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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 June 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 June 30, 1994, there were 35,771,758 shares of Common Stock $1 Par
Value, outstanding.
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ROLLINS, INC. AND SUBSIDIARIES
INDEX
Part I Financial Information Page No.
Statements of Financial Position -
June 30, 1994 and December 31, 1993 1
Statements of Income and Earnings Retained
- three months and six months ended
June 30, 1994 and 1993 2
Statements of Cash Flows
- six months ended June 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
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ROLLINS, INC. AND SUBSIDIARIES
PART 1. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION
(In thousands, except share data)
(Unaudited)
<TABLE>
<CAPTION>
June 30, December 31,
1994 1993
<S> <C> <C>
ASSETS
Cash and Short-Term Investments $ 24,254 $ 18,102
Marketable Securities 51,556 50,991
Trade Receivables, Net 101,693 87,518
Materials and Supplies 19,454 15,829
Other Current Assets 13,090 12,092
Current Assets 210,047 184,532
Equipment and Property, Net 28,684 28,890
Intangible Assets 42,131 42,171
Other Assets 10,982 11,601
Total Assets $ 291,844 $ 267,194
LIABILITIES
Accounts Payable $ 15,264 $ 12,279
Accrued Insurance Expenses 16,657 13,600
Accrued Payroll 16,239 15,519
Unearned Revenue 13,462 12,854
Other Expenses 15,243 12,752
Current Liabilities 76,865 67,004
Deferred Income Taxes 12,762 12,983
Long-Term Accrued Liabilities 21,590 26,699
Total Liabilities 111,217 106,686
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 191,077 171,862
232,509 213,294
Less--Common Stock In Treasury, At Cost,
5,660,056 in 1994 ; 5,758,619 shares in 1993 51,882 52,786
Total Stockholders' Equity 180,627 160,508
Total Liabilities and Stockholders' Equity $ 291,844 $ 267,194
</TABLE>
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)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES
Customer Services $ 171,874 $ 163,248 $ 308,317 $ 290,543
COSTS AND EXPENSES
Cost of Services Provided 83,669 80,876 153,821 146,525
Sales, General and Administrative Expenses 52,342 49,866 105,903 100,620
Depreciation and Amortization 2,033 2,057 4,014 3,851
Interest Income (423) (560) (874) (1,002)
137,621 132,239 262,864 249,994
INCOME BEFORE INCOME TAXES 34,253 31,009 45,453 40,549
PROVISION (CREDIT) FOR INCOME TAXES:
Current 12,681 12,026 17,820 16,065
Deferred 506 (88) (321) (454)
13,187 11,938 17,499 15,611
NET INCOME 21,066 19,071 27,954 24,938
EARNINGS RETAINED:
Balance at Beginning of Period 174,409 144,244 171,862 141,999
Cash Dividends (4,475) (3,919) (8,935) (7,836)
Employee Benefit Plans 77 264 196 559
BALANCE AT END OF PERIOD $ 191,077 $ 159,660 $ 191,077 $ 159,660
EARNINGS PER SHARE $ 0.59 $ 0.54 $ 0.78 $ 0.70
WEIGHTED AVERAGE
SHARES OUTSTANDING 35,757,223 35,629,110 35,734,591 35,618,674
</TABLE>
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)
Six Months Ended
June 30
1994 1993
OPERATING ACTIVITIES
Net Income $ 27,954 $ 24,938
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 4,014 3,851
Other, Net 654 1,147
(Increase) Decrease in:
Trade Receivables (14,103) (15,474)
Materials and Supplies (3,625) (2,073)
Other Current Assets (1,482) 1,240
Increase (Decrease) in:
Accounts Payable and Accrued Expenses 9,461 7,321
Unearned Revenue 608 1,333
Non-Current Deferred Income Taxes 584 (3,226)
Long-Term Accrued Liabilities (5,229) 588
Other Non-Current Assets (324) (270)
Net Cash Provided by Operating Activities 18,512 19,375
INVESTING ACTIVITIES
Purchases of Equipment and Property (4,329) (4,511)
Net Cash Used for Acquisition of Companies (345) ---
Proceeds from Sales of Equipment and Property 714 205
Purchases of Marketable Securities (565) (612)
Net Cash Used in Investing Activities (4,525) (4,918)
FINANCING ACTIVITIES
Dividends Paid (8,935) (7,836)
Treasury Stock Issued to Benefit Plans 1,100 959
Net Cash Used in Financing Activities (7,835) (6,877)
Net Increase (Decrease) in Cash
and Short-Term Investments 6,152 7,580
Cash and Short-Term Investments
at Beginning of Period 18,102 20,061
Cash and Short-Term Investments
at End of Period $ 24,254 $ 27,641
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, 1993.
Certain prior year amounts have been reclassified to
conform with the second 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 June 30, 1994 and
December 31, 1993, and the results of operations and
cash flows for the six months ended June 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 six months ended
June 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.
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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.
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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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1994
RESULTS OF OPERATIONS
<TABLE>
<CAPTION>
SELECTED INDUSTRY SEGMENT DATA
Three Months Ended Six Months Ended
June 30 June 30
(In thousands)
1994 1993 1994 1993
<S> <C> <C> <C> <C>
REVENUES
Orkin $ 153,119 $ 146,519 $ 271,479 $ 257,212
Rollins Protective 15,299 13,954 30,171 27,930
Other 3,456 2,775 6,667 5,401
$ 171,874 $ 163,248 $ 308,317 $ 290,543
OPERATING INCOME
Orkin $ 33,389 $ 30,305 $ 44,876 $ 40,252
Rollins Protective 1,504 1,311 2,834 2,479
Other 1,392 1,092 2,330 1,849
$ 36,285 $ 32,708 $ 50,040 $ 44,580
</TABLE>
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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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1994
General Operating Comments
Rollins, Inc. reported another quarter of record earnings. These
results dramatically illustrate Rollins' growing penetration in its
markets. Revenue for the second quarter ended June 30, 1994 reached
$171.9 million, an increase of $8.6 million or 5.3% from the prior
year period ($17.8 million or 6.1% year-to-date). Operating income
increased $3.6 million or 10.9% to $36.3 million for the quarter ($5.5
million or 12.2% year-to-date). Although seasonal termite business was
negatively impacted by an extremely cold winter and spring, the
Company produced consistent earnings results. This marks the 17th
consecutive quarter of double-digit earnings increases.
The Company as a whole is working hard to improve employee
productivity and increase customer growth, while maintaining tight
control of expenses. The investments in customer service and
recurring revenue growth during the first half of the year should
result in overall favorable earnings for the year.
Net income for the quarter grew 10.5% to $21.1 million and earnings
per share was 59 cents, compared to 54 cents a year ago, a 9.3%
improvement. Year-to-date, net income increased 12.1% to $28.0
million and earnings per share was 78 cents, an increase of 11.4% from
the previous year.
For the quarter, the Orkin Group's operating income increased 10.2% to
$33.4 million on revenues of $153.1 million which grew 4.5% over 1993.
These results provided improved operating margins of 21.8%, compared to
20.7% in the prior year. Rollins Protective Services operating income
increased 14.7% to $1.5 million on revenues of $15.3 million.
For the six months ended June 30, 1994, Orkin revenues increased 5.5%
with operating income improving 11.5%. Operating margins grew to
16.5% compared to 15.6% for the same period last year. Rollins
Protective Services' revenue grew 8.0%; operating income improved
14.3% over last year, with operating margins increasing to 9.4%.
Detail segment information follows.
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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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1994
Orkin 1994 Versus 1993
Revenues increased 4.5% to $153.1 million and operating income
increased 10.2% to $33.4 million for the second quarter ended June 30,
1994. For the six months ended June 30, 1994, Orkin had revenues of
$271.5 million and operating income of $44.9 million (increases of
5.5% and 11.5%, respectively, from the prior year). Pest Control
increased 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. Lawn Care has continued to improve its operating income
results with more efficient execution of operational programs. Orkin
Plantscaping will continue its program of location standardization and
employee training, while gaining a tighter control of expenses and
resulting margins.
Rollins Protective Services (RPS) 1994 Versus 1993
For the second quarter, Rollins Protective Services had revenues of
$15.3 million, an increase of 9.6%, and operating income improving
14.7% to $1.5 million. For the first six months, RPS had revenues of
$30.2 million, an increase of 8.0%, and operating income of $2.8
million, an increase of 14.3%. In the second quarter, RPS rolled out
the national introduction of its Vision 2000, a home surveillance
system. Vision 2000 allows customers to keep watch over their
children or see who's at the door-all from their cable connected
television sets.
FINANCIAL CONDITION
(In thousands) June 30, December 31,
1994 1993
Cash and Short-Term Investments $ 24,254 $ 18,102
Marketable Securities 51,556 50,991
Working Capital $ 133,182 $ 117,528
Current Ratio 2.7 2.8
Cash Provided From Operations $ 39,171 $ 40,034
(Twelve Months Ended)
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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 SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1994
At June 30, 1994 cash and short-term investments were $24.3 million,
an increase of $6.2 million from December 31, 1993. The investment in
marketable securities at June 30, 1994, was $51.6 million.
At June 30, 1994 the current ratio was 2.7 and working capital was
$133.2 million (an increase of $15.7 million or 13.3% 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 $14.2 million or 16.2% at June 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 $33.4 million
and $28.7 million at the end of the June 30, 1994 and December 31,
1993, respectively. (Delinquency statistics, as a percentage of total
receivables, have improved over the prior year). The increase in
receivables is attributed to the continuing effect of a 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 5.3% for the quarter and 6.1% year-to-
date.
During the first quarter of 1994, the Company adopted Statement of
Financial Accounting Standard No. 115 (SFAS 115), "Accounting for
Certain Investments in Debt and Equity Securities". Future unrealized
gains and losses will likely occur, although their magnitude cannot be
predicted and the effects on the Company's results are not expected to
be material.
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ROLLINS, INC. AND SUBSIDIARIES
PART II. OTHER INFORMATION
ROLLINS, INC. AND SUBSIDIARIES
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 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
None
(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: August 11, 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)
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