-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, M2bFfSgdyssXzZisHnNzS7pAtmMsgJjRiZchNhc+QX349GGyrJyg3FPrJurW7Xnm GXbXWnK4bStZe6s8DeqtWw== 0000950168-94-000363.txt : 19941122 0000950168-94-000363.hdr.sgml : 19941122 ACCESSION NUMBER: 0000950168-94-000363 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROLLINS INC CENTRAL INDEX KEY: 0000084839 STANDARD INDUSTRIAL CLASSIFICATION: 7340 IRS NUMBER: 510068479 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04422 FILM NUMBER: 94559025 BUSINESS ADDRESS: STREET 1: 2170 PIEDMONT RD NE CITY: ATLANTA STATE: GA ZIP: 30324 BUSINESS PHONE: 4048882362 MAIL ADDRESS: STREET 1: 2170 PIEDMONT ROAD, NE CITY: ATLANTA STATE: GA ZIP: 30324 10-Q 1 ROLLINS 10-Q 11-14-94 80156.1 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 September 30, 1994. 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 September 30, 1994, there were 35,811,521 shares of Common Stock $1 Par Value, outstanding. ROLLINS, INC. AND SUBSIDIARIES INDEX
Part I Financial Information Page No. Statements of Financial Position - September 30, 1994 and December 31, 1993 1 Statements of Income and Earnings Retained - three months and nine months ended September 30, 1994 and 1993 2 Statements of Cash Flows - nine months ended September 30, 1994 and 1993 3 Notes to Financial Statements 4-5 Management's Discussion and Analysis of Financial Condition and Results of Operations 6-9 Part II Other Information 10 ROLLINS, INC. AND SUBSIDIARIES PART 1. FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION (In thousands, except share data) (Unaudited)
September 30, December 31, 1994 1993 ASSETS Cash and Short-Term Investments $ 28,374 $ 18,102 Marketable Securities 51,919 50,991 Trade Receivables, Net 104,607 87,518 Materials and Supplies 16,794 15,829 Other Current Assets 14,502 12,092 Current Assets 216,196 184,532 Equipment and Property, Net 28,347 28,890 Intangible Assets 42,112 42,171 Other Assets 10,647 11,601 Total Assets $ 297,302 $ 267,194 LIABILITIES Accounts Payable $ 12,612 $ 12,279 Accrued Insurance Expenses 17,107 13,600 Accrued Payroll 16,667 15,519 Unearned Revenue 14,461 12,854 Other Expenses 14,639 12,752 Current Liabilities 75,486 67,004 Deferred Income Taxes 11,893 12,983 Long-Term Accrued Liabilities 20,508 26,699 Total Liabilities 107,887 106,686 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 199,501 171,862 240,933 213,294 Less--Common Stock In Treasury, At Cost, 5,620,293 in 1994 ; 5,758,619 shares in 1993 51,518 52,786 Total Stockholders' Equity 189,415 160,508 Total Liabilities and Stockholders' Equity $ 297,302 $ 267,194 The accompanying notes are an integral part of these statements. 1 of 11 ROLLINS, INC. AND SUBSIDIARIES STATEMENTS OF INCOME AND EARNINGS RETAINED (In thousands, except share data) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1994 1993 1994 1993 REVENUES Customer Services $ 158,002 $ 151,808 $ 466,319 $ 442,351 COSTS AND EXPENSES Cost of Services Provided 82,315 77,052 236,136 223,577 Sales, General and Administrative Expenses 53,450 53,683 159,353 154,303 Depreciation and Amortization 1,934 2,213 5,948 6,064 Interest Income (853) (633) (1,727) (1,635) 136,846 132,315 399,710 382,309 INCOME BEFORE INCOME TAXES 21,156 19,493 66,609 60,042 PROVISION (CREDIT) FOR INCOME TAXES: Current 8,688 8,720 26,508 24,785 Deferred (543) (915) (864) (1,369) 8,145 7,805 25,644 23,416 NET INCOME 13,011 11,688 40,965 36,626 EARNINGS RETAINED: Balance at Beginning of Period 191,077 159,660 171,862 141,999 Cash Dividends (4,474) (3,921) (13,409) (11,757) Other (113) 293 83 852 BALANCE AT END OF PERIOD $ 199,501 $ 167,720 $ 199,501 $ 167,720 EARNINGS PER SHARE $ 0.36 $ 0.33 $ 1.14 $ 1.03 WEIGHTED AVERAGE SHARES OUTSTANDING 35,791,806 35,648,066 35,753,872 35,628,579
The accompanying notes are an integral part of these statements. 2 of 11 ROLLINS, INC. AND SUBSIDIARIES STATEMENTS OF CASH FLOWS (In thousands) (Unaudited) Nine Months Ended September 30 1994 1993 OPERATING ACTIVITIES Net Income $ 40,965 $ 36,626 Noncash Charges (Credits) to Earnings: Depreciation and Amortization 5,948 6,064 Other, Net 2,692 825 (Increase) Decrease in: Trade Receivables (16,990) (19,998) Materials and Supplies (965) (29) Other Current Assets (1,701) 2,175 Increase (Decrease) in: Accounts Payable and Accrued Expenses 6,907 6,011 Unearned Revenue 1,607 2,362 Non-Current Deferred Income Taxes (2,663) (2,934) Long-Term Accrued Liabilities (6,311) 1,553 Other Non-Current Assets (514) (487) Net Cash Provided by Operating Activities 28,975 32,168 INVESTING ACTIVITIES Purchases of Equipment and Property (5,934) (6,107) Net Cash Used for Acquisition of Companies (527) (416) Proceeds from Sales of Equipment and Property 744 273 Purchases of Marketable Securities (1,479) (10,838) Net Cash Used in Investing Activities (7,196) (17,088) FINANCING ACTIVITIES Dividends Paid (13,409) (11,757) Treasury Stock Issued to Benefit Plans 1,902 1,441 Net Cash Used in Financing Activities (11,507) (10,316) Net Increase (Decrease) in Cash and Short-Term Investments 10,272 4,764 Cash and Short-Term Investments at Beginning of Period 18,102 20,061 Cash and Short-Term Investments at End of Period $ 28,374 $ 24,825 The accompanying notes are an integral part of these statements. 3 of 11 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, 1993. Certain prior year amounts have been reclassified to conform with the third quarter 1994 presentation. 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 September 30, 1994 and December 31, 1993, and the results of operations and cash flows for the nine months ended September 30, 1994 and 1993. NOTE 2. INVESTMENT IN MARKETABLE SECURITIES During the first quarter of 1994, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities." The adoption of SFAS No. 115 did not have a material effect on the Company's financial position, results of operations, or liquidity for the nine months ended September 30, 1994. NOTE 3. 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. 4 of 11 ROLLINS, INC. AND SUBSIDIARIES NOTES TO FINANCIAL STATEMENTS (Unaudited) NOTE 4. EARNINGS PER SHARE Earnings per share is computed by dividing net income by the weighted average number of shares outstanding during the respective periods. NOTE 5. 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 and results of operations and will take an extended time to resolve. 5 of 11 ROLLINS, INC. AND SUBSIDIARIES PART I. ITEM 2. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1994 RESULTS OF OPERATIONS SELECTED INDUSTRY SEGMENT DATA
Three Months Ended Nine Months Ended September 30 September 30 (In thousands) 1994 1993 1994 1993 REVENUES Orkin $ 138,818 $ 133,776 $ 410,297 $ 390,988 Rollins Protective 15,547 14,927 45,718 42,857 Other 3,637 3,105 10,304 8,506 $ 158,002 $ 151,808 $ 466,319 $ 442,351 OPERATING INCOME Orkin $ 19,342 $ 18,031 $ 64,218 $ 58,283 Rollins Protective 1,833 1,711 4,667 4,190 Other 1,731 1,486 4,061 3,335 $ 22,906 $ 21,228 $ 72,946 $ 65,808
6 of 11 ROLLINS, INC. AND SUBSIDIARIES PART I. ITEM 2. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1994 General Operating Comments Rollins, Inc. reported another quarter of record earnings. Revenues for the third quarter ended September 30, 1994 reached $158.0 million, an increase of $6.2 million or 4.1% from the prior year period ($24.0 million or 5.4% year- to-date). Operating income increased $1.7 million or 7.9% to $22.9 million for the quarter ($7.1 million or 10.8% year-to-date). Although the pest control season was negatively impacted by the weather, the Company produced consistent net income results. This marks the 18th consecutive quarter of double-digit net income increases. The Company continued its commitment to strategically expand its business units through the combination of new marketing programs, acquisitions, and the opening of new branches. As a whole, the Company is working hard to improve employee productivity and increase customer growth, while maintaining tight control of expenses. The results of investments in customer service and recurring revenue growth during the first half of 1994 are beginning to be realized and should continue with overall favorable earnings for the year. Net income for the quarter grew 11.3% to $13.0 million and earnings per share was 36 cents, compared to 33 cents a year ago, a 9.1% improvement. Year-to- date, net income increased 11.8% to $41.0 million and earnings per share was $1.14, an increase of 10.7% from the previous year. For the quarter, the Orkin Group's operating income increased 7.3% to $19.3 million on revenues of $138.8 million which grew 3.8% over 1993. These results provided improved operating margins of 13.9%, compared to 13.5% in the prior year. Rollins Protective Services' operating income increased 7.1% to $1.8 million on revenues of $15.5 million. For the nine months ended September 30, 1994, Orkin revenues increased 4.9% with operating income improving 10.2%. Operating margins grew to 15.7% compared to 14.9% for the same period last year. Rollins Protective Services' revenues grew 6.7%; operating income improved 11.4% over last year, with operating margins increasing to 10.2%. Detail segment information follows. 7 of 11 ROLLINS, INC. AND SUBSIDIARIES PART I. ITEM 2. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1994 Orkin 1994 Versus 1993 Revenues increased 3.8% to $138.8 million and operating income increased 7.3% to $19.3 million for the third quarter ended September 30, 1994. For the nine months ended September 30, 1994, Orkin had revenues of $410.3 million and operating income of $64.2 million (increases of 4.9% and 10.2%, respectively, from the prior year). Pest Control and Termite services increased their sales dollars and customer base for the quarter and year-to-date. The Company maintained its commitment to expanding its existing operations by entering new geographic markets with the opening of new branches. The fundamentals and financial position of the Pest Control business remain very strong and the Company is motivated to taking full advantage of market opportunities through alternative services such as the Agribusiness service with strong revenue gains. Success with other marketing programs also contributed to revenue and operating income improvements such as the introduction of a 24 hour service on its 1-800 number and a neighborhood marketing campaign, initiated in 1993, was expanded during the third quarter and has exceeded sales expectations. Orkin utilized it's telemarketing program to make "quality assurance calls", which has provided confirmation on the level of customer satisfaction, in addition to generating potential sales benefits of cross-marketing from our customers. Of the customers surveyed, 98% reported that they are pleased with our service, which creates an ideal prospect for additional Rollins services. Rollins Protective Services (RPS) 1994 Versus 1993 For the third quarter, Rollins Protective Services had revenues of $15.5 million, an increase of 4.2%, and operating income improving 7.1% to $1.8 million. For the first nine months, RPS had revenues of $45.7 million, an increase of 6.7%, and operating income of $4.7 million, an increase of 11.4%. In the third quarter of 1993, RPS reported sales improvements due to the benefits realized by refocusing its attention on the residential market through the introduction of a new mid-range product (the Protector). Revenue growth in 1994 is being driven by above-average commercial and National Accounts program results. Customer acceptance of the Vision 2000 home surveillance security system, introduced in the second quarter, has been strong and will contribute into 1995. 8 of 11 ROLLINS, INC. AND SUBSIDIARIES PART I. ITEM 2. FINANCIAL INFORMATION MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS FOR THE THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1994 FINANCIAL CONDITION (In thousands) September 30, December 31, 1994 1993 Cash and Short-Term Investments $ 28,374 $ 18,102 Marketable Securities 51,919 50,991 Working Capital $ 140,710 $ 117,528 Current Ratio 2.9 2.8 Cash Provided From Operations (Twelve Months Ended) $ 36,841 $ 40,034 At September 30, 1994 cash and short-term investments were $28.4 million, an increase of $10.3 million from December 31, 1993, due primarily to reduced investment activities during 1994. The investment in marketable securities at September 30, 1994, was $51.9 million. At September 30, 1994 the current ratio was 2.9 and working capital was $140.7 million (an increase of $23.2 million or 19.7% compared to December 31, 1993). 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. Trade receivables, net increased $17.1 million or 19.5% at September 30, 1994 compared with December 31, 1993. Trade receivables include installment receivables which are due subsequent to one year from the balance sheet date. These amounts were approximately $34.9 million and $28.7 million at the end of the September 30, 1994 and December 31, 1993, respectively. The increase in receivables is attributed to the continuing effect of an Orkin termite and Rollins Protective Services marketing programs, the increased average length and amount of an Orkin contract, and the overall increase in Company revenues of 4.1% for the quarter and 5.4% year-to-date. 9 of 11 ROLLINS, INC. AND SUBSIDIARIES PART II. OTHER INFORMATION ROLLINS, INC. AND SUBSIDIARIES ITEM 1. LEGAL PROCEEDINGS Refer to Note Number 5 to the Financial Statements, "Commitments and Contingencies". 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 26, 1994. Results of that meeting were disclosed in the Company's Form 10-Q filed for the first quarter of 1994. 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 10 of 11 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: November 14, 1994 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) 11 of 11 EX-27 2
5 The Schedule contains summary financial information extracted from the Consolidated Statements of Financial Position and Statements of Income and Earnings Retained and is qualified in its entirety by reference to such financial statements. 9-MOS DEC-31-1994 SEP-30-1994 28,374 51,919 110,081 5,474 16,794 216,196 81,383 53,036 297,302 75,486 0 41,432 0 0 147,983 297,302 0 466,319 0 236,136 163,574 0 0 66,609 25,644 40,965 0 0 0 40,965 1.14 1.14
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