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

INCOME TAXES (Tables)

12 Months Ended

Dec. 31, 2016

The Company’s income tax provision consisted of the following:

The primary factors causing income tax expense to be different than the federal statutory rate for 2016, 2015, and 2014 are as follows:

For the years ended December 31,	2016			2015			2014
(in thousands)
Income tax at statutory rate	$	91,222		$	85,112		$	76,820
State income tax expense (net of federal benefit)		8,876			8,377			7,429
Foreign tax expense/(benefit)		9,857			(1,729	)		(1,760	)
Foreign tax credit		(19,155	)		(2,816	)		(205	)
Other		2,467			2,085			(464	)
Total income tax provision	$	93,267		$	91,029		$	81,820

Significant components of the Company’s deferred tax assets and liabilities at December 31, 2016 and 2015 are as follows:

December 31,	2016			2015
(in thousands)
Deferred tax assets:
Termite accrual	$	1,848		$	1,968
Insurance and contingencies		26,560			24,991
Unearned revenues		14,610			15,026
Compensation and benefits		15,798			15,288
State and foreign operating loss carryforwards		12,817			10,629
Bad debt reserve		4,842			4,779
Foreign Tax Credit		18,213			2,554
Other		1,804			1,579
Net Pension Liability		1,109			3,768
Valuation allowance		(6,507	)		(3,969	)
Total deferred tax assets		91,094			76,613
Deferred tax liabilities:
Depreciation and amortization		(21,217	)		(10,985	)
Intangibles and other		(28,000	)		(24,963	)
Total deferred tax liabilities		(49,217	)		(35,948	)
Net deferred tax assets	$	41,877		$	40,665

Analysis of the valuation allowance:

December 31,	2016		2015
(in thousands)
Valuation allowance at beginning of year	$	3,969	$	3,415
Increase in valuation allowance		2,538		554
Valuation allowance at end of year	$	6,507	$	3,969

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

December 31,	2016		2015
(in thousands)
Balance at Beginning of Year	$	2,554	$	—
Additions for tax positions of prior years		—		2,554
Balance at End of Year	$	2,554	$	2,554