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, 1997.
[ ] 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, 1997, there were 33,708,073 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, 1997 and December 31, 1996 1
Statements of Income and Earnings Retained
- Three months and six months ended June 30, 1997
and June 30, 1996 2
Statements of Cash Flows
- Six months ended June 30, 1997 and 1996 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,
1997 1996
<S> <C> <C>
ASSETS
Cash and Short-Term Investments $ 6,987 $ 12,150
Marketable Securities 70,108 84,785
Trade Receivables, Net 82,500 78,856
Materials and Supplies 19,504 15,006
Deferred Income Taxes 4,813 4,379
Other Current Assets 9,992 10,560
Current Assets 193,904 205,736
Equipment and Property, Net 42,242 41,042
Intangible Assets 41,883 41,931
Other Assets 23,981 20,074
Total Assets $ 302,010 $ 308,783
LIABILITIES
Capital Lease Obligations $ 2,998 $ 2,735
Accounts Payable 18,881 15,897
Accrued Insurance Expenses 14,149 15,053
Accrued Payroll 15,536 12,957
Unearned Revenue 16,617 15,614
Other Expenses 19,165 17,263
Current Liabilities 87,346 79,519
Capital Lease Obligations 10,636 12,163
Long-Term Accrued Liabilities 25,197 20,591
Deferred Income Taxes 4,558 6,220
Total Liabilities 127,737 118,493
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share;
authorized 99,500,000 shares; 33,708,073
shares issued in 1997; 34,594,481
shares issued in 1996 33,708 34,594
Earnings Retained 140,565 155,696
Total Stockholders' Equity 174,273 190,290
Total Liabilities
and Stockholders' Equity $ 302,010 $ 308,783
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,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
REVENUES
Customer Services $ 177,781 $ 177,847 $ 328,175 $ 320,349
COSTS AND EXPENSES
Cost of Services Provided 102,077 94,226 187,949 173,600
Depreciation and Amortization 2,408 1,949 4,719 3,770
Sales, General and Administrative Expenses 64,277 62,448 119,408 114,747
Interest Income (1,172) (1,487) (2,389) (2,781)
167,590 157,136 309,687 289,336
INCOME BEFORE INCOME TAXES 10,191 20,711 18,488 31,013
PROVISION (CREDIT) FOR INCOME TAXES
Current 5,525 8,176 9,673 13,359
Deferred (1,653) (306) (2,648) (1,574)
3,872 7,870 7,025 11,785
NET INCOME 6,319 12,841 11,463 19,228
EARNINGS RETAINED
Balance at Beginning of Period 146,734 225,082 155,696 224,009
Cash Dividends (5,059) (5,183) (10,252) (10,385)
Common Stock Purchased and Retired (7,741) (8,762) (16,573) (8,762)
Other 312 (256) 231 (368)
BALANCE AT END OF PERIOD $ 140,565 $ 223,722 $ 140,565 $ 223,722
EARNINGS PER SHARE $ 0.19 $ 0.36 $ 0.34 $ 0.54
WEIGHTED AVERAGE
SHARES OUTSTANDING 33,807,036 35,691,862 34,135,825 35,782,506
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)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 11,463 $ 19,228
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 4,719 3,770
Deferred Income Taxes (2,648) (1,574)
Other, Net 1,771 2,715
(Increase) Decrease in Assets:
Trade Receivables (3,401) (2,204)
Materials and Supplies (4,469) (3,796)
Other Current Assets 564 8,863
Other Non-Current Assets (3,508) 104
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 6,267 11,062
Unearned Revenue 959 1,656
Long-Term Accrued Liabilities 4,606 5,360
Non-Current Deferred Income Taxes 0 1,109
Net Cash Provided by Operating Activities 16,323 46,293
INVESTING ACTIVITIES
Capital Expenditures (5,764) (6,287)
Net Cash Used for Acquisition of Companies (1,691) (5,498)
Net Sale (Purchase) of Marketable Securities 14,783 (17,916)
Net Cash (Used in) Provided by Investing
Activities 7,328 (29,701)
FINANCING ACTIVITIES
Dividends Paid (10,252) (10,385)
Common Stock Purchased and Retired (17,495) (9,164)
Payments on Capital Lease (1,264) (547)
Other 197 153
Net Cash Used in Financing Activities (28,814) (19,943)
Net Increase (Decrease) in Cash
and Short-Term Investments (5,163) (3,351)
Cash and Short-Term Investments
at Beginning of Period 12,150 33,623
Cash and Short-Term Investments
at End of Period $ 6,987 $ 30,272
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, 1996.
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, 1997 and December 31, 1996, and the results of operations and
cash flows for the six months ended June 30, 1997 and 1996.
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, 1997
RESULTS OF OPERATIONS
<TABLE>
SELECTED INDUSTRY SEGMENT DATA
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(In thousands)
<S> <C> <C> <C> <C>
REVENUES
Orkin $ 160,117 $ 159,256 $ 292,411 $ 283,689
Rollins Protective 15,250 15,982 31,072 31,312
Other 2,414 2,609 4,692 5,348
$ 177,781 $ 177,847 $ 328,175 $ 320,349
OPERATING INCOME
Orkin $ 10,937 $ 20,678 $ 19,216 $ 31,975
Rollins Protective 612 1,428 1,473 2,713
Other (56) (433) (75) (500)
$ 11,493 $ 21,673 $ 20,614 $ 34,188
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General Operating Comments
The second quarter financial results were disappointing. However, the
investments made in the Company's core businesses along with the expansion
of tested marketing and service programs will favorably affect the
Company's future growth and profitability.
Revenues for the second quarter ended June 30, 1997 of $177.8 million were
approximately flat when compared to the same period last year. Operating
income of $11.5 million decreased 47.0% for the quarter, while net income
decreased 50.8% to $6.3 million. Earnings per share were 19 cents versus
36 cents for the second quarter 1996. Year-to-date, net income decreased
40.4% to $11.5 million and earnings per share were 34 cents versus 54 cents
last year.
For the quarter, Orkin's operating income decreased 47.1% to $10.9 million
on a 0.5% revenue increase to $160.1 million. Operating margins were 6.8%,
compared to 13.0% in the prior year. Rollins Protective Services' (RPS)
operating income decreased 57.1% to $0.6 million on a revenue decrease of
$0.7 million or 4.6% to $15.2 million. RPS' operating margins were 4.0%
compared to 8.9% last year.
For the six months ended June 30, 1997, Orkin's revenue increased 3.1% with
operating income declining 39.9%. Operating margins were 6.6%, compared to
11.3% for the same period last year. RPS revenue decreased 0.8% while
operating income decreased 45.7%. Operating margins declined from 8.7% to
4.7%. Detail segment information follows.
Orkin 1997 Versus 1996
For the quarter, Orkin had increases in pest control revenue and termite
renewal revenue. However, these gains were offset by a decrease in termite
sales revenue which can be attributed to a cold, wet spring and changes in
sales policies. Operating income for the quarter was negatively impacted by
the shortfall in termite sales, increased insurance costs, and termite
claims.
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Rollins Protective Services (RPS) 1997 Versus 1996
RPS' revenue decline for the quarter was due primarily to a strategic
diversification to more competitive mid-market products. Earnings were
negatively impacted by the shortfall in revenues and increased sales and
marketing expenses. However, double-digit growth was experienced in unit
sales as well as service and monitoring revenue. The strategies RPS
continues to implement along with account acquisitions in existing markets
will improve its long-term revenues and profits.
Other 1997 Versus 1996
Other businesses revenue decreased 7.5% for the quarter and 12.3% for the
six month period primarily as a result of an 8.8% and 11.6% reduction in
the average interest-earning receivables for the quarter and six month
period, respectively, within the consumer finance company, Rollins
Acceptance Company (RAC). The unfavorable revenue results were offset by
lower expenses in RAC for an improvement in operating income of 87.1% and
85.0% for the quarter and six month period, respectively.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
June 30, December 31,
1997 1996
(In thousands)
<S> <C> <C>
Cash and
Short-Term Investments $ 6,987 $ 12,150
Marketable Securities 70,108 84,785
$ 77,095 $ 96,935
Working Capital $ 106,558 $ 126,217
Current Ratio 2.2 2.6
Cash Provided By
Operations $ 28,097 $ 58,067
(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
future expansion.
Interest income decreased 14.1% for the six months ended June 30, 1997, due
to the decrease in average funds invested in short-term investments and
marketable securities and realized losses.
Net trade receivables increased $3.6 million or 4.6% at June 30, 1997
compared with December 31, 1996. Trade receivables include installment
receivables which are due subsequent to one year from the balance sheet
date. These amounts were approximately $18.6 million and $19.0 million at
June 30, 1997 and December 31, 1996, respectively.
During the six month period, the Company invested $7.5 million in capital
expenditures and acquisitions. Also, $10.3 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 433,300 shares of its common
stock, confirming management's and the Board of Directors' confidence in
the Company's future. The Company has repurchased a total of 922,600
shares in 1997. Furthermore, the Board of Directors authorized the
purchase by the Company of up to an additional 2,000,000 shares of its
common stock. The purchases will be made from time to time using funds
already on hand.
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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 22, 1997. The
results of that meeting were disclosed in the Company's Form 10-Q for
the first quarter 1997.
ITEM 5.OTHER INFORMATION
In July 1997, the Plantscaping and Lawn Care divisions of Orkin
Exterminating Company, Inc., a wholly-owned subsidiary, were sold to
Tru-Green L.P. The sale of these divisions represents the Company's
strategic decision to focus its resources on its core businesses.
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)(a) as
filed with its Form 10-K for the year ended December 31,
1992.
(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.
(2) 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 14, 1997
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)
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<TABLE> <S> <C>
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<LEGEND>
2nd Qtr 1997 FDS
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<S> <C>
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<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
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<ALLOWANCES> 5636
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<PP&E> 91031
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0
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<COMMON> 33708
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