Rollins, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

LEASES

LEASES

12 Months Ended

Dec. 31, 2020

14. LEASES

The Company leases certain buildings, vehicles, and equipment in order to reduce the risk associated with ownership. The Company elected the practical expedient approach permitted under ASC 842 not to include short-term leases with a duration of 12 months or less on the balance sheet. As of December 31, 2020 and 2019, all leases were classified as operating leases. Building leases generally carry terms of 5 to 10 years with annual rent escalations at fixed amounts per the lease. Vehicle leases generally carry a fixed term of one year with renewal options to extend the lease on a monthly basis resulting in lease terms up to 7 years depending on the class of vehicle. The exercise of renewal options is at the Company’s sole discretion. It is reasonably certain that the Company will exercise the renewal options on its vehicle leases. The measurement of right-of-use assets and liabilities for vehicle leases includes the fixed payments associated with such renewal periods. We separate lease and non-lease components of contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

The Company uses the rate implicit in the lease when available; however, most of our leases do not provide a readily determinable implicit rate. Accordingly, we estimate our incremental borrowing rate based on information available at lease commencement.


(dollars in thousands)			Years Ended December 31,
Lease Classification	Financial Statement Classification		2020		2019
Short-term lease cost		Cost of services provided, Sales, general, and administrative expenses	$	189	$	351
Operating lease cost		Cost of services provided, Sales, general, and administrative expenses		85,426		77,412
Total lease expense			$	85,615	$	77,763

Other Information:

Weighted average remaining lease term - operating leases				3.76 Yrs		3.90 Yrs
Weighted average discount rate - operating leases				3.93%		3.94%
Cash paid for amounts included in the measurement of lease liabilities
Operating cash flows for operating leases:			$	84,673	$	76,404
Operating lease right-of-use assets, net			$	212,342	$	200,727
Operating lease liabilities-current			$	73,248	$	66,117
Operating lease liabilities, less current portion			$	140,897	$	135,651

Lease Commitments

Future minimum lease payments, including assumed exercise of renewal options at December 31, 2020 were as follows:

(in thousands)	Operating Leases
2021	$	80,425
2022		63,078
2023		42,813
2024		20,194
2025		10,143
Thereafter		16,390
Total future minimum lease payments		233,043
Less: Amount representing interest		18,898
Total future minimum lease payments, net of interest	$	214,145

Future commitments presented in the table above include lease payments in renewal periods for which it is reasonably certain that the Company will exercise the renewal option. Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of $97.9 million for building leases and $135.1 million for vehicle leases. As of December 31, 2020, the Company had additional future obligations of $7.0 million for leases that had not yet commenced.