Page 1 of 8
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
/ X / QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
/___/ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-8368
ROLLINS ENVIRONMENTAL SERVICES, INC.
(Exact name of registrant as specified in its charter)
DELAWARE 51-0228924
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Rollins Plaza, Wilmington, Delaware 19803
(Address of principal executive offices) (Zip Code)
(302) 426-3314
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
The number of shares of the registrant's common stock outstanding as of
June 30, 1994 was 60,375,811.
FORM 10-Q Page 2 of 8
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
The accompanying unaudited condensed consolidated financial statements
have been prepared in accordance with the instructions to Form 10-Q and do not
include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
quarter and nine months ended June 30, 1994 are not necessarily indicative of
the results that may be expected for the year ending September 30, 1994. These
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report to Shareholders and Form 10-K
for the year ended September 30, 1993.
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
($000 Omitted Except for Per Share Amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
1994 1993 1994 1993
Operating revenues $46,650 $51,563 $135,528 $165,162
Operating expenses 32,284 36,016 100,516 110,425
Special charge - - 14,500 -
Depreciation 5,670 4,606 17,125 14,954
Selling and administrative expenses 6,138 6,884 20,067 21,332
Interest expense 79 93 304 332
44,171 47,599 152,512 147,043
Earnings (loss) before income taxes
(benefit) and cumulative effect of
change in accounting principle 2,479 3,964 (16,984) 18,119
Income taxes (benefit) 911 1,507 (6,285) 6,715
Earnings (loss) before cumulative
effect of change in accounting
principle 1,568 2,457 (10,699) 11,404
Cumulative effect (to September 30,
1993) of adoption of SFAS No. 109 - - 543 -
Net earnings (loss) $ 1,568 $ 2,457 $(10,156) $11,404
Earnings (loss) per share:
Earnings (loss) before cumulative
effect of change in accounting
principle $ .02 $ .04 $ (.18) $ .19
Cumulative effect of adoption
of SFAS No. 109 - - .01 -
$ .02 $ .04 $ (.17) $ .19
Average common shares and equivalents
outstanding (000) 60,376 60,368
Dividends paid per common share $ - $.02 1/2 $ - $.07 1/2
FORM 10-Q Page 3 of 8
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1994 1993
Current assets
Cash and cash equivalents (includes short term
investments of: June-$45,072; September-$44,218) $ 49,415 $ 47,487
Accounts receivable, net 28,998 30,311
Deferred income taxes 5,600 3,514
Income taxes recoverable 3,801 1,446
Other current assets 8,159 6,612
Total current assets 95,973 89,370
Property and equipment, at cost
Land 28,726 27,861
Buildings 31,959 28,150
Equipment and vehicles 188,501 186,075
Site improvements 27,404 25,406
Construction in progress 9,551 20,409
Accumulated depreciation (122,168) (106,903)
163,973 180,998
Other assets 7,135 8,273
$ 267,081 $ 278,641
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 6,085 $ 7,067
Accrued liabilities 14,300 12,119
Accrued remediation and other costs 5,241 4,697
Current maturities of long-term debt 662 623
Total current liabilities 26,288 24,506
Long-term debt 3,970 4,632
Accrued remediation and other costs 14,683 16,358
Other liabilities 5,968 4,964
Deferred income taxes 13,432 15,374
Commitments and contingent liabilities
See Part II, Item 1. Legal Proceedings
Shareholders' equity
Preferred stock, $1 par value,
1,000,000 shares authorized; issued and
outstanding - None
Common stock, $1 par value, 120,000,000 shares
authorized; issued and outstanding:
June-60,375,811; September-60,350,254 60,376 60,350
Capital in excess of par value 4,650 4,588
Retained earnings 137,714 147,869
Total shareholders' equity 202,740 212,807
$ 267,081 $ 278,641
FORM 10-Q
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months Ended June 30,
1994 1993
Cash flows from operating activities:
Net (loss) earnings $ (10,156) $ 11,404
Reconciliation of net (loss) earnings to
net cash flows from operating activities:
Special charge 14,500
Expenditures charged to accrued remediation
and other costs, net (1,131) (2,957)
Depreciation 17,125 14,954
Current and deferred income taxes (6,384) (1,118)
Decrease in accounts receivable 1,313 8,506
Increase (decrease) in accounts payable and
accrued liabilities 1,199 (6,265)
Other, net (3,251) (509)
Net cash flows from operating activities 13,215 24,015
Cash flows from investing activities:
Purchase of property and equipment (10,811) (26,361)
Proceeds from sale of equipment 58 106
Net cash flows (used in) investing activities (10,753) (26,255)
Cash flows from financing activities:
Repayment of long-term debt (623) (1,376)
Payment of dividends - (4,524)
Exercise of stock options 89 250
Net cash flows (used in) financing activities (534) (5,650)
Net increase (decrease) in cash and cash equivalents 1,928 (7,890)
Cash and cash equivalents:
Beginning of period 47,487 55,120
End of period $ 49,415 $ 47,230
Supplemental information:
Interest paid $ 580 $ 596
Income taxes (recovered) paid $ (444) $ 7,982
FORM 10-Q Page 5 of 8
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Nine Months Ended June 30, 1994 vs. Nine Months Ended
June 30, 1993
Revenues for the first nine months decreased by $29,634,000 (17.9%) mainly
due to the weak conditions in the hazardous waste treatment market and the
impact of severe weather conditions in the Northeast and Midwest earlier in
1994. The revenue reduction resulted from a combination of lower average prices
and lower volume.
Operating expenses decreased by $9,909,000 (9.0%) reflecting the reduced
level of revenues along with the impact of the Company's cost containment
program. Operating costs as a percentage of revenues increased to 74.2% in 1994
from 66.9% in 1993 mainly due to the decrease in revenues.
Depreciation increased by $2,171,000 (14.5%) due to the Company's capital
expenditure program to upgrade equipment, improve operating efficiency and
comply with changing regulations.
Selling and administrative expenses decreased by $1,265,000 (5.9%) mainly
due to lower commissions and other compensation expenses related to the lower
level of revenues and personnel cutbacks under the Company's cost containment
program. As a percentage of revenues, selling and administrative expenses were
14.8% in 1994 and 12.9% in 1993 mainly due to the lower revenues.
The income tax benefit recorded for the nine months ended June 30, 1994 was
based on an estimated effective income tax rate of 37.0%. The income tax
provision for 1993 was based on an estimated effective income tax rate of 37.1%.
The net loss for the first nine months of 1994 was $10,156,000 or $.17 per
share compared with net earnings of $11,404,000 or $.19 per share in 1993. The
nine month results include a special charge before income taxes of $14,500,000
($.15 per share after income taxes) as previously reported for the second
quarter. The cumulative effect to September 30, 1993 of the adoption of SFAS
No. 109, Accounting For Income Taxes, recorded in the first quarter of 1994
resulted in a favorable adjustment to net earnings of $543,000 or $.01 per
share. Exclusive of the special charge and the cumulative effect of the change
in accounting principle, the Company had a net loss of $1,668,000 or $.03 per
share.
Results of Operations: Quarter Ended June 30, 1994 vs. Quarter Ended June 30,
1993
Revenues decreased by $4,913,000 (9.5%) due to the continued weak
conditions in the hazardous waste treatment market. The reduced revenues for
the third quarter resulted principally from lower prices.
Operating expenses decreased by $3,732,000 (10.4%) reflecting the impact
of personnel cutbacks and other cost containment efforts and the reduced level
of revenues. As a percentage of revenues, operating expenses were 69.2% in 1994
compared with 69.8% in 1993.
Depreciation increased by $1,064,000 (23.1%) due to the Company's capital
expenditure program to upgrade its equipment, improve operating efficiency and
comply with changing regulations.
FORM 10-Q Page 6 of 8
Selling and administrative expenses decreased by $746,000 (10.8%) mainly due
to lower compensation costs resulting from the Company's cost reduction
efforts. Selling and administrative expenses were 13.2% of revenues in 1994
compared with 13.4% in 1993.
The income tax benefit recorded in the third quarter of 1994 was based on
an estimated annual effective income tax rate of 37.0%. The effective income
tax rate for the third quarter of 1993 was 38.0%.
During the third quarter of 1994, the Company noted improved conditions in
the commercial hazardous waste treatment market. The Company continues its cost
containment efforts to improve its competitive position and its profitability.
Furthermore, the Company continues to work with the Federal EPA on improving
environmental standards for the management of hazardous waste by fuel blenders,
TSDs (treatment, storage and disposal facilities) and cement kilns.
Liquidity and Capital Resources
The Company's financial condition remains strong despite the reduced level
of earnings in recent quarters. The special charge of $14,500,000 recorded in
the second quarter had no significant impact on current cash flow. The accruals
for landfill capping and other costs included in the special charge will require
cash outlays in future periods.
During fiscal 1994, the Company's capital expenditures were financed with
the cash flow from operations.
The Company's Board of Directors suspended the payment of common stock
dividends at its October 29, 1993 meeting in order to retain funds for use in
its capital improvement program. The Board of Directors periodically reviews
this decision.
Otherwise, there have been no material changes in the Company's financial
condition and its liquidity and capital resources since September 30, 1993. For
further details, see page 14 of the Company's 1993 Annual Report to
Shareholders.
FORM 10-Q Page 7 of 8
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
There have been no additional significant legal proceedings nor any material
changes in the legal proceedings reported on pages 3 through 5 of the Company's
Form 10-K for the fiscal year ended September 30, 1993.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
On July 27, 1994, the Company announced that it had acquired 100% of the
stock of Highway 36 Land Development Company, a treatment, storage and disposal
facility 70 miles east of Denver, Colorado. No stock was issued nor was any
long-term debt issued or assumed in the transaction. This acquisition gives the
Company the ability to re-enter the hazardous waste stabilization and
solidification business and provides the Company's customer base with a broader
spectrum of environmental services. In addition, the site provides the
opportunity to expand the Company's TSD capabilities. The acquisition is not
expected to have any significant current impact on the financial statements of
the Company.
Item 6. Exhibits and Reports on Form 8-K
None.
FORM 10-Q Page 8 of 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: July 28, 1994 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
___________________________________
Nicholas Pappas
President and Chief Operating Officer
_____________________________________
Leo F. Rattigan, Jr.
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
FORM 10-Q Page 8 of 8
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: July 28, 1994 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
/s/ Nicholas Pappas
Nicholas Pappas
President and Chief Operating Officer
/s/ Leo F. Rattigan, Jr.
Leo F. Rattigan, Jr.
Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer