (526,211,000) (526,406,000)
$1,449,636,000 $1,012,307,000
Commitments for the purchase of transportation equipment amounted to
$100,659,000 at September 30, 2000.
At September 30, 2000, minimum future revenues from noncancelable
leases are as follows:
Year Ending September 30,
2001 $ 359,494,000
2002 305,264,000
2003 248,964,000
2004 191,891,000
2005 135,367,000
Later years 133,209,000
Total future minimum lease revenues $1,374,189,000
In connection with the UPS acquisition, the Company acquired 1,689
trucks, tractors and trailers under operating leases, which are subleased
to customers. Minimum future rental payments required under these
operating leases having noncancelable terms in excess of one year as of
September 30, 2000 are as follows:
Year Ending September 30,
2001 $13,910,000
2002 11,832,000
2003 9,861,000
2004 6,501,000
2005 3,336,000
Later years 2,579,000
Total minimum payments required $48,019,000
Total rent expense for this equipment was $11,700,000 in 2000.
Other Property and Equipment
The Company's other property and equipment accounts are as follows:
September 30,
2000 1999
Land $ 75,337,000 $ 61,979,000
Transportation service facilities 278,073,000 224,820,000
Other operating assets 40,338,000 41,713,000
Less accumulated depreciation (111,129,000) (100,067,000)
$282,619,000 $228,445,000
Equipment Financing Obligations
Equipment financing obligations are as follows:
September 30,
2000 1999
Revolving credit facilities $ 88,000,000 $ -
Collateral Trust Debentures:
Series I, 10.35%, due 2000 - 50,000,000
Series L, 7%, due 2003 70,000,000 70,000,000
Series M, 7%, due 2001 60,000,000 60,000,000
Series N, 8.27%, due 2002 100,000,000 100,000,000
Series O, 7.25%, due 2005 50,000,000 50,000,000
Series P, 6.89%, due 2004 75,000,000 75,000,000
Series Q, 6 7/8%, due 2001 60,000,000 60,000,000
Series R, 7.30%, due 2007 75,000,000 75,000,000
Series S, 6.52%, due 2005 75,000,000 75,000,000
Series T, 6.75%, due 2006 100,000,000 100,000,000
Series U, 7.77%, due 2004 85,000,000 -
Series V, 8%, due 2003 75,000,000 -
Series W, 8.375%, due 2007 75,000,000 -
Series X, 8.25%, due 2002 150,000,000 -
Capital lease obligations 122,406,000 75,732,000
Other equipment financing obligations 13,144,000 11,726,000
$1,273,550,000 $802,458,000
On March 29, 2000, the Company's principal subsidiary, Rollins
Leasing Corp., entered into a $150,000,000 revolving credit agreement
(the "Revolver") with a group of banks with $75,000,000 maturing in March
2001 and $75,000,000 maturing in March 2003. Interest is based, at the
Company's option, upon (i) LIBOR plus a margin ranging from .6% to 1.15%
or (ii) the base rate (the greater of the prime rate or the federal funds
rate plus .5%). Interest rates on LIBOR borrowings are reset for one-,
two-, three- or six-month periods, at the Company's option. The margin
applicable to LIBOR borrowings is based upon the rating of the Company's
senior secured debt. At the option of the banks, the Revolver and the
Collateral Trust Debentures may be secured by certain leasing equipment.
The Revolver provides for the maintenance of specified financial ratios
and restricts payments to the Company by Rollins Leasing Corp. At
September 30, 2000, Rollins Leasing Corp. was in compliance with all
terms and covenants, and net assets not restricted under the Revolver
totaled $63,331,000. There was $85,000,000 outstanding under the
Revolver at September 30, 2000 at a weighted-average interest rate of
7.4%.
As a supplement to the Revolver, the Company also has available a
$25,000,000 revolving line of credit with a bank bearing interest at the
base rate, as defined above, plus the margin attributable to LIBOR
borrowings under the Revolver plus an additional .25%. There was
$3,000,000 outstanding under this supplemental line of credit at
September 30, 2000 at a weighted-average interest rate of 7.6%. This
line of credit is payable on demand and will mature in March 2001.
Capital lease obligations due within one year totaled $18,384,000 at
September 30, 2000 with the balance payable through 2009. Interest rates
on these obligations averaged 5.9% at September 30, 2000. The capital
lease obligations are collateralized by certain leasing equipment.
Other equipment financing obligations due within one year totaled
$5,506,000 at September 30, 2000 with the balance payable through 2002.
Interest rates on these obligations averaged 7.5% at September 30, 2000.
The other equipment financing obligations are collateralized by certain
leasing equipment. The Collateral Trust Debentures are secured by notes
from Rollins Leasing Corp.
Based on published bid prices at September 30, 2000, the estimated
fair value of the Company's Collateral Trust Debentures was
$1,020,688,000 compared with the recorded book amount of $1,050,000,000.
The fair value of the remaining $223,550,000 of equipment indebtedness
approximates its recorded amount.
The aggregate amounts of maturities for all indebtedness over the
next five years are as follows: 2001-$221,890,000; 2002-$287,889,000;
2003-$173,116,000; 2004-$100,046,000 and 2005-$221,764,000.
Accrued Liabilities
Accrued liabilities are as follows:
September 30,
2000 1999
Employee compensation $14,190,000 $11,909,000
Interest 16,975,000 9,906,000
Taxes other than income 11,534,000 8,991,000
Insurance reserves 13,642,000 12,890,000
Environmental 501,000 452,000
Unbilled services and supplies 9,298,000 5,324,000
Acquisition-related liabilities 7,845,000 -
Accrued pension cost 6,902,000 5,848,000
Other 7,259,000 8,901,000
$88,146,000 $64,221,000
Pension Plans
The Company maintains a noncontributory pension plan for eligible
employees not covered by pension plans under collective bargaining
agreements. Pension costs are funded in accordance with the provisions
of the Internal Revenue Code. The Company also maintains a nonqualified,
noncontributory defined benefit pension plan for certain employees to
restore pension benefits reduced by federal income tax regulations. The
cost associated with the plan is determined using the same actuarial
methods and assumptions as those used for the Company's qualified pension
plan.
The following table sets forth the funded status and the amount
recognized in the Company's balance sheet for the plans:
September 30,
2000 1999
Change in benefit obligation:
Benefit obligation at beginning of year $51,476,000 $56,189,000
Service cost 3,384,000 4,132,000
Interest cost 4,381,000 4,004,000
Amendments - 3,539,000
Actuarial (gain) loss 1,176,000 (14,534,000)
Benefits paid (2,618,000) (1,854,000)
Benefit obligation at end of year 57,799,000 51,476,000
Change in plan assets:
Fair value of plan assets at
beginning of year 62,745,000 48,703,000
Actual return on plan assets 8,870,000 14,196,000
Employer contribution - 1,700,000
Benefits paid (2,618,000) (1,854,000)
Fair value of plan assets at end of year 68,997,000 62,745,000
Funded status 11,198,000 11,269,000
Unrecognized net gain (21,684,000) (20,928,000)
Unrecognized prior service cost 3,584,000 3,881,000
Unrecognized overfunding at adoption - (70,000)
Accrued pension cost $(6,902,000) $(5,848,000)
Discount rate 8.5% 8.5%
Assumed rate of compensation increase 4.5% 4.5%
Expected long-term rate of return
on assets 9.5% 9.5%
At September 30, 2000, the assets of the pension plans were invested
80.2% in equity securities, 17.9% in fixed income securities and the
balance in other short-term interest bearing accounts.
The components of net periodic pension cost are as follows:
Year Ended September 30,
2000 1999 1998
Service cost $3,384,000 $4,132,000 $3,449,000
Interest cost 4,381,000 4,004,000 3,415,000
Expected return on plan assets (5,857,000) (5,044,000) (4,773,000)
Net amortization and deferral (853,000) 226,000 (629,000)
Net periodic pension cost $1,055,000 $3,318,000 $1,462,000
The Company also maintains a defined contribution 401(k) plan, which
permits participation by substantially all employees not represented
under a collective bargaining agreement. In connection with the plan,
the Company's matching contribution charged to expense was $564,000 in
2000, $518,000 in 1999 and $373,000 in 1998.
The Company expensed payments to multi-employer pension plans
required by collective bargaining agreements of $106,000 in 2000,
$102,000 in 1999 and $119,000 in 1998. The actuarial present value of
accumulated plan benefits and net assets available for benefits to
employees under these plans are not available.
Shareholders' Equity
The Company is authorized to issue 100,000,000 shares of its $1 Par
Value Common Stock and 1,000,000 shares of Preferred Stock. The
preferred shares are without par value, with terms and conditions of each
issue as determined by the Board of Directors.
Each share of common stock includes one common stock purchase right
("Right") which is non-exercisable until certain defined events occur,
including tender offers or the acquisition by a person or group of
affiliated or associated persons of 20% of the Company's common stock.
Upon the occurrence of certain defined events, the Right entitles the
holder to purchase additional stock of the Company or stock of an
acquiring company at a 50% discount. The Right expires on June 30, 2009
unless earlier redeemed by the Company at a price of $.01 per Right.
Stock Option Plans
Under the Company's stock option plans, options to purchase common
stock of the Company may be granted to officers and key employees at not
less than 100% of the fair market value at the date of grant. Generally,
options granted vest ratably over a six-year period and have a maximum
life of eight years.
The Company accounts for these plans under APB No. 25. Accordingly,
no compensation cost has been recognized. Had compensation cost for
these plans been determined consistent with SFAS No. 123, the Company's
pro forma net earnings for 2000, 1999 and 1998 would have been reduced
to $80,663,000 ($1.39 per diluted share), $55,622,000 ($.95 per diluted
share) and $51,365,000 ($.84 per diluted share), respectively. Because
the SFAS 123 method of accounting has not been applied to options granted
prior to October 1, 1995, the resulting pro forma compensation cost may
not be representative of that to be expected in future years.
<TABLE>
As of September 30, stock option activity under the Company's plans is as follows:
<CAPTION>
2000 1999 1998
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Shares Price Shares Price Shares Price
<S> <C> <C> <C> <C> <C> <C>
Outstanding at
beginning of year 2,469,960 $8.66 2,286,755 $8.30 2,203,072 $ 6.57
Granted 1,272,000 8.58 425,200 9.66 721,900 10.73
Exercised (138,665) 6.13 (191,970) 6.38 (478,919) 4.28
Expired or cancelled (256,819) 7.99 (50,025) 9.31 (159,298) 7.53
Outstanding at
September 30 3,346,476 $8.78 2,469,960 $8.66 2,286,755 $ 8.30
Exercisable at
September 30 1,001,418 $8.03 898,081 $7.42 774,797 $ 6.85
The weighted average fair value of options granted during 2000, 1999 and 1998 was $2.99, $3.40
and $3.20, respectively. The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following weighted average assumptions for 2000, 1999
and 1998, respectively: risk-free interest rates of 5.9%, 6.2% and 4.3%; dividend yields of 2.0%,
1.7% and 1.7%; expected volatility of .30, .27 and .26 and a weighted average expected life of
seven years for each of the three years.
</TABLE>
<TABLE>
The following table summarizes information regarding stock options outstanding and exercisable
at September 30, 2000:
<CAPTION>
Options Outstanding Options Exercisable
Weighted
Average Weighted Weighted
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life Price Exercisable Price
<S> <C> <C> <C> <C> <C> <C>
$ 6.33 - $ 6.56 715,211 5.1 years $ 6.43 286,911 $ 6.36
$ 7.33 - $ 11.00 2,631,265 5.5 years $ 9.43 714,507 $ 8.70
At September 30, 2000, a total of 847,594 shares of common stock were available for future
grants.
</TABLE>
Lease Commitments
The Company leases some of the premises and equipment used in its
operations. Leases classified as operating leases expire on various
dates during the next 15 years. Some of the leases are renewable at the
Company's option. Minimum future rental payments required under
operating leases having noncancelable terms in excess of one year as of
September 30, 2000 are as follows:
Year Ending September 30,
2001 $ 9,438,000
2002 7,132,000
2003 4,453,000
2004 3,339,000
2005 2,344,000
Later years 9,745,000
Total minimum payments required $36,451,000
Total rent expense for all operating leases except revenue equipment
on operating lease and those with terms of one month or less was
$9,897,000 in 2000, $8,493,000 in 1999 and $7,919,000 in 1998.
Income Taxes
The tax provisions for the three years are comprised as follows:
Year Ended September 30,
2000 1999 1998
Current:
Federal $15,945,000 $12,669,000 $11,113,000
State 4,095,000 3,549,000 1,824,000
Deferred:
Federal 28,863,000 18,381,000 17,507,000
State 3,237,000 1,659,000 2,636,000
Total income taxes $52,140,000 $36,258,000 $33,080,000
A reconciliation of the tax provisions for the three years with
amounts calculated by applying the statutory federal tax rate to earnings
before income taxes for those years is as follows:
Year Ended September 30,
2000 1999 1998
Federal tax $46,913,000 $32,456,000 $29,786,000
State taxes, net of
federal benefit 4,765,000 3,370,000 2,899,000
Other 462,000 432,000 395,000
Total income taxes $52,140,000 $36,258,000 $33,080,000
The tax effect of temporary differences and the tax credit
carryforwards that comprise the net deferred tax amounts shown on the
balance sheet are as follows:
September 30
2000 1999
Depreciation $235,279,000 $204,468,000
Expenses deductible when paid (13,187,000) (10,389,000)
Alternative minimum tax credit carryforwards - (4,979,000)
Other (1,828,000) (118,000)
Deferred income taxes, net $220,264,000 $188,982,000
At September 30, 2000, the Company had no alternative minimum or
other tax credit carryforwards for financial reporting purposes since all
such credits have been considered in the determination of deferred tax
amounts.
Transactions with Related Parties
Certain directors and officers of the Company are also directors and
officers of Matlack Systems, Inc. and Dover Downs Entertainment, Inc.
The Company provided administrative services including insurance,
and rented office space to Matlack Systems, Inc. for aggregate charges
of $3,877,000 in 2000, $5,068,000 in 1999 and $5,192,000 in 1998, which
have been included in revenues or offset against operating expense, as
appropriate, in the Consolidated Statement of Earnings. The Company owns
600,000 shares of Matlack Systems, Inc. common stock, which had a fair
value of $750,000 and $3,038,000 at September 30, 2000 and 1999,
respectively. The unrealized loss on these securities, net of tax
benefit, was $1,395,000 in 2000, $708,000 in 1999 and $367,000 in 1998.
These amounts are reflected in comprehensive income and are included in
accumulated other comprehensive income (loss).
The Company provided administrative services including insurance to
Dover Downs Entertainment, Inc. for aggregate charges of $615,000 in
2000, $501,000 in 1999 and $520,000 in 1998, which have been included in
revenues or offset against operating expense, as appropriate, in the
Consolidated Statement of Earnings.
An officer of the Company is the trustee of an employee benefits
trust, which provides certain insurance and health care benefits to
employees of the Company. Contributions to the trust, which were charged
to operating or selling and administrative expense, as appropriate, were
$18,200,000 in 2000, $13,720,000 in 1999 and $12,897,000 in 1998.
In the opinion of management of the Company, the foregoing
transactions were effected at rates that approximate those the Company
would have realized or incurred had such transactions been effected with
independent third parties.
Acquisitions and Disposition of Business
On October 29, 1999, the Company, through its wholly owned and
principal operating subsidiary Rollins Leasing Corp., acquired the net
assets and business of Keen Leasing, Inc. ("Keen") for a purchase price
of $42,437,000. Keen is a truck rental and leasing business
headquartered in Harrisburg, Pennsylvania, which currently services
approximately 1,800 vehicles from 13 locations in Pennsylvania, Maryland
and Virginia. The excess of the purchase price over fair market value
of the underlying assets is being amortized over 20 years on a straight-
line basis. The fair value of assets acquired and liabilities assumed
is summarized as follows:
Accounts receivable $ 87,000
Prepaid expenses and other assets 1,261,000
Equipment on operating leases 28,146,000
Other property and equipment 5,597,000
Excess of cost over net assets of business acquired 10,599,000
Accrued liabilities (180,000)
Equipment financing obligations (3,073,000)
Purchase Price $42,437,000
On January 3, 2000, 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 $216,911,000 consisted of cash payments of
$189,589,000 and the issuance of 2,000,000 shares of the Company's $1.00
par value common stock with a fair value of $20,000,000 with the balance
related to working capital adjustments to be settled in fiscal year 2001.
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.
The purchase price has been allocated to the assets acquired and
liabilities assumed based on their fair values at January 3, 2000. The
excess of cost over net assets acquired is being amortized over 20 years
on a straight-line basis. The fair value of assets acquired and
liabilities assumed is summarized as follows:
Accounts receivable $ 28,168,000
Prepaid expenses and other assets 4,788,000
Equipment on operating leases 122,760,000
Other property and equipment 17,568,000
Excess of cost over net assets of business acquired 49,594,000
Accounts payable (3,365,000)
Accrued liabilities (2,602,000)
Purchase Price $216,911,000
On August 2, 1999, Rollins Leasing Corp. acquired Range
Transportation Systems, Inc. ("Range") in a purchase business combination
for $6,935,000 in cash. Range is based in Toronto, Canada and is engaged
in truck rental and leasing. The excess of the purchase price over fair
market value of the underlying assets is being amortized on a straight-
line basis over 15 years.
These acquisitions have been accounted for using the purchase method
of accounting for business combinations and, accordingly, their operating
results have been included in the Company's consolidated financial
statements since their respective dates of acquisition.
The following summarized unaudited pro forma consolidated statement
of earnings information gives effect to the UPS Truck Leasing acquisition
as though it had occurred at the beginning of fiscal 2000 and 1999, after
giving effect to certain adjustments, principally interest expense and
the amortization of goodwill. The pro forma financial information, which
is for informational purposes only, is based upon certain assumptions and
estimates and does not necessarily reflect the results that would have
occurred had the transaction actually taken place at the beginning of the
respective periods presented, nor are they necessarily indicative of
future consolidated results. The effects of the other acquisitions on the
consolidated financial statements are not significant and have been
excluded from the pro forma presentation.
2000 1999
Revenues $756,827,000 $755,426,000
Net earnings $ 44,876,000 (1) $ 59,873,000
Earnings per diluted share $ .77 (1) $ 1.03
(1) Excludes the net gain of $34,477,000 or $.59 per diluted share from
the sale of the assets and business of Rollins Logistics Inc., as
described below.
On January 3, 2000, the Company's dedicated carriage and logistics
subsidiary, Rollins Logistics Inc., sold its assets and business to
Worldwide Dedicated Services, Inc., a UPS Logistics Group company, for
a purchase price of $69,103,000, which consisted of a cash payment of
$67,220,000 with the balance related to working capital adjustments to
be settled in fiscal year 2001. The Company recorded a before-tax gain
on the sale of $56,664,000 ($34,477,000 or $.59 per diluted share, after-
tax.)
Commitments and Contingent Liabilities
There are various routine claims and legal actions pending against
the Company incidental to the ordinary operation of its business. The
Company is of the opinion, based on the advice of counsel, that it is
only remotely likely that the ultimate resolution of these claims and
actions will be material.
Environmental Regulation
The Company is subject to certain regulations of the Environmental
Protection Agency in that it stores and dispenses petroleum products.
Most of these regulations address testing and replacement of underground
tanks. The Company's adherence to these regulations is part of its
normal business operations. These regulations have not had any material
adverse effect upon the Company.
Year 2000 ("Y2K") Issues
The Company's business operations have not been materially impacted
by Year 2000 ("Y2K") matters. The Company will continue to monitor its
operations for possible Y2K information technology programming issues.
<TABLE>
<CAPTION>
Quarterly Results (Unaudited)
December March June September
2000 31 31 30 30
<S> <C> <C> <C> <C>
Revenues $169,622,000 $175,858,000 $187,900,000 $186,911,000
Gross profit $ 54,304,000 $ 61,081,000 $ 63,299,000 $ 54,875,000
Earnings before income taxes $ 24,210,000 $ 79,930,000(1) $ 21,361,000 $ 8,536,000
Net earnings $ 14,770,000 $ 48,651,000(1) $ 12,881,000 $ 5,595,000
Earnings per diluted share $ .26 $ .83(1) $ .22 $ .10
1999
Revenues $155,345,000 $150,929,000 $156,617,000 $164,506,000
Gross profit $ 50,154,000 $ 45,807,000 $ 53,236,000 $ 56,703,000
Earnings before income taxes $ 23,034,000 $ 18,248,000 $ 25,022,000 $ 26,427,000
Net earnings $ 14,074,000 $ 11,149,000 $ 15,156,000 $ 16,094,000
Earnings per diluted share $ .24 $ .19 $ .26 $ .28
(1) Includes the gain on sale of the logistics business of $56,664,000 ($34,477,000 or $.59 per
diluted share, after-tax.)
</TABLE>
SCHEDULE I - Condensed Financial Information
ROLLINS TRUCK LEASING CORP.
BALANCE SHEET
($000 Omitted)
September 30,
Assets 2000 1999
Cash $ 341 $ 7,678
Accounts receivable 23 99
Accounts receivable from subsidiaries* 43 19
Notes receivable from subsidiary* 1,050,000 715,000
Investments in subsidiaries, at equity* 359,012 346,641
Advances to subsidiaries* 40,285 15,040
Property and equipment, at cost,
net of accumulated depreciation 1,019 720
Other assets 36 74
Deferred income taxes 525 (131)
Total assets $1,451,284 $1,085,140
Liabilities and Shareholders' Equity
Accounts payable to subsidiaries* $ 22 $ 9
Accounts payable to others 267 239
Accrued liabilities 1,757 406
Income taxes payable 3,875 (277)
Collateral Trust Debentures
10.35 % Series I, due 2000 - 50,000
7 % Series L, due 2003 70,000 70,000
7 % Series M, due 2001 60,000 60,000
8.27 % Series N, due 2002 100,000 100,000
7.25 % Series O, due 2005 50,000 50,000
6.89 % Series P, due 2004 75,000 75,000
6 7/8 % Series Q, due 2001 60,000 60,000
7.30 % Series R, due 2007 75,000 75,000
6.52 % Series S, due 2005 75,000 75,000
6.75 % Series T, due 2006 100,000 100,000
7.77 % Series U, due 2004 85,000 -
8 % Series V, due 2003 75,000 -
8.375 % Series W, due 2007 75,000 -
8.25 % Series X, due 2002 150,000 -
Advances from subsidiaries* - 49,377
Commitments and contingent liabilities
(see Notes to the Financial Statements)
Shareholders' equity
Common stock $1 par value,
100,000,000 shares authorized;
issued and outstanding:
2000: 57,979,616; 1999: 57,214,551 57,980 57,215
Additional paid-in capital 12,386 -
Accumulated other comprehensive income (loss) (1,876) 518
Retained earnings 326,873 262,653
Total shareholders' equity 395,363 320,386
Total liabilities and shareholders'
equity $1,451,284 $1,085,140
* Eliminated in consolidation.
The Notes to the Financial Statements are an integral part of these
statements.
SCHEDULE I - Condensed Financial Information
(continued)
ROLLINS TRUCK LEASING CORP.
STATEMENT OF EARNINGS
($000 Omitted)
Year Ended September 30,
2000 1999 1998
Revenues:
Dividends from subsidiaries $78,020 $41,000 $30,000
Other income 1,659 7,015 8,200
79,679 48,015 38,200
Expenses:
Administrative 6,429 3,336 4,541
Depreciation and amortization 244 270 279
Gain on sale of property and equipment - (29) -
6,673 3,577 4,820
Earnings before interest and
income taxes 73,006 44,438 33,380
Interest income 69,410 50,715 44,708
Interest expense (68,700) (53,793) (47,031)
Earnings before income taxes 73,716 41,360 31,057
Income taxes (1,319) 380 512
Net earnings of Rollins Truck
Leasing Corp. 75,035 40,980 30,545
Equity in undistributed
net earnings of subsidiaries 6,862 15,493 21,478
Net earnings $81,897 $56,473 $52,023
The Notes to the Financial Statements are an integral part of these
statements.
SCHEDULE I - Condensed Financial Information
(continued)
ROLLINS TRUCK LEASING CORP.
STATEMENT OF CASH FLOWS
($000 Omitted)
Year Ended September 30,
2000 1999 1998
Cash flows from operating activities:
Earnings prior to equity in
subsidiaries' undistributed earnings $ 75,035 $ 40,980 $ 30,545
Adjustments to reconcile earnings
to net cash provided by operating
activities:
Depreciation and amortization 244 270 279
Changes in assets and liabilities:
Accounts receivable 52 2,715 (2,691)
Accounts payable and accrued
liabilities 1,377 (2,650) 1,111
Current and deferred income taxes 3,496 430 (1,283)
Other, net 36 635 (451)
Net gain on sale of property
and equipment - (29) -
Net cash provided by operating
activities 80,240 42,351 27,510
Cash flows from investing activities:
Purchase of equipment (448) (151) (128)
Proceeds from sale of equipment - 123 7
Net cash used in investing
activities (448) (28) ( 121)
Cash flows from financing activities:
Proceeds of equipment financing
obligations 385,000 100,000 75,000
Issuance of notes receivable
from subsidiary (385,000) (100,000) (75,000)
Repayment of note by subsidiary 50,000 30,000 -
Repayment of equipment financing
obligations (50,000) (30,000) -
Payment of dividends (12,728) (11,569) (9,244)
Proceeds of stock options exercised 851 1,225 2,051
Common stock acquired and retired (12,649) (18,305) (41,367)
Subsidiary advances and payments (62,603) (17,787) 31,882
Other - - (93)
Net cash used in financing activities (87,129) (46,436) (16,771)
Net increase (decrease) in cash (7,337) (4,113) 10,618
Cash at beginning of year 7,678 11,791 1,173
Cash at end of year $ 341 $ 7,678 $11,791
Supplemental information:
Interest paid $62,023 $47,119 $43,528
Income taxes paid $(4,816) $ (50) $ 1,795
The Notes to the Financial Statements are an integral part of these
statements.
SCHEDULE I - Condensed Financial Information
(continued)
ROLLINS TRUCK LEASING CORP.
Notes to the Financial Statements
Accounting Policies
The accounting policies of the Company and its subsidiaries are set
forth in the Organization and Accounting Policies note in the
consolidated financial statements of this 2000 Annual Report on Form 10-
K.
The Company's principal sources of earnings are dividends and
management fees paid by its subsidiaries. Certain loan agreements
restrict payments to the Company by its subsidiaries. Net assets of
subsidiaries not restricted under such loan agreements totaled
$68,064,000 at September 30, 2000. The Company also realizes cash
receipts by assessing subsidiaries for federal taxes on income and
expends cash in payment of such taxes on a consolidated basis. Tax
assessments are based on the amount of federal income taxes which would
be payable (recoverable) by each subsidiary company based on its current
year's earnings (loss) reduced by that subsidiary's applicable portion
of any consolidated credits utilized currently in the consolidated
federal income tax return.
Interest income on notes receivable from a subsidiary, which are
pledged to secure the Collateral Trust Debentures (described in the
Equipment Financing Obligations note in the consolidated financial
statements of this 2000 Annual Report on Form 10-K), was $68,700,000,
$49,646,000 and $44,547,000 in 2000, 1999 and 1998, respectively.
Commitments and Contingencies
The Company is obligated to a subsidiary for $353,000 annually
($441,000 in the aggregate) of future rentals under a lease through 2001.
Rent expense was $383,000 in 2000, $317,000 in 1999 and $302,000 in 1998.
Commitments of the Company have been collateralized by bank letters
of credit issued on behalf of the Company in the amount of $6,700,000.
The aggregate amounts of maturities for the Collateral Trust
Debentures during the next five years are as follows: 2001-$120,000,000;
2002 - $250,000,000; 2003 - $145,000,000; 2004 - $75,000,000; and 2005 -
$210,000,000.
<TABLE>
ROLLINS TRUCK LEASING CORP. AND SUBSIDIARIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
($000 OMITTED)
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
Additions
Balance at Charged to Charged Balance at
Year Ended Beginning Costs and to Other End of
September 30, Description of Period Expenses Accounts Deductions Period
<S> <C> <C> <C> <C> <C> <C>
2000: Allowance for
doubtful accounts $2,479 $4,980 $1,025(1) $4,983(2) $3,501
1999: Allowance for
doubtful accounts $2,452 $1,326 $ 345(1) $1,644(2) $2,479
1998: Allowance for
doubtful accounts $2,126 $1,529 $ 484(1) $1,687(2) $2,452
</TABLE>
(1) Recoveries.
(2) Write-offs.
ROLLINS TRUCK LEASING CORP.
Exhibits to Form 10-K
For Fiscal Year Ended September 30, 2000
Index to Exhibits
(3) (a) Restated Certificate of Incorporation of Rollins Truck
Leasing Corp. as last amended on May 23, 2000.
(3) (b) By-Laws of Rollins Truck Leasing Corp. as last amended on
July 17, 2000.
(4) (a) Collateral Trust Indenture dated March 21, 1983, between RLC
CORP. (now known as Rollins Truck Leasing Corp.) and Bank of
America Illinois (formerly Continental Illinois National Bank
and Trust Company of Chicago), as Trustee, as filed with the
Company's Registration Statement No. 33-40476 on Form S-3
dated May 10, 1991, is incorporated herein by reference.
(4) (b) Third Supplemental Collateral Trust Indenture dated February
20, 1986 to the Collateral Trust Indenture dated March 21,
1983 between RLC CORP. (now known as Rollins Truck Leasing
Corp.) and Bank of America Illinois (formerly Continental
Illinois National Bank and Trust Company of Chicago), as
Trustee, as filed with the Company's Registration Statement
No. 33-40476 on Form S-3 dated May 10, 1991, is incorporated
herein by reference.
(4) (c) Eighth Supplemental Collateral Trust Indenture dated May 15,
1990 to the Collateral Trust Indenture dated March 21, 1983
as supplemented and amended by a Third Supplemental Indenture
thereto dated February 20, 1986, between Rollins Truck
Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 33-67682 on Form S-3
dated August 20, 1993 is incorporated herein by reference.
(4) (d) Eleventh Supplemental Collateral Trust Indenture dated March
15, 1993 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (e) Twelfth Supplemental Collateral Trust Indenture dated March
15, 1994 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (f) Thirteenth Supplemental Collateral Trust Indenture dated
March 15, 1995 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (g) Fourteenth Supplemental Collateral Trust Indenture dated May
15, 1995 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and Bank of America Illinois (formerly
Continental Bank, N.A.), as Trustee, as filed with the
Company's Registration Statement No. 333-21835 on Form S-3
dated February 14, 1997 is incorporated herein by reference.
(4) (h) Fifteenth Supplemental Collateral Trust Indenture dated March
15, 1996 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and First Trust of Illinois, National
Association, as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated
February 14, 1997 is incorporated herein by reference.
(4) (i) Sixteenth Supplemental Collateral Trust Indenture dated
August 7, 1996 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by an Eighth
Supplemental Indenture dated May 15, 1990, between Rollins
Truck Leasing Corp. and First Trust of Illinois, National
Association, as Trustee, as filed with the Company's
Registration Statement No. 333-21835 on Form S-3 dated
February 14, 1997 is incorporated herein by reference.
(4) (j) Seventeenth Supplemental Collateral Trust Indenture dated
March 10, 1997 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986 and by the Eighth
Supplemental Indenture dated May 15, 1990 between Rollins
Truck Leasing Corp. and First Union National Bank, as
Trustee, as filed with the Company's Registration Statement
No. 333-95501 on Form S-3 dated January 27, 2000 is
incorporated herein by reference.
(4) (k) Eighteenth Supplemental Collateral Trust Indenture dated July
16, 1998 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, an Eighth
Supplemental Indenture thereto dated May 15, 1990 and by the
Seventeenth Supplemental Indenture dated March 10, 1997
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee, as filed with the Company's Registration
Statement No. 333-95501 on Form S-3 dated January 27, 2000 is
incorporated herein by reference.
(4) (l) Nineteenth Supplemental Collateral Trust Indenture dated
April 5, 1999 to the Collateral Trust Indenture dated March
21, 1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, an Eighth
Supplemental Indenture thereto dated May 15, 1990 and by the
Seventeenth Supplemental Indenture dated March 10, 1997
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee, as filed with the Company's Registration
Statement No. 333-95501 on Form S-3 dated January 27, 2000 is
incorporated herein by reference.
(4) (m) Twentieth Supplemental Collateral Trust Indenture dated
December 15, 1999 to the Collateral Trust Indenture dated
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated February 20, 1986, an
Eighth Supplemental Indenture thereto dated May 15, 1990 and
by the Seventeenth Supplemental Indenture dated March 10,
1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee, as filed with the Company's
Registration Statement No. 333-95501 on Form S-3 dated
January 27, 2000 is incorporated herein by reference.
(4) (n) Twenty-first Supplemental Collateral Trust Indenture dated
February 15, 2000 to the Collateral Trust Indenture dated
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated February 20, 1986, an
Eighth Supplemental Indenture thereto dated May 15, 1990 and
by the Seventeenth Supplemental Indenture dated March 10,
1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee.
(4) (o) Twenty-second Supplemental Collateral Trust Indenture dated
February 15, 2000 to the Collateral Trust Indenture dated
March 21, 1983 as supplemented and amended by a Third
Supplemental Indenture thereto dated February 20, 1986, an
Eighth Supplemental Indenture thereto dated May 15, 1990 and
by the Seventeenth Supplemental Indenture dated March 10,
1997 between Rollins Truck Leasing Corp. and First Union
National Bank, as Trustee.
(4) (p) Twenty-third Supplemental Collateral Trust Indenture dated
May 3, 2000 to the Collateral Trust Indenture dated March 21,
1983 as supplemented and amended by a Third Supplemental
Indenture thereto dated February 20, 1986, an Eighth
Supplemental Indenture thereto dated May 15, 1990 and by the
Seventeenth Supplemental Indenture dated March 10, 1997
between Rollins Truck Leasing Corp. and First Union National
Bank, as Trustee.
(4) (q) 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.
(4) (r) Asset Purchase Agreement by and among Worldwide Dedicated
Services, Inc., Rollins Truck Leasing Corp., Rollins
Logistics Inc., Rollins Dedicated Carriage Services, Inc. and
Rollins Transportation Systems, Inc. as of November 12, 1999
as filed with the Company's Annual Report on Form 10-K for
the year ended September 30, 1999, is incorporated herein by
reference.
(4) (s) Stock Purchase Agreement by and between UPS Logistics Group,
Inc., UPS Truck Leasing, Inc., Rollins Truck Leasing Corp.
and Rollins Leasing Corp. as of November 12, 1999 as filed
with the Company's Annual Report on Form 10-K for the year
ended September 30, 1999, is incorporated herein by
reference.
(4) (t) Strategic Alliance Agreement to be entered into as of
December 31, 1999 in connection with the closing under the
Stock Purchase Agreement filed as Exhibit (4)(s), above, as
filed with the Company's Annual Report on Form 10-K for the
year ended September 30, 1999, is incorporated herein by
reference.
(10) (a) RLC CORP. (now known as Rollins Truck Leasing Corp.) 1982
Incentive Stock Option Plan, as filed with the Company's
Proxy Statement for the Annual Meeting of Shareholders held
on January 27, 1983, is incorporated herein by reference.
(10) (b) RLC CORP. (now known as Rollins Truck Leasing Corp.) 1986
Stock Option Plan, as filed with the Company's Proxy
Statement for the Annual Meeting of Shareholders held on
January 29, 1987, is incorporated herein by reference.
(10) (c) Rollins Truck Leasing Corp. 1993 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual Meeting of
Shareholders held on January 27, 1994, is incorporated herein
by reference.
(10) (d) Rollins Truck Leasing Corp. 1997 Stock Option Plan, as filed
with the Company's Proxy Statement for the Annual Meeting of
Shareholders held on January 29, 1998, is incorporated herein
by reference.
(10) (e) Revolving Credit Agreement dated March 29, 2000 among Rollins
Leasing Corp., the Lending Institutions Party Hereto, Fleet
National Bank, as Administrative Agent, First Union National
Bank, as Syndication Agent, National City Bank, as
Documentation Agent and FleetBoston Robertson Stephens Inc.,
as Syndication Agent and Arranger.
(18) Letter from Ernst & Young LLP dated December 5, 2000
concerning change in accounting principle.
(21) Rollins Truck Leasing Corp. Subsidiaries at September 30,
2000.
(23) (a) Consent of Ernst & Young LLP, Independent Auditors.
(23) (b) Consent of KPMG LLP, Independent Auditors.
(27) (a) Rollins Truck Leasing Corp. Financial Data Schedule at
September 30, 2000.
(99) Independent Auditors' Report of KPMG LLP.
Exhibit 18
December 5, 2000
Board of Directors
Rollins Truck Leasing Corp.
One Rollins Plaza
Wilmington, Delaware 19803
Dear Sirs:
The Notes to the consolidated financial statements of Rollins Truck
Leasing Corp. included in its Form 10-K for the year ended September 30,
2000 describe a change in accounting method with respect to the
presentation of the balance sheet as the Company has changed from a
classified to unclassified presentation. There are no authoritative
criteria for determining a "preferable" method based on the particular
circumstances; however, we conclude that such change in the method of
accounting is to an acceptable alternative method which, based on your
business judgment to make this change and for the stated reasons, is
preferable in your circumstances.
Very truly yours,
Ernst & Young LLP
<PAGE>
Exhibit 21
ROLLINS TRUCK LEASING CORP.
Subsidiaries of Registrant at September 30, 2000
JURISDICTION OF
NAME INCORPORATION
Rollins Logistics Inc. Delaware
Rollins Leasing Corp. Delaware
Rollins Properties, Inc. Delaware
Transrisk, Limited Bermuda
Concord Administrative Services, Inc. Delaware
Exhibit 23(a)
Consent of Ernst & Young LLP, Independent Auditors
We consent to the incorporation by reference in the Registration
Statement (Form S-3 No. 33-95501) of Rollins Truck Leasing Corp. and
in the related Prospectus of our report dated October 24, 2000, with
respect to the 2000 consolidated financial statements and schedules of
Rollins Truck Leasing Corp. included in this Annual Report (Form 10-K)
for the year ended September 30, 2000.
Ernst & Young LLP
Philadelphia, Pennsylvania
December 5, 2000
Exhibit 23(b)
Consent of Independent Accountants
The Board of Directors
Rollins Truck Leasing Corp.:
We consent to the incorporation by reference in the registration
statement (No. 333-95501) on Form S-3 of Rollins Truck Leasing Corp. of
our report dated October 27, 1999, relating to the consolidated balance
sheet of Rollins Truck Leasing Corp. and subsidiaries as of September 30,
1999 and the related consolidated statements of earnings, cash flows, and
shareholders' equity (before the change in presentation as described in
the note "Organization and Accounting Policies" to the consolidated
financial statements) and related financial statement schedules for each
of the years in the two-year period ended September 30, 1999, which
report appears in the 2000 Annual Report on Form 10-K of Rollins Truck
Leasing Corp.
KPMG LLP
Wilmington, Delaware
December 6, 2000
Exhibit 99
Independent Auditors' Report
The Shareholders and Board of Directors
Rollins Truck Leasing Corp.
We have audited the accompanying consolidated balance sheet of Rollins
Truck Leasing Corp. and subsidiaries as of September 30, 1999 and the
related consolidated statements of earnings, cash flows and
shareholders' equity for each of the years in the two-year period
ended September 30, 1999, before the change in presentation as
described in the note "Organization and Accounting Policies" to the
consolidated financial statements. In connection with our audits of
the consolidated financial statements, we have also audited the
financial statement schedules of condensed financial information as of
September 30, 1999 and for the years ended September 30, 1999 and
1998, and of valuation and qualifying accounts for the years ended
September 30, 1999 and 1998. The consolidated financial statements
and financial statement schedules are the responsibility of the
Company's management. Our responsibility is to express an opinion on
these consolidated financial statements and financial statement
schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free from material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates used by management, as well
as evaluating the overall financial statement presentation. We
believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements (before the change
in presentation) referred to above present fairly, in all material respects,
the financial position of Rollins Truck Leasing Corp. and subsidiaries as of
September 30, 1999, and the results of their operations and their cash flows
for each of the years in the two-year period ended September 30, 1999, in
conformity with generally accepted accounting principles. Also in our
opinion, the related financial statement schedules referred to above,
when considered in relation to the basic consolidated financial
statements taken as a whole, present fairly, in all material respects,
the information set forth therein.
KPMG LLP
Wilmington, Delaware
October 27, 1999
