NOTE 6.                STOCKHOLDERS’ EQUITY

During the quarter ended March 31, 2013 the Company paid $13.1 million or $0.09 per share in cash dividends compared to $11.7 million or $0.08 per share during the same period in 2012.  During the first quarter ended March 31, 2013, the Company did not repurchase from the open market any of its $1 par value common stock compared to 68,000 shares purchased at a weighted average price of $19.58 during the same period in 2012. Rollins, Inc. has had a buyback program in place for a number of years and has routinely purchased shares when it felt the opportunity was desirable. The Board authorized the purchase of 5.0 million additional shares of the Company’s common stock in July 2012.  These authorizations enable the Company to continue the purchase of Rollins, Inc. common stock when appropriate, which is an important benefit resulting from the Company’s strong cash flows.  The stock buy-back program has no expiration date.  In total, 5.3 million additional shares may be purchased under the share repurchase program.  The Company repurchased $4.5 and $3.4 million of common stock for the three months ended March 31, 2013 and 2012, respectively from employees for the payment of taxes on vesting restricted shares.

As more fully discussed in Note 14 of the Company’s notes to the consolidated financial statements in its 2012 Annual Report on Form 10-K, stock options, time lapse restricted shares (TLRS’s) and restricted stock units have been issued to officers and other management employees under the Company’s Employee Stock Incentive Plans.  The Company issues new shares from its authorized but unissued share pool.  At March 31, 2013, approximately 4.0 million shares of the Company’s common stock were reserved for issuance.

Stock Options

Stock options generally vest over a five-year period and expire ten years from the issuance date.

During the first quarter ended March 31, 2013, approximately 1,000 shares of common stock were issued upon exercise of stock options by employees compared to approximately 13,000 shares for the prior year quarter.  The Company has no more outstanding stock options as of March 31, 2013.

Options activity outstanding under the Company’s stock option plan as of March 31, 2013 and changes during the three months ended March 31, 2013, were as follows:

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that day. The amount of aggregate intrinsic value will change based on the fair market value of the Company’s stock.

The aggregate intrinsic value of options exercised during the three months ended March 31, 2013 and March 31, 2012 was $20 thousand and $217 thousand, respectively. Exercise of options for the first quarter ended March 31, 2013 and 2012 resulted in cash receipts of less than $10 thousand, for each quarter respectively.

Time Lapse Restricted Shares and Restricted Stock Units

The following table summarizes the components of the Company’s stock-based compensation programs recorded as expense:

The Company recognized a tax benefit of approximately $2.7 million and $2.6 million during the first quarters ended March 31, 2013 and 2012, respectively, related to the amortization of restricted shares which have been recorded as increases to paid-in capital.

The following table summarizes information on unvested restricted stock outstanding as of March 31, 2013:

At March 31, 2013 and December 31, 2012, the Company had $39.3 million and $30.9 million of total unrecognized compensation cost, respectively, related to time-lapse restricted shares that are expected to be recognized over a weighted average period of approximately 4.4 years and 4.1 years, respectively.