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, 1994.
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, 1994, there were 35,691,907 shares of Common
Stock $1 Par Value, outstanding.
ROLLINS, INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page No.
Statements of Financial Position -
March 31, 1994 and December 31, 1993 1
Statements of Income and Earnings Retained
- three months ended March 31, 1994 and 1993 2
Statements of Cash Flows
- three months ended March 31, 1994 and 1993 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,
1994 1993
ASSETS
Cash and Short-Term Investments $ 25,817 $ 18,102
Marketable Securities 51,417 50,991
Trade Receivables, Net 88,551 87,518
Materials and Supplies 18,165 15,829
Deferred Income Taxes 5,045 4,980
Other Current Assets 7,932 7,112
Current Assets 196,927 184,532
Equipment and Property, Net 29,141 28,890
Intangible Assets 42,151 42,171
Other Assets 11,111 11,601
Total Assets $ 279,330 $ 267,194
LIABILITIES
Accounts Payable $ 14,705 $ 12,279
Accrued Insurance Expenses 16,570 13,600
Accrued Payroll 14,499 15,519
Unearned Revenue 14,181 12,854
Other Expenses 17,112 12,752
Current Liabilities 77,067 67,004
Deferred Income Taxes 12,513 12,983
Long-Term Accrued Liabilities 26,524 26,699
Total Liabilities 116,104 106,686
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 174,409 171,862
215,841 213,294
Less--Common Stock In Treasury, At Cost,
5,739,907 in 1994 ; 5,758,619 shares in 1993 52,615 52,786
Total Stockholders' Equity 163,226 160,508
Total Liabilities and Stockholders' Equity $ 279,330 $ 267,194
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,
1994 1993
REVENUES
Customer Services $ 136,443 $ 127,295
COSTS AND EXPENSES:
Cost of Services Provided 70,152 65,649
Sales, General and
Administrative Expenses 53,561 50,754
Depreciation and Amortization 1,981 1,794
Interest Income (451) (442)
125,243 117,755
INCOME BEFORE INCOME TAXES 11,200 9,540
PROVISION (CREDIT) FOR INCOME TAXES:
Current 5,139 4,039
Deferred (827) (366)
4,312 3,673
NET INCOME 6,888 5,867
EARNINGS RETAINED:
Balance at Beginning of Period 171,862 141,999
Cash Dividends (4,460) (3,917)
Employee Benefit Plans 119 295
BALANCE AT END OF PERIOD $ 174,409 $ 144,244
EARNINGS PER SHARE $ 0.19 $ 0.16
WEIGHTED AVERAGE
SHARES OUTSTANDING 35,678,930 35,608,123
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
1994 1993
OPERATING ACTIVITIES
Net Income $ 6,888 $ 5,867
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 1,981 1,794
Deferred Income Taxes (827) (366)
Other, Net 709 973
(Increase) Decrease in:
Trade Receivables (1,033) (2,634)
Materials and Supplies (2,336) (1,133)
Other Current Assets (820) 2,683
Increase (Decrease) in:
Accounts Payable and Accrued
Expenses 8,678 2,653
Unearned Revenue 1,327 482
Non-Current Deferred Income
Taxes 292 (2,492)
Long-Term Accrued Liabilities (175) 115
Other Non-Current Assets (112) 9
Net Cash Provided by Operating
Activities 14,572 7,951
INVESTING ACTIVITIES
Purchases of Equipment and Property (2,234) (2,357)
Net Cash Used for Acquisition of
Companies (27) ---
Purchases of Marketable Securities (426) (300)
Net Cash Used in Investing Activities (2,687) (2,657)
FINANCING ACTIVITIES
Dividends Paid (4,460) (3,917)
Treasury Stock Issued to Benefit Plans 290 507
Net Cash Used in Financing Activities (4,170) (3,410)
Net Increase (Decrease) in Cash
and Short-Term Investments 7,715 1,884
Cash and Short-Term Investments
at Beginning of Period 18,102 20,061
Cash and Short-Term Investments
at End of Period $ 25,817 $ 21,945
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, 1993.
Certain prior year amounts have been reclassified to conform with the
first quarter 1994 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 March 31, 1994 and December 31, 1993,
and the results of operations and cash flows for the three months
ended March 31, 1994 and 1993.
NOTE 2. INVESTMENT IN MARKETABLE SECURITIES
During the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 115, "Accounting for
Certain Investments in Debt and Equity Securities." The adoption of
SFAS No. 115 did not have a material effect on the Company's
financial position, results of operations, or liquidity for the first
quarter of 1994.
NOTE 3. 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 4. 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, 1994
RESULTS OF OPERATIONS
SELECTED INDUSTRY SEGMENT DATA
Three Months Ended
March 31
1994 1993
(In thousands)
REVENUES
Orkin $118,360 $110,693
Rollins Protective 14,872 13,976
Other 3,211 2,626
$136,443 $127,295
OPERATING INCOME
Orkin $ 11,487 $ 9,947
Rollins Protective 1,330 1,168
Other 938 757
$ 13,755 $ 11,872
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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, 1994
General Operating Comments
Rollins, Inc. reported another quarter of record earnings. These results
dramatically illustrate Rollins' growing penetration in its markets. Revenue
for the first quarter ended March 31, 1994 reached $136.4 million, an
increase of 7.2% from the prior year period. Operating income increased 15.9%
to $13.8 million. Although revenue was impacted somewhat by weather
conditions in January and February, the Company produced consistent earnings
results. This marks the 16th consecutive quarter of double-digit earnings
increases.
Net income grew 17.4% to $6.9 million and earnings per share was $.19 cents,
compared to $.16 cents a year ago, an 18.8% improvement.
For the quarter, the Orkin Group's operating income increased 15.5% to $11.5
million on revenues of $118.4 which grew 6.9% over 1993. These results
provided an improvement in operating margins of 9.7%, compared to 9.0% in the
prior year. Rollins Protective Services operating income increased 13.9% to
$1.3 million on revenues of $14.9 million. Detail segment information
follows.
Orkin 1994 Versus 1993
Orkin continued its tradition of exceptional results with increases in
revenue, profit and customer growth. As mentioned, revenues increased 6.9%
to $118.4 million for the first quarter ended March 31, 1994. Pest Control
anticipates a good spring season and is expecting an improvement over last
year. During the first quarter Orkin Pest Control launched its National
Borate Program officially adding a "Fourth Barrier" to its already highly
successful and effective "Triple Barrier" termite protection. Orkin
Lawn Care completed the first quarter with positive results, generating a
double digit revenue increase while exceeding its internal operating
objectives. These results can be directly attributed to the ongoing
conversion of its customer base in most markets from its traditional 6 - 7
annual service cycles to monthly service. This transition should
contribute to future margin improvements. The recent introduction of its
Total Lawn Care service and the SlowGrow Plus Program should also
contribute to these improvements. Orkin Plantscaping will continue its
program of location standardization and employee training while gaining a
tighter control of expenses and resulting margins.
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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, 1994
Rollins Protective Services (RPS) 1994 Versus 1993
Rollins Protective Services grew revenues 6.4% to $14.9 million with
operating income improving 13.9% to $1.3 million. Operating margins
increased to 8.9% from 8.4% last year. These results are the continuation
of the positive new customer sales trend which began in the last half of
1993. There are several factors that contributed to this improvement, some
of which include: an all time record sales month in March, and better
employee and customer retention. RPS is also benefiting from a strengthened
management team highlighted with the recent promotion of Paul Roman, formerly
Vice President and Division Head, to President of RPS. All of these factors
should assist in this division's growth and overall performance during the
remainder of the year.
FINANCIAL CONDITION
(In thousands) March 31, December 31,
1994 1993
Cash and Short-Term Investments $ 25,817 $ 18,102
Marketable Securities 51,417 50,991
Working Capital $119,860 $117,528
Current Ratio 2.6 2.8
Cash Provided From Operations
(Twelve Months Ended) $ 46,655 $ 40,034
At March 31, 1994 cash and short-term investments were $25.8 million, an
increase of $7.7 million from December 31, 1993. The investment in marketable
securities at March 31, 1994, was $51.4 million.
At March 31, 1994 the current ratio was 2.6 and working capital was $119.9
million (an increase of $2.3 million or 2.0% compared to December 31, 1993).
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.
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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, 1994
Trade receivables, net increased $1.0 million or 1.2% at March 31, 1994
compared with December 31, 1993. Trade receivables include installment
receivables which are due subsequent to one year from the balance sheet date.
These amounts were approximately $29.7 million and $28.7 million at the end
of the March 31, 1994 and December 31, 1993, respectively. (Delinquency
statistics, as a percentage of total receivables, have improved over the prior
year). The increase in receivables is attributed to the continuing effect of a
Orkin termite and Rollins Protective Services marketing programs, the
increased average length and amount of an Orkin contract, and the overall
increase in Company revenues of 7.2% for the quarter.
During the first quarter of 1994, the Company adopted Statement of Financial
Accounting Standard No. 115 (SFAS 115), "Accounting for Certain Investments in
Debt and Equity Securities". Future unrealized gains and losses will likely
occur, although their magnitude cannot be predicted and the effects on the
Company's results are not expected to be material.
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ROLLINS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ROLLINS, INC. AND SUBSIDIARIES
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 26, 1994. The stockholders
elected John W. Rollins and Gary W. Rollins as Class II Directors for the
three year term expiring in 1997. Also, the stockholders approved the 1994
Employee Stock Incentive Plan (the "1994 Plan"). The 1994 Plan was adopted by
the Board of Directors on January 25, 1994. An aggregate of 1,200,000 shares
of Common Stock have been reserved for issuance under the 1994 Plan. The 1994
Plan provides for the granting to directors and key employees of the Company
("Participants") stock options, stock appreciation rights ("SARS") and /or
other awards valued in whole or in part by reference to, or based upon, the
Company's $1.00 par value Common Stock, including without limitation,
restricted stock. The 1994 Plan will afford the Company latitude in tailoring
incentive compensation to support corporate and business objectives, and to
anticipate and respond to a changing business environment and competitive
compensation practices.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(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 12, 1994
Rollins, Inc.
(Registrant)
/s/ GARY W. ROLLINS
Gary W. Rollins
President and Chief
Operating Officer
(Member of the Board of
Directors)
/s/ GENE L. SMITH
Gene L. Smith
Chief Financial Officer
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
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