Quarterly report pursuant to Section 13 or 15(d)

ALLOWANCE FOR CREDIT LOSSES

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ALLOWANCE FOR CREDIT LOSSES
9 Months Ended
Sep. 30, 2021
ALLOWANCE FOR CREDIT LOSSES  
ALLOWANCE FOR CREDIT LOSSES

NOTE 4.ALLOWANCE FOR CREDIT LOSSES

Effective January 1, 2020, the Company adopted ASC 326, the new accounting standard related to credit losses. The Company is exposed to credit losses primarily related to accounts receivables and financed receivables derived from customer services revenue. To reduce credit risk for residential pest control accounts receivable, we promote enrollment in our auto-pay programs. In general, we may suspend future services for customers with past due balances. The Company’s credit risk is generally low with a large number of entities comprising Rollins’ customer base and dispersion across many different geographical regions.

The Company manages its financing receivables on an aggregate basis when assessing and monitoring credit risks. The Company’s established credit evaluation and monitoring procedures seek to minimize the amount of business we conduct with higher risk customers. The credit quality of a potential obligor is evaluated at the loan origination based on an assessment of the individual’s Beacon/credit bureau score. Rollins requires a potential obligor to have good credit worthiness with low risk before entering into a contract. Depending upon the individual’s credit score, the Company may accept with 100% financing or require a significant down payment or turn down the contract. Delinquencies of accounts are monitored each month. Financing receivables include installment receivable amounts, some of which are due subsequent to one year from the balance sheet dates.

The Company’s allowances for credit losses for trade accounts receivable and financed receivables are developed using historical collection experience, current economic and market conditions, reasonable and supportable forecasts, and a review of the current status of customers’ receivables. The Company’s receivable pools are classified between residential customers, commercial customers, large commercial customers, and financed receivables. Accounts are written-off against the allowance for credit losses when the Company determines that amounts are uncollectible, and recoveries of amounts previously written off are recorded when collected. The Company stops accruing interest to these receivables when they

are deemed uncollectible. Below is a roll forward of the Company’s allowance for credit losses for the three and nine months ended September 30, 2021 and 2020.

(in thousands)

Allowance for Credit Losses

    

Trade

    

Financed

    

Total

Receivables

Receivables

Receivables

Balance at June 30, 2021

$

13,863

$

4,341

$

18,204

Provision for expected credit losses

 

3,526

 

323

 

3,849

Write-offs charged against the allowance

 

(5,163)

 

(657)

 

(5,820)

Recoveries collected

 

1,247

 

 

1,247

Balance at September 30, 2021

$

13,473

$

4,007

$

17,480

Allowance for Credit Losses

Trade

Financed

Total

    

Receivables

    

Receivables

    

Receivables

Balance at December 31, 2020

$

16,854

$

3,231

$

20,085

Provision for expected credit losses

 

5,760

 

2,762

 

8,522

Write-offs charged against the allowance

 

(12,912)

 

(1,986)

 

(14,898)

Recoveries collected

 

3,771

 

 

3,771

Balance at September 30, 2021

$

13,473

$

4,007

$

17,480

Allowance for Credit Losses

Trade

Financed

Total

    

Receivables

    

Receivables

    

Receivables

Balance at June 30, 2020

$

16,452

$

3,014

$

19,466

Provision for expected credit losses

 

2,363

 

689

 

3,052

Write-offs charged against the allowance

 

(3,502)

 

(567)

 

(4,069)

Recoveries collected

 

660

 

 

660

Balance at September 30, 2020

$

15,973

$

3,136

$

19,109

Allowance for Credit Losses

Trade

Financed

Total

    

Receivables

    

Receivables

    

Receivables

Balance at December 31, 2019

$

16,699

$

2,959

$

19,658

Adoption of ASC 326

 

(3,330)

 

 

(3,330)

Provision for expected credit losses

 

10,843

 

1,977

 

12,820

Write-offs charged against the allowance

 

(11,735)

 

(1,800)

 

(13,535)

Recoveries collected

 

3,496

 

 

3,496

Balance at September 30, 2020

$

15,973

$

3,136

$

19,109