FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(Mark One)
[X] Quarterly report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934 For the quarterly period ended March 31, 1996.
Transition report pursuant to section 13 or 15(d) of the Securities
Exchange Act of 1934
[ ] For the transition period from _____ to _____
Commission file number 1-4422
____________________________
ROLLINS, INC.
Incorporated I.R.S. Employer
in Identification Number
Delaware 51-0068479
2170 Piedmont Road, N.E., Atlanta, Georgia 30324
Telephone Number -- (404) 888-2000
____________________________
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 [ ]
At March 31, 1996, there were 35,880,472 shares of Common Stock $1 Par
Value, outstanding.
ROLLINS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Statements of Financial Position -
March 31, 1996 and December 31, 1995 1
Statements of Income and Earnings Retained
- Three months ended March 31, 1996 and 1995 2
Statements of Cash Flows
- Three months ended March 31, 1996 and 1995 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-8
Part II Other Information 9
ROLLINS, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
(In thousands except share data)
(Unaudited)
March 31, December 31,
1996 1995
ASSETS
Cash and Short-Term Investments $ 37,328 $ 33,623
Marketable Securities 73,921 65,743
Trade Receivables, Net 86,478 88,542
Materials and Supplies 17,350 13,924
Deferred Income Taxes 7,872 7,447
Other Current Assets 9,780 13,486
Current Assets 232,729 222,765
Equipment and Property, Net 39,274 37,799
Intangible Assets 41,994 42,013
Other Assets 15,040 12,348
Total Assets $ 329,037 $ 314,925
LIABILITIES
Capital Lease Obligation $ 1,576 $ 1,314
Accounts Payable 17,271 13,334
Accrued Insurance Expenses 15,179 14,314
Accrued Payroll 12,783 12,028
Unearned Revenue 17,069 14,695
Other Expenses 16,958 15,324
Current Liabilities 80,836 71,009
Capital Lease Obligation 7,160 7,422
Long-Term Accrued Liabilities 19,913 15,936
Deferred Income Taxes 5,539 6,240
Total Liabilities 113,448 100,607
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share;
authorized 99,500,000 shares;
41,431,814 shares issued 41,432 41,432
Earnings Retained 225,082 224,009
266,514 265,441
Less--Common Stock In Treasury, At Cost,
5,551,342 in 1996 ; 5,573,589 shares in 50,925 51,123
1995
Total Stockholders' Equity 215,589 214,318
Total Liabilities and Stockholders'
Equity $ 329,037 $ 314,925
The accompanying notes are an integral part of these statements.
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ROLLINS, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME AND EARNINGS RETAINED
(In thousands except share data)
(Unaudited)
Three Months Ended
March 31,
1996 1995
REVENUES
Customer Services $ 142,502 $ 142,654
COSTS AND EXPENSES
Cost of Services Provided 79,374 73,238
Depreciation and Amortization 1,821 1,839
Sales, General and Administrative Expenses 52,299 55,932
Interest Income (1,294) (946)
132,200 130,063
INCOME BEFORE INCOME TAXES 10,302 12,591
PROVISION (CREDIT) FOR INCOME TAXES
Current 5,183 5,340
Deferred (1,268) (556)
3,915 4,784
NET INCOME 6,387 7,807
EARNINGS RETAINED
Balance at Beginning of Period 224,009 203,582
Cash Dividends (5,202) (5,018)
Other (112) 583
BALANCE AT END OF PERIOD $ 225,082 $ 206,954
EARNINGS PER SHARE $ 0.18 $ 0.22
WEIGHTED AVERAGE
SHARES OUTSTANDING 35,873,150 35,837,688
The accompanying notes are an integral part of these statements.
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ROLLINS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1996 1995
OPERATING ACTIVITIES
Net Income $ 6,387 $ 7,807
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 1,821 1,839
Deferred Income Taxes (1,268) (556)
Other, Net 1,062 1,341
(Increase) Decrease in Assets:
Trade Receivables 2,144 1,308
Materials and Supplies (3,383) (1,483)
Other Current Assets 3,574 (152)
Other Non-Current Assets 264 (207)
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 7,109 10,777
Unearned Revenue 2,207 535
Long-Term Accrued Liabilities 3,977 3,326
Non-Current Deferred Income Taxes 133 (200)
Net Cash Provided by Operating Activities 24,027 24,335
INVESTING ACTIVITIES
Purchases of Equipment and Property (3,277) (2,855)
Net Cash Used for Acquisition of Companies (3,657) (324)
Marketable Securities, Net (8,557) (541)
Proceeds from Sales of Equipment
and Property 39 119
Net Cash Used in Investing Activities (15,452) (3,601)
FINANCING ACTIVITIES
Dividends Paid (5,202) (5,018)
Treasury Stock Issued to Benefit Plans 332 421
Net Cash Used in Financing Activities (4,870) (4,597)
Net Increase (Decrease) in Cash
and Short-Term Investments 3,705 16,137
Cash and Short-Term Investments
at Beginning of Period 33,623 31,917
Cash and Short-Term Investments
at End of Period $ 37,328 $ 48,054
The accompanying notes are an integral part of these statements.
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ROLLINS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1.BASIS OF PREPARATION
The consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Footnote
disclosures normally included in the financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations.
These consolidated financial statements should be read in conjunction
with the financial statements and related notes contained in the
Registrant's annual report on Form 10-K for the year ended December 31,
1995.
In the opinion of management, the consolidated financial statements
included herein contain all normal recurring adjustments necessary to
present fairly the financial position of the Registrant as of March 31,
1996 and December 31, 1995, and the results of operations and cash
flows for the three months ended March 31, 1996 and 1995.
NOTE 2.PROVISION FOR INCOME TAXES
The book provision for income taxes includes the liability for state
income taxes, net of the federal income tax benefit. The deferred
provision for income taxes arises from the changes during the year in
the company's net deferred tax asset or liability.
NOTE 3.EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the weighted
average number of shares outstanding during the respective periods.
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ROLLINS, INC. AND SUBSIDIARIES
PART I. ITEM 2. FINANCIAL INFORMATION
MANAGEMENT 'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED MARCH 31, 1996
RESULTS OF OPERATIONS
SELECTED INDUSTRY SEGMENT DATA
Three Months Ended
March 31,
1996 1995
(In thousands)
REVENUES
Orkin $ 124,433 $ 125,253
Rollins Protective 15,330 14,218
Other 2,739 3,183
$ 142,502 $ 142,654
OPERATING INCOME
Orkin $ 11,297 $ 13,064
Rollins Protective 1,285 1,341
Other (67) 496
$ 12,515 $ 14,901
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General Operating Comments
The first quarter operating results were consistent with the Company's
strategic plans to build on their dedication to customer service and
investments for long-term growth. Investments in the core businesses include
a renewed emphasis on recurring monthly pest control, increased focus on
Commercial opportunities, and refined operational fundamentals in marketing,
training, automation, and technology. The Rollins Customer Service Center
(RCSC), our new telecenter, is now supporting all four service lines (pest
control and termite, lawn care, plantscaping and protective services). We
look forward to seeing a more substantial contribution from the RCSC in the
second quarter and for the balance of 1996.
Revenues for the first quarter ended March 31, 1996 decreased 0.1% or $0.2
million, to $142.5 million from the prior year period. Operating income
decreased $2.4 million to $12.5 million for the quarter, while net income
decreased 18.2% to $6.4 million. Earnings per share were 18 cents versus 22
cents for the first quarter 1995.
For the quarter, the Orkin's operating income decreased 13.5% to $11.3 million
on a 0.7% revenue decrease to $124.4 million. Operating margins were 9.1%,
compared to 10.4% in the prior year. Rollins Protective Services' (RPS)
operating income decreased 4.2% to $1.3 million on a revenue increase of $1.1
million or 7.8% to $15.3 million. RPS' operating margins were 8.4% compared
to 9.4% last year, however better than the fourth quarter 1995 margin of 2.4%.
Detail segment information follows.
Orkin 1996 Versus 1995
Orkin realized an increase in pest control revenue and customer base,
supporting the strategic decision to continue emphasizing recurring monthly
pest control. However, due to the severe, extended winter weather, the pest
control revenue increase is offset by a decrease in termite revenue. Assuming
more typical weather conditions this Spring, Orkin expects to realize termite
revenue increases in the second quarter.
The decrease in operating income was the result of the revenue shortfall,
investments in sales and service staffing, and business development
activities. The Orkin business development group has been active the first
quarter with the opening of eight new locations, two acquisitions, including a
growing presence in the Canadian market; and an expansion of the Agribusiness
program's product and service offering. In addition, the level of interest
and expansion potential of the new franchise program continues to gain
momentum, with four new operations starting this quarter.
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Rollins Protective Services (RPS) 1996 Versus 1995
The RPS investments in new, dedicated commercial branches and the acquisitions
during the last twelve months are starting to make postive contributions, with
the resulting revenue increase. The operating margin deterioration in the
first quarter was primarily the result of the company-wide launch of our new
System VII security system.
RPS expanded its market penetration in the New England states through the
first quarter acquisition of one of that area's largest security firms.
RPS will continue to focus on the System VII product sales, Commercial sales
and service initiatives, and cross-marketing efficiencies from the National
Customer Support Center.
Other 1996 Versus 1995
Other businesses revenue and operating income decreased for the quarter due to
revisions of the Company's credit and internal operating policies within the
consumer finance area, Rollins Acceptance Company (RAC). The volume of
Company financed sales is lower than last year, as the revised policies
redirected marketing efforts toward stronger customer demographics
inconjunction with a lower termite demand.
The expanded physical facility, increased collector headcount, and new
computers and phone dialing equipment caused margin deterioration, however
these investments have better positioned RAC to more effectively manage the
receivables portfolio and function as a marketing support operation.
FINANCIAL CONDITION
March 31, December 31,
1996 1995
(In thousands)
Cash and Short-Term
Investments $ 37,328 $ 33,623
Marketable Securities 73,921 65,743
$ 111,249 $ 99,366
Working Capital $ 151,893 $ 151,756
Current Ratio 2.9 3.1
Cash Provided By Operations$ 46,602 $ 46,910
(Twelve Months Ended)
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Rollins, Inc.'s financial position remained solid. The Company's operations
have historically provided a strong positive cash flow which represents the
Company's principal source of funds. Management believes that this liquidity,
along with expected cash from operations, will support the Company's continued
growth, capital expenditures, cash dividends, and expansion plans.
Interest income increased 36.8% due to the increase in average funds invested
in short-term investments and marketable securities, coupled with the increase
in the average rate of return.
Net trade receivables decreased $2.1 million or 2.3% at March 31, 1996
compared with December 31, 1995. Trade receivables include installment
receivables which are due subsequent to one year from the balance sheet date.
These amounts were approximately $22.8 million and $26.2 million at March 31,
1996 and December 31, 1995, respectively.
In the first quarter, the Company invested $6.9 million in capital
expenditures and acquisitions. Also, $5.2 million was paid out in cash
dividends. The Company maintains a $40.0 million unused line of credit. This
source of funds has not been used, but is available for future acquisitions
and growth, if needed.
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ROLLINS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
None
ITEM 2.CHANGES IN SECURITIES
None
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4.SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
The Annual Stockholder's Meeting was held on April 23, 1996. The
stockholders elected R. Randall Rollins, Henry B. Tippie, and James B.
Williams as Class I Directors for the three year term expiring in 1999.
ITEM 5.OTHER INFORMATION
None
ITEM 6.EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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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: May 13, 1996
Rollins, Inc.
(Registrant)
Gary W. Rollins
Gary W. Rollins
President and Chief
Operating Officer
(Member of the Board of
Directors)
Gene L. Smith
Gene L. Smith
Chief Financial Officer
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
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