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, 1996.
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, 1996, there were 35,481,052 shares of Common Stock $1 Par
Value, outstanding.
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ROLLINS, INC. AND SUBSIDIARIES
INDEX
Page No.
Part I Financial Information
Statements of Financial Position -
June 30, 1996 and December 31, 1995 1
Statements of Income and Earnings Retained
- Three months and six months ended
June 30, 1996 and 1995 2
Statements of Cash Flows
- Six months ended June 30, 1996 and 1995 3
Notes to Financial Statements 4
Management's Discussion and Analysis of
Financial Condition and Results of Operations 5-8
Part IIOther Information 9
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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)
<CAPTION>
June 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and Short-Term Investments $ 30,272 $ 33,623
Marketable Securities 83,165 65,743
Trade Receivables, Net 90,826 88,542
Materials and Supplies 17,763 13,924
Deferred Income Taxes 2,489 7,447
Other Current Assets 9,551 13,486
Current Assets 234,066 222,765
Equipment and Property, Net 40,277 37,799
Intangible Assets 41,974 42,013
Other Assets 15,936 12,348
Total Assets $ 332,253 $ 314,925
LIABILITIES
Capital Lease Obligation $ 1,561 $ 1,314
Accounts Payable 17,074 13,334
Accrued Insurance Expenses 14,245 14,314
Accrued Payroll 14,769 12,028
Unearned Revenue 16,688 14,695
Other Expenses 20,044 15,324
Current Liabilities 84,381 71,009
Capital Lease Obligation 6,628 7,422
Long-Term Accrued Liabilities 21,296 15,936
Deferred Income Taxes 6,119 6,240
Total Liabilities 118,424 100,607
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share; authorized
99,500,000 shares; 41,029,814
shares issued in 1996; 41,431,814
shares issued in 1995 41,030 41,432
Earnings Retained 223,722 224,009
264,752 265,441
Less--Common Stock In Treasury, At Cost,
5,548,762 in 1996 ; 5,573,589
shares in 1995 50,923 51,123
Total Stockholders' Equity 213,829 214,318
Total Liabilities and
Stockholders' Equity $ 332,253 $ 314,925
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)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
REVENUES
Customer Services $ 177,847 $ 175,350 $ 320,349 $ 318,004
COSTS AND EXPENSES
Cost of Services Provided 94,226 86,874 173,600 160,112
Depreciation and Amortization 1,949 1,895 3,770 3,734
Sales, General and
Administrative Expenses 62,448 53,761 114,747 109,693
Interest Income (1,487) (1,216) (2,781) (2,162)
157,136 141,314 289,336 271,377
INCOME BEFORE INCOME TAXES 20,711 34,036 31,013 46,627
PROVISION (CREDIT) FOR INCOME TAXES
Current 8,176 13,565 13,359 18,905
Deferred (306) (631) (1,574) (1,187)
7,870 12,934 11,785 17,718
NET INCOME 12,841 21,102 19,228 28,909
EARNINGS RETAINED
Balance at Beginning of Period 225,082 206,954 224,009 203,582
Cash Dividends (5,183) (5,019) (10,385) (10,037)
Common Stock Retired (8,762) 0 (8,762) 0
Other (256) 528 (368) 1,111
BALANCE AT END OF PERIOD $ 223,722 $ 223,565 $ 223,722 $ 223,565
EARNINGS PER SHARE $ 0.36 $ 0.59 $ 0.54 $ 0.81
WEIGHTED AVERAGE
SHARES OUTSTANDING 35,691,862 35,850,498 35,782,506 35,844,128
The accompanying notes are an integral part of these statements.
</TABLE>
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ROLLINS, INC. AND SUBSIDIARIES
STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1996 1995
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 19,228 $ 28,909
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 3,770 3,734
Deferred Income Taxes (1,574) (1,187)
Other, Net 2,715 2,275
(Increase) Decrease in Assets:
Trade Receivables (2,204) (4,341)
Materials and Supplies (3,796) (2,565)
Other Current Assets 8,863 (724)
Other Non-Current Assets 104 (755)
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 11,062 9,862
Unearned Revenue 1,656 (498)
Long-Term Accrued Liabilities 5,360 (2,788)
Non-Current Deferred Income Taxes 1,109 701
Net Cash Provided by Operating Activities 46,293 32,623
INVESTING ACTIVITIES
Purchases of Equipment and Property (6,364) (5,167)
Net Cash Used for Acquisition of Companies (5,498) (2,266)
Marketable Securities, Net (17,916) (15,998)
Proceeds from Sales of Equipment
and Property 77 142
Net Cash Used in Investing Activities (29,701) (23,289)
FINANCING ACTIVITIES
Dividends Paid (10,385) (10,037)
Purchase of Treasury Stock (9,164) 0
Payments on Capital Lease (547) 0
Treasury Stock Issued to Benefit Plans 153 610
Net Cash Used in Financing Activities (19,943) (9,427)
Net Increase (Decrease) in Cash
and Short-Term Investments (3,351) (93)
Cash and Short-Term Investments
at Beginning of Period 33,623 31,917
Cash and Short-Term Investments
at End of Period $ 30,272 $ 31,824
The accompanying notes are an integral part of these statements.
</TABLE>
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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,
1995.
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,
1996 and December 31, 1995, and the results of operations and cash
flows for the six months ended June 30, 1996 and 1995.
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
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 ENDED JUNE 30, 1996
RESULTS OF OPERATIONS
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SELECTED INDUSTRY SEGMENT DATA
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1996 1995 1996 1995
(In thousands)
<S> <C> <C> <C> <C>
REVENUES
Orkin $ 159,256 $ 157,296 $ 283,689 $ 282,549
Rollins Protective 15,982 14,660 31,312 28,878
Other 2,609 3,394 5,348 6,577
$ 177,847 $ 175,350 $ 320,349 $ 318,004
OPERATING INCOME
Orkin $ 20,678 $ 33,905 $ 31,975 $ 46,969
Rollins Protective 1,428 1,421 2,713 2,762
Other (433) (109) (500) 387
$ 21,673 $ 35,217 $ 34,188 $ 50,118
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General Operating Comments
In the second quarter, the Company continued to execute strategic plans to
build on their dedication to customer service and investments for long-term
growth. Investments in the core businesses include a renewed emphasis on
recurring monthly pest control, increased focus on Commercial opportunities,
and expanding the number of locations. During the quarter, the Company
repurchased 402,000 shares of their common stock, confirming management's and
the Board of Directors' confidence in the Company's future.
Revenues for the second quarter ended June 30, 1996 increased 1.4% or $2.5
million, to $177.8 million from the prior year period. Operating income
decreased $13.5 million to $21.7 million for the quarter, while net income
decreased 39.1% to $12.8 million. Earnings per share were 36 cents versus 59
cents for the second quarter 1995. Year-to-date, net income decreased 33.5%
to $19.2 million and earnings per share were 54 cents versus 81 cents last
year.
For the quarter, the Orkin's operating income decreased 39.0% to $20.7 million
on a 1.2% revenue increase to $159.3 million. Operating margins were 13.0%,
compared to 21.6% in the prior year. Rollins Protective Services' (RPS)
operating income increased 0.5% to $1.4 million on a revenue increase of $1.3
million or 9.0% to $16.0 million. RPS' operating margins were 8.9% compared
to 9.7% last year.
For the six months ended June 30, 1996, Orkin's revenue increased 0.4% with
operating income declining 31.9%. Operating margins were 11.3%, compared to
16.6% for the same period last year. RPS revenue increased 8.4% while
operating income decreased 1.8%. Operating margins declined from 9.6% to 8.7%.
Detail segment information follows.
Orkin 1996 Versus 1995
Orkin realized an increase in pest control revenue and customer base,
supporting the strategic decision to continue emphasizing recurring monthly
pest control. However, due to the effect of the unexpected, severe and
extended winter weather, the pest control revenue increase is offset by a
decrease in termite revenue. The termite business continues to be an
important part of Orkin's business mix, however Orkin will continue their
strategic marketing and customer service programs toward expansion of the less
weather sensitive recurring pest control segment. To augment the positive
results in the recurring pest control business, a Commercial Pest Control
Division was created during the second quarter.
The decrease in operating income was the result of the termite sales
shortfall, combined with increased claims and legal expenses and planned
investments in sales and service staffing. Business development activities
included 20 new branch and franchise openings during the first six months,
compared to 14 for all of 1995.
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Rollins Protective Services (RPS) 1996 Versus 1995
During the second quarter, RPS completed it's second acquisition for the year,
with the acquisition of Protect-A-Life Corporation in the Philadelphia area.
Acquisitions are an important component of growth for RPS.
RPS operating margins were impacted by investments in new, dedicated
commercial branches and costs associated with acquisitions during the last
twelve months. Operating income improvements are expected to be realized this
year through RPS' focus on the System VII product sales, Commercial sales and
service initiatives, cross-marketing efficiencies from the National Customer
Support Center, and acquisitions.
Other 1996 Versus 1995
Other businesses revenue and operating income decreased for the quarter due to
revisions of the Company's credit and internal operating policies within the
consumer finance area, Rollins Acceptance Company (RAC). The volume of
Company financed sales is lower than last year, as the revised policies
redirected marketing efforts toward stronger customer demographics
inconjunction with a lower termite demand.
The expanded physical facility, increased collector headcount, and new
computers and phone dialing equipment caused margin deterioration, however
these investments have better positioned RAC to more effectively manage the
receivables portfolio and function as a marketing support operation.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
(In thousands)
<S> <C> <C>
Cash and Short-Term
Investments $ 30,272 $ 33,623
Marketable Securities 83,165 65,743
$ 113,437 $ 99,366
Working Capital $ 149,685 $ 151,756
Current Ratio 2.8 3.1
Cash Provided By Operations$ 60,580 $ 46,910
(Twelve Months Ended)
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Rollins, Inc.'s financial position remained solid. 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, cash dividends, and expansion plans.
Interest income increased 28.6% for the six months ended June 30, 1996, due to
the increase in average funds invested in short-term investments and
marketable securities, coupled with the increase in the average rate of return.
Net trade receivables increased $2.3 million or 2.6% at June 30, 1996 compared
with December 31, 1995. Trade receivables include installment receivables
which are due subsequent to one year from the balance sheet date. These
amounts were approximately $21.9 million and $26.2 million at June 30, 1996
and December 31, 1995, respectively.
During the six month period, the Company invested $11.9 million in capital
expenditures and acquisitions. Also, $10.4 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.
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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 23, 1996. The
results of that meeting were disclosed in the Company's Form 10-Q for
the first quarter 1996.
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
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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 12, 1996
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)
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Statement of Financial Position at June 30, 1996 and Statement of Income for the
Second Quarter and Six Months ended June 30, 1996 and is qualified in its
entirety by reference to such statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 30,272
<SECURITIES> 83,165
<RECEIVABLES> 95,847
<ALLOWANCES> 5,021
<INVENTORY> 17,763
<CURRENT-ASSETS> 234,066
<PP&E> 92,905
<DEPRECIATION> 52,628
<TOTAL-ASSETS> 332,253
<CURRENT-LIABILITIES> 84,381
<BONDS> 0
0
0
<COMMON> 41,030
<OTHER-SE> 172,799
<TOTAL-LIABILITY-AND-EQUITY> 332,253
<SALES> 0
<TOTAL-REVENUES> 320,349
<CGS> 0
<TOTAL-COSTS> 173,600
<OTHER-EXPENSES> 115,736
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 31,013
<INCOME-TAX> 11,785
<INCOME-CONTINUING> 19,228
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 19,228
<EPS-PRIMARY> 0.54
<EPS-DILUTED> 0.54
</TABLE>
