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 March 31, 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 March 31, 1997, there were 34,140,781 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 -
March 31, 1997 and December 31, 1996 1
Statements of Income and Earnings Retained
- Three months ended March 31, 1997 and 1996 2
Statements of Cash Flows
- Three months ended March 31, 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>
March 31, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and Short-Term Investments $ 14,289 $ 12,150
Marketable Securities 80,101 84,785
Trade Receivables, Net 78,530 78,856
Materials and Supplies 17,132 15,006
Deferred Income Taxes 4,542 4,379
Other Current Assets 10,201 10,560
Current Assets 204,795 205,736
Equipment and Property, Net 41,571 41,042
Intangible Assets 41,907 41,931
Other Assets 22,378 20,074
Total Assets $ 310,651 $ 308,783
LIABILITIES
Capital Lease Obligations $ 3,097 $ 2,735
Accounts Payable 19,957 15,897
Accrued Insurance Expenses 14,391 15,053
Accrued Payroll 13,915 12,957
Unearned Revenue 15,700 15,614
Other Expenses 22,111 17,263
Current Liabilities 89,171 79,519
Capital Lease Obligations 11,407 12,163
Long-Term Accrued Liabilities 23,640 20,591
Deferred Income Taxes 5,558 6,220
Total Liabilities 129,776 118,493
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share;
authorized 99,500,000 shares;
34,140,781 and 34,594,481 shares issued 34,141 34,594
Earnings Retained 146,734 155,696
Total Stockholders' Equity 180,875 190,290
Total Liabilities and
Stockholder's Equity $ 310,651 $ 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
March 31,
1997 1996
<S> <C> <C>
REVENUES
Customer Services $ 150,394 $ 142,502
COSTS AND EXPENSES
Cost of Services Provided 85,872 79,374
Depreciation and Amortization 2,311 1,821
Sales, General and Administrative Expenses 55,131 52,299
Interest Income (1,217) (1,294)
142,097 132,200
INCOME BEFORE INCOME TAXES 8,297 10,302
PROVISION (CREDIT) FOR INCOME TAXES
Current 4,148 5,183
Deferred (995) (1,268)
3,153 3,915
NET INCOME 5,144 6,387
EARNINGS RETAINED
Balance at Beginning of Period 155,696 224,009
Cash Dividends (5,193) (5,202)
Common Stock Purchased and Retired (8,832) --
Other (81) (112)
BALANCE AT END OF PERIOD $ 146,734 $ 225,082
EARNINGS PER SHARE $ 0.15 $ 0.18
WEIGHTED AVERAGE
SHARES OUTSTANDING 34,468,268 35,873,150
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>
Three Months Ended
March 31,
1997 1996
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 5,144 $ 6,387
Noncash Charges (Credits) to Earnings:
Depreciation and Amortization 2,311 1,821
Deferred Income Taxes (995) (1,268)
Other, Net 761 1,062
(Increase) Decrease in Assets:
Trade Receivables 569 2,144
Materials and Supplies (2,097) (3,383)
Other Current Assets 355 3,574
Other Non-Current Assets (1,360) 264
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses 8,973 7,109
Unearned Revenue 58 2,207
Long-Term Accrued Liabilities 3,049 3,977
Non-Current Deferred Income Taxes - 133
Net Cash Provided by Operating Activities 16,768 24,027
INVESTING ACTIVITIES
Purchases of Equipment and Property (2,688) (3,238)
Net Cash Used for Acquisition of Companies (1,584) (3,657)
Marketable Securities, Net 4,435 (8,557)
Net Cash Provided by (Used in)
Investing Activities 163 (15,452)
FINANCING ACTIVITIES
Dividends Paid (5,193) (5,202)
Common Stock Purchased and Retired (9,321) --
Payments on Capital Lease (394) --
Other 116 332
Net Cash Used in Financing Activities (14,792) (4,870)
Net Increase (Decrease) in Cash
and Short-Term Investments 2,139 3,705
Cash and Short-Term Investments
at Beginning of Period 12,150 33,623
Cash and Short-Term Investments
at End of Period $ 14,289 $ 37,328
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,
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 March 31,
1997 and December 31, 1996, and the results of operations and cash
flows for the three months ended March 31, 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 FIRST QUARTER ENDED MARCH 31, 1997
RESULTS OF OPERATIONS
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SELECTED INDUSTRY SEGMENT DATA
<CAPTION>
Three Months Ended
March 31,
1997 1996
(In thousands)
<S> <C> <C>
REVENUES
Orkin $ 132,294 $ 124,433
Rollins Protective 15,822 15,330
Other 2,278 2,739
$ 150,394 $ 142,502
OPERATING INCOME
Orkin $ 8,279 $ 11,297
Rollins Protective 861 1,285
Other (19) (67)
$ 9,121 $ 12,515
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General Operating Comments
The first quarter provided sales improvement in all areas and reflected the
impact of the Company's expansion and marketing strategies. Operating
profits for the quarter continue to be impacted by investments in the core
businesses. The benefits of these investments will contribute to growth in
the customer base and recurring revenues, while enhancing long-term
shareholder value.
Revenues for the first quarter ended March 31, 1997 increased 5.5% or $7.9
million, to $150.4 million from the prior year period. Operating income
decreased $3.4 million to $9.1 million for the quarter, while net income
decreased 19.5% to $5.1 million. Earnings per share were 15 cents for the
quarter versus 18 cents for the same period last year.
For the quarter, Orkin's operating income decreased 26.7% to $8.3 million on a
6.3% revenue increase to $132.3 million. Operating margins were 6.3%,
compared to 9.1% in the prior year. Rollins Protective Services' (RPS)
operating income decreased 33.0% to $0.9 million on a revenue increase of $0.5
million or 3.2% to $15.8 million. RPS' operating margins were 5.4% compared
to 8.4% last year. Detail segment information follows.
Orkin 1997 Versus 1996
Orkin realized an increase in both recurring pest control revenue and termite
revenue. The decrease in operating income was the result of the significant
business investments initiated in 1996 including market expansion and growth
related programs as well as increased insurance costs and termite claims.
Orkin completed three acquisitions, including two in Hawaii, which established
its presence in the Pacific market.
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Rollins Protective Services (RPS) 1997 Versus 1996
During the first quarter, RPS's revenues increased while operating income
decreased. Operating income was impacted primarily by sales and market
development expenses as well as the cost associated with acquisitions made in
1996 and those made in the current year.
RPS increased its recurring revenues and customer base through five
acquisitions in the first quarter. RPS also made further progress in their
strategic partnering arrangements in the new home and cable television
industries.
Other 1997 Versus 1996
Other businesses' revenue decreased 16.8% due to a lower average receivables
portfolio within the consumer finance company, Rollins Acceptance Company
(RAC). The volume of financed purchases was 18.2% less for the quarter
compared to the first quarter last year. The unfavorable revenue results
were offset by lower expenses in RAC for an increase in operating income.
FINANCIAL CONDITION
<TABLE>
<CAPTION>
March 31, December 31,
1997 1996
(In thousands)
<S> <C> <C>
Cash and Short-Term
Investments $ 14,289 $ 12,150
Marketable Securities 80,101 84,785
$ 94,390 $ 96,935
Working Capital $ 115,624 $ 126,217
Current Ratio 2.3 2.6
Cash Provided By Operations$ 50,808 $ 58,067
(Twelve Months Ended)
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Rollins, Inc. maintains a strong financial position. The Company's operations
have historically provided a strong positive cash flow which represents the
Company's principal source of funds for capital expenditures, cash dividends,
growth and expansion plans.
Interest income decreased 6.0% for the three months ended March 31, 1997 due
to the decrease in average funds invested in short-term investments and
realized losses.
Net trade receivables decreased $0.3 million or 0.4% at March 31, 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 $18.9 million and $19.0 million at March 31,
1997 and December 31, 1996, respectively.
In the first quarter, the Company invested $4.3 million in capital
expenditures and acquisitions. Also, $5.2 million was paid out in cash
dividends and approximately 0.5 million shares of the Company's common stock
were purchased and retired during the first quarter. 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 Stockholder's Meeting was held on April 22, 1997. The
stockholders elected John W. Rollins and Gary W. Rollins as Class II
Directors for the three year term expiring in 2000.
ITEM 5.OTHER INFORMATION
None
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.
(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: May 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>
<ARTICLE> 5
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<CASH> 14,289
<SECURITIES> 80,101
<RECEIVABLES> 84,095
<ALLOWANCES> 5,565
<INVENTORY> 17,132
<CURRENT-ASSETS> 204,795
<PP&E> 90,501
<DEPRECIATION> 48,930
<TOTAL-ASSETS> 310,651
<CURRENT-LIABILITIES> 89,171
<BONDS> 0
0
0
<COMMON> 34,141
<OTHER-SE> 146,734
<TOTAL-LIABILITY-AND-EQUITY> 310,651
<SALES> 0
<TOTAL-REVENUES> 150,394
<CGS> 0
<TOTAL-COSTS> 85,872
<OTHER-EXPENSES> 56,225
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 8,297
<INCOME-TAX> 3,153
<INCOME-CONTINUING> 5,144
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 5,144
<EPS-PRIMARY> 0.15
<EPS-DILUTED> 0.15
</TABLE>
