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 June 30, 1995.
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 June 30, 1995, there were 35,851,508 shares of Common Stock $1 Par Value,
outstanding.
ROLLINS, INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page No.
Statements of Financial Position -
June 30, 1995 and December 31, 1994 1
Statements of Income and Earnings Retained
- three months and six months ended
June 30, 1995 and 1994 2
Statements of Cash Flows
- six months ended June 30, 1995 and 1994 3
Notes to Financial Statements 4-5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-9
Part II Other Information 10
ROLLINS, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
(In thousands, except share data)
(Unaudited)
June 30, December 31,
1995 1994
------------ --------------
ASSETS
Cash and Short-Term Investments $31,824 $31,917
Marketable Securities 68,992 51,820
Trade Receivables, Net 106,292 101,900
Materials and Supplies 18,831 16,250
Deferred Income Taxes 4,479 4,445
Other Current Assets 8,576 8,567
--------- --------
Current Assets 238,994 214,899
Equipment and Property, Net 29,307 27,989
Intangible Assets 42,053 42,092
Other Assets 11,626 10,285
--------- --------
Total Assets $321,980 $295,265
========= ========
LIABILITIES
Accounts Payable $16,929 $12,002
Accrued Insurance Expenses 15,243 14,258
Accrued Payroll 15,272 12,700
Unearned Revenue 15,069 15,567
Other Expenses 13,807 12,362
--------- --------
Current Liabilities 76,320 66,889
Deferred Income Taxes 12,072 12,205
Long-Term Accrued Liabilities 19,750 22,538
--------- --------
Total Liabilities 108,142 101,632
--------- --------
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 223,565 203,582
--------- --------
264,997 245,014
Less--Common Stock In Treasury, At Cost,
5,580,306 in 1995 ; 5,605,412 shares in 1994 51,159 51,381
--------- --------
Total Stockholders' Equity 213,838 193,633
--------- --------
Total Liabilities and Stockholders' Equity $321,980 $295,265
========= ========
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 Six Months Ended
June 30, June 30,
------------------ ----------------
1995 1994 1995 1994
----------- ----------- ----------- -----------
REVENUES
Customer Services $ 175,350 $ 171,874 $ 318,004 $ 308,317
---------- ---------- ----------- -----------
COSTS AND EXPENSES
Cost of Services Provided 86,874 83,669 160,112 153,821
Sales, General and Administrative Expenses 53,761 52,342 109,693 105,903
Depreciation and Amortization 1,895 2,033 3,734 4,014
Interest Income (1,216) (423) (2,162) (874)
---------- ---------- ----------- -----------
141,314 137,621 271,377 262,864
---------- ---------- ----------- -----------
INCOME BEFORE INCOME TAXES 34,036 34,253 46,627 45,453
---------- ---------- ----------- -----------
PROVISION (CREDIT) FOR INCOME TAXES
Current 13,565 12,681 18,905 17,820
Deferred (631) 506 (1,187) (321)
---------- ---------- ----------- -----------
12,934 13,187 17,718 17,499
---------- ---------- ----------- -----------
NET INCOME 21,102 21,066 28,909 27,954
---------- ---------- ----------- -----------
EARNINGS RETAINED
Balance at Beginning of Period 206,954 174,409 203,582 171,862
Cash Dividends (5,019) (4,475) (10,037) (8,935)
Other 528 77 1,111 196
---------- ---------- ----------- -----------
BALANCE AT END OF PERIOD $ 223,565 $ 191,077 $ 223,565 $ 191,077
========== ========== =========== ===========
EARNINGS PER SHARE $ 0.59 $ 0.59 $ 0.81 $ 0.78
========== ========== =========== ===========
WEIGHTED AVERAGE
SHARES OUTSTANDING 35,850,498 35,757,223 35,844,128 35,734,591
========== ========== =========== ===========
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)
Six Months Ended
June 30,
------------------------------
1995 1994
---- ----
OPERATING ACTIVITIES
Net Income $28,909 $27,954
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 3,734 4,014
Deferred Income Taxes (1,187) (321)
Other, Net 2,275 975
(Increase) Decrease in assets:
Trade Receivables (4,341) (14,103)
Materials and Supplies (2,565) (3,625)
Other Current Assets (724) (1,482)
Other Non-Current Assets (755) (324)
Increase (Decrease) in liabilities:
Accounts Payable and Accrued Expenses 9,862 9,461
Unearned Revenue (498) 608
Deferred Income Taxes 701 584
Long-Term Accrued Liabilities (2,788) (5,229)
--------- ---------
Net Cash Provided by Operating Activities 32,623 18,512
--------- ---------
INVESTING ACTIVITIES
Purchases of Equipment and Property (5,167) (4,329)
Net Cash Used for Acquisition of Companies (2,266) (345)
Proceeds from Sales of Equipment and Property 142 714
Marketable Securities, Net (15,998) (565)
--------- ---------
Net Cash Used in Investing Activities (23,289) (4,525)
--------- ---------
FINANCING ACTIVITIES
Dividends Paid (10,037) (8,935)
Treasury Stock Issued to Benefit Plans 610 1,100
--------- ---------
Net Cash Used in Financing Activities (9,427) (7,835)
--------- ---------
Net Increase (Decrease) in Cash
and Short-Term Investments (93) 6,152
Cash and Short-Term Investments
at Beginning of Period 31,917 18,102
--------- ---------
Cash and Short-Term Investments
at End of Period $ 31,824 $ 24,254
========= =========
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, 1994.
Certain prior year amounts have been reclassified to conform with the
second quarter 1995 presentation.
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 June 30, 1995
and December 31, 1994, and the results of operations and cash flows for the
six months ended June 30, 1995 and 1994.
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
NOTES TO FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 4. COMMITMENTS AND CONTINGENCIES
On May 26, 1993, the Attorney General of Missouri and several Missouri
residents who received termite treatment from Orkin, on behalf of
themselves and an alleged class, filed an action in the City of St. Louis
Circuit Court. The Attorney General has alleged violations of the Missouri
Merchandising Practices Act. The private plaintiffs have alleged fraud and
breach of certain termite extermination contracts. The Plaintiffs' claims
are based on allegations that the Company failed to apply termiticides in
accordance with termiticide labels and its advertising. Plaintiffs are
collectively seeking restitution for claimed losses, civil penalties,
compensatory and punitive damages, and litigation expenses, including
attorneys' fees. On June 1, 1994, the Court ruled Plaintiffs' would be
permitted to pursue a class action lawsuit against Orkin. The class was
limited to those Missouri customers who purchased termite extermination
services between January 1, 1987 and May 15, 1993, inclusively, and who
have basement or crawl space foundation walls, in which an organophosphate
termiticide was used.
The Company is vigorously defending this lawsuit. Except for the class
certification, the judicial system has not ruled on any substantive issues
in this case. Due to the preliminary nature of this action, the final
outcome of the litigation cannot be determined at this time. However, it
is the opinion of management that the ultimate resolution of this action
will not have a material adverse effect on the Company's financial
position, results of operations, or liquidity and will take an extended
time to resolve.
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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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1995
RESULTS OF OPERATIONS
SELECTED INDUSTRY SEGMENT DATA
Three Months Ended Six Months Ended
June 30, June 30,
------------------ ----------------
(In thousands) 1995 1994 1995 1994
---- ---- ---- ----
REVENUES
Orkin $ 157,296 $ 153,119 $ 282,549 $ 271,479
Rollins Protective 14,660 15,299 28,878 30,171
Other 3,394 3,456 6,577 6,667
--------- --------- --------- ---------
$ 175,350 $ 171,874 $ 318,004 $ 308,317
========= ========= ========= =========
OPERATING INCOME
Orkin $ 33,905 $ 33,389 $ 46,969 $44,876
Rollins Protective 1,421 1,504 2,762 2,834
Other (109) 1,392 387 2,330
--------- --------- --------- ---------
$ 35,217 $ 36,285 $ 50,118 $ 50,040
========= ========= ========= =========
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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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1995
GENERAL OPERATING COMMENTS
We were disappointed with the second quarter operating results, nonetheless, we
continue to see positive signs from investments made to achieve the Company's
long-term growth. Our benchmarking surveys of the pest control industry imply
that this year's cold and wet spring weather had an unfavorable impact on the
seasonal termite demand. Revenues for the second quarter ended June 30, 1995
increased 2.0% or $3.5 million, to $175.4 million from the prior year period
($9.7 million or 3.1% year-to-date). Operating income decreased $1.1 million or
2.9% to $35.2 million for the quarter, yet increased slightly year-to-date (0.2%
to $50.1 million). Net income for the quarter was relatively flat (0.2%
increase) to $21.1 million and earnings per share was unchanged at 59 cents.
However, year-to-date net income increased 3.4% to $28.9 million and earnings
per share was 81 cents, a 3.8% increase from a year ago.
For the quarter, the Orkin Group's operating income increased 1.5% to $33.9
million on revenues of $157.3 million which grew 2.7% over 1994. These results
resulted in a slight deterioration in operating margins of 21.6%, compared to
21.8% in the prior year. Rollins Protective Services' operating income decreased
5.5% to $1.4 million on revenues of $14.7 million.
For the six months ended June 30, 1995, the Orkin Group revenues increased 4.1%
with operating income improving 4.7%. Operating margins grew slightly to 16.6%
compared to 16.5% for the same period last year. Rollins Protective Services
revenue declined 4.3%, along with operating income 2.5% lower, while operating
margins improved from 9.4% to 9.6%. Detail segment information follows.
ORKIN 1995 VERSUS 1994
Revenues increased 2.7% to $157.3 million and operating income increased 1.5% to
$33.9 million for the second quarter ended June 30, 1995. For the six months
ended June 30, 1995, Orkin had revenues of $282.5 million and operating income
of $47.0 million (increases of 4.1% and 4.7%, respectively, from the prior
year). Pest Control services increased their sales dollars and customer base
for the quarter and year-to-date. Although termite demand was lower than
expectations, Orkin is encouraged by the positive results in recurring pest
control sales. Residential leads and sales were up solidly over last year.
Prospective Orkin marketing and customer service programs will focus more on
building this segment by shifting emphasis away from the less predictable
termite business. The comparisons in operating results were also affected by
the December 1994 sale of the 11 Northern Lawn Care locations.
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ROLLINS PROTECTIVE SERVICES 1995 VERSUS 1994
For the second quarter, Rollins Protective Services (RPS) had revenues of $14.7
million, a decrease of 4.2%, and operating income decreased 5.5% to $1.4
million. For the first six months, RPS had revenues of $28.9 million and
operating income of $2.8 million, representing decreases of 4.3% and 2.5%,
respectively, compared to the prior year. In the first quarter of 1995, RPS
sales focus shifted to new product introductions, including the VIP 2000
marketed for the middle income homeowner and "Safe Start", a new homebuilder
product. RPS experienced difficulty integrating these product offerings into
the marketplace, resulting in slower than expected market acceptance. RPS will
continue to focus marketing efforts on these new products as well as continuing
successful programs tested in 1994 targeted at customer retention and National
Accounts. Also, RPS completed two acquisitions during the second quarter and
one additional shortly after quarter-end. These acquisitions provide Rollins
Protective Services the ability to expand its services in the three existing
markets, while providing their customers continued access to quality service.
OTHER 1995 VERSUS 1994
Other businesses revenue and operating income decreased 1.8% and 107.8%,
respectively for the quarter and 1.3% and 83.4%, respectively year-to-date, due
to revisions of the Company's credit and internal operating policies within the
credit service center during the fourth quarter of 1994. The volume of Company
financed sales is lower than last year, as the revised policies redirected
marketing efforts toward stronger customer demographics inconjunction with the
lower than anticipated termite demand. Also, Corporate management is continuing
to monitor the implementation and effectiveness of these policy changes.
FINANCIAL CONDITION
(In thousands) June 30, December 31,
1995 1994
---- ----
Cash and Short-Term Investments $ 31,824 $ 31,917
Marketable Securities 68,992 51,820
Working Capital $162,674 $148,010
Current Ratio 3.1 3.2
Cash Provided By Operations
(Twelve Months Ended) $ 53,451 $ 39,340
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At June 30, 1995 the current ratio was 3.1 and working capital was $162.7
million (an increase of $14.7 million or 9.9% compared to December 31, 1994).
The Company has been debt-free since 1987. 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.
Net trade receivables increased $4.4 million or 4.3% at June 30, 1995 compared
with December 31, 1994. Trade receivables include installment receivables which
are due subsequent to one year from the balance sheet date. These amounts were
approximately $35.4 million and $33.8 million at June 30, 1995 and December 31,
1994, respectively. The increase in receivables is offset in part to the effect
of a revision to the Company's credit and internal operating policies within the
credit service center as discussed on page 8 under the caption "Other 1995
versus 1994".
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ROLLINS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ROLLINS, INC. AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
Refer to Note Number 4 to the Financial Statements,
"Commitments and Contingencies" and Part I, Item 3. Legal
Proceedings, of the Registrant's Form 10-K filed for the year
ended December 31, 1994.
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 25, 1995.
The results of that meeting were disclosed in the Company's
Form 10-Q for the first quarter of 1995.
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: AUGUST 11, 1995
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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