- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

------------------------
FORM 10-K

(MARK ONE)

/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

FOR THE TRANSITION PERIOD FROM TO

COMMISSION FILE NO. 1-4422
------------------------
ROLLINS, INC.

(Exact name of registrant as specified in its charter)

DELAWARE 51-0068479
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)

2170 PIEDMONT ROAD, N.E., ATLANTA, GEORGIA 30324
(Address of principal executive offices)
TELEPHONE NUMBER (404) 888-2000

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

TITLE OF EACH CLASS NAME OF EACH
---------------------------------------- EXCHANGE ON WHICH REGISTERED
---------------------------------
Common Stock, $1 Par Value The New York Stock Exchange
The Pacific Stock Exchange

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 if disclosure of delinquent filers pursuant to item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / /

The aggregate market value of Rollins, Inc. common stock, held by
non-affiliates on March 2, 1998 was $363,060,329, based on the closing price on
the New York Stock Exchange on such date of $20 11/16 per share.

Rollins, Inc. had 33,254,095 shares of common stock outstanding as of March
2, 1998.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of Rollins, Inc.'s Annual Report to Stockholders for the calendar
year ended December 31, 1997 are incorporated by reference into Part II, Items
5-8, and Part IV, Item 14.

Portions of the Proxy Statement for the 1998 Annual Meeting of Stockholders
of Rollins, Inc. are incorporated by reference into Part III, Items 10, 11, 12
and 13.

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

PART I

ITEM 1. BUSINESS

(A) GENERAL DEVELOPMENT OF BUSINESS.

In July 1997, the Registrant, Rollins, Inc., completed the sale of the
Plantscaping and Lawn Care divisions of its subsidiary, Orkin Exterminating
Company, Inc. (Orkin). The gross proceeds related to the sale of Orkin's
Plantscaping and Lawn Care divisions were approximately $37 million. The gain on
the sale was $15,300,000 ($9,486,000 after tax or $0.28 per share). In October
1997, the Registrant completed the sale of its Rollins Protective Services (RPS)
business segment. The gross proceeds related to the sale of RPS were
approximately $200 million. The gain on the sale was $161,000,000 ($96,600,000
after tax or $2.84 per share). Although both of these divestitures provided an
excellent return to the Company, the most significant benefit provided is the
greater focus on the core business operations of Orkin.

(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.

As a result of the divestiture of the RPS business segment as detailed in
Item 1. (a) above, the Registrant no longer has the Rollins Protective industry
segment. Therefore, this section is no longer applicable.

(1)(i) The Registrant is a national company with headquarters located in
Atlanta, Georgia, providing services to both residential and commercial
customers. The two primary services provided are termite and pest control.

Orkin Exterminating Company, Inc., a wholly owned subsidiary (Orkin),
founded in 1901, is one of the world's largest termite and pest control
companies. It provides customized services to approximately 1.6 million
customers through a network of 422 company-owned and franchised branch locations
serving customers in the United States, the District of Columbia, the Bahamas,
Canada, Mexico, and Puerto Rico. It provides customized pest control services to
homes and businesses, including hotels, food service establishments, dairy farms
and transportation companies. Orkin's continuous regular service provides
protection against household pests, rodents and termites.

(ii) The Registrant has made no announcement of, nor did any information
become public about, a new line of business or product requiring the investment
of a material amount of the Registrant's total assets.

(iii) Sources and availability of raw materials present no particular
problem to the Registrant, since its businesses are primarily in service-related
industries.

(iv) Other than the Orkin-Registered Trademark- trademark, which is material
to the company, governmental licenses, patents, trademarks and franchises are of
minor importance to the Registrant's service operations. Local licenses and
permits are required in order for the Registrant to conduct its termite and pest
control services in certain localities. In view of the widespread operations of
the Registrant's service operations, the failure of a few local governments to
license a facility would not have a material adverse effect on the results of
operations of the Registrant.

(v) The business of the Registrant is affected by the seasonal nature of the
Registrant's termite and pest control services. The metamorphosis of termites in
the spring and summer (the occurrence of which is determined by the timing of
the change in seasons) has historically resulted in an increase in the revenue
and income of the Registrant's termite and pest control operations during such
period.

(vi) Inapplicable.

(vii) The Registrant and its subsidiaries do not have a material part of
their business that is dependent upon a single customer or a few customers, the
loss of which would have a material effect on the business of the Registrant.

(viii) The dollar amount of service contracts and backlog orders as of the
end of the Registrant's 1997 and 1996 calendar years was approximately
$12,457,000 and $12,727,000, respectively. Backlog services and orders are
usually provided within the month following the month of receipt, except in the
area of prepaid pest control where services are usually provided within twelve
months of receipt. (Backlog orders for 1996 have been restated to exclude
backlog of the Registrant's RPS business segment and Orkin's Plantscaping and
Lawn Care divisions which were divested in 1997).

(ix) Inapplicable.

(x) The Registrant believes that Orkin competes favorably with competitors
as one of the world's largest termite and pest control companies.

The principal methods of competition in the Registrant's termite and pest
control business are service and guarantees, including the money-back guarantee
on termite and pest control, and the termite retreatment and damage repair
guarantee to qualified homeowners.

(xi) Expenditures by the Registrant on research activities relating to the
development of new products or services are not significant. Some of the new and
improved service methods and products are researched, developed and produced by
unaffiliated universities and companies. Also a portion of these methods and
products are produced to the specifications provided by the Registrant.

(xii) Other than the impact on the Registrant of the 1997 Provision for
Termite Contracts which was established to address the abnormal occurrence of
termite claims, and the related cost to more frequently reapply materials, the
capital expenditures, earnings and competitive position of the Registrant and
its subsidiaries are not materially affected by compliance with Federal, state
and local provisions which have been enacted or adopted regulating the discharge
of materials into the environment, or otherwise relating to the protection of
the environment.

(xiii) The number of persons employed by the Registrant and its subsidiaries
as of the end of 1997 was 8,934.

(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.

Inapplicable.

ITEM 2. PROPERTIES.

The Registrant's administrative headquarters and central warehouse, both of
which are owned by the Registrant, are located at 2170 Piedmont Road, N.E.,
Atlanta, Georgia 30324. The Registrant owns or leases several hundred branch
offices and operating facilities used in its businesses. None of the branch
offices, individually considered, represents a materially important physical
property of the Registrant. The facilities are suitable and adequate to meet the
current and reasonably anticipated future needs of the Registrant.

ITEM 3. LEGAL PROCEEDINGS.

In the normal course of business, the Company is a defendant in a number of
lawsuits which allege that plaintiffs have been damaged as a result of the
rendering of services by Company personnel and equipment. The Company is
actively contesting these actions. It is the opinion of Management that the
outcome of these actions will not have a material adverse effect on the
Company's financial position, results of operations, or liquidity.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

Inapplicable.

ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT.

Each of the executive officers of the Registrant was elected by the Board of
Directors to serve until the Board of Directors' meeting immediately following
the next annual meeting of stockholders or until his earlier removal by the
Board of Directors or his resignation. The following table lists the executive
officers of the Registrant and their ages, offices with the Registrant, and the
dates from which they have continually served in their present offices with the
Registrant.

DATE FIRST ELECTED
TO
NAME AGE OFFICE WITH REGISTRANT PRESENT OFFICE
- ------------------------------------------ --- ------------------------------------------ -------------------

R. Randall Rollins (1).................... 66 Chairman of the Board and Chief Executive 10/22/91
Officer

Gary W. Rollins (1)....................... 53 President and Chief Operating Officer 1/24/84

Gene L. Smith (2)......................... 52 Chief Financial Officer, 1/22/91
Secretary, and Treasurer 1/26/93

- ------------------------

(1) R. Randall Rollins and Gary W. Rollins are brothers.

(2) Gene L. Smith served as the Registrant's Vice President of Finance for the
period 12/30/85 to 1/21/91.

PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Information containing dividends and stock prices on page 8 and the
principal markets on which common shares are traded on page 21 of the 1997
Annual Report to Stockholders are incorporated herein by reference. The number
of stockholders of record on December 31, 1997 was 3,139.

ITEM 6. SELECTED FINANCIAL DATA.

Selected Financial Data on page 1 of the 1997 Annual Report to Stockholders
is incorporated herein by reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Management's Discussion and Analysis of Financial Condition and Results of
Operations included on pages 9 through 11 of the 1997 Annual Report to
Stockholders is incorporated herein by reference. The effects of inflation on
operations were not material for the periods being reported.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The following consolidated financial statements and supplementary data of
the Registrant and its consolidated subsidiaries, included in the 1997 Annual
Report to Stockholders, are incorporated herein by reference.

Financial Statements:

Statements of Income for each of the three years in the period ended
December 31, 1997, page 13.

Statements of Earnings Retained for each of the three years in the period
ended December 31, 1997, page 13.

Statements of Financial Position as of December 31, 1997 and 1996, page
12.

Statements of Cash Flows for each of the three years in the period ended
December 31, 1997, page 14.

Notes to Financial Statements, pages 15 through 19.

Report of Independent Auditors, page 20.

Supplementary Data:

Quarterly Information, page 8.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Inapplicable.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The response to Item 10, applicable to the Directors of the Registrant, is
incorporated herein by reference to the information set forth under the caption
"Election of Directors" in the Proxy Statement for the Annual Meeting of
Stockholders to be held April 28, 1998. Additional information concerning
executive officers is included in Part I, Item 4.A. of this Form 10-K.

ITEM 11. EXECUTIVE COMPENSATION.

The response to Item 11 is incorporated herein by reference to the
information set forth under the caption "Executive Compensation" in the Proxy
Statement for the Annual Meeting of Stockholders to be held April 28, 1998.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The response to Item 12 is incorporated herein by reference to the
information set forth under the captions "Capital Stock" and "Election of
Directors" in the Proxy Statement for the Annual Meeting of Stockholders to be
held April 28, 1998.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The section entitled "Compensation Committee Interlocks and Insider
Participation" in the Proxy Statement for the Annual Meeting of Stockholders to
be held April 28, 1998 is incorporated herein by reference.

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

The following are filed as part of this report:

(a) 1. Financial Statements

The following financial statements are incorporated herein by reference to
portions of the 1997 Annual Report to Stockholders included with this Form 10-K:

Statements of Income for each of the three years in the period ended
December 31, 1997, page 13.

Statements of Earnings Retained for each of the three years in the period
ended December 31, 1997, page 13.

Statements of Financial Position as of December 31, 1997 and 1996, page
12.

Statement of Cash Flows for each of the three years in the period ended
December 31, 1997, page 14.

Notes to Financial Statements, pages 15 through 19.

Report of Independent Auditors, page 20.

(a) 2. Financial Statement Schedule

II VALUATION AND QUALIFYING ACCOUNTS

Schedules not listed above have been omitted as either not applicable,
immaterial or disclosed in the financial statements or notes thereto.

(a) 3. Exhibits

(3)(i) The Certificate of Incorporation of Rollins, Inc.

(ii) By-laws of Rollins, Inc. are incorporated herein by reference to Exhibit
3(b) as filed with its Form 10-K for the year ended December 31, 1993.

(10) Rollins, Inc. 1984 Employee Incentive Stock Option Plan is incorporated
herein by reference to Exhibit 10 as filed with its Form 10-K for the
year ended December 31, 1996.

(10)(a) Rollins, Inc. 1994 Employee Stock Incentive Plan is incorporated herein by
reference to Exhibit A of the March 18, 1994 Proxy Statement for the
Annual Meeting of Stockholders held on April 26, 1994.

(10)(b) Asset Purchase Agreement, dated as of October 1, 1997, by and among
Rollins, Ameritech Monitoring Services, Inc. and Ameritech Corporation is
incorporated herein by reference to Exhibit 2.1 as filed with its Form
8-K Current Report filed October 16, 1997.

(13) Portions of the Annual Report to Stockholders for the year ended December
31, 1997 which are specifically incorporated herein by reference.

(21) Subsidiaries of Registrant.

(23) Consent of Independent Public Accountants.

(24) Powers of Attorney for Directors.

(27) Financial Data Schedule.

(b) A form 8-K Current Report was filed on October 16, 1997. The report,
dated October 3, 1997, disclosed the October 3, 1997 sale of Rollins,
Inc.'s security monitoring assets, which were operated through its
Rollins Protective Services division, to Ameritech Monitoring Services,
Inc. for approximately $200,000,000 in cash and assumed liabilities. An
asset purchase agreement dated as of October 1, 1997 was filed as Exhibit
2.1.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

By: /s/ R. RANDALL ROLLINS
-----------------------------------------
R. Randall Rollins
CHAIRMAN OF THE BOARD OF DIRECTORS
(PRINCIPAL EXECUTIVE OFFICER)
March 25, 1998

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND
IN THE CAPACITIES AND ON THE DATES INDICATED.

/S/ R. RANDALL ROLLINS /S/ GENE L. SMITH
- ------------------------------------------------------------
R. Randall Rollins Gene L. Smith
CHAIRMAN OF THE BOARD OF CHIEF FINANCIAL OFFICER,
DIRECTORS SECRETARY, AND TREASURER
(PRINCIPAL EXECUTIVE OFFICER) (PRINCIPAL FINANCIAL AND
March 25, 1998 ACCOUNTING OFFICER)
March 25, 1998

The Directors of Rollins, Inc. (listed below) executed a power of attorney
appointing Gary W. Rollins their attorney-in-fact, empowering him to sign this
report on their behalf.

Wilton Looney, Director
John W. Rollins, Director
Henry B. Tippie, Director
James B. Williams, Director
Bill J. Dismuke, Director

/S/ GARY W. ROLLINS
- ------------------------------
Gary W. Rollins, AS
ATTORNEY-IN-FACT
& DIRECTOR, PRESIDENT AND
CHIEF OPERATING OFFICER
March 25, 1998

ROLLINS, INC. AND SUBSIDIARIES
INDEX TO FINANCIAL STATEMENTS AND SCHEDULE

CONSOLIDATED FINANCIAL STATEMENTS OF ROLLINS, INC. AND SUBSIDIARIES:

The Registrant's 1997 Annual Report to Stockholders, portions of which are
filed with this Form 10-K, contains on pages 12 through 20 the consolidated
financial statements for the years ended December 31, 1997, 1996 and 1995 and
the report of Arthur Andersen LLP on the financial statements for the years then
ended. These financial statements and the report of Arthur Andersen LLP are
incorporated herein by reference. The financial statements include the
following:

Statements of Income for each of the three years in the period ended
December 31, 1997.

Statements of Earnings Retained for each of the three years in the period
ended December 31, 1997.

Statements of Financial Position as of December 31, 1997 and 1996.

Statements of Cash Flows for each of the three years in the period ended
December 31, 1997.

Notes to Financial Statements.

REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE, PAGE 9.

SCHEDULE

SCHEDULE
NUMBER
- --------

II Valuation and Qualifying Accounts, Page 10.

Schedules not listed above have been omitted as either not applicable,
immaterial or disclosed in the financial statements or notes thereto.

REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE

To the Directors and the Stockholders of Rollins, Inc.:

We have audited, in accordance with generally accepted auditing standards,
the financial statements included in Rollins, Inc.'s annual report to
stockholders incorporated by reference in this Form 10-K, and have issued our
report thereon dated February 16, 1998. Our audits were made for the purpose of
forming an opinion on those statements taken as a whole. The schedule listed in
Item 14 of this Form 10-K is the responsibility of the Company's management and
is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic financial statements. This
schedule has been subjected to the auditing procedures applied in the audits of
the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.

ARTHUR ANDERSEN LLP

Atlanta, Georgia
February 16, 1998

ROLLINS, INC. AND SUBSIDIARIES

SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS (2)

FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

(IN THOUSANDS OF DOLLARS)

ADDITIONS
------------------------

BALANCE AT CHARGED TO CHARGED TO BALANCE AT
BEGINNING COSTS AND OTHER DEDUCTIONS END OF
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS (1) PERIOD
- ------------------------------------------------ ----------- ----------- ----------- ------------- -----------

Year ended December 31, 1997
Allowance for doubtful accounts............... $ 4,457 $ 14,531 $ -- $ 9,662 $ 9,326
----------- ----------- ----------- ------------- -----------

Year ended December 31, 1996
Allowance for doubtful accounts............... $ 8,879 $ 7,264 $ -- $ 11,686 $ 4,457
----------- ----------- ----------- ------------- -----------

Year ended December 31, 1995
Allowance for doubtful accounts............... $ 5,318 $ 21,342 $ -- $ 17,781 $ 8,879
----------- ----------- ----------- ------------- -----------

- ------------------------

NOTE: (1) Deductions represent the write-off of uncollectible receivables, net
of recoveries.

(2) The above schedule is prepared reflecting the divestitures of the
Registrant's RPS business segment and Orkin's Plantscaping and Lawn
Care divisions. All prior years have been restated.

EXHIBIT INDEX

EXHIBIT NUMBER
- --------------

(3)(i) The Certificate of Incorporation of Rollins, Inc.

(ii) By-laws of Rollins, Inc. are incorporated herein by
reference to Exhibit (3)(b) as filed with its form 10-K
for the year ended December 31, 1993.

(10) Rollins, Inc. 1984 Employee Incentive Stock Option Plan is
incorporated herein by reference to Exhibit 10 as filed
with its Form 10-K for the year ended December 31, 1996.

(10)(a) Rollins, Inc. 1994 Employee Stock Incentive Plan is
incorporated herein by reference to Exhibit A to the March
18, 1994 Proxy Statement for the Annual Meeting of
Stockholders held on April 26, 1994.

(10)(b) Asset Purchase Agreement, dated as of October 1, 1997, by
and among Rollins, Ameritech Monitoring Services, Inc. and
Ameritech Corporation is incorporated herein by reference
to Exhibit 2.1 as filed with its Form 8-K Current Report
filed October 16, 1997.

(13) Portions of the Annual Report to Stockholders for the year
ended December 31, 1997 which are specifically
incorporated herein by reference.

(21) Subsidiaries of Registrant.

(23) Consent of Independent Public Accountants.

(24) Powers of Attorney for Directors.

(27) Financial Data Schedule.