UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2004.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-4422
ROLLINS, INC.
(Exact name of registrant as specified in its charter)
Delaware 51-0068479
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2170 Piedmont Road, N.E., Atlanta, Georgia
(Address of principal executive offices)
30324
(Zip Code)
(404) 888-2000
(Registrant's telephone number, including area code)
--------------------------------
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [ X ] No [ ]
Indicate by check mark whether the registrant is an accelerated filer (as
defined in rule 12b-2 of the Exchange Act).
Yes [ X ] No [ ]
Rollins, Inc. had 45,439,640 shares of its $1 Par Value Common Stock outstanding
as of April 15, 2004.
ROLLINS, INC. AND SUBSIDIARIES
INDEX
PART I FINANCIAL INFORMATION Page No.
--------------
Item 1. Financial Statements.
Consolidated Statements of Financial Position as of March 31, 2004
and December 31, 2003 2
Consolidated Statements of Income for the Three Months Ended March
31, 2004 and 2003 3
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2004 and 2003 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations. 10
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 14
Item 4. Controls and Procedures. 15
PART II OTHER INFORMATION
Item 1. Legal Proceedings. 16
Item 6. Exhibits and Reports on Form 8-K. 16
SIGNATURES 18
PART I FINANCIAL INFORMATION
Item 1. Financial Statements.
ROLLINS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(in thousands except share and per share data)
March 31, December 31,
2004 2003
-------------------- ------------------
(Unaudited)
ASSETS
Cash and Short-Term Investments $ 97,888 $ 59,540
Marketable Securities --- 21,866
Trade Receivables, Net of Allowance for Doubtful
Accounts of $3,805 and $4,616, respectively 45,549 48,471
Materials and Supplies 10,147 9,837
Deferred Income Taxes 20,580 23,243
Other Current Assets 10,092 7,414
-------------------- ------------------
Current Assets 184,256 170,371
Equipment and Property, Net 34,618 35,836
Goodwill 72,521 72,498
Customer Contracts and Other Intangible Assets 28,924 30,333
Deferred Income Taxes 17,287 15,902
Other Assets 25,350 24,964
-------------------- ------------------
Total Assets $ 362,956 $ 349,904
==================== ==================
LIABILITIES
Accounts Payable $ 15,325 $ 12,290
Accrued Insurance 13,050 13,050
Accrued Payroll 26,913 31,019
Unearned Revenue 50,702 46,007
Accrual for Termite Contracts 21,500 21,500
Other Current Liabilities 23,983 21,156
-------------------- ------------------
Current Liabilities 151,473 145,022
Accrued Insurance, Less Current Portion 24,764 26,024
Accrual for Termite Contracts, Less Current Portion 22,135 22,373
Long-Term Accrued Liabilities 16,741 17,711
-------------------- ------------------
Total Liabilities 215,113 211,130
-------------------- ------------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share; 99,500,000
shares authorized; 45,399,280 and 45,156,674
shares issued and outstanding, respectively 45,399 45,157
Additional Paid-In Capital 7,025 4,408
Accumulated Other Comprehensive Loss (300) (314)
Retained Earnings 95,719 89,523
-------------------- ------------------
Total Stockholders' Equity 147,843 138,774
-------------------- ------------------
Total Liabilities and Stockholders' Equity $ 362,956 $ 349,904
==================== ==================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
2
ROLLINS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(in thousands except per share data)
(Unaudited)
Three Months Ended
March 31,
----------------------------------
2004 2003
---------------- ----------------
REVENUES
Customer Services $ 158,692 $ 155,122
---------------- ----------------
COSTS AND EXPENSES
Cost of Services Provided 85,357 83,926
Depreciation and Amortization 4,657 5,156
Sales, General & Administrative 54,175 54,376
(Gain)/Loss on Sale of Assets 1 (2)
Interest Income (150) (66)
---------------- ----------------
144,040 143,390
---------------- ----------------
INCOME BEFORE INCOME TAXES 14,652 11,732
---------------- ----------------
PROVISION FOR INCOME TAXES
Current 4,661 3,463
Deferred 1,273 995
---------------- ----------------
5,934 4,458
---------------- ----------------
NET INCOME $ 8,718 $ 7,274
================ ================
EARNINGS PER SHARE - BASIC $ 0.19 $ 0.16
================ ================
EARNINGS PER SHARE - DILUTED $ 0.19 $ 0.16
================ ================
Average Shares Outstanding---Basic 45,298 44,912
Average Shares Outstanding---Diluted 46,643 46,110
DIVIDENDS PER SHARE $ 0.06 $ 0.05
================ ================
The accompanying notes are an integral part of these
consolidated financial statements.
3
ROLLINS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(Unaudited)
Three Months Ended
March 31,
----------------------------------------
2004 2003
------------------ -----------------
OPERATING ACTIVITIES
Net Income $ 8,718 $ 7,274
Adjustments to Reconcile Net Income to Net
Cash Provided by Operating Activities:
Depreciation and Amortization 4,657 5,156
Deferred Income Taxes 1,273 1,009
Other, Net 64 35
(Increase) Decrease in Assets:
Trade Receivables 2,873 495
Materials and Supplies (310) (526)
Other Current Assets (2,678) (2,063)
Other Non-Current Assets (446) 44
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 3,761 2,787
Unearned Revenue 4,694 2,989
Accrued Insurance (1,261) 9
Accrual for Termite Contracts (238) 997
Long-Term Accrued Liabilities (917) (52)
------------------ -----------------
Net Cash Provided by Operating Activities 20,190 18,154
------------------ -----------------
INVESTING ACTIVITIES
Sale/(Purchase) of Marketable Securities, Net 21,866 ---
Purchases of Equipment and Property (1,739) (961)
Acquisition of Companies (158) (385)
------------------ -----------------
Net Cash Provided by (Used in) Investing Activities 19,969 (1,346)
------------------ -----------------
FINANCING ACTIVITIES
Dividends Paid (2,718) (2,247)
Other 907 1,475
------------------ -----------------
Net Cash Used in Financing Activities (1,811) (772)
------------------ -----------------
Net Increase in Cash and Short-Term Investments 38,348 16,036
Cash and Short-Term Investments At Beginning of Period 59,540 38,315
------------------ -----------------
Cash and Short-Term Investments At End of Period $ 97,888 $ 54,351
================== =================
<FN>
The accompanying notes are an integral part of these consolidated financial
statements.
</FN>
4
ROLLINS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PREPARATION AND OTHER
Basis of Preparation--The consolidated financial statements included
herein have been prepared by Rollins, Inc. (the "Company"), without
audit, pursuant to the rules and regulations of the Securities and
Exchange Commission applicable to quarterly reporting on Form 10-Q.
These consolidated financial statements have been prepared in
accordance with Statement of Financial Accounting Standard No. 94,
Consolidation of All Majority-Owned Subsidiaries ("SFAS 94") and Rule
3A-02(a) of Regulation S-X. In accordance with SFAS 94 and with Rule
3A-02(a) of Regulation S-X, the Company's policy is to consolidate all
subsidiaries and investees where it has voting control. The Company
does not have any subsidiaries or investees where it has less than a
100% equity interest or less than 100% voting control, nor does it
have any interest in other investees, joint ventures, or other
entities that require consolidation.
Footnote disclosures normally included in financial statements
prepared in accordance with accounting principles generally accepted
in the United States have been condensed or omitted pursuant to such
rules and regulations. These consolidated financial statements should
be read in conjunction with the financial statements and related notes
contained in the Company's annual report on Form 10-K for the year
ended December 31, 2003.
In the opinion of management, the consolidated financial statements
included herein contain all adjustments, consisting of a normal
recurring nature, necessary to present fairly the financial position
of the Company as of March 31, 2004 and December 31, 2003, and the
results of its operations and cash flows for the three months ended
March 31, 2004 and 2003. Operating results for the three months ended
March 31, 2004 are not necessarily indicative of the results that may
be expected for the year ending December 31, 2004.
The Company has only one reportable segment, its pest and termite
control business. The Company's results of operations and its
financial condition are not reliant upon any single customer or a few
customers or the Company's foreign operations.
Estimates Used in the Preparation of Consolidated Financial
Statements--The preparation of the consolidated financial statements
in conformity with accounting principles generally accepted in the
United States requires Management to make estimates and assumptions
that affect the amounts reported in the accompanying notes and
financial statements. Actual results could differ from those
estimates.
Cash and Short-Term Investments--The Company considers all investments
with a maturity of three months or less to be cash equivalents.
Short-term investments are stated at cost, which approximates fair
market value.
Marketable Securities--From time to time, the Company maintains
investments held by several large, well-capitalized financial
institutions. The Company's investment policy does not allow
investment in any securities rated less than "investment grade" by
national rating services.
Management determines the appropriate classification of debt
securities at the time of purchase and re-evaluates such designations
as of each balance sheet date. Debt securities are classified as
available-for-sale because the Company does not have the intent to
hold the securities to maturity. Available-for-sale securities are
stated at their fair values, with the unrealized gains and losses, net
of tax, reported as a separate component of stockholders' equity.
Realized gains and losses and declines in value judged to be other
than temporary on available-for-sale securities are included in
interest income. In the first quarter of 2004, the Company sold the
balance of its marketable securities, the proceeds of which will be
used to pay for the Western Industries, Inc. acquisition scheduled to
be completed in the second quarter of 2004. The cost of securities
sold is based on the specific identification method. Interest and
dividends on securities classified as available-for-sale are included
in interest income. The Company's marketable securities generally
consist of United States government, corporate and municipal debt
securities.
Comprehensive Income (Loss)--Other Comprehensive Income (Loss) results
from foreign currency translations and unrealized loss on marketable
securities.
New Accounting Standards--In December 2002, the FASB issued
Interpretation No. 46, Consolidation of Variable Interest Entities
("FIN 46"). The Interpretation requires that a variable interest
entity be consolidated by a company if that company is subject to a
majority of the risk of loss from the variable interest entity's
5
activities or entitled to receive a majority of the entity's residual
returns or both. The consolidation requirements of FIN 46 are
effective for all variable interest entities created or acquired after
January 31, 2003. In December 2003, the Financial Accounting Standards
Board issued a revision to FIN 46 referred to as Interpretation No. 46
(R). Among other provisions, the revision extended the adoption date
of FIN 46 (R) to the first quarter of 2004 for variable interest
entities created prior to February 1, 2003. During 2003, the Company
adopted FIN 46 with respect to variable interest entities created
after January 31, 2003. The Company adopted FIN 46 (R) in the first
quarter of 2004 for variable interest entities created prior to
February 1, 2003. The adoption did not have a significant effect on
the Company's financial position or results of operations.
Franchising Program--Orkin has 45 franchises as of March 31, 2004,
including international franchises in Mexico, established in 2000, and
Panama, established in 2003. Transactions with franchises involve
sales of customer contracts to establish new franchises, initial
franchise fees and royalties. The customer contracts and initial
franchise fees are typically sold for a combination of cash and notes
due over periods ranging up to 5 years. As of March 31, 2004 and 2003,
notes receivable from franchises aggregated $4.5 million and $4.0
million, respectively. The Company recognizes gains from the sale of
customer contracts at the time they are sold to franchises and
collection on the notes is reasonably assured, which amounted to
approximately $0.9 million in the first quarter of 2004 compared to
$1.6 million in first quarter of 2003, and are included as revenues in
the accompanying Consolidated Statements of Income. Initial franchise
fees are deferred for the duration of the initial contract period and
are included as unearned revenue in the Consolidated Statements of
Financial Position. Deferred franchise fees amounted to $1.5 million
and $1.3 million at March 31, 2004 and 2003, respectively. Royalties
from franchises are accrued and recognized as revenues as earned on a
monthly basis. Revenues from royalties were $0.4 million in the first
quarter of 2004 compared to $0.2 million in the first quarter of 2003.
The Company's maximum exposure to loss relating to the franchises
aggregate $3.0 million and $2.7 million at March 31, 2004 and 2003,
respectively.
Fair Value of Financial Instruments--The Company's financial
instruments consist of cash, short-term investments, marketable
securities, trade and notes receivables, accounts payable and other
short-term liabilities. The carrying amounts of these financial
instruments approximate their fair values.
Reclassifications--Certain amounts for prior periods have been
reclassified to conform with the current period consolidated financial
statement presentation. Such reclassifications had no effect on
previously reported net income.
Seasonality--The business of the Company is affected by the seasonal
nature of the Company's pest and termite control services as evidenced
by the following chart.
Total Net Revenues
------------------------------------------
2004 2003 2002
- --------------------------------------------------------------------------------
First Quarter $158,692 $155,122 $153,302
Second Quarter N/A 185,105 184,189
Third Quarter N/A 178,262 174,063
Fourth Quarter N/A 158,524 153,871
- --------------------------------------------------------------------------------
6
NOTE 2. EARNINGS PER SHARE
In accordance with SFAS No. 128, Earnings Per Share ("EPS"), the
Company presents basic EPS and diluted EPS. Basic EPS is computed on
the basis of weighted-average shares outstanding. Diluted EPS is
computed on the basis of weighted-average shares outstanding plus
common stock options outstanding during the year which, if exercised,
would have a dilutive effect on EPS. A reconciliation of the number of
weighted-average shares used in computing basic and diluted EPS is as
follows:
Three Months Ended
March 31,
--------------------------
(in thousands except per share data and per share amounts) 2004 2003
----------------------------------------------------------------------------------------------------
Basic and diluted earnings available to stockholders (numerator): $ 8,718 $ 7,274
------------ ------------
Shares (denominator):
Weighted-average shares outstanding 45,298 44,912
Effect of Dilutive securities:
Employee Stock Options 1,345 1,198
------------ ------------
Adjusted Weighted-Average Shares 46,643 46,110
------------ ------------
Per share amounts:
Basic earnings per common share $ 0.19 $ 0.16
Diluted earnings per common share $ 0.19 $ 0.16
----------------------------------------------------------------------------------------------------
NOTE 3. LEGAL PROCEEDINGS
Orkin, one of the Company's subsidiaries, is a named defendant in
Helen Cutler and Mary Lewin v. Orkin Exterminating Company, Inc. et
al. pending in the District Court of Houston County, Alabama. The
plaintiffs in the above mentioned case filed suit in March of 1996 and
are seeking monetary damages and injunctive relief for alleged breach
of contract arising out of alleged missed or inadequate reinspections.
The attorneys for the plaintiffs contend that the case is suitable for
a class action and the court has ruled that the plaintiffs would be
permitted to pursue a class action lawsuit against Orkin. Orkin
believes this case to be without merit and intends to defend itself
vigorously at trial. The trial is currently set for June 2004. At this
time, the final outcome of the litigation cannot be determined.
However, in the opinion of Management, the ultimate resolution of this
action will not have a material adverse effect on the Company's
financial position, results of operations or liquidity.
Orkin is also a named defendant in Butland et al. v. Orkin
Exterminating Company, Inc. et al. pending in the Circuit Court of
Hillsborough County, Tampa, Florida. The plaintiffs filed suit in
March of 1999 and are seeking monetary damages and injunctive relief.
The Court ruled in early April 2002, certifying the class action
lawsuit against Orkin. Orkin appealed this ruling to the Florida
Second District Court of Appeals which remanded the case back to the
trial court for further findings. Orkin believes this case to be
without merit and intends to defend itself vigorously through trial,
if necessary. At this time, the final outcome of the litigation cannot
be determined. However, in the opinion of Management, the ultimate
resolution of this action will not have a material adverse effect on
the Company's financial position, results of operations or liquidity.
Orkin is involved in certain environmental matters primarily arising
in the normal course of business. In the opinion of Management, the
Company's liability under any of these matters would not materially
affect its financial condition or results of operations.
Additionally, in the normal course of business, Orkin is a defendant
in a number of lawsuits, which allege that plaintiffs have been
damaged as a result of the rendering of services by Orkin personnel
and equipment. Orkin is actively contesting these actions. Some
lawsuits have been filed (Ernest W. Warren and Dolores G. Warren et
al. v. Orkin Exterminating Company, Inc., et al.; Elizabeth Allen and
William Allen et al. v. Rollins, Inc. and Orkin Exterminating Company,
Inc.; Francis D. Petsch, et al. v. Orkin Exterminating Company, Inc.
et al.; and Bob J. Stevens v. Orkin Exterminating Company, Inc. and
Rollins, Inc.) in which the Plaintiffs are seeking certification of a
class. The cases originate in Georgia, Florida, and Texas. The Company
believes them to be without merit and intends to vigorously contest
certification and defend itself through trial, if necessary. In the
opinion of Management, the outcome of these actions will not have a
material adverse effect on the Company's financial position, results
of operations or liquidity.
7
NOTE 4. STOCKHOLDERS' EQUITY
During the first quarter ended March 31, 2004, approximately 249,000
shares of common stock were issued upon exercise of stock options by
employees. As permitted by SFAS No. 123, Accounting for Stock-Based
Compensation, the Company accounts for employee stock compensation
plans using the intrinsic value method prescribed by Accounting
Principles Board Opinion No. 25, Accounting for Stock Issued to
Employees. No stock-based employee compensation cost is reflected in
net income, as all options granted had an exercise price equal to the
market value of the underlying common stock on the date of grant. The
following table illustrates the effect on net income and earnings per
share if the Company had applied the fair value recognition provisions
of FASB Statement No. 123, Accounting for Stock-Based Compensation, to
stock-based employee compensation.
Three Months Ended
March 31,
-------------------------
(in thousands, except per share data) 2004 2003
-------------------------
Net income, as reported $ 8,718 $ 7,274
Deduct: Total stock-based employee
compensation expense determined under
fair value based method for all awards,
net of related tax effects (202) (483)
-------------------------
Pro forma net income $ 8,516 $ 6,791
-------------------------
Earnings per share:
Basic-as reported $ 0.19 $ 0.16
Basic-pro forma $ 0.19 $ 0.15
Diluted-as reported $ 0.19 $ 0.16
Diluted-pro forma $ 0.18 $ 0.15
NOTE 5. ACCUMULATED OTHER COMPREHENSIVE LOSS
Accumulated other comprehensive loss consists of the following (in
thousands):
Unrealized
Minimum Foreig n Loss on
Pension Currency Marketable
Liability Translation Securities Total
- ----------------------------------------------------------------------------------------------------------------
Balance at December 31, 2002 $ (16,182) $ (765) $ --- $ (16,947)
Change during 2003:
Before-tax amount.. 26,079 842 (108) 26,813
Tax benefit (expense) (9,897) (324) 41 (10,180)
-------------------------------------------------------------
16,182 518 (67) 16,633
-------------------------------------------------------------
Balance at December 31, 2003 $ --- $ (247) $ (67) $ (314)
-------------------------------------------------------------
Change during first three months of 2004:
Before-tax amount.. --- (89) 108 19
Tax benefit (expense) --- 36 (41) (5)
-------------------------------------------------------------
--- (53) 67 14
-------------------------------------------------------------
Balance at March 31, 2004 $ --- $ (300) $ --- $ (300)
- ----------------------------------------------------------------------------------------------------------------
8
NOTE 6. ACCRUAL FOR TERMITE CONTRACTS
The Company maintains an accrual for termite contracts representing
the estimated costs of reapplications, repair claims and associated
labor, chemicals, and other costs relative to termite control services
performed prior to the balance sheet date. A reconciliation of the
beginning and ending balances of the accrual for termite contracts is
as follows:
Three Months Ended
March 31,
--------------------------
(in thousands) 2004 2003
----------------------------------------------------------------------
Beginning Balance $43,873 $46,446
Current Period Provision 4,532 5,525
Settlements, Claims and Expenditures Made
During the Period (4,770) (4,528)
--------------------------
Ending Balance $43,635 $47,443
----------------------------------------------------------------------
NOTE 7. PENSION AND POST-RETIREMENT BENEFIT PLANS
The following represents the net periodic pension benefit costs and
related components in accordance with SFAS 132 ( R ):
Components of Net Pension Benefit Cost
Three Months Ended
March 31,
--------------------------
(in thousands) 2004 2003
----------------------------------------------------------------------
Service Cost $ 1,297 $ 1,171
Interest Cost 2,074 1,950
Expected Return on Plan Assets (2,394) (2,123)
Amortization of:
Prior Service Benefit (217) (217)
Unrecognized Net Loss 845 506
--------------------------
Net Periodic Benefit Cost $ 1,605 $ 1,287
----------------------------------------------------------------------
A contribution of $3.0 million was made to the pension plan in April
2004. The Company expects to contribute an additional $0.0 to $3.0
million to the pension plan in 2004.
NOTE 8. RELATED PARTY TRANSACTIONS
On April 28, 2004, the Company sold real estate in Okeechobee County,
Florida to LOR, Inc., a company controlled by R. Randall Rollins,
Chairman of the Board of Rollins, Inc. and Gary W. Rollins, Chief
Executive Officer, President and Chief Operating Officer of Rollins,
Inc. for $16.6 million in cash. The sale is expected to result in a
net gain after tax ranging from $0.17 to $0.19 per share since the
real estate has appreciated over approximately 30 years it has been
owned by the Company. The real estate is under a lease agreement with
annual rentals of $131,939 that expires June 30, 2007. The Board of
Directors, at its quarterly meeting on January 27, 2004, approved the
formation of a committee (the "Committee") made up of Messrs. Bill J.
Dismuke and James B. Williams, who are independent directors, to
evaluate the transaction. The Committee was furnished with full
disclosure of the transaction, including independent appraisals, and
determined that the terms of the transaction were reasonable and fair
to the Company. The Company is also contemplating the sale of two
pieces of real estate in Sussex County, Delaware to LOR, Inc. or an
entity wholly owned by LOR, Inc. In addition, the Company is
contemplating the purchase of real estate located at 2158 Piedmont
Road, N.E., Atlanta, Georgia 30324, adjacent to the Company's
headquarters, from LOR, Inc.
NOTE 9. SUBSEQUENT EVENTS
On March 8, 2004, the Company entered into a definitive agreement to
acquire, through a purchase of assets, the pest control business and
certain ancillary operations of Western Industries, Inc. ("Western")
and its affiliates, including Residex Corporation ("Residex"),
Western's distribution business. The aggregate consideration will be
paid in a combination of approximately $95.0 million in cash and
short-term investments, on hand as well as $15.0 million in borrowings
from the below mentioned Wachovia Bank NA credit facility, totaling
approximately $110.0 million. The Company is anticipating closing on
the purchase in the second
9
quarter of 2004. Shortly following the purchase of Western, the
Company anticipates selling Residex, the distribution business of
Western. No gain is expected on the sale of Residex.
On April 28, 2004 the Company entered into a $15.0 million senior
unsecured revolving credit facility with Wachovia Bank NA. The entire
amount of the credit facility will be used to fund a portion of the
Western Industries, Inc. acquisition that the Company anticipates
closing on in the second quarter of 2004.
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations.
Overview
The Company's investment in our new marketing and sales initiatives and
continued emphasis on customer retention resulted in revenue growth of 2.3% in
the first quarter of 2004 compared to the first quarter of 2003, year-over-year
sales growth and further increases in the Company's cash position.
For the first quarter of 2004, the Company had net income of $8.7 million
compared to net income of $7.3 million in the first quarter of 2003, which
represents a 19.9% increase. In addition to the revenue increase of 2.3%, the
Company's Cost of Services Provided decreased 0.3 percentage points, as a
percentage of revenues, and the Company achieved an improvement in Sales,
General and Administrative expenses of 1.0 percentage point, as a percentage of
revenues.
The financial results for the first quarter of 2004 were positively impacted by
the continued benefit of our recent service and sales and marketing initiatives,
which included every-other-month residential pest control service, Gold Medal
premium commercial pest control services, the investment in Business Development
Managers for every Orkin division, the Commercial Pest Control Quality Assurance
Program, termite directed liquid and baiting treatment, and the creation of or
enhancement of regional call centers, which have enabled better accountability
over leads and better coordination of scheduling starts for new customers.
A key component of these revenue-generating initiatives is our new Business
Development Managers ("BDM"). These managers work closely with Division Vice
Presidents and Region Managers to identify specific market opportunities and to
develop action plans that specifically meet these situations. As a result, the
Company is experiencing increased calls from interested consumers, improved
sales productivity and sales gains.
In addition, our Commercial Pest Control Quality Assurance Program is improving
the service being provided to our commercial customers and helping the Company
build stronger customer relationships. This program clearly defines the
Company's service expectations and branches and service technicians are being
independently audited against these expectations.
The Company is also gaining brand recognition through its new media plan and
advertising plans, in part as a result of a new Creative advertising campaign,
and an increase in its national radio advertising. A large portion of the
Company's potential customers are highly reachable with radio and it avoids much
of the clutter that exists in T.V. advertising today.
An example of building the Orkin brand is the recently forged partnership with
the National Science Teachers Association (NSTA), a nationwide organization of
educators with over 50,000 members. At the national conference in Atlanta
earlier this month, over 950 teachers signed up for an Orkin Man School
Presentation and 4,000 Orkin pest identification posters were distributed.
In the summer of 2003, the Company test marketed a mosquito control program in a
few U.S. locations and two provinces in Canada, in response to the health risk
caused by mosquitoes and the spread of West Nile Virus in North America. The
Company is now in the process of expanding this program to ninety-five U.S.
branches. Additionally, the Canadian provinces that utilized the mosquito
control program last year have renewed their agreements. This is a significant
endorsement to the effectiveness of the service. The Company will also be
marketing the mosquito program to neighborhood associations in the U.S.
The Company continues to expand its growth through the Orkin franchise program.
This program is primarily used in smaller markets where it is currently not
economically feasible to locate a conventional Orkin branch. There is a
contractual buyback provision at the Company's option with a pre-determined
purchase price using a formula applied to revenues of the franchise. There were
45 Company franchises at the end of the first quarter of 2004 compared to 44 at
the end of 2003.
10
Results of Operations
Three Months Ended % Better/Worse as
March 31, Compared to Prior Year
-------------------------------------------------------------------
(in thousands) 2004 2003 2004
-------------------------------------------------------------------
Revenues $158,692 $155,122 2.3%
Cost of Services Provided 85,357 83,926 (1.7)
Depreciation and Amortization 4,657 5,156 9.7
Sales, General and Administrative 54,175 54,376 0.4
(Gain)/Loss on Sale of Assets 1 (2) (150.0)
Interest Income (150) (66) 127.3
-------------------------------------------------------------------
Income Before Income Taxes 14,652 11,732 24.9
Provision for Income Taxes 5,934 4,458 (33.1)
-------------------------------------------------------------------
Net Income $ 8,718 $ 7,274 19.9%
Revenues for the quarter ended March 31, 2004 increased to $158.7 million, an
increase of $3.6 million or 2.3% from last year's first quarter revenues of
$155.1 million. The Company deferred $1.8 million more in termite renewals
received in March this year than in previous year's first quarter. Refinements
in systems and reporting have allowed the Company to more accurately match
specific cash receipts against the renewal period to which they apply.
Consequently, termite revenues declined slightly. April is traditionally one of
the largest completions months for termite sales and many people pay their
annual renewals in the following March. As a result, certain termite renewal
revenue that was received in the first quarter of 2004 has been deferred until
the second quarter of 2004 at which time the renewal anniversary will occur.
This refinement will have no impact over the course of the year, but delays
recognition of some revenue to a later quarter. Every-other-month service, our
primary residential pest control service offering, continues to grow in
importance, comprising 55.3% of our residential pest control customer base at
March 31, 2004. The Company's largest growth for the first quarter of 2004 was
in the Company's commercial pest control business which exceeded 7.0%, while
modest growth was achieved in residential pest control. The Company's foreign
operations accounted for approximately 6% of total first quarter revenues of
2004 compared to approximately 5% in the first quarter of 2003.
The business of the Company is affected by the seasonal nature of the Company's
pest and termite control services as evidenced by the following chart.
Total Net Revenues
---------------------------------------
2004 2003 2002
- --------------------------------------------------------------------------------
First Quarter $158,692 $155,122 $153,302
Second Quarter N/A 185,105 184,189
Third Quarter N/A 178,262 174,063
Fourth Quarter N/A 158,524 153,871
- --------------------------------------------------------------------------------
Cost of Services Provided for the first quarter ended March 31, 2004 increased
$1.4 million or 1.7%, although the expense expressed as a percentage of revenues
decreased by 0.3 percentage points, representing 53.8% of revenues for the first
quarter 2004 compared to 54.1% of revenues in the prior year first quarter. The
dollar increase was mainly due to higher expenses for personnel related costs
and materials and supplies partially offset by lower insurance and claims.
Sales, General and Administrative for the first quarter ended March 31, 2004
decreased $201,000 or 0.4% and, as a percentage of revenues, improved by 1.0
percentage point or 2.8%, averaging 34.1% of total revenues compared to 35.1%
for the prior year quarter. The improvement for the quarter was mainly a result
of a change in the period over which the summer sales program is expensed.
Outside sales commissions for the summer sales program are now expensed over the
selling period, whereas they were formerly amortized over a twelve month period.
This policy change started in the fourth quarter of 2003.
Depreciation and Amortization expenses for the quarter ended March 31, 2004 were
$499,000 or 9.7% lower than the prior year quarter. The decrease was due to
lower capital spending and certain technology assets becoming fully depreciated
in the last twelve months.
The Company's tax provision of $5.9 million for the first quarter ended March
31, 2004 reflects increased pre-tax income over the prior year period and an
increase in the effective tax rate. The effective tax rate was 40.5% for the
first quarter ended March 31, 2004, up from 38.0% for the first quarter ended
March 31, 2003. The increase reflects increases in the Company's effective state
income tax rate, as well as the impact of permanent differences associated with
the Company's Canadian operations.
11
Critical Accounting Policies
We view critical accounting policies to be those policies that are very
important to the portrayal of our financial condition and results of operations,
and that require Management's most difficult, complex or subjective judgments.
The circumstances that make these judgments difficult or complex relate to the
need for Management to make estimates about the effect of matters that are
inherently uncertain. We believe our critical accounting policies to be as
follows:
Accrual for Termite Contracts--The Company maintains an accrual for termite
contracts representing the estimated costs of reapplications, repair claims,
associated labor and chemicals, settlements, awards and other costs relative to
termite control services performed prior to the balance sheet date. The Company
contracts an independent third party actuary on an annual basis to provide the
Company an estimate of the liability based upon historical claims information
for the largest portion of the accrual. In addition, Management estimates and
accrues for costs outside the scope of the actuarial study including the
estimated costs of retreatments, representing costs to be incurred that are
estimatable at the balance sheet date, as well as liability and costs associated
with claims in litigation. The actuarial study and historical experience are
major considerations in determining the accrual balance, along with Management's
knowledge of changes in business practices, contract changes, ongoing claims,
and termite remediation trends. The accrual is established based on all these
factors. Management makes judgments utilizing these operational and other
factors but recognizes that they are inherently subjective due to the difficulty
in predicting settlements and awards. Other factors that may impact future cost
include chemical life expectancy and government regulation. It is significant
that the actual number of claims has decreased in recent years due to changes in
the Company's business practices. However, it is not possible to accurately
predict future significant claims. Positive changes to our business practices
include revisions made to our contracts, more effective treatment methods that
include a directed-liquid baiting program, more effective termiticides, and
expanded training methods and techniques.
Accrued Insurance--The Company self-insures, up to specified limits, certain
risks related to general liability, workers' compensation and vehicle liability.
The estimated costs of existing and future claims under the self-insurance
program are accrued based upon historical trends as incidents occur, whether
reported or unreported (although actual settlement of the claims may not be made
until future periods) and may be subsequently revised based on developments
relating to such claims. The Company contracts an independent third party
actuary on an annual basis to provide the Company an estimated liability based
upon historical claims information. The actuarial study is a major
consideration, along with Management's knowledge of changes in business
practices and existing claims compared to current balances. The reserve is
established based on all these factors. Management's judgment is inherently
subjective and a number of factors are outside Management's knowledge and
control. Additionally, historical information is not always an accurate
indication of future events. It should be noted that the number of claims has
been decreasing due to the Company's proactive risk management to develop and
maintain ongoing programs. However, it is not possible to accurately predict
future significant claims. Initiatives that have been implemented include
pre-employment screening and an annual motor vehicle report required on all its
drivers, utilization of a Global Positioning System that has been fully deployed
to our Company vehicles, post-offer physicals for new employees, and pre-hire,
random and post-accident drug testing. The Company has improved the time
required to report a claim by utilizing a "Red Alert" program that provides
serious accident assessment twenty four hours a day and seven days a week and
has instituted a modified duty program that enables employees to go back to work
on a limited-duty basis.
Revenue Recognition--The Company's revenue recognition policies are designed to
recognize revenues at the time services are performed. For certain revenue
types, because of the timing of billing and the receipt of cash versus the
timing of performing services, certain accounting estimates are utilized.
Residential and commercial pest control services are primarily recurring in
nature on a monthly or bi-monthly basis, while certain types of commercial
customers may receive multiple treatments within a given month. In general, pest
control customers sign an initial one-year contract, and revenues are recognized
at the time services are performed. For pest control customers, the Company
offers a discount for those customers who prepay for a full year of services.
The Company defers recognition of these advance payments and recognizes the
revenue as the services are rendered. The Company classifies the discounts
related to the advance payments as a reduction in revenues. Termite baiting
revenues are recognized based on the delivery of the individual units of
accounting. At the inception of a new baiting services contract upon quality
control review of the installation, the Company recognizes revenue for the
delivery of the monitoring stations, initial directed liquid termiticide
treatment and installation of the monitoring services. The amount deferred is
the fair value of monitoring services to be rendered after the initial service.
The amount deferred for the undelivered monitoring element is then recognized as
income on a straight-line basis over the remaining contract term, which results
in recognition of revenue in a pattern that approximates the timing of
performing monitoring visits. Baiting renewal revenue is deferred and recognized
over the annual contract period on a straight-line basis that approximates the
timing of performing the required monitoring visits. Traditional termite
treatments are recognized as revenue at the time services are performed.
Traditional termite contract renewals are recognized as revenues at the renewal
date in order to match the revenue with the approximate timing of the
corresponding service provided. Interest income on installment receivables is
accrued monthly based on actual loan balances and stated interest rates.
Franchise fees are treated as unearned revenue in the Statement of Financial
Position for the duration of the initial contract period. Royalties from Orkin
franchises are accrued and recognized as revenues as earned on a monthly basis.
Gains on sales of pest control customer accounts to franchises are recognized at
the time of sale and when collection is reasonably assured.
12
Contingency Accruals--The Company is a party to legal proceedings with respect
to matters in the ordinary course of business. In accordance with Statement of
Financial Accounting Standards No. 5, Accounting for Contingencies, the Company
estimates and accrues for its liability and costs associated with the
litigation. Estimates and accruals are determined in consultation with outside
counsel. It is not possible to accurately predict the ultimate result of the
litigation. However, in the opinion of Management, the outcome of the litigation
will not have a material adverse impact on the Company's financial condition or
results of operations.
Liquidity and Capital Resources
Cash and Cash Flow
Three Months Ended March 31,
-----------------------------------
(in thousands) 2004 2003
- --------------------------------------------------------------------------------
Net Cash Provided by Operating Activities $ 20,190 $ 18,154
Net Cash Provided by (Used in) Investing Activities 19,969 (1,346)
Net Cash Used in Financing Activities (1,811) (772)
------------ ----------------
Net Increase in Cash and Short-Term Investments $ 38,348 $ 16,036
- --------------------------------------------------------------------------------
The Company believes its current cash and short-term investments balances,
future cash flows from operating activities and available borrowings under its
$55.0 million credit facility and $15.0 million credit facility, as discussed
below, will be sufficient to finance its current operations and obligations, and
fund expansion of the business for the foreseeable future, and acquisition of
other select pest control businesses including the previously announced
acquisition of Western Industries, Inc. The Company's operations generated cash
of $20.2 million for the first quarter ended March 31, 2004, compared with cash
provided by operating activities of $18.2 million for the same period in 2003.
The 2004 increase was achieved primarily from higher Net Income and strong
collections in accounts receivable and advance payments received from customers.
The Company invested approximately $1.7 million in capital expenditures during
the three months ended March 31, 2004, compared to $1.0 million during the same
period in 2003, and expects to invest between $8.0 million and $10.0 million for
the full year. Capital expenditures for the first three months consisted
primarily of the purchase of equipment replacements and upgrades and
improvements to the Company's management information systems. During the first
three months, the Company made acquisitions totaling $158,000, compared to
$385,000 during the same period in 2003. A total of $2.7 million was paid in
cash dividends ($0.06 per share) during the first three months of 2004, compared
to $2.2 million or $0.05 per share during the same period in 2003. At the
January 27, 2004 Board of Directors' Meeting, the Board approved a 20% increase
in the quarterly dividend, from $0.05 to $0.06 per share to holders of record on
February 10, 2004, payable March 10, 2004. The Company did not repurchase any
shares of Common Stock in the first quarter of 2004 and there remain 649,684
shares authorized to be repurchased. The capital expenditures, acquisitions and
cash dividends were funded entirely through existing cash balances and operating
activities. The Company maintains a $55.0 million credit facility with a
commercial bank, of which no borrowings were outstanding as of March 31, 2004 or
April 15, 2004. However, the Company does maintain approximately $32.0 million
in Letters of Credit.
On March 8, 2004, the Company entered into a definitive agreement to acquire,
through a purchase of assets, the pest control business and certain ancillary
operations of Western Industries, Inc. ("Western") and its affiliates, including
Residex Corporation ("Residex"), Western's distribution business. The aggregate
consideration will be funded through a combination of approximately $95.0
million in cash and short-term investments on hand, as well as $15.0 million in
borrowings from the below mentioned Wachovia Bank NA credit facility, totaling
approximately $110.0 million. The Company is anticipating closing on the
purchase in April 2004. Shortly following the purchase of Western, the Company
anticipates selling Residex, the distribution business of Western. No gain is
expected on the sale of Residex.
On April 28, 2004, the Company entered into a $15.0 million senior unsecured
revolving credit facility with Wachovia Bank NA. The entire amount of the credit
facility will be used to fund a portion of the Western Industries, Inc.
acquisition that the Company anticipates closing on in April 2004.
On April 28, 2004, the Company sold real estate in Okeechobee County, Florida to
LOR, Inc., a company controlled by R. Randall Rollins, Chairman of the Board of
Rollins, Inc. and Gary W. Rollins, Chief Executive Officer, President and Chief
Operating Officer of Rollins, Inc. for $16.6 million in cash. The sale is
expected to result in a net gain after tax ranging from $0.17 to $0.19 per share
since the real estate has appreciated over approximately 30 years it has been
owned by the Company. The real estate is under a lease agreement with annual
rentals of $131,939 that expires June 30, 2007. The Board of Directors, at its
quarterly meeting on January 27, 2004, approved the formation of a committee
(the "Committee") made up of Messrs. Bill J. Dismuke and James B. Williams, who
are independent directors, to evaluate the transaction. The Committee was
furnished with full disclosure of the transaction, including independent
appraisals, and determined that the terms of the
13
transaction were reasonable and fair to the Company. The Company is also
contemplating the sale of two pieces of real estate in Sussex County, Delaware
to LOR, Inc. or an entity wholly owned by LOR, Inc. In addition, the Company is
contemplating the purchase of real estate located at 2158 Piedmont Road, N.E.,
Atlanta, Georgia 30324, adjacent to the Company's headquarters, from LOR, Inc.
Orkin, one of the Company's subsidiaries, is aggressively defending a class
action lawsuit filed in Hillsborough County, Tampa, Florida. In early April
2002, the Circuit Court of Hillsborough County certified the class action status
of Butland et al. v. Orkin Exterminating Company, Inc. et al. Orkin is also a
defendant in Helen Cutler and Mary Lewin v. Orkin Exterminating Company, Inc. et
al pending in the District Court of Houston County, Alabama. Other lawsuits
against Orkin, and in some instances the Company, are also being vigorously
defended, including the Warren, Allen, Petsch, and Stevens cases. For further
discussion, see Note 3 to the accompanying financial statements.
A contribution of $3.0 million was made to the pension plan in April 2004. The
Company expects to contribute an additional $0.0 to $3.0 million to the pension
plan in 2004. In the opinion of Management, additional Plan contributions will
not have a material effect on the Company's financial position, results of
operations or liquidity.
Impact of Recent Accounting Pronouncements
In December 2002, the FASB issued Interpretation No. 46, Consolidation of
Variable Interest Entities ("FIN 46"). The Interpretation requires that a
variable interest entity be consolidated by a company if that company is subject
to a majority of the risk of loss from the variable interest entity's activities
or entitled to receive a majority of the entity's residual returns or both. The
consolidation requirements of FIN 46 are effective for all variable interest
entities created or acquired after January 31, 2003. In December 2003, the
Financial Accounting Standards Board issued a revision to FIN 46 referred to as
Interpretation No. 46 (R). Among other provisions, the revision extended the
adoption date of FIN 46 (R) to the first quarter of 2004 for variable interest
entities created prior to February 1, 2003. During 2003, the Company adopted FIN
46 with respect to variable interest entities created after January 31, 2003.
The Company adopted FIN 46 (R) in the first quarter of 2004 for variable
interest entities created prior to February 1, 2003. The adoption did not have a
significant effect on the Company's financial position or results of operations
(see Note 1 to the accompanying financial statements).
Forward-Looking Statements
This Quarterly Report contains forward-looking statements within the meaning of
the Private Securities Litigation Reform Act of 1995. Such forward-looking
statements include statements regarding the expected amount and impact of
potential future pension plan contributions, the expected impact of related
party transactions, the outcome of litigation arising in the ordinary course of
business and the outcome of the Helen Cutler and Mary Lewin v. Orkin
Exterminating Company, Inc. et al. ("Cutler") and the Butland et al. v. Orkin
Exterminating Company, Inc. et al. ("Butland") litigation on the Company's
financial position, results of operations and liquidity; the adequacy of the
Company's resources to fund operations and obligations; the Company's projected
2004 capital expenditures; the amount and impact of the sale of Residex; and the
impact of recent accounting pronouncements. The actual results of the Company
could differ materially from those indicated by the forward-looking statements
because of various risks, timing and uncertainties including, without
limitation, the possibility of an adverse ruling against the Company in the
Cutler, Butland or other litigation; general economic conditions; market risk;
changes in industry practices or technologies; the degree of success of the
Company's termite process reforms and pest control selling and treatment
methods; the Company's ability to identify potential acquisitions; climate and
weather trends; competitive factors and pricing practices; potential increases
in labor costs; and changes in various government laws and regulations,
including environmental regulations and additional risks discussed in the
Company's Form 10-K for 2003. All of the foregoing risks and uncertainties are
beyond the ability of the Company to control, and in many cases the Company
cannot predict the risks and uncertainties that could cause its actual results
to differ materially from those indicated by the forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
As of March 31, 2004, the Company maintained an investment portfolio subject to
short-term interest rate risk exposure. The Company has been affected by the
impact of lower interest rates on interest income from its short-term
investments. The Company is also subject to interest rate risk exposure through
borrowings on its $55.0 million credit facility. Due to the absence of such
borrowings as of March 31, 2004, this risk was not significant in 2003 and is
not expected to have a material effect upon the Company's results of operations
or financial position going forward. However, the Company does maintain
approximately $32.0 million in Letters of Credit. The Company is also exposed to
market risks arising from changes in foreign exchange rates. The Company
believes that this foreign exchange rate risk will not have a material effect
upon the Company's results of operations or financial position going forward.
14
Item 4. Controls and Procedures.
Under the supervision and with the participation of our Management, including
our principal executive officer and principal financial officer, we conducted an
evaluation of the effectiveness of the design and operations 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 of March 31, 2004. 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 such that the material information required to be included in
our Securities and Exchange Commission ("SEC") reports is recorded, processed,
summarized and reported within the time periods specified in SEC rules and forms
relating to Rollins, Inc., including our consolidated subsidiaries, and was made
known to them by others within those entities, particularly during the period
when this report was being prepared.
In addition, there were no significant changes in our internal control over
financial reporting during the quarter that could significantly affect these
controls. As of March 31, 2004, we did not identify any significant deficiency
or material weaknesses in our internal controls, and therefore no corrective
actions were taken.
15
PART II OTHER INFORMATION
Item 1. Legal Proceedings.
See Note 3 to Part I, Item 1 for discussion of certain litigation.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits
(2) (i) Asset Purchase Agreement by and among Orkin, Inc. and
Western Industries, Inc., Western Exterminating Company,
Inc. et al. dated March 8, 2004*.
(3) (i) Restated Certificate of Incorporation of Rollins,
Inc. is incorporated herein by reference to Exhibit
(3) (i) as filed with its Form 10-K for the year ended
December 31, 1997.
(ii) Amended and Restated By-laws of Rollins, Inc.
(4) Form of Common Stock Certificate of Rollins, Inc. is
incorporated herein by reference to Exhibit (4) as filed
with its Form 10-K for the year ended December 31, 1998.
(31.1) Certification of Chief Executive Officer Pursuant to
Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
(31.2) Certification of Chief Financial Officer Pursuant to
Item 601(b)(31) of Regulation S-K, as adopted pursuant
to Section 302 of the Sarbanes-Oxley Act of 2002.
(32.1) Certification of Chief Executive Officer and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350,
As Adopted Pursuant to Section 906 of the Sarbanes-Oxley
Act of 2002.
* To be filed with amendment.
16
(b) Reports on Form 8-K.
On January 30, 2004, the Company furnished a report on Form
8-K, which reported under Items 7 and 9 that on January 27,
2004, the Company reported that the Board of Directors
approved a 20% increase in the Company's quarterly dividend
on January 27, 2004. The increased regular quarterly
dividend of $0.06 per share will be payable March 10, 2004
to stockholders of record at the close of business February
10, 2004.
On February 6, 2004, the Company furnished a report on Form
8-K, which reported under Items 7 and 9 that on February 4,
2004, the Company reported that in the company's January 27,
2004 board of directors meeting, Glen Rollins was named
President and Chief Operating Officer of Orkin, Inc. and
former President, Gary W. Rollins, became Orkin, Inc.
chairman.
On February 17, 2004, the Company furnished a report that on
Form 8-K, which reported under Items 7 and 9 reported
unaudited financial results for its fourth quarter and year
ended December 31, 2003.
On February 24, 2004, the Company furnished a report that on
Form 8-K, which reported under Item 12 that on February 17,
2004, Rollins, Inc. had a conference call in which financial
results for the fourth quarter and the year ended December
31, 2003 were discussed. A transcript of the conference call
is attached to this report as Exhibit 99.1 and is
incorporated herein by reference.
On March 10, 2004, the Company furnished a report that on
Form 8-K, which reported under Items 5 and 7 that on March
8, 2004, Rollins, Inc. sent out a press release announcing,
that it had entered into a definitive purchase agreement to
acquire, through a purchase of assets, the pest control
business and certain ancillary operations of Western
Industries, Inc. and its affiliates.
On March 19, 2004, the Company furnished a report that on
Form 8-K, which reported under Items 7 and 12 that on March
16, 2004, Rollins, Inc. a nationwide consumer services
company (NYSE:ROL), announced that it filed Form 10-K for
the year ended December 31, 2003 with the Securities and
Exchange Commission on March 15, 2004.
17
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROLLINS, INC.
(Registrant)
Date: April 29, 2004 By: /s/ Gary W. Rollins
----------------------------------------------
Gary W. Rollins
Chief Executive Officer, President
and Chief Operating Officer
(Member of the Board of Directors)
Date: April 29, 2004 By: /s/ Harry J. Cynkus
----------------------------------------------
Harry J. Cynkus
Chief Financial Officer and Treasurer
(Principal Financial and Accounting Officer)
18