-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HLewOqREn3pMzOWxUs+DCB/wxG1s2TflOqz1k55wG4Q/Q0m8IvBQIgujw1VHNjxw mm8ueoz4hc2I4Us5dk96hQ== 0000084839-98-000005.txt : 19980529 0000084839-98-000005.hdr.sgml : 19980529 ACCESSION NUMBER: 0000084839-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980528 SROS: BSE SROS: CSE SROS: NYSE SROS: PHLX SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROLLINS INC CENTRAL INDEX KEY: 0000084839 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-TO DWELLINGS & OTHER BUILDINGS [7340] IRS NUMBER: 510068479 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-04422 FILM NUMBER: 98632578 BUSINESS ADDRESS: STREET 1: 2170 PIEDMONT RD NE CITY: ATLANTA STATE: GA ZIP: 30324 BUSINESS PHONE: 4048882000 MAIL ADDRESS: STREET 1: 2170 PIEDMONT ROAD NE CITY: ATLANTA STATE: GA ZIP: 30324 10-Q 1 1ST QTR 1998 10-Q 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, 1998. [ ] 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 (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 (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 [ ] At March 31, 1998, there were 33,220,491 shares of Common Stock $1 Par Value, outstanding. ROLLINS, INC. AND SUBSIDIARIES INDEX Page No. Part I Financial Information Statements of Financial Position - March 31, 1998 and December 31, 1997 1 Statements of Income (Loss) and Earnings Retained - Three months ended March 31, 1998 and 1997 2 Statements of Cash Flows - Three months ended March 31, 1998 and 1997 3 Notes to Financial Statements 4-5 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, Dec 31 1998 1997 ASSETS Cash and Short-Term Investments $ 111,035 $ 125,842 Marketable Securities 74,945 75,037 Trade Receivables, Net 44,175 49,166 Materials and Supplies 16,455 15,010 Deferred Income Taxes 27,596 24,826 Other Current Assets 11,569 11,737 Current Assets 285,775 301,618 Equipment and Property, Net 36,121 34,639 Intangible Assets 39,533 39,383 Deferred Income Taxes 46,836 49,072 Other Assets 7,899 7,968 Total Assets $ 416,164 $ 432,680 LIABILITIES Capital Lease Obligations $ 3,187 $ 3,138 Accounts Payable 19,736 25,420 Accrued Insurance Expenses 18,810 21,225 Accrued Payroll 15,586 17,913 Unearned Revenue 15,352 13,831 Other Expenses 59,479 49,191 Current Liabilities 132,150 130,718 Capital Lease Obligations 8,424 9,239 Long-Term Accrued Liabilities 138,340 147,079 Total Liabilities 278,914 287,036 Commitments and Contingencies STOCKHOLDERS' EQUITY Common Stock, par value $1 per share; authorized 99,500,000 shares; 33,220,491 shares issued in 1998; 33,279,281 shares issued in 1997 33,220 33,279 Earnings Retained 104,030 112,365 Total Stockholders' Equity 137,250 145,644 Total Liabilities and Stockholders' Equity $ 416,164 $ 432,680 The accompanying notes are an integral part of these statements.
1 of 10 ROLLINS, INC. AND SUBSIDIARIES STATEMENTS OF INCOME (LOSS) AND EARNINGS RETAINED (In thousands except share data) (Unaudited)
Three Months Ended March 31, 1998 1997 REVENUES Customer Services $ 122,965 $ 126,951 COSTS AND EXPENSES Cost of Services Provided 76,909 72,317 Depreciation and Amortization 2,092 1,909 Sales, General and Administrative 49,431 45,724 Interest Income (2,622) (1,217) 125,810 118,733 INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE INCOME TAXES (2,845) 8,218 PROVISION (CREDIT) FOR INCOME TAXES Current (3,311) 4,118 Deferred 2,230 (995) (1,081) 3,123 INCOME (LOSS) FROM CONTINUING OPERATIONS (1,764) 5,095 DISCONTINUED OPERATIONS Operating Income, Less Income Tax Expense of $30 - 49 NET INCOME (LOSS) $ (1,764) $ 5,144 EARNINGS RETAINED Balance at Beginning of Period $ 112,365 $ 155,696 Cash Dividends (4,988) (5,193) Common Stock Purchased and Retired (1,596) (8,832) Other 13 (81) BALANCE AT END OF PERIOD $ 104,030 $ 146,734 EARNINGS (LOSS) PER SHARE Continuing Operations $ (0.05) $ 0.15 Discontinued Operations - - EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED $ (0.05) $ 0.15 WEIGHTED SHARES OUTSTANDING - BASIC 33,269,785 34,468,268 WEIGHTED SHARES OUTSTANDING - DILUTED 33,284,705 34,474,989 The accompanying notes are an integral part of these statements.
2 of 10 ROLLINS, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (In Thousands) (Unaudited)
Three Months Ended March 31, 1998 1997 OPERATING ACTIVITIES Net Income (Loss) $ (1,764) $ 5,144 Adjustments to Reconcile Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization 2,092 1,909 Provision (Credit) for Deferred Income 2,230 (995) Discontinued Operations, Net of Taxes - (49) Other, Net 106 651 (Increase) Decrease in Assets: Trade Receivables 5,014 370 Materials and Supplies (1,437) (2,010) Other Current Assets (2,826) 418 Other Non-Current Assets 192 (1,360) Increase (Decrease) in Liabilities: Accounts Payable and Accrued Expenses (164) 8,624 Unearned Revenue 1,521 (679) Long-Term Accrued Liabilities (8,739) 2,786 Net Cash Provided by (Used in) Operating Activities (3,775) 14,809 INVESTING ACTIVITIES Purchases of Equipment and Property (3,516) (2,436) Net Cash Used for Acquisition of Companies (210) (1,056) Marketable Securities, Net 85 4,435 Net Cash Provided by (Used in) Investing Activities (3,641) 943 FINANCING ACTIVITIES Dividends Paid (4,988) (5,193) Common Stock Purchased and Retired (1,678) (9,321) Payments on Capital Lease (766) (394) Other 41 116 Net Cash Used in Financing Activities (7,391) (14,792) Net Cash Provided by (Used in) Discontinued Operations - 1,179 Net Increase (Decrease) in Cash and Short-Term Investments (14,807) 2,139 Cash and Short-Term Investments at Beginning of Period 125,842 12,150 Cash and Short-Term Investments at End of Period $ 111,035 $ 14,289 The accompanying notes are an integral part of these statements.
3 of 10 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, 1997. Prior year amounts have been restated to reflect the 1997 divestitures of the Company's Rollins Protective Services division and its Lawn Care and Plantscaping businesses. 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, 1998 and December 31, 1997, and the results of operations and cash flows for the three months ended March 31, 1998 and 1997. Operating results for the quarter ended March 31, 1998 are not necessarily indicative of the results that may be expected for the year ended December 31, 1998. 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 Pursuant to the provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per Share," the number of weighted average shares used in computing basic and diluted earnings per share (EPS) are as follows (in thousands):
Three Months Ended 1998 1997 Basic EPS 33,270 34,468 Effect of dilutive stock options 15 7 Diluted EPS 33,285 34,475
No adjustments to net income available to common stockholders were required during the periods presented. 4 of 10 NOTE 4. NEW ACCOUNTING PRONOUNCEMENTS For the quarter ended March 31, 1998, the Company adopted Statement of Financial Accounting Standards No. 130 (SFAS 130), "Reporting Comprehensive Income," which establishes standards for the presentation and disclosure of other comprehensive income. The adoption of SFAS 130 did not have a material impact on the Company's financial condition or results of operations and, as a result, the impact is not reflected in the attached Statements of Income (Loss) and Earnings Retained or Statements of Financial Position. Statement of Financial Accounting Standards No. 132, "Employers' Disclosures about Pension and Other Postretirement Benefits -- an amendment of FASB Statements No. 87, 88, and 106, " will be adopted effective with the year-end financial statements dated December 31, 1998. 5 of 10 PAGE> 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, 1998 RESULTS OF OPERATIONS The divestitures of the Orkin Lawn Care and Plantscaping divisions in July 1997 marked the Company's return to a single operational focus. Accordingly, the results of operations are presented on a continuing operations basis. Revenues for the first quarter ended March 31, 1998 decreased 3.1% to $123.0 million. Net income (loss) was $(1.8) million as compared to $5.1 million in 1997. Basic and diluted earnings (loss) per share was (5) cents (loss) compared to 15 cents last year. Increases in pest control revenue were more than offset by decreased termite revenue resulting from more restrictive termite control sales policies in response to certain building materials and construction practices. Operating income was adversely impacted, primarily by increased payroll expenses, due to the national implementation of key termite and pest control sales and customer service programs. Customer retention improved in both service categories. The Company is encouraged by its pest control revenue results along with the proactive measures that have been initiated in its termite business. The Company believes they are ahead of the competition with termite service programs and look forward to the time when both of their services could make favorable contributions. Revenues and income from discontinued operations after income taxes for the first quarter ended March 31, 1997 were $23.4 million and $49,000, respectively. 6 of 10 FINANCIAL CONDITION
March 31, December 31, 1998 1997 (In thousands) Cash and Short-Term Investments $ 111,035 $ 125,842 Marketable Securities 74,945 75,037 $ 185,980 $ 200,879 Working Capital $ 153,625 $ 170,900 Current Ratio 2.2 2.3
Rollins, Inc.'s financial position remained sound. The Company's operations have historically provided a strong positive cash flow which represents the Company's principal source of funds. Management believes that this liquidity, along with expected cash from operations, will support the Company's continued growth, capital expenditures, and cash dividends. Interest income increased 115.4% for the three months ended March 31, 1998 due to the increase in average cash invested in short-term investments as a result of the 1997 divestitures. Net trade receivables decreased $5.0 million or 10.2% at March 31, 1998 compared with December 31, 1997. Trade receivables include installment receivables which are due subsequent to one year from the balance sheet date. These amounts were approximately $11.0 million and $13.9 million at March 31, 1998 and December 31, 1997, respectively. The decrease in receivables is primarily the result of decreased financed sales, the increased provision for doubtful accounts, and the effect of revisions to the Company's credit policies. Over the past several years, the termite treatment segment of the pest control industry has faced great challenges in solving property owners' termite problems. Some of the reasons for the increased difficulty in protecting structures have been changes in building practices and materials that have increased the property owners' potential for termites, the loss of Chlordane from the market in 1987 which resulted in the use of termiticides that may only last for a few years under some conditions, and laws and regulations restricting certain retreatment practices. All of the above factors have subjected termite service providers to experience elevated levels of claims. The Company's response to these industry-wide conditions is to undertake broad changes in its own termite processes. New quality control and field training programs, more thorough communication to customers concerning conducive conditions, and restrictions on the sale of certain structures were initiated during 1997. As a result of the factors described above and new information which became available in 1997, a Provision for Termite Contracts of $117.0 million was recorded at December 31, 1997 related to the anticipated costs of reinspections, repair obligations, and associated labor, chemicals, and other costs incurred relative to termite work performed prior to December 31, 1997. The Company believes this provision is still reasonable at March 31, 1998. 7 of 10 During the three month period, the Company invested $3.7 million in capital expenditures and acquisitions. Also, $5.0 million was paid out in cash dividends. The Company maintains a $40.0 million unused line of credit. This source of funds has not been used, but is available for future acquisitions and growth, if needed. During the quarter, the Company repurchased 82,000 shares of its common stock, confirming management's and the Board of Director's confidence in the Company's future. During the fourth quarter of 1997, Orkin received a letter from the Federal Trade Commission (FTC) advising of their investigation of the pest control industry - more specifically, the termite control practices of the industry. The FTC has requested certain information voluntarily from Orkin and they have been advised of our intention to cooperate fully with their investigation. At this point in time, it is too early to determine the impact, if any, of this investigation. FORWARD-LOOKING STATEMENTS This Form 10-Q contains forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. The actual results of the Company could differ materially from those indicated by the forward-looking statements because of various risks and uncertainties, including without limitation, general economic conditions, changes in industry practices or technologies, climate and weather trends, competitive factors and pricing pressures, uncertainties of litigation and changes in various government laws and regulations, including environmental regulations. 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. 8 of 10 ROLLINS, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS None 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 Stockholders' Meeting was held on April 28, 1998. The stockholders elected Bill J. Dismuke and Wilton Looney as Class III Directors for the three year term expiring in 2001. The 1998 Employee Stock Incentive Plan was approved by shareholders. ITEM 5. OTHER INFORMATION None ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits (1)(i) The Company's Certificate of Incorporation is incorporated herein by reference to Exhibit (3)(i) as filed with its Form 10-K for the year ended December 31, 1997. (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. 1998 Employee Stock Incentive Plan is incorporated herein by reference to Exhibit A to the March 24, 1998 Proxy Statement for the Annual Meeting of Stockholders held on April 28, 1998. (27) Financial Data Schedule (b) Reports on Form 8-K None 9 of 10 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 14, 1998 Rollins, Inc. (Registrant) _________________________ Gary W. Rollins President and Chief Operating Officer (Member of the Board of Directors) _________________________ Gene L. Smith Chief Financial Officer Secretary and Treasurer (Principal Financial and Accounting Officer) 10 of 10 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 14, 1998 Rollins, Inc. (Registrant) Gary W. Rollins Gary W. Rollins President and Chief Operating Officer (Member of the Board of Directors) Gene L. Smith Gene L. Smith Chief Financial Officer Secretary and Treasurer (Principal Financial and Accounting Officer) 10 of 10 EX-27 2
5 First Quarter 1998 Form 10-Q 1,000 USD 3-MOS 3-MOS DEC-31-1998 DEC-31-1997 JAN-01-1998 JAN-01-1997 MAR-31-1998 MAR-31-1997 1 1 111035 14289 74945 80101 52977 68206 8802 3933 16455 13632 285775 186114 75287 71547 39166 34297 416164 297056 132150 78277 0 0 0 0 0 0 33220 34141 104030 146734 416164 297056 0 0 122965 126951 0 0 76909 72317 48901 46416 0 0 0 0 (2845) 8218 (1081) 3123 (1764) 5095 0 49 0 0 0 0 (1764) 5144 (0.05) 0.15 (0.05) 0.15
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