FINANCING RECEIVABLES

12 Months Ended

Dec. 31, 2013

Financing Receivables

FINANCING RECEIVABLES

5. FINANCING RECEIVABLES

Rollins manages its financing receivables on an aggregate basis when assessing and monitoring credit risks. The Company’s credit risk is generally low with a large number of entities comprising Rollins’ customer base and dispersion across many different geographical regions. The credit quality of a potential obligor is evaluated at the loan origination based on an assessment of the individual’s beacon/credit bureau score. Rollins requires potential obligor to have good credit worthiness with low risk before entering into a contract. Depending upon the individual’s credit score the Company may accept with 100% financing, require a significant down payment or turndown the contract. Delinquencies of accounts are monitored each month. Financing receivables include installment receivable amounts which are due subsequent to one year from the balance sheet dates.

At December 31,	2013			2012
(in thousands)
Gross Financing Receivables, short-term	$	13,997		$	13,665
Gross Financing Receivables, long-term		13,031			13,089
Allowance for Doubtful Accounts		(3,200	)		(3,250	)
Net Financing Receivables	$	23,828		$	23,504

Total financing receivables, net were $23.8 million and $23.5 million at December 31, 2013 and December 31, 2012, respectively. Financing receivables are charged-off when deemed uncollectable or when 180 days have elapsed since the date of the last full contractual payment. The Company’s charge-off policy has been consistently applied and no significant changes have been made to the policy during the periods reported. Management considers the charge-off policy when evaluating the appropriateness of the allowance for doubtful accounts. Gross charge-offs as a percentage of average financing receivables were 2.7% and 2.6% for the twelve months ended December 31, 2013 and December 31, 2012, respectively. Due to the low percentage of charge-off receivables and the high credit worthiness of the potential obligor, the entire Rollins, Inc. financing receivables portfolio has a low credit risk.

The Company offers 90 days same-as-cash financing to some customers based on their credit worthiness. Interest is not recognized until the 91^st day at which time it is recognized retrospectively back to the first day if the contract has not been paid in full. In certain circumstances, such as when delinquency is deemed to be of an administrative nature, accounts may still accrue interest when they reach 180 days past due. As of December 31, 2013, there were no accounts on a non-accrual status, and no financing receivables greater than 180 days past due.

Included in financing receivables are notes receivable from franchise owners. These notes are low risk as the repurchase of these franchises is guaranteed by the Company’s wholly-owned subsidiary, Orkin, Inc., and the repurchase price of the franchise is currently estimated and have historically been well above the receivable due from the franchise owner.

The carrying amount of financing receivables approximates fair value as the interest rates approximate market rates for these types of contracts. Long-term financing receivables, net were $11.6 million and $11.7 million at December 31, 2013 and 2012, respectively.

Rollins establishes an allowance for doubtful accounts to insure financing receivables are not overstated due to uncollectability. The allowance balance is comprised of a general reserve, which is determined based on a percentage of the financing receivables balance, and a specific reserve, which is established for certain accounts with identified exposures, such as customer default, bankruptcy or other events, that make it unlikely that Rollins will recover its investment. The general reserve percentages are based on several factors, which include consideration of historical credit losses and portfolio delinquencies, trends in overall weighted-average risk rating of the portfolio and information derived from competitive benchmarking.

The allowance for doubtful accounts related to financing receivables was as follows:

At December 31,	2013			2012
(in thousands)
Balance, beginning of period	$	3,250		$	3,000
Additions to allowance		626			906
Deductions, net of recoveries		(676	)		(656	)
Balance, end of period	$	3,200		$	3,250

The following is a summary of the past due financing receivables:

December 31,	2013		2012
(in thousands)
30-59 days past due	$	1,185	$	563
60-89 days past due		251		190
90 days or more past due		355		331
Total	$	1,791	$	1,084

The following is a summary of percentage of gross financing receivables:

December 31,	2013			2012
Current		93.4	%		95.9	%
30-59 days past due		4.4	%		2.1	%
60-89 days past due		0.8	%		0.7	%
90 days or more past due		1.4	%		1.3	%
Total		100.0	%		100.0	%