Annual report pursuant to Section 13 and 15(d)


12 Months Ended
Dec. 31, 2016
Financing Receivables  


Rollins manages its financing receivables on an aggregate basis when assessing and monitoring credit risks. 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 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 turndown the contract. Delinquencies of accounts are monitored each month. Financing receivables include installment receivable amounts which are due subsequent to one year from the balance sheet dates.


At December 31,   2016     2015  
(in thousands)            
Gross Financing Receivables, short-term   $ 17,695     $ 15,674  
Gross Financing Receivables, long-term     18,178       15,080  
Allowance for Doubtful Accounts     (3,157 )     (3,288 )
Net Financing Receivables   $ 32,716     $ 27,466  


Total financing receivables, net were $32.7 million and $27.5 million at December 31, 2016 and December 31, 2015, respectively. Financing receivables are generally charged-off when deemed uncollectable or when 180 days have elapsed since the date of the last full contractual payment. The Company’s charge-off policy has been consistently applied during the periods reported. Management considers the charge-off policy when evaluating the appropriateness of the allowance for doubtful accounts. Gross charge-offs as a percentage of average financing receivables were 3.2% and 3.0% for the twelve months ended December 31, 2016 and December 31, 2015, respectively. Due to the low percentage of charge-off receivables and the high credit worthiness of the potential obligor, Management considers the entire Rollins, Inc. financing receivables portfolio has a low credit risk.


The Company offers 90 days same-as-cash financing to some customers based on their credit worthiness. Interest is not recognized until the 91st day at which time it is recognized retrospectively back to the first day if the contract has not been paid in full. In certain circumstances, such as when delinquency is deemed to be of an administrative nature, accounts may still accrue interest when they reach 180 days past due. As of December 31, 2016 and 2015, there were ten and seven accounts that are greater than 180 days past due, respectively, which have been fully reserved.


Included in financing receivables are notes receivable from franchise owners. The majority of these notes are low risk as the repurchase of these franchises is guaranteed by the Company’s wholly-owned subsidiary, Orkin, Inc., and the repurchase price of the franchise is currently estimated and has historically been well above the receivable due from the franchise owner. Also included in notes receivables are franchise notes from other brands which are not guaranteed and do not have the same historical valuation.


The carrying amount of notes receivable approximates fair value as the interest rates approximate market rates for these types of contracts. Long-term installment receivables, net were $16.7 million and $13.6 million at December 31, 2016 and 2015, respectively.


Rollins’ wholly-owned subsidiary, Rollins Wildlife Services, had 94 and 108 Critter Control franchises in the United States and Canada as of December 31, 2016 and 2015, respectively. Transactions with franchises involve sales of territories to establish new franchises, initial franchise fees and royalties. The territories and initial franchise fees are typically sold for a combination of cash and notes. Notes receivable from franchises were $0.3 million and $0.4 million at December 31, 2016 and 2015, respectively. These notes are not guaranteed.  The Company anticipates that should there be any losses from franchisees these losses would be recouped by removing the individual franchisee and re-selling the abandoned territory. These amounts are included as financing receivables in the accompanying Consolidated Statements of Financial Position.


Royalties from franchises are accrued and recognized in accordance with the FASB ASC Topic 952-605 “Franchisor Revenue Recognition,” as revenues are earned on a monthly basis.


Rollins establishes an allowance for doubtful accounts to insure financing receivables are not overstated due to uncollectability. The allowance balance is comprised of a general reserve, which is determined based on a percentage of the financing receivables balance, and a specific reserve, which is established for certain accounts with identified exposures, such as customer default, bankruptcy or other events, that make it unlikely that Rollins will recover its investment. The general reserve percentages are based on several factors, which include consideration of historical credit losses and portfolio delinquencies, trends in overall weighted-average risk rating of the portfolio and information derived from competitive benchmarking.


The allowance for doubtful accounts related to financing receivables was as follows:


At December 31,   2016     2015  
(in thousands)            
Balance, beginning of period   $ 3,288     $ 3,150  
Additions to allowance     890       965  
Deductions, net of recoveries     (1,021 )     (827 )
Balance, end of period   $ 3,157     $ 3,288  


The following is a summary of the past due financing receivables:


December 31,   2016     2015  
(in thousands)            
30-59 days past due   $ 1,384     $ 721  
60-89 days past due     347       531  
90 days or more past due     937       757  
Total   $ 2,668     $ 2,009  


The following is a summary of percentage of gross financing receivables:


December 31,   2016     2015  
Current     92.5 %     93.5 %
30-59 days past due     3.9 %     2.3 %
60-89 days past due     1.0 %     1.7 %
90 days or more past due     2.6 %     2.5 %
Total     100.0 %     100.0 %