2022
| September 30, | December 31, | |||||||
| 2017 | 2016 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Cash and cash equivalents | $ | 113,396 | $ | 142,785 | ||||
| Trade receivables, net of allowance for doubtful accounts of $11,922 and $11,443, respectively | 110,325 | 88,490 | ||||||
| Financed receivables, short-term, net of allowance for doubtful accounts of $1,535 and $1,727, respectively | 17,208 | 15,968 | ||||||
| Materials and supplies | 15,380 | 13,724 | ||||||
| Other current assets | 26,617 | 29,204 | ||||||
| Total current assets | 282,926 | 290,171 | ||||||
| Equipment and property, net | 132,865 | 133,477 | ||||||
| Goodwill | 372,924 | 255,665 | ||||||
| Customer contracts | 141,385 | 117,466 | ||||||
| Other intangible assets | 45,973 | 44,310 | ||||||
| Financed receivables, long-term, net of allowance for doubtful accounts of $1,357 and $1,430, respectively | 18,995 | 16,748 | ||||||
| Deferred income taxes | 32,491 | 41,877 | ||||||
| Other assets | 18,968 | 16,824 | ||||||
| Total assets | $ | 1,046,527 | $ | 916,538 | ||||
| LIABILITIES | ||||||||
| Accounts payable | $ | 36,195 | $ | 30,284 | ||||
| Accrued insurance | 27,830 | 26,201 | ||||||
| Accrued compensation and related liabilities | 75,087 | 75,839 | ||||||
| Unearned revenues | 118,950 | 99,820 | ||||||
| Other current liabilities | 50,724 | 44,847 | ||||||
| Total current liabilities | 308,786 | 276,991 | ||||||
| Accrued insurance, less current portion | 34,014 | 32,023 | ||||||
| Accrued pension | 1,759 | 2,880 | ||||||
| Long-term accrued liabilities | 51,529 | 36,099 | ||||||
| Total liabilities | 396,088 | 347,993 | ||||||
| Commitments and Contingencies | ||||||||
| STOCKHOLDERS’ EQUITY | ||||||||
| Preferred stock, without par value; 500,000 shares authorized, zero shares issued | — | — | ||||||
| Common stock, par value $1 per share; 375,000,000 shares authorized, 217,975,154 and 217,791,511 shares issued and outstanding, respectively | 217,975 | 217,792 | ||||||
| Paid in capital | 78,482 | 77,452 | ||||||
| Accumulated other comprehensive loss | (59,601 | ) | (70,075 | ) | ||||
| Retained earnings | 413,583 | 343,376 | ||||||
| Total stockholders’ equity | 650,439 | 568,545 | ||||||
| Total liabilities and stockholders’ equity | $ | 1,046,527 | $ | 916,538 | ||||
| June 30, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Cash and cash equivalents | $ | 154,747 | $ | 95,346 | |||||||
| Trade receivables, net of allowance for expected credit losses of $12,739 and $14,073, respectively | 176,567 | 155,759 | |||||||||
| Financed receivables, short-term, net of allowance for expected credit losses of $2,087 and $1,768, respectively | 37,495 | 33,618 | |||||||||
| Materials and supplies | 32,685 | 29,745 | |||||||||
| Other current assets | 62,489 | 34,151 | |||||||||
| Total current assets | 463,983 | 348,619 | |||||||||
| Equipment and property, net of accumulated depreciation of $346,886 and $333,298, respectively | 123,470 | 128,046 | |||||||||
| Goodwill | 1,045,997 | 846,704 | |||||||||
| Customer contracts, net | 407,205 | 298,559 | |||||||||
| Trademarks & tradenames, net | 148,901 | 111,646 | |||||||||
| Other intangible assets, net | 7,568 | 8,543 | |||||||||
| Operating lease right-of-use assets | 282,598 | 277,355 | |||||||||
| Financed receivables, long-term, net of allowance for expected credit losses of $3,922 and $3,200, respectively | 72,646 | 63,523 | |||||||||
| Other assets | 46,962 | 39,033 | |||||||||
| Total assets | $ | 2,599,330 | $ | 2,122,028 | |||||||
| LIABILITIES | |||||||||||
| Accounts payable | $ | 74,398 | $ | 42,796 | |||||||
| Accrued insurance - current | 40,796 | 39,534 | |||||||||
| Accrued compensation and related liabilities | 94,968 | 99,251 | |||||||||
| Unearned revenues | 183,253 | 158,092 | |||||||||
| Operating lease liabilities - current | 86,918 | 84,543 | |||||||||
| Current portion of long-term debt | — | 15,000 | |||||||||
| Other current liabilities | 95,368 | 54,568 | |||||||||
| Total current liabilities | 575,701 | 493,784 | |||||||||
| Accrued insurance, less current portion | 45,659 | 38,350 | |||||||||
| Operating lease liabilities, less current portion | 200,201 | 196,888 | |||||||||
| Long-term debt | 337,509 | 39,898 | |||||||||
| Other long-term accrued liabilities | 98,035 | 85,911 | |||||||||
| Total liabilities | 1,257,105 | 854,831 | |||||||||
| Commitments and contingencies (see Note 11) | |||||||||||
| STOCKHOLDERS’ EQUITY | |||||||||||
| Preferred stock, without par value; 500,000 shares authorized, zero shares issued | — | — | |||||||||
| Common stock, par value $1 per share; 800,000,000 shares authorized, 492,820,761 and 492,447,997 shares issued and outstanding, respectively | 492,821 | 492,448 | |||||||||
| Additional paid in capital | 121,005 | 119,242 | |||||||||
| Accumulated other comprehensive loss | (29,051) | (31,562) | |||||||||
| Retained earnings | 757,450 | 687,069 | |||||||||
| Total stockholders’ equity | 1,342,225 | 1,267,197 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,599,330 | $ | 2,122,028 | |||||||
2022
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| REVENUES | ||||||||||||||||
| Customer services | $ | 450,442 | $ | 423,994 | $ | 1,259,244 | $ | 1,187,863 | ||||||||
| COSTS AND EXPENSES | ||||||||||||||||
| Cost of services provided | 218,781 | 205,608 | 612,424 | 579,353 | ||||||||||||
| Depreciation and amortization | 14,313 | 13,083 | 41,630 | 37,073 | ||||||||||||
| Sales, general and administrative | 134,932 | 125,407 | 379,753 | 364,207 | ||||||||||||
| Gain on sale of assets, net | (66 | ) | (52 | ) | (179 | ) | (720 | ) | ||||||||
| Interest income, net | (79 | ) | (18 | ) | (342 | ) | (156 | ) | ||||||||
| INCOME BEFORE INCOME TAXES | 82,561 | 79,966 | 225,958 | 208,106 | ||||||||||||
| PROVISION FOR INCOME TAXES | 31,131 | 30,315 | 80,569 | 78,744 | ||||||||||||
| NET INCOME | $ | 51,430 | $ | 49,651 | $ | 145,389 | $ | 129,362 | ||||||||
| NET INCOME PER SHARE - BASIC AND DILUTED | $ | 0.24 | $ | 0.23 | $ | 0.67 | $ | 0.59 | ||||||||
| DIVIDENDS PAID PER SHARE | $ | 0.115 | $ | 0.10 | $ | 0.345 | $ | 0.30 | ||||||||
| Weighted average participating shares outstanding - basic and diluted | 217,988 | 218,039 | 217,987 | 218,386 | ||||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| REVENUES | |||||||||||||||||||||||
| Customer services | $ | 820,750 | $ | 714,049 | $ | 1,478,765 | $ | 1,304,729 | |||||||||||||||
| COSTS AND EXPENSES | |||||||||||||||||||||||
| Cost of services provided (exclusive of depreciation and amortization below) | 384,191 | 336,780 | 711,033 | 632,158 | |||||||||||||||||||
| Sales, general and administrative | 255,331 | 219,987 | 451,762 | 398,772 | |||||||||||||||||||
| Depreciation and amortization | 26,439 | 22,605 | 48,941 | 45,732 | |||||||||||||||||||
| Total operating expenses | 665,961 | 579,372 | 1,211,736 | 1,076,662 | |||||||||||||||||||
| OPERATING INCOME | 154,789 | 134,677 | 267,029 | 228,067 | |||||||||||||||||||
| Interest expense, net | 4,785 | 880 | 5,250 | 1,448 | |||||||||||||||||||
| Other income, net | (1,019) | (1,911) | (5,733) | (3,190) | |||||||||||||||||||
| CONSOLIDATED INCOME BEFORE INCOME TAXES | 151,023 | 135,708 | 267,512 | 229,809 | |||||||||||||||||||
| PROVISION FOR INCOME TAXES | 40,880 | 34,088 | 69,135 | 54,423 | |||||||||||||||||||
| NET INCOME | $ | 110,143 | $ | 101,620 | $ | 198,377 | $ | 175,386 | |||||||||||||||
| NET INCOME PER SHARE - BASIC AND DILUTED | $ | 0.22 | $ | 0.21 | $ | 0.40 | $ | 0.36 | |||||||||||||||
| Weighted average shares outstanding - basic | 492,700 | 492,327 | 492,593 | 492,270 | |||||||||||||||||||
| Weighted average shares outstanding - diluted | 492,891 | 492,440 | 492,764 | 492,382 | |||||||||||||||||||
| DIVIDENDS PAID PER SHARE | $ | 0.13 | $ | 0.10 | $ | 0.26 | $ | 0.20 | |||||||||||||||
INCOME
2022
| Three Months Ended | Nine Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| NET INCOME | $ | 51,430 | $ | 49,651 | $ | 145,389 | $ | 129,362 | ||||||||
| Other comprehensive earnings (loss), net of tax | ||||||||||||||||
| Foreign currency translation adjustments | 4,085 | (2,957 | ) | 10,474 | 4,422 | |||||||||||
| Other comprehensive earnings (loss) | 4,085 | (2,957 | ) | 10,474 | 4,422 | |||||||||||
| Comprehensive earnings | $ | 55,515 | $ | 46,694 | $ | 155,863 | $ | 133,784 | ||||||||
| Three Months Ending June 30, | Six Months Ended June 30, | ||||||||||||||||||||||
| 2023 | 2022 | 2023 | 2022 | ||||||||||||||||||||
| NET INCOME | $ | 110,143 | $ | 101,620 | $ | 198,377 | $ | 175,386 | |||||||||||||||
| Other comprehensive income (loss), net of tax: | |||||||||||||||||||||||
| Foreign currency translation adjustments | 2,362 | (16,913) | 2,459 | (13,786) | |||||||||||||||||||
| Unrealized (loss) gain on available for sale securities | (110) | (362) | 52 | (952) | |||||||||||||||||||
| Other comprehensive income (loss), net of tax | 2,252 | (17,275) | 2,511 | (14,738) | |||||||||||||||||||
| Comprehensive income | $ | 112,395 | $ | 84,345 | $ | 200,888 | $ | 160,648 | |||||||||||||||
Rollins, Inc. and Subsidiaries
(In thousands) (unaudited)
| Accumulated | ||||||||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||||||||
| Common Stock | Treasury | Paid- | Comprehensive | Retained | ||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | In-Capital | Income / (Loss) | Earnings | Total | |||||||||||||||||||||||||
| Balance at December 31, 2015 | 218,753 | $ | 218,753 | (200 | ) | $ | (200 | ) | $ | 69,762 | $ | (71,178 | ) | $ | 306,892 | $ | 524,029 | |||||||||||||||
| Net Income | 167,369 | 167,369 | ||||||||||||||||||||||||||||||
| Other Comprehensive Income, Net of Tax | ||||||||||||||||||||||||||||||||
| Pension Liability Adjustment | — | — | — | — | — | 1,705 | — | 1,705 | ||||||||||||||||||||||||
| Foreign Currency Translation Adjustments | — | — | — | — | — | (602 | ) | — | (602 | ) | ||||||||||||||||||||||
| Cash Dividends | — | — | — | — | — | — | (109,002 | ) | (109,002 | ) | ||||||||||||||||||||||
| Common Stock Purchased (1) | (836 | ) | (836 | ) | — | — | — | — | (21,883 | ) | (22,719 | ) | ||||||||||||||||||||
| Common Stock Retired | (200 | ) | (200 | ) | 200 | 200 | — | |||||||||||||||||||||||||
| Stock Compensation | 388 | 388 | — | — | 12,027 | — | — | 12,415 | ||||||||||||||||||||||||
| Employee Stock Buybacks | (313 | ) | (313 | ) | — | — | (8,036 | ) | — | — | (8,349 | ) | ||||||||||||||||||||
| Excess Tax Benefit on Share-based payments | — | — | — | — | 3,699 | — | — | 3,699 | ||||||||||||||||||||||||
| Balance at December 31, 2016 | 217,792 | 217,792 | — | — | 77,452 | (70,075 | ) | 343,376 | 568,545 | |||||||||||||||||||||||
| Net Income | 145,389 | 145,389 | ||||||||||||||||||||||||||||||
| Other Comprehensive Income, Net of Tax | ||||||||||||||||||||||||||||||||
| Foreign Currency Translation Adjustments | — | — | — | — | — | 10,474 | — | 10,474 | ||||||||||||||||||||||||
| Cash Dividends | — | — | — | — | — | — | (75,182 | ) | (75,182 | ) | ||||||||||||||||||||||
| Stock Compensation | 417 | 417 | — | — | 8,989 | — | — | 9,406 | ||||||||||||||||||||||||
| Employee Stock Buybacks | (234 | ) | (234 | ) | — | — | (7,959 | ) | — | — | (8,193 | ) | ||||||||||||||||||||
| Balance at September 30, 2017 | 217,975 | 217,975 | — | — | 78,482 | (59,601 | ) | 413,583 | 650,439 | |||||||||||||||||||||||
(1) Charges to Retained Earnings are from purchases of the Company’s Common Stock.
The accompanying notes are an integral part of these consolidated financial statements.
ROLLINS, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE NINETHREE AND SIX MONTHS ENDED SEPTEMERJUNE 30, 20172023 AND 2016
2022
| Nine Months Ended | ||||||||
| September 30, | ||||||||
| 2017 | 2016 | |||||||
| OPERATING ACTIVITIES | ||||||||
| Net income | $ | 145,389 | $ | 129,362 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 41,630 | 37,073 | ||||||
| Provision for deferred income taxes | 9,386 | 4,954 | ||||||
| Provision for bad debts | 7,222 | 8,320 | ||||||
| Stock - based compensation expense | 9,406 | 9,429 | ||||||
| Excess tax benefits from share-based payments | — | (3,536 | ) | |||||
| Other, net | (728 | ) | (700 | ) | ||||
| Changes in operating assets and liabilities | (22,918 | ) | (26,743 | ) | ||||
| Net cash provided by operating activities | 189,387 | 158,159 | ||||||
| INVESTING ACTIVITIES | ||||||||
| Cash used for acquisitions of companies, net of cash acquired | (127,881 | ) | (40,824 | ) | ||||
| Purchases of equipment and property | (17,217 | ) | (27,128 | ) | ||||
| Proceeds from sales of franchises | 437 | 199 | ||||||
| Other | 67 | 1,133 | ||||||
| Net cash used in investing activities | (144,594 | ) | (66,620 | ) | ||||
| FINANCING ACTIVITIES | ||||||||
| Cash paid for common stock purchased | (8,193 | ) | (31,043 | ) | ||||
| Dividends paid | (75,182 | ) | (65,506 | ) | ||||
| Excess tax benefits from share-based payments | — | 3,536 | ||||||
| Net cash used in financing activities | (83,375 | ) | (93,013 | ) | ||||
| Effect of exchange rate changes on cash | 9,194 | 6,163 | ||||||
| Net increase/(decrease) in cash and cash equivalents | (29,388 | ) | 4,689 | |||||
| Cash and cash equivalents at beginning of period | 142,785 | 134,574 | ||||||
| Cash and cash equivalents at end of period | $ | 113,397 | $ | 139,263 | ||||
| Common Stock | Paid-in- Capital | Accumulated Other Comprehensive Income / (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2023 | 492,787 | $ | 492,787 | $ | 115,018 | $ | (31,303) | $ | 711,250 | $ | 1,287,752 | ||||||||||||||||||||||||
| Net Income | — | — | — | — | 110,143 | 110,143 | |||||||||||||||||||||||||||||
| Other comprehensive income / (loss), net of tax: | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | 2,362 | — | 2,362 | |||||||||||||||||||||||||||||
| Unrealized (losses) on available for sale securities | — | — | — | (110) | — | (110) | |||||||||||||||||||||||||||||
| Cash dividends | — | — | — | — | (63,943) | (63,943) | |||||||||||||||||||||||||||||
| Stock compensation | 42 | 42 | 6,342 | — | — | 6,384 | |||||||||||||||||||||||||||||
| Employee stock buybacks | (8) | (8) | (355) | — | — | (363) | |||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 492,821 | $ | 492,821 | $ | 121,005 | $ | (29,051) | $ | 757,450 | $ | 1,342,225 | ||||||||||||||||||||||||
| Common Stock | Paid-in- Capital | Accumulated Other Comprehensive Income / (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at March 31, 2022 | 492,461 | $ | 492,461 | $ | 104,783 | $ | (13,874) | $ | 554,649 | $ | 1,138,019 | ||||||||||||||||||||||||
| Net Income | — | — | — | — | 101,620 | 101,620 | |||||||||||||||||||||||||||||
| Other comprehensive income / (loss), net of tax: | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | (16,913) | — | (16,913) | |||||||||||||||||||||||||||||
| Unrealized (losses) on available for sale securities | — | — | — | (362) | — | (362) | |||||||||||||||||||||||||||||
| Cash dividends | — | — | — | — | (49,229) | (49,229) | |||||||||||||||||||||||||||||
| Stock compensation | (26) | (26) | 4,845 | — | — | 4,819 | |||||||||||||||||||||||||||||
| Employee stock buybacks | (18) | (18) | (558) | — | — | (576) | |||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 492,417 | $ | 492,417 | $ | 109,070 | $ | (31,149) | $ | 607,040 | $ | 1,177,378 | ||||||||||||||||||||||||
| Common Stock | Paid-in- Capital | Accumulated Other Comprehensive Income / (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2022 | 492,448 | $ | 492,448 | $ | 119,242 | $ | (31,562) | $ | 687,069 | $ | 1,267,197 | ||||||||||||||||||||||||
| Net Income | — | — | — | — | 198,377 | 198,377 | |||||||||||||||||||||||||||||
| Other comprehensive income / (loss), net of tax: | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | 2,459 | — | 2,459 | |||||||||||||||||||||||||||||
| Unrealized gains on available for sale securities | — | — | — | 52 | — | 52 | |||||||||||||||||||||||||||||
| Cash dividends | — | — | — | — | (127,996) | (127,996) | |||||||||||||||||||||||||||||
| Stock compensation | 643 | 643 | 11,688 | — | — | 12,331 | |||||||||||||||||||||||||||||
| Employee stock buybacks | (270) | (270) | (9,925) | — | — | (10,195) | |||||||||||||||||||||||||||||
| Balance at June 30, 2023 | 492,821 | $ | 492,821 | $ | 121,005 | $ | (29,051) | $ | 757,450 | $ | 1,342,225 | ||||||||||||||||||||||||
| Common Stock | Paid-in- Capital | Accumulated Other Comprehensive Income / (Loss) | Retained Earnings | Total | |||||||||||||||||||||||||||||||
| Shares | Amount | ||||||||||||||||||||||||||||||||||
| Balance at December 31, 2021 | 491,911 | $ | 491,911 | $ | 105,629 | $ | (16,411) | $ | 530,088 | $ | 1,111,217 | ||||||||||||||||||||||||
| Net Income | — | — | — | — | 175,386 | 175,386 | |||||||||||||||||||||||||||||
| Other comprehensive income / (loss), net of tax: | |||||||||||||||||||||||||||||||||||
| Foreign currency translation adjustments | — | — | — | (13,786) | — | (13,786) | |||||||||||||||||||||||||||||
| Unrealized (losses) on available for sale securities | — | — | — | (952) | — | (952) | |||||||||||||||||||||||||||||
| Cash dividends | — | — | — | — | (98,434) | (98,434) | |||||||||||||||||||||||||||||
| Stock compensation | 731 | 731 | 10,226 | — | — | 10,957 | |||||||||||||||||||||||||||||
| Employee stock buybacks | (225) | (225) | (6,785) | — | — | (7,010) | |||||||||||||||||||||||||||||
| Balance at June 30, 2022 | 492,417 | $ | 492,417 | $ | 109,070 | $ | (31,149) | $ | 607,040 | $ | 1,177,378 | ||||||||||||||||||||||||
| Six Months Ended June 30, | |||||||||||
| 2023 | 2022 | ||||||||||
| OPERATING ACTIVITIES | |||||||||||
| Net income | $ | 198,377 | $ | 175,386 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization | 48,941 | 45,732 | |||||||||
| Stock-based compensation expense | 12,331 | 10,957 | |||||||||
| Provision for expected credit losses | 9,946 | 8,433 | |||||||||
| Gain on sale of assets, net | (5,734) | (3,190) | |||||||||
| Provision for deferred income taxes | 144 | 3,301 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Trade accounts receivable and other accounts receivable | (28,425) | (29,217) | |||||||||
| Financing receivables | (13,000) | (11,928) | |||||||||
| Materials and supplies | (2,233) | (176) | |||||||||
| Other current assets | (28,513) | (21,651) | |||||||||
| Accounts payable and accrued expenses | 34,055 | 10,745 | |||||||||
| Unearned revenue | 18,047 | 19,860 | |||||||||
| Other long-term assets and liabilities | 4,250 | 6,565 | |||||||||
| Net cash provided by operating activities | 248,186 | 214,817 | |||||||||
| INVESTING ACTIVITIES | |||||||||||
| Acquisitions, net of cash acquired | (327,892) | (49,580) | |||||||||
| Capital expenditures | (14,411) | (15,881) | |||||||||
| Proceeds from sale of assets | 10,186 | 3,290 | |||||||||
| Other investing activities, net | 495 | 139 | |||||||||
| Net cash (used in) investing activities | (331,622) | (62,032) | |||||||||
| FINANCING ACTIVITIES | |||||||||||
| Payment of contingent consideration | (4,350) | (5,196) | |||||||||
| Borrowings under term loan | — | 252,000 | |||||||||
| Borrowings under revolving commitment | 585,000 | 11,000 | |||||||||
| Repayments of term loan | (55,000) | (65,000) | |||||||||
| Repayments of revolving commitment | (245,000) | (118,000) | |||||||||
| Payment of dividends | (127,996) | (98,434) | |||||||||
| Cash paid for common stock purchased | (11,808) | (7,010) | |||||||||
| Other financing activities, net | (651) | — | |||||||||
| Net cash provided by (used in) financing activities | 140,195 | (30,640) | |||||||||
| Effect of exchange rate changes on cash | 2,642 | (6,482) | |||||||||
| Net increase in cash and cash equivalents | 59,401 | 115,663 | |||||||||
| Cash and cash equivalents at beginning of period | 95,346 | 105,301 | |||||||||
| Cash and cash equivalents at end of period | $ | 154,747 | $ | 220,964 | |||||||
| Supplemental disclosure of cash flow information: | |||||||||||
| Cash paid for interest | $ | 4,197 | $ | 1,668 | |||||||
| Cash paid for income taxes, net | $ | 84,583 | $ | 69,742 | |||||||
| Non-cash additions to operating lease right-of-use assets | $ | 55,353 | $ | 51,212 | |||||||
statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the interim periodsquarter have been made. These adjustments are of a normal recurring nature.nature but complicated by the continued uncertainty surrounding economic trends. The results of operations for the three and nine month periodsix months ended SeptemberJune 30, 20172023, are not necessarily indicative of results for the entire year.
The Company has only one reportable segment, its pestseverity, magnitude and termite control business.duration of certain economic trends continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to economic trends and may change materially in future periods.
information above adjusts for the effects of material business combination items, including the alignment of accounting policies, the effect of fair value adjustments including the amortization of acquired intangible assets, interest expense related to the incremental borrowings under the Credit Agreement, and income tax effects as if Fox had been part of Rollins since January 1, 2022 instruments): the claims may not be made until future periods) and may be subsequently revised based on developments relating to such claims. The Company 2022. Performance Share Unit Awards The following table summarizes the components of the Company’s stock-based compensation programs recorded as expense: 13. EARNINGS PER SHARE margins. Cash Flow subsidiaries. Form 10-Q. the claims may not be During the second quarter, the Company acquired FPC Holdings, LLC (“Fox Pest Control”, or "Fox"). The Company is currently in the process of integrating Fox into its assessment of its internal control over financial reporting. In issuedadopted accounting standards to be adopted in 2017 or laterThe(“FASB”("FASB") and Internationalissued Accounting Standards Board issued their converged standard on revenue recognition in May 2014. The standard provides a comprehensive, industry-neutral revenue recognition model intended to increase financial statement comparability across companiesUpdate ("ASU") 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and industries and significantly reduce the complexity inherent in today’s revenue recognition guidance. The various ASUs related to Revenue from Contracts with Customers (Topic 606) have been listed below:·ASU No. 2014-09. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services using a five step process.·ASU No. 2015-14. Deferred the effective date of ASU 2014-09 for all entities by one year to the first quarter of 2018 with early application permitted.·ASU No. 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net). The amendments provide guidance on whether an entity is a principal or agent when providing services to a customer along with another party.·ASU No. 2016-10, Identifying Performance Obligations and Licensing. The amendments clarify the earlier guidance on identifying performance obligations and licensing implementation.·ASU No. 2016-11, Rescission of SEC Guidance Because of ASUs 2014-09 and 2014-16 Pursuant to Staff Announcements at the March 3, 2016 EITF Meeting. This ASU rescinds certain SEC guidance related to issues that are currently codified under various topics.·ASU No. 2016-12, Narrow-Scope Improvements and Practical Expedients. The amendments provide clarifying guidance on certain aspects of the five step process and practical expedients regarding the effect of modifications and status of completed contracts under legacy GAAP and disclosures related to the application of this guidance using the modified retrospective or retrospective transition method.·ASU No. 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers. The amendments in ASU 2016-20 affect narrow aspects of the guidance issued in ASU 2014-09 and includes among others, loan guarantees, impairment testing of contract costs, performance obligations disclosures and accrual of advertising costs.The Company is currently analyzing the effect of the standard across all of its revenue streams to evaluate the impact of the new standard on its revenue contracts. This includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. Most of the Company’s services are primarily short-term in nature, and the assessment at this stage is that the Company does not expect the adoption of the new revenue recognition standard to have a material impact on its financial statements. As part of its preparation to adopt the standard, the Company established an initial project governance framework, selected a working group and hired a third party service provider to assist with the evaluation. The Company has completed a preliminary review of a representative sample of contracts with its customers and identified the variable consideration provisions of the new guidance as potentially having the most impact on the Company’s method of recognizing revenue. In the next phases of solution development and implementation, the Company will prepare technical accounting memorandums, draft new formal accounting policies, outline and refine required disclosures, identify new IT system requirements, as well as assess the need for additional contract reviews to ensure a representative sample of how the Company contracts with its customers has been chosen. The Company plans to adopt the standard in the first quarter of 2018 using the modified retrospective method by recognizing the cumulative effect of initially applying the new standard as an adjustment to the opening balance of retained earnings.7ROLLINS, INC. AND SUBSIDIARIESIn February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). In September 2017, the FASB issued ASU 2017-13, Revenue Recognition (Topic 605), Revenue from Contracts with Customers (Topic 606), Leases (Topic 840), and Leases (Topic 842), which provides additional implementation guidance on the previously issued ASU 2016-02 Leases (Topic 842). ASU 2016-02 requires a lessee to recognize assets and liabilities on the balance sheet for leases with lease terms greater than 12 months. ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018, and early adoption is permitted. Based on a preliminary assessment, the Company expects the adoption of this guidance to have a material impact on its assets and liabilities due to the recognition of right-of-use assets and lease liabilities on its consolidated balance sheets at the beginning of the earliest period presented. The Company is continuing its assessment, which may identify additional impacts this guidance will have on its consolidated financial statements and disclosures.In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flow Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.Vintage Disclosures.” The amendments in this update are effectiveUpdate eliminate the accounting guidance for the Company’stroubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial statements issueddifficulty. Additionally, for annual periods beginning after December 15, 2017, and interim periods within annual periods. Earlier adoption is permitted for any entity in any interim or annual reporting period. The Company is currently evaluating the impact of this standard on its consolidated financial statements.In January 2017, the FASB issued ASU No. 2017-01, Business Combinations (Topic 805): Clarifying the Definition of a Business, which requires an entity to evaluate if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or a group of similar identifiable assets; if so, the set of transferred assets and activities is not a business. The guidance also requires apublic business to include at least one substantive process and narrows the definition of outputs by more closely aligning it with how outputs are described in ASC 606. The amendments in the update are effective for the Company’s financial statements issued for fiscal years beginning after December 15, 2017, and interim periods within those years. Early adoption is permitted. We do not expect this standard to have a material impact on the Company’s reported results of operations or financial position.In January 2017, the FASB issued ASU No. 2017-04, Intangibles-Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which eliminates the requirement to calculate the implied fair value of goodwill (i.e., Step 2 of the current goodwill impairment test) to measure a goodwill impairment charge. Instead, entities, will record an impairment charge based on the excess of a reporting unit’s carrying amount over its fair value (i.e., measure the charge based on the current Step 1). The standard in this update is effective for the Company’s financial statements issued for fiscal years beginning in 2020. Early adoption is permitted for annual and interim goodwill impairment testing dates after January 1, 2017. We do not expect this standard to have a material impact on the Company’s reported results of operations or financial position.In February 2017, the FASB issued Accounting Standards Update No. 2017-06, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965), Employee Benefit Plan Master Trust Reporting (“ASU 2017-06”). ASU 2017-06 relates primarily to the reporting by an employee benefit plan (a plan) for its interest in a master trust. A master trust is a trust for which a regulated financial institution (bank, trust company, or similar financial institution that is regulated, supervised, and subject to periodic examination by a state or federal agency) serves as a trustee or custodian and in which assets of more than one plan sponsored by a single employer or by a group of employers under common control are held. Under Topic 960, investments in master trusts are presented in a single line item in the statement of net assets available for benefits. Similar guidance is not provided in Topic 962 or 965, which has resulted in diversity in practice. For each master trust in which a plan holds an interest, the amendments in this Update require that an entity disclose current-period gross write-offs by year of origination for financing receivables. ASU 2017-06 require a plan’s interest in that master trust and any change in that interest to be presented in separate line items in the statement of net assets available for benefits and in the statement of changes in net assets available for benefits, respectively. The amendments in ASU 2017-06 are2022-02 was effective for fiscal years beginning after December 15, 2018. Early2022. The adoption is permitted. An entity should apply the amendments inof this ASU 2017-06 retrospectively to each period for which financial statements are presented. We dodid not expect this standard to have a material impact on the Company’s reportedconsolidated financial statements.June 30, 2023 Cash $ 4,366 Accounts receivable 1,542 Materials and supplies 431 Operating lease right-of-use assets 8,689 Other current assets 487 Goodwill 187,655 Customer contracts 118,000 Trademarks & tradenames 38,000 Current liabilities (5,051) Unearned revenue (6,144) Operating lease liabilities (8,689) Assets acquired and liabilities assumed $ 339,286 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Revenues $ 820,750 $ 745,838 $ 1,507,673 $ 1,360,062 Net income 109,564 99,549 191,999 169,921 position.June 30, 2023 Cash $ 249 Accounts receivable 287 Materials and supplies 201 Other current assets 49 Equipment and property 2,311 Goodwill 11,540 Customer contracts 20,163 Other intangible assets 283 Current liabilities (163) Unearned revenue (861) Other assets and liabilities, net (693) Assets acquired and liabilities assumed $ 33,366 Three Months Ended
June 30,Six Months Ended
June 30,(in thousands) 2023 2022 2023 2022 United States $ 763,646 $ 661,703 $ 1,372,654 $ 1,208,163 Other countries 57,104 52,346 106,111 96,566 Total Revenues $ 820,750 $ 714,049 $ 1,478,765 $ 1,304,729 Three Months Ended
June 30,Six Months Ended
June 30,(in thousands) 2023 2022 2023 2022 Residential revenue $ 385,645 $ 325,311 $ 669,270 $ 584,570 Commercial revenue 259,964 234,483 490,366 440,270 Termite completions, bait monitoring, & renewals 166,823 146,781 303,428 266,487 Franchise revenues 4,303 4,155 8,090 7,892 Other revenues 4,015 3,319 7,611 5,510 Total Revenues $ 820,750 $ 714,049 $ 1,478,765 $ 1,304,729 Three Months Ended June 30, Six Months Ended June 30, (in thousands) 2023 2022 2023 2022 Beginning balance $ 198,154 $ 180,333 $ 187,994 $ 168,607 Deferral of unearned revenue 77,911 63,628 143,537 125,263 Recognition of unearned revenue (57,791) (50,989) (113,257) (100,898) Ending balance $ 218,274 $ 192,972 $ 218,274 $ 192,972 March 2017,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 individuals and entities comprising Rollins’ customer base and dispersion across many different geographical regions.FASB issuedamount of business we conduct with higher risk customers. The credit quality of a potential obligor is evaluated at the loan origination based on anAllowance for Credit Losses (in thousands) Trade
ReceivablesFinanced
ReceivablesTotal
ReceivablesBalance at December 31, 2022 $ 14,073 $ 4,968 $ 19,041 Provision for expected credit losses 1,461 2,435 3,896 Write-offs charged against the allowance (4,687) (1,927) (6,614) Recoveries collected 1,629 — 1,629 Balance at March 31, 2023 $ 12,476 $ 5,476 $ 17,952 Provision for expected credit losses 3,185 2,865 6,050 Write-offs charged against the allowance (4,271) (2,332) (6,603) Recoveries collected 1,349 — 1,349 Balance at June 30, 2023 $ 12,739 $ 6,009 $ 18,748 Allowance for Credit Losses (in thousands) Trade
ReceivablesFinanced
ReceivablesTotal
ReceivablesBalance at December 31, 2021 $ 13,885 $ 3,985 $ 17,870 Provision for expected credit losses 3,204 1,054 4,258 Write-offs charged against the allowance (4,248) (1,189) (5,437) Recoveries collected 1,329 — 1,329 Balance at March 31, 2022 $ 14,170 $ 3,850 $ 18,020 Provision for expected credit losses 2,350 1,825 4,175 Write-offs charged against the allowance (4,218) (1,121) (5,339) Recoveries collected 1,364 — 1,364 Balance at June 30, 2022 $ 13,666 $ 4,554 $ 18,220 Goodwill: Balance at December 31, 2021 $ 786,504 Additions 64,997 Measurement adjustments (9) Adjustments due to currency translation (4,788) Balance at December 31, 2022 846,704 Additions 199,195 Measurement adjustments (294) Adjustments due to currency translation 392 Balance at June 30, 2023 $ 1,045,997 June 30, 2023 December 31, 2022 Gross Accumulated
AmortizationCarrying
ValueGross Accumulated
AmortizationCarrying
ValueUseful Life
in YearsAmortizable intangible assets: Customer contracts $ 618,743 $ (211,538) $ 407,205 $ 502,689 $ (204,130) $ 298,559 3-20 Trademarks and tradenames 18,165 (7,934) 10,231 17,351 (10,009) 7,342 7-20 Non-compete agreements 13,849 (8,646) 5,203 14,180 (8,226) 5,954 3-20 Patents 6,896 (6,881) 15 6,934 (6,802) 132 3-15 Other assets 1,983 (1,860) 123 2,016 (1,786) 230 10 Total amortizable intangible assets $ 659,636 $ (236,859) 422,777 $ 543,170 $ (230,953) 312,217 Indefinite-lived intangible assets: Trademarks and tradenames 138,670 104,304 Internet domains 2,227 2,227 Total indefinite-lived intangible assets 140,897 106,531 Total customer contracts and other intangible assets $ 563,674 $ 418,748 (in thousands) 2023 (excluding the six months ended June 30, 2023) $ 45,467 2024 75,662 2025 66,856 2026 63,339 2027 59,674 Update No. 2017-07, ImprovingCodification Topic 842 “Leases”, not to include short-term leases with a duration of 12 months or less on the Presentationbalance sheet. As of Net Periodic Pension CostJune 30, 2023, and Net Periodic Postretirement Benefit Cost (“ASU 2017-07”).December 31, 2022, all leases were classified as operating leases. Building leases generally carry terms of 5 to 15 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 update requires employers to presentexercise of renewal options is at the service cost componentCompany’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.(in thousands, except Other Information) Three Months Ended June 30, Six Months Ended June 30, Lease Classification Financial Statement Classification 2023 2022 2023 2022 Short-term lease cost Cost of services provided, Sales, general, and administrative expenses $ 81 $ 36 $ 148 $ 62 Operating lease cost Cost of services provided, Sales, general, and administrative expenses 27,480 23,615 53,667 47,638 Total lease expense $ 27,561 $ 23,651 $ 53,815 $ 47,700 Other Information: Weighted-average remaining lease term - operating leases 4.9 years 5.4 years Weighted-average discount rate - operating leases 3.82 % 3.34 % Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows from operating leases $ 53,212 $ 47,099 (in thousands) 2023 (excluding the six months ended June 30, 2023) $ 51,531 2024 84,780 2025 65,720 2026 44,647 2027 21,008 2028 13,234 Thereafter 40,365 Total future minimum lease payments 321,285 Less: Amount representing interest 34,166 Total future minimum lease payments, net of interest $ 287,119 periodic benefit costpresent value on the Company’s books and are considered level 3 liabilities. The table below presents a summary of the changes in fair value for these liabilities.Three Months Ended
June 30,Six Months Ended
June 30,(in thousands) 2023 2022 2023 2022 Beginning balance $ 10,533 $ 23,399 $ 13,496 $ 25,156 New acquisitions and revaluations 38,731 1,574 40,031 2,750 Payouts (252) (2,145) (4,350) (5,196) Interest on outstanding contingencies 1,084 122 1,106 247 Charge offset, forfeit and other (788) (208) (975) (215) Ending balance $ 49,308 $ 22,742 $ 49,308 $ 22,742 same income statement line itemform of increased revolving commitments or one or more tranches of term loans by up to an additional $750 million, subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028.other employeeset forth in the Credit Agreement.costsand casualty insurance contracts coverage and were increased from $71.3 million as of December 31, 2022. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims.services rendered duringour international business operations and global economic conditions. The Company enters into certain derivative financial instruments to lock in certain interest rates, as well as to protect the period. value or fix the amount of certain obligations in terms of its functional currency, the U.S. dollar.other components of net benefit cost, including interest cost, expected return on plan assets, amortization of prior service cost/credit and actuarial gain/loss, and settlement and curtailment effects, areCompany is exposed to be presented outside of any subtotal of operating income. Employers will havefluctuations in various foreign currencies against its functional currency, the U.S. dollar. We use foreign currency derivatives, specifically foreign currency forward contracts (“FX Forwards”), to disclose the line(s) usedmanage our exposure to present the other components of net periodic benefit cost, if the components are not presented separatelyfluctuations in the income statement. ASU 2017-07 is effectiveUSD-CAD and USD-AUD exchange rates. FX Forwards involve fixing the foreign currency exchange rate for fiscal years and interim periods beginning after December 15, 2017, and early adoption is permitted.delivery of a specified amount of foreign currency on a specified date. The FX Forwards are typically settled in U.S. dollars for their fair value at or close to their settlement date. We do not expect this standardcurrently designate any of these FX Forwards under hedge accounting, but rather reflect the changes in fair value immediately in earnings. We do not use such instruments for speculative or trading purposes, but rather use them to have a material impact onmanage our exposure to foreign exchange rates. Changes in the fair value of FX Forwards were recorded in other income/expense and were insignificant for the three and six month periods ended June 30, 2023 and 2022. The fair values of the Company’s reported resultsFX Forwards were recorded as a net liability of operations or financial position.
$0.2 million in Other Current Liabilities as of June 30, 2023, and a net asset of $0.3 million in Other Current Assets as of December 31, 2022.8ROLLINS, INC. AND SUBSIDIARIESNOTE 3. EARNINGS PER SHARETheAs of June 30, 2023, the Company follows ASC 260,Earnings Per Share (ASC 260) that requireshad the reporting of both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to participating common stockholders by the weighted averagefollowing outstanding FX Forwards (in thousands except for number of participating common shares outstanding for the period.Basic and diluted earnings per share attributable to common and restricted shares of common stock for the period were as follows: Three Months Ended Nine Months Ended September 30, September 30, 2017 2016 2017 2016 Basic and diluted earnings per share Common stock $ 0.24 $ 0.23 $ 0.67 $ 0.59 Restricted shares of common stock $ 0.23 $ 0.23 $ 0.65 $ 0.59 FX Forward Contracts Number of
InstrumentsSell
NotionalBuy
NotionalSell AUD/Buy USD Fwd Contract 19 2,350 $ 1,570 Sell CAD/Buy USD Fwd Contract 19 19,000 14,155 Total 38 $ 15,725 4.11. CONTINGENCIEScertain of the Company’sCompany and its subsidiaries are defendantsinvolved in, a numberand will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, lawsuits,our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or arbitrations which allege that the subsidiaries’ services caused damage.local authorities, including taxing authorities, of violations of regulations or statutes. In addition, the Company defends employment relatedwe are parties to employment-related cases and claims from time to time.time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.actively contesting eachaccrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of these matters. however unlikely, could result in a charge that might be material to the results of an individual quarter or year.NOTE 5. FAIR VALUE OF FINANCIAL INSTRUMENTSThe Company’s financial instruments consist of cash and cash equivalents, trade receivables, notes receivable, accounts payable and other short-term liabilities. The carrying amounts of these financial instruments approximate their fair values. The Company has a Revolving Credit Agreement with SunTrust Bank and Bank of America, N.A. for an unsecured line of credit of up to $175.0 million, which includes a $75.0 million letter of credit subfacility and a $25.0 million swingline subfacility. There were no outstanding borrowings at September 30, 2017 and December 31, 2016.6.12. STOCKHOLDERS’ EQUITYninesix months ended SeptemberJune 30, 2017,2023, the Company paid $75.2$128.0 million, or $0.345$0.26 per share, in cash dividends compared to $65.5$98.4 million, or $0.30$0.20 per share, during the same period in 2016.third quartersix months ended SeptemberJune 30, 2017,2023, and during the same period in 2022, the Company did not repurchase shares on the open market. During the same period 2016,However, in 2023 the Company repurchased 0.4 millionpurchased shares on behalf of employees for the open market of its $1 par value common stock at a weighted average price of $27.77 per share. Employee Stock Purchase Plan ("ESPP") discussed below. did not repurchase shares of its common stock on the open market during the first nine months of 2017. During the first nine months of 2016, the Company repurchased approximately 0.8 million shares at a weighted average price of $27.19.The Company also repurchases shares from employees for the payment of their taxes on vesting restricted shares.shares that have vested. The Company repurchased $0.5$0.4 million and $0.9$0.6 million of common stock for the quarterquarters ended SeptemberJune 30, 20172023, and 2016, respectively, from employees2022, and $11.8 million and $7.0 million for the payment of taxes on vesting restricted sharessix month periods ended June 30, 2023 and $8.2 million2022, respectively.$8.3 million of common stock for the nine months ended September 30, 2017 and 2016, respectively.1514 of the Company’s notes to the consolidated financial statements in its 20162022 Annual Report on Form 10-K, stock options, time lapsetime-lapse restricted sharesawards and restricted stock units (“restricted shares”) have been issued to officers and other management employees under the Company’s Employee Stock Incentive Plans. Beginning with the 2023 grant, restricted shares vest in 25 percent increments over four years from the date of the grant. Prior grants vest either over five years or over six years from the date of grant, depending on the year of the grant. Additionally, during 2023, certain executives were granted Performance Share Unit awards (PSUs) in addition to restricted shares. These awards will be expensed on a straight-line basis over the three-year vesting period.At SeptemberAs of June 30, 2017,2023, approximately 4.35.3 million shares of the Company’s common stock were reserved for issuance.9ROLLINS, INC. AND SUBSIDIARIESTime Lapse Restricted Shares and Restricted Stock Units Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2017 2016 2017 2016 Time lapse restricted stock: Pre-tax compensation expense $ 3,031 $ 3,049 $ 9,406 9,429 Tax benefit (1,173 ) (1,180 ) (3,640 ) (3,649 ) Restricted stock expense, net of tax $ 1,858 $ 1,869 $ 5,766 $ 5,780 The Company adopted the amendmentsThree Months Ended
June 30,Six Months Ended
June 30,(in thousands) 2023 2022 2023 2022 Restricted shares and PSUs: Pre-tax compensation expense $ 6,192 $ 4,819 $ 11,948 $ 10,957 Tax benefit (1,687) (1,272) (3,083) (2,596) Compensation expense, net of tax $ 4,505 $ 3,547 $ 8,865 $ 8,361 restricted stockawards outstanding as of SeptemberJune 30, 2017: Average Grant- Number of Date Fair Shares Value Unvested Restricted Stock at December 31, 2016 2,261 $ 20.21 Forfeited (31 ) 22.64 Vested (676 ) 17.16 Granted 448 33.88 Unvested Restricted Stock at September 30, 2017 2,002 $ 24.25 At September2023:(number of shares in thousands) Number of
SharesWeighted
Average
Grant-Date
Fair ValueUnvested restricted shares and PSUs at December 31, 2022 2,685 $ 28.97 Forfeited (59) 29.54 Vested (820) 26.88 Granted 671 36.48 Unvested restricted shares and PSUs at June 30, 2023 2,477 $ 31.68 20172023, and December 31, 2016,2022, the Company had $35.0$64.2 million and $29.9$52.3 million of total unrecognized compensation cost, respectively, related to time-lapse restricted shares and PSUs that are expected to be recognized over a weighted average period of approximately 4.03.3 years and 3.83.5 years, respectively.7. PENSION AND POST RETIREMENT BENEFIT PLANSfollowing table representsCompany reports both basic and diluted earnings per share. Basic earnings per share is computed by dividing net income available to participating common stockholders by the weighted average number of participating common shares outstanding for the period. Diluted earnings per share is calculated by dividing the net periodic pension benefit costs and related components in accordance with FASB ASC 715 “Compensation - Retirement Benefits”:Componentsincome available to participating common shareholders by the diluted weighted average number of Net Pension Benefit Gain Three Months Ended Nine Months Ended September 30, September 30, (in thousands) 2017 2016 2017 2016 Interest and service cost $ 2,138 $ 2,350 $ 6,414 $ 7,050 Expected return on plan assets (3,342 ) (3,305 ) (10,026 ) (9,915 ) Amortization of net loss 830 816 2,490 2,448 Net periodic benefit $ (374 ) $ (139 ) $ (1,122 ) $ (417 ) During the nine months ended September 30, 2017 the Company made no contributions to its defined benefit retirement plans (the “Plans”). During the same time frame in prior year the Company made $3.0 million in contributions. The Company made $3.3 million in contributionsshares outstanding for the year ended December 31, 2016.period. The Companydiluted weighted average number of shares outstanding is adequately funded on its Pension Plans and is not expecting to make further contributions in 2017.
the basic weighted number of shares adjusted for any potentially dilutive equity.10ROLLINS, INC. AND SUBSIDIARIESNOTE 8. BUSINESS COMBINATIONSThe Company made 19 acquisitions during the nine month period ended September 30, 2017, and 34 acquisitions for the year ended December 31, 2016, respectively, as disclosed on various press releases and related Current Reports on Form 8-K.On August 1, 2017 Rollins, Inc. completed its acquisition of Northwest Exterminating Co., Inc.’s pest control business. Based in Marietta, Ga., Northwest was established in 1951 and services approximately 120,000 customers in Georgia, South Carolina, Tennessee, Alabama, and North Carolina. Pest control industry trade publication PCT Magazine listed Northwest as the 17th largest pest control operator in the country in its most recent 2017 list.The preliminary values of major classes of assets acquired and liabilities assumed recorded at the date of acquisition, as adjusted during the valuation period, are included in theA reconciliation of the total considerationweighted average shares outstanding is as follows (in thousands): September 30, 2017 Accounts Receivable $ 3,595 Current Assets 464 Equipment and property 2,245 Goodwill and other intangible assets 158,513 Current liabilities (21,493 ) Long-term liabilities 151 Total consideration paid $ 143,475 Less: Contingent consideration liability (15,593 ) Total cash purchase price $ 127,882 Goodwill from acquisitions representsThree Months Ended
June 30,Six Months Ended
June 30,2023 2022 2023 2022 Weighted-average outstanding common shares 490,168 489,741 490,058 489,679 Add participating securities: Weighted-average time-lapse restricted awards 2,532 2,586 2,535 2,591 Total weighted-average shares outstanding - basic 492,700 492,327 492,593 492,270 Dilutive effect of restricted stock units and PSUs 191 113 171 112 Weighted-average shares outstanding - diluted 492,891 492,440 492,764 492,382 excessCompany’s estimate of the purchase price overannual effective income tax rate for the fair valuefull year applied to “ordinary” income or loss, adjusted each quarter for discrete items. The Company recorded a provision for income taxes of net assets of businesses acquired. The carrying amount of goodwill was $372.9$40.9 million and $255.7$34.1 million at Septemberfor the three months ended June 30, 20172023, and 2022, and $69.1 million and $54.4 million for the six months ended June 30, 2023 and 2022, respectively.2016, respectively. Goodwill generally changes due to the timing of acquisitions, finalization of allocation of purchase prices of previous acquisitions and foreign currency translations. The carrying amount of goodwill in foreign countries was $46.4 million at September 30, 2017 and $42.7 million at December 31, 2016.The Company completed its most recent annual impairment analyses as of September 30, 2017. Based upon the results of these analyses, the Company has concluded that no impairment of its goodwill or other intangible assets was indicated.The carrying amount of customer contracts was $141.4 million and $117.5 million at September 30, 2017 and December 31, 2016, respectively, and the carrying amount of other intangible assets was $46.0 million and $44.3 million at September 30, 2017 and December 31, 2016, respectively. The carrying amount of customer contracts in foreign countries was $31.0 million and $29.7 million at September 30, 2017 and December 31, 2016, respectively and the carrying amount of other intangible assets in foreign countries was $3.6 million and $3.8 million at September 30, 2017 and December 31, 2016, respectively.Customer contracts and other amortizable intangible assets are amortized on a straight-line basis over their economic useful lives. The following table sets forth the components of intangible assets as of September 30, 2017 (in thousands): Carrying Useful Life Intangible Asset Value in Years Customer contracts $ 141,385 3 - 12.5 Trademarks and tradenames 35,196 0 - 20 Non-compete agreements 4,245 3 - 20 Patents 2,676 3 - 15 Other assets 1,629 10 Internet domains 2,227 n/a Total customer contracts and other intangible assets $ 187,358 NOTE 9. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIESRisk Management Objective of Using DerivativesThe Company is exposed to certain risk arising from both its business operations and economic conditions. To manage this risk, the Company enters into derivative financial instruments from time to time. Certain of the Company’s foreign operations expose the Company to fluctuations of foreign interest rates and exchange rates. These fluctuations may impact the value of the Company’s cash receipts and payments in terms of the Company’s functional currency. The Company enters into derivative financial instruments from time to time to protect the value or fix the amount of certain obligations in terms of its functional currency, the U.S. dollar.Hedges of Foreign Exchange RiskThe Company is exposed to fluctuations in various foreign currencies against its functional currency, the U.S. dollar. The Company uses foreign currency derivatives, specifically vanilla foreign currency forwards, to manage its exposure to fluctuations in the USD-CAD and AUD-USD exchange rates. Currency forward agreements involve fixing the foreign currency exchange rate for delivery of a specified amount of foreign currency on a specified date. The currency forward agreements are typically cash settled in U.S. dollars for their fair value at or close to their settlement date.11ROLLINS, INC. AND SUBSIDIARIESThe Company does not currently designate any of these foreign exchange forwards under hedge accounting, but rather reflects the changes in fair value immediately in earnings. Derivatives not designated as hedges are not speculative and are used to manage the Company’s exposure to foreign exchange rates. Changes in the fair value of derivatives not designated in hedging relationships are recorded directly in earnings and were equal to a loss of $0.2 million for the quarter ended September 30, 2017 and a gain of $0.1 million for the same quarter in the prior year. For the nine month period ending September 30, 2017 and September 30, 2016, the Company recorded a loss of $0.3 million and $0.5 million, respectively. As of September 30, 2017,2022, the Company had deferred income tax assets of $0.7 million and $1.8 million included in other assets, and deferred income tax liabilities of $26.0 million and $24.2 million, respectively, included in other long-term accrued liabilities.following outstanding derivatives that were not designated as hedges in qualifying hedging relationships (in thousands except for number of instruments): Non-Designated Derivative Summary Number of Instruments Sell Notional Buy Notional FX Forward Contracts Sell AUD/Buy USD Fwd Contract 6 $ 650 $ 493 Sell CAD/Buy USD Fwd Contract 10 $ 6,050 $ 4,714 Total 16 $ 6,700 $ 5,207 The table below presents the fair valueCompany entered into a Registration Rights Agreement (the “Registration Rights Agreement”) with LOR, Inc. (“LOR”). LOR is a member of the Company’s derivative financial instruments as well as their classificationcontrol group which owns more than 50% of our stock (“Control Group”). Under the Registration Rights Agreement, the Company must use reasonable best efforts to file and keep a registration statement on Form S-3 continuously effective and usable for the Balance Sheetresale of the shares owned by the Control Group as of September 30, 2017 and December 31, 2016 (in thousands): Tabular Disclosure of Fair Values of Derivative Instruments Derivatives Asset Derivative Liabilities Fair Value as of: September 30, December 31, September 30, December 31, 2017 2016 2017 2016 Derivatives Not Designated as Hedging Instruments FX Forward Contracts Balance Sheet Location Other Current Other Current Other Assets Other Assets Liabilities Liabilities Sell AUD/Buy USD Fwd Contract $ — $ — $ 16 $ — Sell CAD/Buy USD Fwd Contract $ — $ — $ 137 $ — Total $ — $ — $ 153 $ — The table below presents the effectdate of the Company’s derivative financial instrumentsRegistration Rights Agreement. With certain exceptions, LOR has the right to request up to eight (8) offerings pursuant to the Registration Rights Agreement. The Registration Rights Agreement will stay in effect until June 5, 2038. Pursuant to the Registration Rights Agreement, a registration statement on Form S-3 was filed with the Income Statement as of September 30, 2017Securities and September 30, 2016 (in thousands):Effect of Derivative InstrumentsExchange Commission on June 5, 2023, and declared effective on June 22, 2023 (the "Form S-3").Income Statement for Derivatives Not Designatedas Hedging Instruments for the Three and Nine Months Ended September 30, 2017 and 2016 Amount of Gain or (Loss) Recognized Amount of Gain or in Income (Loss) Recognized in Location of Gain or Three Months Income Derivatives Not Designated as (Loss) Recognized Ended Nine Months Ended Hedging Instruments in Income September 30, September 30, 2017 2016 2017 2016 Sell AUD/Buy USD Fwd Contract Other Inc/(Exp) $ (11 ) $ (9 ) $ (29 ) $ (36 ) Sell CAD/Buy USD Fwd Contract Other Inc/(Exp) (224 ) 103 (319 ) (476 ) Total $ (235 ) $ 94 $ (348 ) $ (512 ) 12ROLLINS, INC. AND SUBSIDIARIESThe table below presents the total fair value classification within the fair value hierarchy for the complete portfolio of derivative transactions at September 30, 2017 (in thousands): Recurring Fair Value Measurements Quoted Prices in Active Markets for Identical Significant Other Significant Assets and Liabilities Observable Inputs Unobservable Inputs (Level 1) (Level 2) (Level 3) Total Fair Value at As of September 30, September 30, September 30, September 30, 2017 2016 2017 2016 2017 2016 2017 2016 Assets Derivative Financial Instruments $ — $ — $ — $ — $ — $ — $ — $ — Liabilities Derivative Financial Instruments $ — $ — $ (153 ) $ (122 ) $ — $ — $ (153 ) $ (122 ) As of September 30, 2017, the fair value of derivatives in a net liability position was $0.2 million inclusive of counterparty credit risk. Asexecution of the balance sheet date,Registration Rights Agreement, LOR paid $1.5 million to the Company has not posted any collateral relatedand will pay an additional $3.5 million to these agreements. If the Company had breachedupon the closing of the first requested offering pursuant to the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company will pay all costs, fees and expenses incident to the Company’s performance or compliance with the Registration Rights Agreement with respect to a total of five (5) requested offerings, and thereafter, LOR will be responsible for all such expenses in connection with any subsequent offering. The Registration Rights Agreement also contains customary indemnification provisions. The Registration Rights Agreement was approved by the disinterested directors of these provisions at September 30, 2017, it could have been requiredour Board, which excluded any directors with a relationship with LOR or the Control Group.settlebe complete and is subject to, and is qualified in its obligations underentirety by reference to, the agreements at their termination valuefull text of $0.2 million.the Registration Rights Agreement, which is filed as Exhibit 4.11 to the Form S-3.10.16. SUBSEQUENT EVENTSOctober 24, 2017,July 25, 2023, the Company announced that theCompany’s Board of Directors declared a regular quarterly cash dividend on its common stock of $0.115$0.13 per share plus a special year-end dividend of $0.10 per share both payable December 11, 2017on September 8, 2023 to stockholders of record at the close of business Novemberon August 10, 2017.2023.OverviewOn October 25, 2017,Company reported its 46th consecutiverelated notes that appear elsewhere in this quarterly report on Form 10-Q. The following discussion contains forward-looking statements that involve risks and uncertainties and reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A, “Risk Factors,” of our 2022 Form 10-K and Part II, Item 1A, “Risk Factors” and “Caution Regarding Forward-Looking Statements” included in this report and those discussed in other documents we file from time to time with the SEC.improved2022. Quarterly operating margin was 18.9% of revenue, and earnings. Netconsistent with the second quarter of 2022. Adjusted operating income* was $160 million, an increase of 18.8% over the prior year. Adjusted operating income margin* was 19.5%, an increase of 60 basis points over the prior year.$51.4$110.1 million, an increase of 8.4% over the prior year net income. Adjusted net income* was $114.1 million, an increase of 12.2% over the prior year.third quarter, ended September 30, 2017, asan increase of 15.1%. Adjusted EBITDA* was 22.3% of sales, which was equal to the second quarter of 2022.$49.7the second quarter a year ago. The Company invested $312.4 million in acquisitions, $6.8 million in capital expenditures, and paid dividends totaling $63.9 million for the prior yearquarter. Free cash flow* was $140.6 million, an increase of 17.8% compared to the second quarter a 3.6% improvement. Revenues increased by 6.2%of 2022.$450.4 million forstart the third quarter 2017and we continue to maintain a very healthy balance sheet that positions us well to continue to invest in growth programs across our business. Although we continue to navigate a highly uncertain macro-environment, we believe we are positioned well to deliver strong results in 2023.$424.0 millionquarter ended June 30, 2022Three Months Ended June 30, Variance (in thousands, except per share data) 2023 2022 $ % GAAP Metrics Revenues $ 820,750 $ 714,049 $ 106,701 14.9 % $ 436,559 $ 377,269 $ 59,290 15.7 % 53.2 % 52.8 % 40 bps Operating income $ 154,789 $ 134,677 $ 20,112 14.9 % Operating income margin 18.9 % 18.9 % 0 bps Net income $ 110,143 $ 101,620 $ 8,523 8.4 % EPS $ 0.22 $ 0.21 $ 0.01 4.8 % Operating cash flow $ 147,413 $ 127,285 20,128 15.8 % Non-GAAP Metrics $ 160,050 $ 134,677 $ 25,373 18.8 % 19.5 % 18.9 % 60 bps $ 114,057 $ 101,620 $ 12,437 12.2 % $ 0.23 $ 0.21 $ 0.02 9.5 % $ 183,294 $ 159,193 $ 24,101 15.1 % 22.3 % 22.3 % 0 bps $ 140,638 $ 119,399 $ 21,239 17.8 % the prior year third quarter. The Company saw a negative impact on the exchange ratediscussion of non-GAAP financial metrics including a reconciliation of the Canadian and Australian dollars and British pounds to U.S. dollars reducingmost closely correlated GAAP measure.$8.4 millionproduct and $9.0 million for the third quarters ended September 30, 2017service offering and 2016, respectively and reduced pre-tax earningsrevenues by $1.6 million and $1.5 million, for the third quarters ended September 30, 2017 and 2016, respectively. Earningsgeography:
SeptemberJune 30, 2017 increased 4.3% to $0.24 per diluted share, as compared to $0.23 per diluted share for2023 were $820.8 million, an increase of $106.7 million, or 14.9%, from 2022 revenues of $714.0 million. Organic revenue* growth was 7.7% with acquisitions adding 7.2% in the quarter. The stronger U.S. Dollar versus the same period in 2016.We were disappointed withquarter a year ago reduced current revenues by 30 basis points. The currency headwind was primarily related to a stronger U.S. Dollar versus the impactCanadian Dollar. Comparing 2023 to revenue and profitability that Hurricane Harvey had on several of the Company’s regions: Southwest and North Texas, South Central Commercial, Oklahoma, Louisiana, and Mississippi. These areas were negatively impacted by pre-hurricane preparation, flood conditions, closed branches, and our inability to service many of our customers.Fortunately our people were unharmed, and, where appropriate, we compensated them even when they were unable to work. Our Employee Relief Fund has also been beneficial to many impacted employees. Hurricane Irma followed at the end of August with a similar effect in Florida, Georgia, Alabama, Mississippi, and Louisiana.On August 1, 2017, the Company completed the acquisition of Northwest Exterminating Co., Inc. Northwest has 23 offices in 5 southeastern states and was the nation’s 17th largest pest management company. Northwest performs services for approximately 120,000 customers and will continue to operate as a separate business, as one of Rollins’ Specialty Brands, along with HomeTeam, Western Pest Services and Waltham.Rollins continued its solid financial performance generating $189.4 million in cash from operations year to date.13ROLLINS, INC. AND SUBSIDIARIESResults of Operations:THREE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED TO THREE MONTHS ENDED SEPTEMBER 30, 2016RevenueRevenues for the third quarter ended September 30, 2017 increased $26.4 million or 6.2% to $450.4 million compared to $424.0 million for the third quarter ended September 30, 2016. Growth occurred across all service lines. Approximately 2.3 percentage points of the 6.2% increase came from acquisitions while growth in customers and pricing made up the remaining 3.9 percentage points.The Company has three primary service offerings: commercial pest control,2022, residential pest control and termite, including ancillary services. During the third quarter ended September 30, 2017,revenue increased 19%, commercial pest control revenue approximated 39% of the Company’s revenues, residential pest control approximated 43% of the Company’s revenues, and termite and ancillary service revenue approximated 17% of the Company’s revenues. Comparing third quarter 2017 to third quarter 2016, the Company’s commercial pest control revenue grew 4.9%, residential pest control revenue grew 6.1%,increased 11% and termite and ancillary services revenue grew 10.1%14%. ForeignThe Company’s foreign operations accounted for approximately 8%7% of total revenues duringfor the quarters ended June 30, 2023, and 2022.quartersquarter.Consolidated Net Revenues (in thousands) 2017 2016 2015 First Quarter $ 375,247 $ 352,736 $ 330,909 Second Quarter 433,555 411,133 392,150 Third Quarter 450,442 423,994 399,746 Fourth Quarter — 385,614 362,500 Year ended December 31, $ 1,259,244 $ 1,573,477 $ 1,485,305 CostConsolidated Net Revenues (in thousands) 2023 2022 2021 First Quarter $ 658,015 $ 590,680 $ 535,554 Second Quarter 820,750 714,049 638,204 Third Quarter — 729,704 650,199 Fourth Quarter — 661,390 600,343 Year to date $ 1,478,765 $ 2,695,823 $ 2,424,300 Services ProvidedCost of Services providedDepreciation and Amortization) the third quarter ended September 30, 2017 increased $13.2 million or 6.4% to $218.8 million, compared to $205.6 million the quarter ended SeptemberJune 30, 2016.2023, was $436.6 million, an increase of $59.3 million, or 15.7%, compared to $377.3 million for the quarter ended June 30, 2022. Gross margin was 53.2% in 2023 compared to 52.8% in 2022. Gross profit remains strong, and we saw good performance on gross profit as pricing more than offset inflationary pressures.thirdeffectiveness of our corporate office and supporting functions. These measures are aimed at modernizing these functions while improving productivity.51.4%,due to higher amortization of intangible assets from acquisitions, most notably Fox Pest Control, offset by lower depreciation of operating equipment and internal-use software.decreasepercentage of 0.1 percentage pointsrevenue, operating income was consistent at 18.9%. Operating margin was driven by the pricing actions discussed above which helped provide improved leverage across a number of categories of the income statement asthird quarter gross margin of 51.5%. The margin for the quarter was negatively affected by the storms in the Southeast and Southwest. The quarter benefitted from improved efficiencies in routing and scheduling technology which also helped to lower salaries as a percent of revenue, specifically as there was a decrease in service salaries and administrative salaries as a percent of revenues from the prior year. Insurance and claims were lower than prior year as a percent of revenue. These gains the Company experienced were offset by higher personnel related costs as we integrate acquisitions and payroll taxes and group insurance increases. Fleet expenses increasedprimarily due to the higher average debt balance, as well as the increase in weighted average interest rates in 2023 compared to 2022. The increase was driven primarily by the increased costdebt associated with the acquisition of gasoline, increased leased vehicle costs, and higher maintenance fees. Materials and supplies were higherFox.our termite baiting customers.Depreciationto 27.1% in the second quarter of 2023, compared to 25.1% in 2022. The rate was higher due to foreign income taxes compared to the prior year.Six Months Ended June 30, Variance (in thousands, except per share data) 2023 2022 $ % GAAP Metrics Revenues $ 1,478,765 $ 1,304,729 $ 174,036 13.3 % $ 767,732 $ 672,571 $ 95,161 14.1 % 51.9 % 51.5 % 40 bps Operating income $ 267,029 $ 228,067 $ 38,962 17.1 % Operating income margin 18.1 % 17.5 % 60 bps Net income $ 198,377 $ 175,386 $ 22,991 13.1 % EPS $ 0.40 $ 0.36 $ 0.04 11.1 % Operating cash flow $ 248,186 $ 214,817 $ 33,369 15.5 % Non-GAAP Metrics $ 272,290 $ 228,067 $ 44,223 19.4 % 18.4 % 17.5 % 90 bps $ 202,291 $ 175,386 $ 26,905 15.3 % $ 0.41 $ 0.36 $ 0.05 13.9 % $ 322,750 $ 276,989 $ 45,761 16.5 % 21.8 % 21.2 % 60 bps $ 233,775 $ 198,936 $ 34,839 17.5 % AmortizationDepreciationamortizationAmortization expensesservice offering and revenues by geography:
third quartersix months ended SeptemberJune 30, 2017 increased $1.2 million to $14.3 million,2023, were $1.5 billion, an increase of 9.4%. Depreciation increased due to expenditures associated with the 2016 rollout of BOSS, the Company’s customer relationship management system, as well as acquisitions and equipment purchases while amortization of intangible assets increased due to amortization of customer contracts included in various acquisitions.Sales, General and AdministrativeSales, General and Administrative Expenses for the third quarter ended September 30, 2017 increased $9.5$174.0 million, or 7.6%13.3%, to 30.0%from 2022 revenues of revenues, up 0.4 percentage points from 29.6% for the third quarter ended September 30, 2016. The increase$1.3 billion. Organic revenue* growth was 8.4% and acquisitions added 4.9% in the percent of revenue is due to higher planned sales commissionssix months ended June 30, 2023. The stronger U.S. Dollar reduced year-to-date revenues by 40 basis points versus the same period a year ago. The currency headwind was primarily related to increased revenue and higher planned outside contractor costsa stronger U.S. Dollar versus the Canadian Dollar. Comparing 2023 to enhance the BOSS system. The increases were partially offset by efficiencies in administrative salaries as a percent of revenues as we maintain a quality support staff, while continuing to grow revenues. Fleet expenses and telephone costs were up as we integrated several acquisitions.Gain on Sale of assets, NetGain on sales of assets, net was a net gain of $66,000 for the third quarter ended September 30, 2017, up from $52,000 prior year. The gains were for the sales of Company owned vehicles and equipment.14ROLLINS, INC. AND SUBSIDIARIESIncome TaxesIncome Taxes for the third quarter ended September 30, 2017 increased $0.8 million or 2.7% to $31.1 million from $30.3 million reported for third quarter ended September 30, 2016. The effective tax rate was 37.7% for the third quarter ended September 30, 2017 and 37.9% for the third quarter ended September 30, 2016. The differences were primarily due to tax credits, state tax rates and the adoption during first quarter 2017 of the amendments of Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accounting. Accordingly, the income tax provisions for the quarter ended September 30, 2017 include excess tax benefits of $0.4 million. Under prior guidance, these excess tax benefits would have been recorded in additional paid-in capital.NINE MONTHS ENDED SEPTEMBER 30, 2017 COMPARED TO NINE MONTHS ENDED SEPTEMBER 30, 2016RevenueRevenues for the nine months ended September 30, 2017 increased $71.4 million or 6.0% to $1.259 billion compared to $1.188 billion for the nine months ended September 30, 2016. The Company saw an increase in lead closure on sales to new customers while average price remained relatively flat in most categories. Approximately 1.4 percentage points of the 6.0% increase came from acquisitions while growth in customers and pricing made up the remaining 4.6 percentage points. The Company’s customer base continued to grow. The higher sales to new customers resulted in growth across all service lines.Commercial pest control revenue approximated 39% of the Company’s revenues during the nine months ended September 30, 2017,2022, residential pest control revenue approximated 42% of revenues, and termite and ancillary service revenues, made up approximately 18% of the Company’s revenues. The Company’sincreased 14%, commercial pest control revenue grew 5.1%, residential pest control revenue grew 6.3%,increased 11% and termite and ancillary services revenue grew 7.9%14%. ForeignThe Company’s foreign operations accounted for approximately 8% and 7% of total revenues for the first ninesix months ended June 30, 2023, and 2022.2017Depreciation and 2016, respectively.Cost of Services ProvidedCost of Services providedAmortization)ninesix months ended SeptemberJune 30, 2017 increased $33.1 million or 5.7% to $612.4 million compared to $579.4 million for the nine months ended September 30, 2016. Gross margin increased to 51.4%, an increase of 0.2 percentage points from 51.2% of revenues for the prior year-to-date. The year-to-date increase in gross margin2023, was due to the Company’s lower service salaries and administrative salaries as a percent of revenue as we leveraged our existing employees over increased revenues and had good cost control. The Company recorded lower insurance expense as a percent of revenue compared to 2016. Fleet expenses were greater as a percent of revenue as gasoline expense and lease vehicle costs increase. The Company maintained good cost controls across most spending categories.Depreciation and AmortizationDepreciation and Amortization expenses for the nine months ended September 30, 2017 increased $4.6 million to $41.6$767.7 million, an increase of 12.3%$95.2 million, or 14.1%, increasing 0.2 percentage pointscompared to $672.6 million for the six months ended June 30, 2022. Gross margin was 51.9% in 2023 compared to 51.5% in 2022.percentpercentage of revenuesales, while insurance and legacy claims related primarily to 3.3% of revenue comparedauto accidents continue to 3.1% of revenue the prior year. Depreciation increased duebe a headwind to the investment associated with the 2016 rollout of BOSS as well as acquisitions and equipment purchases. Amortization of intangible assets increased due to amortization of customer contracts purchased in various acquisitions.Sales, GeneralAdministrativeadministrative (SG&A) expenses forincreased $53.0 million, or 13.3%, compared to the ninesix months ended SeptemberJune 30, 2017 increased $15.5 million or 4.3%2022. As a percentage of revenue SG&A decreased slightly to $379.8 million or 30.2% of revenues,30.5% from $364.2 million or 30.7% of revenues30.6% in the prior year period. The decreaseyear.percentpercentage of sales as we continue to manage our cost structure. Insurance and legacy claims related primarily to auto accidents continue to be a headwind in costs, as well as a percentage of sales.was due primarilyoperating income increased to lower administrative salaries and personnel related cost, and reductions18.1% from 17.5% in bad debt expense.the prior year. The gainsimprovement in SG&Aoperating income as a percentpercentage of revenuessales is driven by the pricing actions discussed above, which helped provide improved leverage across a number of categories of the income statement. These improvements were partially offset by higher sales salaries due to increased commissions on higher revenues. The Company’s higher fleet expense was due to gasoline price increasesinsurance and lease vehicleclaims costs increase. Higher professional services fees increased as we use outside consultants on various projects and our BOSS system.Gain on Sale of assets,from legacy auto claims.Gain on sales of assets, net was a net gain of $0.2 million fornine month period ended September 30, 2017 and a decrease of $0.5 million from $0.7 million for the ninesix months ended SeptemberJune 30, 20162023, interest expense, net increased $3.8 million, compared to the six months ended June 30, 2022, due to the 2016 saleincrease in the average debt balance associated primarily with the acquisition of our wildlife services franchise supply distributorFox and the saleincrease in weighted average interest rates.branch location.result of the Fox acquisition.Company recognized net gains fromrate was higher due to foreign income taxes compared to the saleprior year.Accounting Standards Update (ASU) 2016-09, Improvements to Employee Share-Based Payment Accountingduring 2017. Accordingly, the income tax provisions for the nine months ended September 30, 2017 include excess tax benefits of $5.0 million. Under prior guidance, this excess tax benefits would have been recorded in additional paid-in capital. The effective tax rate was 35.7% for the nine months ended September 30, 2017GAAP and 37.8% for the nine months ended September 30, 2016 primarily due to differences in tax credits, state tax rates and the adoption of ASU 2016-09.Liquidity and Capital ResourcesThe Company believes its current cash and cash equivalents balances, future cash flows expected to be generated from operating activities and available borrowings under its $175.0 million credit facility will be sufficient to finance its current operations and obligations, and fund expansion of the business for the foreseeable future. The Company’s operating activities generated net cash of $189.4 million and $158.2 million for the nine months ended September 30, 2017, and 2016, respectively. During the nine months ended September 30, 2017 the Company made no contribution to its defined benefit retirement plan while making $3.0 million in contributions for the same period in 2016. The Company is adequately funded on its Pension Plans and is not expecting to make further contributions in 2017.The Company invested approximately $17.2 million in capital expenditures, exclusive of expenditures for business acquisitions, during the nine months ended September 30, 2017, compared to $27.1 million during the same period in 2016, and expects to invest approximately $8.0 million for the remainder of 2017. Capital expenditures for the first nine months consisted primarily of the purchase of operating equipment replacements and technology related projects. During the nine months ended September 30, 2017, the Company made expenditures for acquisitions totaling $127.9 million, compared to $40.8 million during the same period in 2016. A total of $75.2 million was paid in cash dividends ($0.345 per share) during the first nine months of 2017, compared to $65.5 million or ($0.30 per share) during the same period in 2016. On October 24, 2017, the Company announced that the Board of Directors declared a regular quarterly cash dividend on its common stock of $0.115 per share plus a special year-end dividend of $0.10 per share both payable December 11, 2017 to stockholders of record at the close of business November 10, 2017 to be funded with existing cash balances. The Company expects to continue to pay cash dividends to common stockholders, subject to the earnings and financial condition of the Company and other relevant factors. The Company did not repurchase shares of its common stock on the open market during the first nine months of 2017 compared to the repurchase of approximately 0.8 million shares at a weighted average price of $27.19 during the first nine months of 2016. non-GAAP Financial Measureshadused the non-GAAP financial measures of organic revenues, adjusted operating income, adjusted operating income margin, adjusted net income, and adjusted earnings per share (“EPS”), earnings before interest, taxes, depreciation and amortization (“EBITDA”), EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, and free cash flow in this Form 10-Q. Organic revenue is calculated as revenue less acquisition revenue. Acquisition revenue is based on the trailing 12-month revenue of our acquired entities. These measures should not be considered in isolation or as a buyback programsubstitute for revenues, net income, earnings per share or other performance measures prepared in place for a numberaccordance with GAAP.years and has routinely purchased shares when it felt the opportunity was desirable. The Board authorized the purchase of 7.5 million additional shares of the Company’s common stock in July 2012. These authorizations enableoperating performance because this measure allows the Company to continuecompare performance consistently over various periods. Management also uses organic revenues to compare revenues over various periods excluding the purchaseimpact of Company common stock when appropriate, whichacquisitions.an important benefita numerical measure of financial performance, financial position, or cash flows that either 1) excludes amounts, or is subject to adjustments that have the effect of excluding amounts, that are included in the most directly comparable measure calculated and presented in accordance with GAAP in the statement of operations, balance sheet or statement of cash flows, or 2) includes amounts, or is subject to adjustments that have the effect of including amounts, that are excluded from the most directly comparable measure so calculated and presented.Three Months Ended June 30, Variance Six Months Ended June 30, Variance 2023 $ % 2023 $ % Reconciliation of Revenues to Organic Revenues Revenues $ 820,750 $ 714,049 106,701 14.9 $ 1,478,765 $ 1,304,729 174,036 13.3 Revenue growth from acquisitions (51,148) — (51,148) — (64,302) — (64,302) — Organic revenues $ 769,602 $ 714,049 55,553 7.7 $ 1,414,463 $ 1,304,729 109,734 8.4 Reconciliation of Operating Income to Adjusted Operating Income and Adjusted Operating Income Margin Operating income $ 154,789 $ 134,677 $ 267,029 $ 228,067 5,261 — 5,261 — Adjusted operating income $ 160,050 $ 134,677 25,373 18.8 $ 272,290 $ 228,067 44,223 19.4 Revenues $ 820,750 $ 714,049 $ 1,478,765 $ 1,304,729 Operating income margin 18.9 % 18.9 % 18.1 % 17.5 % Adjusted operating income margin 19.5 % 18.9 % 18.4 % 17.5 % Reconciliation of Net Income to Adjusted Net Income and Adjusted EPS Net income $ 110,143 $ 101,620 $ 198,377 $ 175,386 5,261 — 5,261 — (1,347) — (1,347) — Adjusted net income $ 114,057 $ 101,620 12,437 12.2 $ 202,291 $ 175,386 26,905 15.3 Adjusted EPS - basic and diluted $ 0.23 $ 0.21 $ 0.41 $ 0.36 Weighted average shares outstanding - basic 492,700 492,327 492,593 492,270 Weighted average shares outstanding - diluted 492,891 492,440 492,764 492,382 Reconciliation of Net Income to EBITDA, Adjusted EBITDA, EBITDA Margin, and Adjusted EBITDA Margin Net income $ 110,143 $ 101,620 $ 198,377 $ 175,386 Depreciation and amortization 26,439 22,605 48,941 45,732 Interest expense, net 4,785 880 5,250 1,448 Provision for income taxes 40,880 34,088 69,135 54,423 EBITDA $ 182,247 $ 159,193 23,054 14.5 $ 321,703 $ 276,989 44,714 16.1 1,047 — 1,047 — Adjusted EBITDA $ 183,294 $ 159,193 24,101 15.1 $ 322,750 $ 276,989 45,761 16.5 Revenues $ 820,750 $ 714,049 $ 1,478,765 $ 1,304,729 EBITDA margin 22.2 % 22.3 % 21.8 % 21.2 % Adjusted EBITDA margin 22.3 % 22.3 % 21.8 % 21.2 % Reconciliation of Net Cash Provided by Operating Activities to Free Cash Flow Net cash provided by operating activities $ 147,413 $ 127,285 $ 248,186 $ 214,817 Capital expenditures (6,775) (7,886) (14,411) (15,881) Free cash flow $ 140,638 $ 119,399 21,239 17.8 $ 233,775 $ 198,936 34,839 17.5 Company’s strongamortization of certain intangible assets and adjustments to the fair value of contingent consideration resulting from the acquisition of Fox Pest Control during the quarter. While we exclude such expenses in this non-GAAP measure, the revenue from the acquired company is reflected in this non-GAAP measure and the acquired assets contribute to revenue generation. The stock buy-back program has no expiration date. In total, 5.1 million additional shares may be purchased under the share repurchase program. The Company repurchased $8.2 million$8.3 million of common stock for the nine months ended September 30, 2017 and 2016, respectively, from employees for the payment of taxes on vesting restricted shares. The acquisitions, capital expenditures, share repurchases and cash dividends were funded through existing cash balances and operating activities.balance sheet as of September 30, 2017 and December 31, 2016 includes short-term unearned revenues of $119.0 million and $99.8 million, respectively, representing approximately 7% of our annual revenue. This represents cash paid to the Company by its customers in advance of services that will be recognized over the next twelve months. The Company’s $113.4$154.7 million of total cash at SeptemberJune 30, 2017,2023 is held at various banking institutions. Approximately $64.7$79.3 million is held in cash accounts at foreigninternational bank institutions and the remaining $48.7$75.4 million is primarily held in Federal Deposit Insurance Corporation (“FDIC”) insured non-interest-bearing accounts at various domestic banks. banks which at times exceed federally insured amounts.Repatriation of cash from the Company’s foreign subsidiaries is not a part of the Company’s current business plan. The Company maintains a large cash position in the United States while having little third-party debtexpects to service.repatriate unremitted foreign earnings from our foreign subsidiaries. The Company maintains adequate liquidity and capital resourcesasserts that are directedwe continue to finance domestic operations and obligations andbe permanently reinvested with respect to fund expansion of its domestic business for the foreseeable future without regard to itsour investments in our foreign deposits.October 31, 2012,February 24, 2023, the Company entered into a Revolvingrevolving credit agreement with, among others, JPMorgan Chase Bank, N.A. (“JPMorgan Chase”), as administrative agent (in such capacity, the “Administrative Agent”), which refinanced its previous credit facility.with SunTrust Bankprovides for a $1.0 billion revolving Credit Facility, which may be denominated in U.S. Dollars and Bankother currencies, including Euros, Australian Dollars, Canadian Dollars, New Zealand Dollars, Pounds Sterling and Japanese Yen, subject to a $400 million foreign currency sublimit. Rollins has the ability to expand its borrowing availability under the Credit Agreement in the form of America, N.A. for an unsecured lineincreased revolving commitments or one or more tranches of credit ofterm loans by up to $175.0an additional $750 million, which includes a $75.0subject to the agreement of the participating lenders and certain other customary conditions. The maturity date of the loans under the Credit Agreement is February 24, 2028. Refer to Note 9. Debt, of the Notes to Condensed Consolidated Financial Statements for further details.letterunder the Credit Facility. The aggregate effective interest rate on the debt outstanding as of credit subfacility,June 30, 2023, was 6.5%. As of December 31, 2022, the Company had outstanding borrowings of $54.9 million under the previous Term Loan and a $25.0 million swingline subfacility. The Company hadthere were no outstanding borrowings under the lineprevious Revolving Commitment. The aggregate effective interest rate on the debt outstanding as of December 31, 2022 was 5.1%.oras of June 30, 2023. These letters of credit are required by the Company’s insurance companies, due to the Company’s high deductible insurance program, to secure various workers’ compensation and casualty insurance contracts coverage and were increased from $71.3 million as of December 31, 2022. The Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims.Six Months Ended June 30, Variance (in thousands) 2023 2022 $ % Net cash provided by operating activities $ 248,186 $ 214,817 33,369 15.5 Net cash used in investing activities (331,622) (62,032) (269,590) N/M Net cash provided by (used in) financing activities 140,195 (30,640) 170,835 N/M Effect of exchange rate on cash 2,642 (6,482) 9,124 N/M Net increase in cash and cash equivalents $ 59,401 $ 115,663 (56,262) (48.6) swingline subfacilityCredit Facility. September 30, 2017. The Company remained in compliance with applicable debt covenants through the date of this filing and expects to maintain compliance through 2017.Litigation certain of the Company’sCompany and its subsidiaries are defendantsinvolved in, a numberand will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, litigation, and tax and other regulatory matters relating to, and arising out of, lawsuits,our businesses and our operations. These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or arbitrations which allege that the subsidiaries’ services caused damage.local authorities, including taxing authorities, of violations of regulations or statutes. In addition, the Company defends employment relatedwe are parties to employment-related cases and claims from time to time.time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental and tax matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.actively contesting eachaccrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of these matters. however unlikely, could result in a charge that might be material to the results of an individual quarter or year.16Critical Accounting PoliciesTherebeen no changes to the Company’s critical accounting policies since the filing of its Form 10-K for the year ended December 31, 2016.New Accounting StandardsSee Note 2 of the Notes to Condensed Consolidated Financial Statements for a description of recent accounting pronouncements, including the expected dates of adoption and estimated effectsmaterial adverse effect on results of operations and financial condition.Forward-Looking StatementsThis Quarterly Report contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements include, without limitation, the effect of the future adoption of recent accounting pronouncements on the Company’s financial statements; statements regarding management’s expectation regarding the effect of the ultimate resolution of pending claims, proceedings or litigation on the Company’sour financial position, results of operationoperations or liquidity; our evaluation of pending and liquidity;threatened claims and establishment of loss contingency reserves based upon outcomes it currently believes to be probable and reasonably estimable; our evaluations of a number of streamlining initiatives that are aimed at improving the effectiveness of our corporate office and supporting functions; our belief that we do not expect the resolution of the alleged violations and information requests from governmental authorities in California for its Orkin and Clark Pest Control operations to have a material adverse effect on our results of operations, financial condition, or cash flows; our belief that it will continue to be involved in various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, its businesses and its operations. the Company’s reasonable certainty that it will exercise the renewal options on its operating leases; our belief that itsour current cash and cash equivalent balances, future cash flows expected to be generated from operating activities and available borrowings under our Credit Facility will be sufficient to finance itsour current operations and obligations, and fund expansion of the business for the foreseeable future; the Company’s ability to remain in compliance with applicable debt covenants under the Credit Facility throughout 2023; our expectation that the Company will continue to pay dividends;international business expansion efforts and our intentionintent to continue to grow the business in foreign markets in the future through reinvestment of foreign deposits and future earnings as well as acquisitions of unrelated companies, our expectations to repatriate unremitted foreign earnings from its foreign subsidiaries, and our plans to continue to be permanently reinvested with respect to its investments in our foreign subsidiaries; our belief that no changes in our internal control over financial reporting during the second quarter are reasonably likely to materially affect our internal control over financial reporting; our expectation that total unrecognized compensation cost related to restricted shares and PSUs will be recognized over a weighted average period of approximately 3.3 years; our conclusion that there are no impairments of its goodwill or other intangible assets; our belief that the factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized; our belief that we have adequate liquid assets, funding sources and insurance accruals to accommodate potential future insurance claims; our belief that demand remains favorable to start the third quarter and that repatriation of cash is not a part of the Company’s business plan; possible defined benefit retirement plan contributions and their effect on the Company’s financial position, results of operations and liquidity; the Company’s expectation regarding capital expenditure for the remainder of 2017; the Company’s expectationwe continue to maintain compliance with debt covenants; and the Company’sa very healthy balance sheet that positions us well to continue to invest in growth programs across our business; our belief that we are positioned well to deliver strong operating results in 2023; and our belief that continued disruptions in economic markets due to high inflation, increases in interest rate exposurerates, business interruptions due to natural disasters, employee shortages and foreign exchange rate risksupply chain issues, all pose current and future challenges which may adversely affect our future performance, and that we cannot reasonably estimate whether our current strategies will not have a material effecthelp mitigate the impact of these economic disruptors in the future.Company’stime those statements are made and are subject to risks and uncertainties that could cause actual performance or results of operations going forward. The actual results of the Company couldto differ materially from those indicatedexpressed in or suggested by the forward-looking statements, because of variousincluding, but not limited to, risks and uncertainties including, without limitation,regarding: our ability to maintain our competitive position in the possibility of an adverse ruling against the Company in pending litigation; general economic conditions; market risk; changes in industry practices or technologies; the degree of success of the Company’s termite process and pest control selling and treatment methods;industry in the Company’sfuture; our inability to identify, complete or successfully integrate acquisitions or guarantee that any acquisitions will achieve the anticipated financial benefits; our ability to identifyexpand into international markets; our ability to maintain and integrate potential acquisitions; climateenhance our brands and weather conditions; competitive factors and pricing practices;develop a positive client reputation; labor shortages and/or our ability to attract and retain skilled workers,workers; climate change and potential increases in labor costs;unfavorable weather conditions; the effects of a pandemic, including the COVID-19 pandemic; adverse economic conditions; cybersecurity incidents; noncompliance with, changes to, or increased enforcement of federal, state and changes in various governmentlocal laws and regulations pertaining to environmental, public health and safety matters, including environmental regulations. All ofthose related to the foregoingpest control industry; and our capital and ownership structure. Such risks and uncertainties are beyond theour ability of the Company to control, and in many cases, the Companywe cannot predict the risks and uncertainties that could cause itsour actual results to differ materially from those indicated by the forward-looking statements. Adetailed discussionspecifically under Item 1A., “Risk Factors,” of potential risks facingPart I of the Company can be found in the Company’s Annual Report on Form 10-K10 K, filed with the U.S. Securities and Exchange Commission, for the year ended December 31, 2016.2022 (the “2022 Annual Report”) that could cause the Company’s actual results and financial condition to differ materially from estimated results and financial condition. The Company does not undertake to update its forward-looking statements.As of September 30, 2017, the Company maintained an investment portfolio (included in cash and cash equivalents) subjectshort-term interest rate risk exposure. The Company is subject to interest rate risk exposure through borrowings on its $175 million credit facility. The Company is also exposed tocertain market risks, arising from changessee “Quantitative and Qualitative Disclosures about Market Risk,” in foreign exchange rates. See Note 9 to Part I,II, Item 1 for a discussion7.A of the Company’s investments in derivative financial instruments to manage risks of fluctuations in foreign exchange rates. The Company believes that this foreign exchange rate risk will not have a material impact upon the Company’s results of operations going forward.our 2022 Form 10-K. There have beenwere no material changes to the Company’sour market risk exposure sinceduring the endsix months ended June 30, 2023.Under the supervision and our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of SeptemberJune 30, 20172023 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the Evaluation Date to ensure that the information required to be included in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.17ROLLINS, INC. AND SUBSIDIARIESaddition,accordance with the SEC’s published guidance, management’s assessment, and conclusions on the effectiveness of our disclosure controls and procedures as of June 30, 2023, excludes an assessment of the internal control over financial reporting of Fox.thirdsecond quarter that materially affected or are reasonably likely to materially affect our internal control over financial reporting. Asidentify any material weaknessesachieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities, including taxing authorities, of violations of regulations or statutes. In addition, we are parties to employment-related cases and claims from time to time, which may include claims on a representative or class action basis alleging wage and hour law violations. We are also involved from time to time in certain environmental and tax matters primarily arising in the normal course of business. We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.internal controls,estimates, our operating results could be materially affected, and therefore noour ability to take timely corrective actions were taken.
to limit future costs may be limited.PART II OTHER INFORMATIONItem 1.Legal Proceedings.See Note 4 to Part I, Item 1 for discussion of certain litigation.Item 1A.Risk FactorsSee the Company’s risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016.Item 2.Unregistered Sales of Equity Securities and Use of Proceeds.PurchasesEquity SecuritiesRegulation S-K during the period from April 1, 2023 to June 30, 2023.Period Weighted-
average
price paid
per shareApril 1 to 30, 2023 6,761 $ 36.63 — 11,415,625 May 1 to 31, 2023 2,762 $ 41.29 — 11,415,625 June 1 to 30, 2023 84 $ 39.57 — 11,415,625 Total 9,607 — 11,415,625 Issuer and Affiliated PurchasersShares repurchased by Rollins and affiliated purchases duringCompany in connection with tax withholding obligations of its employees upon vesting of such employees’ equity awards.third quarter ended SeptemberCompany’s common stock. The plan has no expiration date. As of June 30, 2017 were as follows: Total number of shares purchased Maximum number of Total Number Weighted-Average as part of publicly shares that may yet be of shares Price paid per announced purchased under the Period Purchased (1) Share repurchases (2) repurchase plans July 1 to 31, 2017 — $ — — 5,073,611 August 1 to 31, 2017 — — — 5,073,611 September 1 to 30, 2017 10,841 46.14 — 5,073,611 Total 10,841 $ 46.14 — 5,073,611 (1)Includes repurchases from employees for the payment of taxes on vesting of restricted shares in the following amounts:July 2017: 0; August 2017: 0; and September 2017: 10,841(2)The Company has a share repurchase plan, adopted in 2012, to repurchase up to 7.5 million shares of the Company’s common stock. The plan has no expiration date.
2023, the Company had a remaining authorization to repurchase 11.4 million shares of the Company's common stock under this program.18(31.1)(31.2)(32.1)Certification of June 12, 2023 August 30, 2024 17,000 Sales to occur on or after September 11, 2023, if certain limit prices are met If all 17,000 shares of Company common stock are sold prior to the scheduled expiration date, the trading plan will terminate on such earlier date Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 ofand TreasurerMarch 13, 2023 February 28, 2024 12,000 Sales occurred on June 12, 2023, once certain limit prices were met Immediately after sales occurred, the Sarbanes-Oxley Act of 2002.trading plan terminated on June 12, 2023June 13, 2023 (101.INS)June 14, 2024XBRL Instance Document10,000 Sales to occur on or after February 21, 2024, if certain limit prices are met (101.SCH)XBRL Taxonomy Extension Schema Document (101.CAL)XBRL Taxonomy Extension Calculation Linkbase Document(101.DEF)XBRL Taxonomy Extension Definition Linkbase Document (101.LAB)XBRL Taxonomy Extension Label Linkbase Document (101.PRE)XBRL Taxonomy Extension Presentation Linkbase Document+Confidential treatment has been requested for certain portionsIf all 10,000 shares of this exhibit (indicated by asterisks). Such information has been omitted and was filed separately withCompany common stock are sold prior to the securities and Exchange Commission.19scheduled expiration date, the trading plan will terminate on such earlier date
In addition to the material terms noted in the table, pursuant to each of these trading plans, in accordance with Rule 10b5-1 of the Exchange Act, there is a mandatory waiting period or “cooling-off period” before the transactions contemplated by each trading plan can begin consisting of the later of (i) ninety days after the adoption date of the applicable trading plan or (ii) two business days following the disclosure of the Company’s financial results in a Form 10-Q or Form 10-K for the completed fiscal quarter in which such plan was adopted. In addition, each trading plan disclosed in this Item 5 includes certain representations made by the applicable officer as to (a) the possession of material, non-public information about the Company; (b) the fact that officer is adopting the plan in good faith and will continue to act in good faith with respect to all transactions contemplated by the plan; and (c) the existence of other trading arrangements pursuant to Rule 10b5-1 currently in effect or scheduled to take effect.Exhibit No. Exhibit Description Incorporated By Reference Filed Herewith Form Date Number 3.1 10-Q August 1, 2005 (3)(i)(A) 3.2 10-K March 11, 2005 (3)(i)(B) 3.3 10-Q August 1, 2005 (3)(i)(C) 3.4 10-K February 25, 2015 (3)(i)(E) 3.5 10-Q July 29, 2015 (3)(i)(F) 3.6 10-Q April 26, 2019 (3)(i)(G) 3.7 10-Q July 30, 2021 (3)(i)(H) 3.8 8-K May 24, 2021 3.1 4.1 10-K March 26, 1999 (4) 4.2 10-K February 28, 2020 4(b) 31.1 X 31.2 X 32.1** X 101.INS Inline XBRL Instance Document X 101.SCH Inline XBRL Schema Document X 101.CAL Inline XBRL Calculation Linkbase Document X 101.LAB Inline XBRL Labels Linkbase Document X 101.PRE Inline XBRL Presentation Linkbase Document X 101.DEF Inline XBRL Definition Linkbase Document X 104 Cover Page Interactive Data File (embedded with the Inline XBRL document) X ROLLINS, INC. (Registrant) Date: OctoberJuly 27, 20172023By: /s/ Gary W. RollinsKenneth D. Krause Gary W. RollinsKenneth D. Krause Vice Chairman and Chief Executive Officer(Principal Executive Officer)Date: October 27, 2017By:/s/ Paul E. NorthenPaul E. NorthenVice President, Chief Financial Officer and Treasurer
(Principal Financial andOfficer)Date: July 27, 2023 By: /s/ Traci Hornfeck Traci Hornfeck Chief Accounting Officer
(Principal Accounting Officer)20