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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, 1996
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) 426-2784
(Registrant's telephone number, including area code)
(Former name of registrant)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Sections 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No _____
The number of shares of the registrant's common stock outstanding as of
June 30, 1996 was 60,375,811.
FORM 10-Q Page 2 of 7
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, 1996 are not necessarily indicative of
the results that may be expected for the year ending September 30, 1996. These
statements should be read in conjunction with the financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
September 30, 1995.
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
($000 Omitted Except for Per Share Amounts)
Quarter Ended Nine Months Ended
June 30, June 30,
1996 1995 1996 1995
Revenues $ 61,582 $ 63,287 $181,749 $156,548
Operating expenses 52,251 54,271 159,248 127,536
Depreciation 9,118 7,797 25,067 19,086
Selling and administrative expenses 7,585 9,032 25,519 23,206
Interest expense 2,162 2,281 6,836 2,446
71,116 73,381 216,670 172,274
Loss before income tax benefit (9,534) (10,094) (34,921) (15,726)
Income tax benefit (3,327) (3,488) (12,480) (5,763)
Net loss $ (6,207) $ (6,606) $(22,441) $ (9,963)
Loss per share $ (.10) $ (.11) $ (.37) $ (.17)
Average common shares and equivalents
outstanding (000) 60,415 60,376
Dividends paid per common share None None None None
FORM 10-Q Page 3 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED BALANCE SHEET
($000 Omitted)
June 30, September 30,
ASSETS 1996 1995
Current assets
Cash and cash equivalents (includes short-term
investments of: $22,370-June;
$32,108-September) $ 24,580 $ 38,691
Accounts receivable, net 42,377 42,774
Income taxes recoverable 3,571 10,637
Deferred income taxes 4,065 4,948
Other current assets 14,405 12,122
Total current assets 89,043 109,172
Property and equipment, at cost
Land 31,324 31,324
Buildings 74,314 72,169
Equipment and vehicles 302,655 299,035
Site improvements 39,692 30,250
Construction in progress 6,728 17,277
Accumulated depreciation (174,141) (151,382)
280,572 298,673
Excess of cost over net assets of
businesses acquired 9,488 10,054
Other assets 9,786 11,585
Total assets $388,889 $429,484
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities
Accounts payable $ 18,432 $ 23,705
Accrued liabilities 35,901 29,283
Accrued remediation and other costs 2,410 3,723
Current maturities of long-term debt 1,728 1,689
Total current liabilities 58,471 58,400
Long-term debt 132,453 134,181
Accrued remediation and other costs 10,306 11,959
Other liabilities 6,091 10,456
Deferred income taxes 19,339 29,819
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-60,375,811 60,376 60,376
Capital in excess of par value 4,650 4,650
Retained earnings 97,203 119,643
Total shareholders' equity 162,229 184,669
Total liabilities and shareholders' equity $388,889 $429,484
FORM 10-Q Page 4 of 7
ROLLINS ENVIRONMENTAL SERVICES, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
($000 Omitted)
Nine Months Ended
June 30,
1996 1995*
Cash flows from operating activities:
Net loss $ (22,441) $ (9,963)
Reconciliation of net loss to net cash flows
from operating activities, net of acquisition;
Expenditures charged to accrued remediation
and other costs (2,966) (2,676)
Depreciation and amortization 25,642 19,281
Changes in assets and liabilities:
Current and deferred income taxes (2,531) (2,157)
Accounts receivable 397 (3,212)
Accounts payable and accrued liabilities 1,345 9,125
Other, net (4,702) (594)
Net cash (used in) provided by
operating activities (5,256) 9,804
Cash flows from investing activities:
Acquisition of businesses, net of cash acquired - (9,588)
Purchase of property and equipment (7,578) (15,261)
Proceeds from sale of equipment 411 359
Net cash used in investing activities (7,167) (24,490)
Cash flows from financing activities:
Repayment of long-term debt (1,688) (662)
Net cash used in financing activities (1,688) (662)
Net (decrease) in cash and cash equivalents (14,111) (15,348)
Cash and cash equivalents:
Beginning of period 38,691 54,772
End of period $ 24,580 $ 39,424
Supplemental information:
Interest paid $ 5,763 $ 941
Income taxes (recovered) $ (10,186) $ (3,605)
Noncash investing and financing activities:
Acquisition of businesses:
Fair value of assets acquired $ - $169,572
Cash paid - 9,599
Liabilities assumed and incurred $ - $159,973
* Certain amounts have been restated to reflect the acquisition of businesses.
FORM 10-Q Page 5 of 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
Results of Operations: Nine Months Ended June 30, 1996 vs. Nine Months
Ended June 30, 1995
Revenues increased by $25,201,000 (16.1%) to $181,749,000 from the
$156,548,000 reported last year. The increase in revenues was the result of
acquisitions made during fiscal 1995 offset in part by lower average prices
and a change in incineration mix. The Company's incineration revenues were
adversely affected by industry-wide overcapacity, waste minimization and
intense price competition.
Operating expenses increased by $31,712,000 (24.9%) to $159,248,000
from the $127,536,000 reported last year. The increase reflects the
increase in revenues and higher fixed operating costs as the result of
acquisitions made during fiscal 1995. Operating costs as a percentage of
revenues increased to 87.6% in 1996 from 81.5% in 1995 mainly due to the
large component of the Company's cost structure which is fixed.
Depreciation increased by $5,981,000 (31.3%) mainly due to the impact
of the 1995 acquisitions and the amortization of airspace for a recently
completed landfill cell, offset in part by lower capital expenditures during
the last few years.
Selling and administrative expenses increased $2,313,000 (10.0%) as the
result of higher payroll, data processing and other costs associated with
acquisitions made during the third quarter of fiscal 1995. As a percentage
of revenues, selling and administrative expenses decreased to 14.0% in 1996
from 14.8% in 1995.
Interest expense increased by $4,390,000 as a result of acquisition-
related debt incurred or assumed in the third quarter of fiscal 1995.
The effective income tax benefits for the nine months ended June 30,
1996 and 1995 were 35.7% and 36.6%, respectively.
Results of Operations: Quarter Ended June 30, 1996 vs. Quarter Ended June
30, 1995.
Revenues decreased by $1,705,000 (2.7%) to $61,582,000 from the
$63,287,000 reported last year. The decrease in revenues was the result of
higher incineration volume processed at lower average prices offset in part
by an increase in transportation and other service revenues. Although
overall business conditions remain very competitive, the Company's
performance in the third quarter compared with the second quarter improved
through increased revenue growth and decreased costs.
Operating expenses decreased by $2,020,000 (3.7%) reflecting the
increased incineration volume and related transportation costs offset in
part by lower payroll, property taxes and maintenance costs. Operating
costs as a percentage of revenues decreased to 84.8% in 1996 from 85.8% in
1995.
Depreciation increased $1,321,000 (16.9%) mainly due to an increase in
the amortization of airspace for a recently completed landfill cell, a
writedown of property and equipment determined to have an impaired value,
and the impact of the 1995 acquisitions offset in part by lower capital
expenditures during the past few years.
FORM 10-Q Page 6 of 7
Selling and administrative expenses decreased by $1,447,000 (16.0%)
principally as the result of lower data processing, consultants and other
transitional costs incurred in connection with acquisitions in the third
quarter of fiscal 1995. As a percentage of revenues, selling and
administrative expenses decreased to 12.3% in 1996 from 14.3% in 1995.
Interest expense decreased $119,000 (5.2%) as a result of lower levels
of long-term debt outstanding.
The effective income tax benefits for the three months ended June 30,
1996 and 1995 were 34.9% and 34.6%, respectively.
Liquidity and Capital Resources
During the first nine months of fiscal 1996 and 1995, expenditures for
property and equipment were $7,578,000 and $15,261,000, respectively. In
addition, expenditures on remediation projects at the Company's facilities
for the first nine months of fiscal 1996 and 1995 were $2,966,000 and
$2,676,000, respectively. The Company financed its capital and remediation
expenditures from available cash resources.
The Company's projected capital and remediation expenditures for the
remainder of fiscal 1996 are approximately $3,000,000. Capital and
remediation expenditures are expected to be financed from available cash
balances and proceeds from the sale of certain nonstrategic assets.
The Company continues its efforts to reduce operating losses through
cost reductions and increased operating efficiencies. In addition, the
Company continues its emphasis on expanding the scope of customer services
in order to enhance revenues and improve cash flows.
For the remainder of fiscal year 1996, the Company anticipates lower
operating cash requirements as it realizes the benefits of cost reductions
and a lower level of planned capital spending. The Company believes that
existing cash balances and cash expected to be generated from future
operations will be sufficient to meet the Company's cash requirements for
the remainder of fiscal 1996. For further details, see page 8 of the
Company's 1995 Annual Report on Form 10-K.
FORM 10-Q Page 7 of 7
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 4 and 5 of the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1995.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: July , 1996 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
______________________________________
John V. Flynn, Jr.
President and Chief Operating Officer
______________________________________
Frank H. Minner, Jr.
Group Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer
FORM 10-Q Page 7 of 7
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 4 and 5 of the
Company's Annual Report on Form 10-K for the fiscal year ended September 30,
1995.
Item 2. Changes in Securities
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Submission of Matters to a Vote of Security Holders
None.
Item 5. Other Information
None.
Item 6. Exhibits and Reports on Form 8-K
None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
DATE: July , 1996 ROLLINS ENVIRONMENTAL SERVICES, INC.
(Registrant)
/s/ John V. Flynn, Jr.
John V. Flynn, Jr.
President and Chief Operating Officer
/s/ Frank H. Minner, Jr.
Frank H. Minner, Jr.
Group Vice President-Finance and Treasurer
Chief Financial Officer
Chief Accounting Officer