FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
(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, 1995.
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.
Incorporated I.R.S. Employer
in Identification Number
Delaware 51-0068479
2170 Piedmont Road, N.E., Atlanta, Georgia 30324
Telephone Number -- (404) 888-2000
____________________________
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 [ ]
At March 31, 1995, there were 35,847,475 shares of Common
Stock $1 Par Value, outstanding.
ROLLINS, INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page No.
--------
Statements of Financial Position -
March 31, 1995 and December 31, 1994 1
Statements of Income and Earnings Retained
- three months ended March 31, 1995 and 1994 2
Statements of Cash Flows
- three months ended March 31, 1995 and 1994 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
Part II Other Information 9
ROLLINS, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
(In thousands, except share data)
(Unaudited)
March 31, December 31,
1995 1994
--------- ------------
ASSETS
Cash and Short-Term Investments $ 48,054 $ 31,917
Marketable Securities 52,943 51,820
Trade Receivables, Net 100,578 101,900
Materials and Supplies 17,733 16,250
Deferred Income Taxes 4,575 4,445
Other Current Assets 8,911 8,567
--------- ------------
Current Assets 232,794 214,899
Equipment and Property, Net 28,609 27,989
Intangible Assets 42,072 42,092
Other Assets 10,278 10,285
--------- ------------
Total Assets $ 313,753 $ 295,265
========== =============
LIABILITIES
Accounts Payable $ 16,666 $ 12,002
Accrued Insurance Expenses 16,183 14,258
Accrued Payroll 12,844 12,700
Unearned Revenue 16,102 15,567
Other Expenses 16,607 12,362
--------- ------------
Current Liabilities 78,402 66,889
Deferred Income Taxes 12,289 12,205
Long-Term Accrued Liabilities 25,864 22,538
--------- ------------
Total Liabilities 116,555 101,632
--------- ------------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share; authorized
99,500,000 shares; 41,431,814 shares issued 41,432 41,432
Earnings Retained 206,954 203,582
--------- ------------
248,386 245,014
Less--Common Stock In Treasury, At Cost,
5,584,339 in 1995; 5,605,412 shares in 1994 51,188 51,381
--------- ------------
Total Stockholders' Equity 197,198 193,633
--------- ------------
Total Liabilities and Stockholders' Equity $ 313,753 $ 295,265
========== =============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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ROLLINS, INC. AND SUBSIDIARIES
STATEMENTS OF INCOME AND EARNINGS RETAINED
(In thousands, except share data)
(Unaudited)
Three Months Ended
March 31,
-------------------------
1995 1994
------------ ------------
REVENUES
Customer Services $ 142,654 $ 136,443
------------ ------------
COSTS AND EXPENSES
Cost of Services Provided 73,238 70,152
Sales, General and Administrative Expenses 55,932 53,561
Depreciation and Amortization 1,839 1,981
Interest Income (946) (451)
------------ ------------
130,063 125,243
------------ ------------
INCOME BEFORE INCOME TAXES 12,591 11,200
------------ ------------
PROVISION (CREDIT) FOR INCOME TAXES
Current 5,340 5,139
Deferred (556) (827)
------------ ------------
4,784 4,312
------------ ------------
NET INCOME 7,807 6,888
------------ ------------
EARNINGS RETAINED
Balance at Beginning of Period 203,582 171,862
Cash Dividends (5,018) (4,460)
Other 583 119
------------ ------------
BALANCE AT END OF PERIOD $ 206,954 $ 174,409
============ ============
EARNINGS PER SHARE $ 0.22 $ 0.19
============ ============
WEIGHTED AVERAGE
SHARES OUTSTANDING 35,837,688 35,678,930
============ ============
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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ROLLINS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Three Months Ended
March 31,
----------------------
1995 1994
-------- --------
OPERATING ACTIVITIES
Net Income $ 7,807 $ 6,888
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 1,839 1,981
Deferred Income Taxes (556) (827)
Other, Net 1,341 709
(Increase) Decrease in:
Trade Receivables 1,308 (1,033)
Materials and Supplies (1,483) (2,336)
Other Current Assets (152) (820)
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 10,777 8,678
Unearned Revenue 535 1,327
Non-Current Deferred Income Taxes (200) 292
Long-Term Accrued Liabilities 3,326 (175)
Other Non-Current Assets (207) (112)
-------- --------
Net Cash Provided by Operating Activities 24,335 14,572
-------- --------
INVESTING ACTIVITIES
Purchases of Equipment and Property (2,855) (2,234)
Net Cash Used for Acquisition of Companies (324) (27)
Proceeds from Sales of Equipment and Property 119 --
Marketable Securities, Net (541) (426)
-------- --------
Net Cash Used in Investing Activities (3,601) (2,687)
-------- --------
FINANCING ACTIVITIES
Dividends Paid (5,018) (4,460)
Treasury Stock Issued to Benefit Plans 421 290
-------- --------
Net Cash Used in Financing Activities (4,597) (4,170)
-------- --------
Net Increase (Decrease) in Cash
and Short-Term Investments 16,137 7,715
Cash and Short-Term Investments
at Beginning of Period 31,917 18,102
-------- --------
Cash and Short-Term Investments
at End of Period $ 48,054 $ 25,817
========= =========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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ROLLINS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PREPARATION
The consolidated financial statements included herein have been
prepared by the Registrant, without audit, pursuant to the rules
and regulations of the Securities and Exchange Commission. Footnote
disclosures normally included in the financial statements prepared
in accordance with generally accepted accounting principles 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 Registrant's annual report on Form 10-K for the
year ended December 31, 1994.
In the opinion of management, the consolidated financial statements
included herein contain all normal recurring adjustments necessary
to present fairly the financial position of the Registrant as of
March 31, 1995 and December 31, 1994, and the results of operations
and cash flows for the three months ended March 31, 1995 and 1994.
NOTE 2. PROVISION FOR INCOME TAXES
The book provision for income taxes includes the liability for
state income taxes, net of the federal income tax benefit. The
deferred provision for income taxes arises from the changes during
the year in the company's net deferred tax asset or liability.
NOTE 3. EARNINGS PER SHARE
Earnings per share is computed by dividing net income by the
weighted average number of shares outstanding during the respective
periods.
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ROLLINS, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 4. COMMITMENTS AND CONTINGENCIES
On May 26, 1993, the Attorney General of Missouri and several
Missouri residents who received termite treatment from Orkin,
on behalf of themselves and an alleged class, filed an action in
the City of St. Louis Circuit Court. The Attorney General has
alleged violations of the Missouri Merchandising Practices Act.
The private plaintiffs have alleged fraud and breach of certain
termite extermination contracts. The Plaintiffs' claims are based
on allegations that the Company failed to apply termiticides in
accordance with termiticide labels and its advertising. Plaintiffs
are collectively seeking restitution for claimed losses, civil
penalties, compensatory and punitive damages, and litigation
expenses, including attorneys' fees. On June 1, 1994, the Court
ruled Plaintiffs' would be permitted to pursue a class action
lawsuit against Orkin. The class was limited to those Missouri
customers who purchased termite extermination services between
January 1, 1987 and May 15, 1993, inclusively, and who have
basement or crawl space foundation walls, in which an
organophosphate termiticide was used.
The Company is vigorously defending this lawsuit. Except for the
class certification, the judicial system has not ruled on any
substantive issues in this case. Due to the preliminary nature of
this action, the final outcome of the litigation cannot be
determined at this time. However, it is the opinion of management
that the ultimate resolution of this action will not have a material
adverse effect on the Company's financial position, results of
operations, or liquidity and will take an extended time to resolve.
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ROLLINS, INC. AND SUBSIDIARIES
PART I. ITEM 2. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
FOR THE FIRST QUARTER ENDED MARCH 31, 1995
RESULTS OF OPERATIONS
SELECTED INDUSTRY SEGMENT DATA
Three Months Ended
March 31,
-------------------------
(In thousands)
1995 1994
--------- ---------
REVENUES
Orkin $ 125,253 $ 118,360
Rollins Protective 14,218 14,872
Other 3,183 3,211
--------- ---------
$ 142,654 $ 136,443
========= =========
OPERATING INCOME
Orkin $ 13,064 $ 11,487
Rollins Protective 1,341 1,330
Other 496 938
--------- ---------
$ 14,901 $ 13,755
========= =========
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ROLLINS, INC. AND SUBSIDIARIES
PART I. ITEM 2. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED MARCH 31, 1995
GENERAL OPERATING COMMENTS
Rollins, Inc. reported another quarter of record earnings. Despite the
residual effect of 1994's disappointing pest season, revenues for the first
quarter ended March 31, 1995 reached $142.7 million, an increase of $6.2
million or 4.6% from the prior year period. Operating income increased $1.1
million or 8.3% to $14.9 million for the quarter. Net income for the quarter
grew 13.3% to $7.8 million and earnings per share was 22 cents, compared to
19 cents a year ago, a 15.8% improvement.
For the quarter, the Orkin Group's operating income increased 13.7% to $13.1
million on revenues of $125.3 million which grew 5.8% over 1994. These
results provided improved operating margins of 10.4%, compared to 9.7% in
the prior year. Rollins Protective Services' operating income increased 0.8%
to $1.3 million on revenues of $14.2 million.
Detail segment information follows.
ORKIN 1995 VERSUS 1994
Revenues increased 5.8% to $125.3 million and operating income increased
13.7% to $13.1 million for the first quarter ended March 31, 1995. Pest
Control and Termite services increased their sales dollars and customer base
for the quarter. During the first quarter, Orkin expanded the availability of
it's 24-hour 1-800-800-ORKIN customer and prospect phone lead access service.
Also, a sophisticated, $1 million Telecenter was opened, designed to
centrally monitor customer service quality and generate additional sales by
cross-marketing to our 1.6 million customers. Geographic expansion of the
Agribusiness service to 15 new markets was accomplished during the first
quarter, and should positively contribute to operating performance throughout
1995.
ROLLINS PROTECTIVE SERVICES 1995 VERSUS 1994
For the first quarter, Rollins Protective Services (RPS) had revenues of
$14.2 million, a decrease of 4.4%, however, operating income was relatively
unchanged at $1.3 million, primarily due to a 5.6% improvement in operating
margins. In the first quarter of 1995, RPS sales focus shifted to new product
introductions, including the VIP 2000 marketed for the middle income
homeowner and "Safe Start", a new homebuilder product. RPS will continue to
focus marketing efforts on the new products as well as continuing successful
programs tested in 1994 targeted at customer retention and National Accounts.
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ROLLINS, INC. AND SUBSIDIARIES
PART I. ITEM 2. FINANCIAL INFORMATION
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FOR THE FIRST QUARTER ENDED MARCH 31, 1995
OTHER 1995 VERSUS 1994
Other businesses revenue and operating income decreased 0.9% and 47.1%,
respectively, due to revisions of the Company's credit and internal operating
policies within the credit service center during the fourth quarter of 1994.
The volume of Company financed sales is lower than last year, as the revised
policies redirected marketing efforts toward stronger customer demographics.
Also, Corporate management is continuing to monitor the implementation and
effectiveness of these policy changes.
FINANCIAL CONDITION
(In thousands) March 31, December 31,
1995 1994
---- ----
Cash and Short-Term Investments $ 48,054 $ 31,917
Marketable Securities 52,943 51,820
Working Capital $ 154,392 $ 148,010
Current Ratio 3.0 3.2
Cash Provided By Operations
(Twelve Months Ended) $ 49,103 $ 39,340
At March 31, 1995 cash and short-term investments increased $16.1 million
from December 31, 1994. The investment in marketable securities at March 31,
1995, was $52.9 million.
At March 31, 1995 the current ratio was 3.0 and working capital was $154.4
million (an increase of $6.4 million or 4.3% compared to December 31, 1994).
The Company has been debt-free since 1987. Management believes that this
liquidity, along with expected cash from operations, will support the
company's continued growth, capital expenditures, cash dividends, and
expansion plans.
Net trade receivables decreased $1.3 million or 1.3% at March 31, 1995
compared with December 31, 1994. Trade receivables include installment
receivables which are due subsequent to one year from the balance sheet date.
These amounts were approximately $34.4 million and $33.8 million at March 31,
1995 and December 31, 1994, respectively. The decrease in receivables is
attributed in part to the effect of a revision to the Company's credit and
internal operating policies within the credit service center as discussed in
the section, "Results of Operations".
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ROLLINS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ROLLINS, INC. AND SUBSIDIARIES
ITEM 1. LEGAL PROCEEDINGS
Refer to Note Number 4 to the Financial Statements, "Commitments and
Contingencies" and Part I, Item 3. Legal Proceedings, of the
Registrant's Form 10-K filed for the year ended December 31, 1994.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTER TO A VOTE OF SECURITY HOLDERS
The Annual Stockholder's Meeting was held on April 25, 1995. The
stockholders elected Wilton Looney and Bill J. Dismuke as Class III
Directors for the three year term expiring in 1998.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K
None
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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.
Date: May 12, 1995
------------
Rollins, Inc.
-------------
(Registrant)
/s/ Gary W. Rollins
---------------------
Gary W. Rollins
President and Chief
Operating Officer
(Member of the Board of
Directors)
/s/ Gene L. Smith
---------------------
Gene L. Smith
Chief Financial Officer
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
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