<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(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, 1999
OR
[ ] 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.
(Exact name of registrant as specified in its charter)
Delaware 51-0068479
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
2170 Piedmont Road, N.E., Atlanta, Georgia
(Address of principal executive offices)
30324
(Zip Code)
(404) 888-2000
(Registrant's telephone number, including area code)
----------------------------
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 [ ]
Rollins, Inc. had 30,542,389 shares of its $1 Par Value
Common Stock outstanding as of April 30, 1999.
<PAGE>
ROLLINS, INC. AND SUBSIDIARIES
INDEX
PART I .....FINANCIAL INFORMATION Page No.
Item 1. Financial Statements.
Consolidated Statements of Financial Position
as of March 31, 1999 and December 31, 1998 2
Consolidated Statements of Income (Loss) and
Earnings Retained for the Quarters Ended
March 31, 1999 and 1998 3
Consolidated Statements of Cash Flows for the
Quarters Ended March 31, 1999 and 1998 4
Notes to Consolidated Financial Statements 5
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations. 7
Item 3. Quantitative and Qualitative Disclosures
About Market Risk. 9
PART II OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds. 10
Item 6. Exhibits and Reports on Form 8-K. 10
SIGNATURES 11
<PAGE>
PART I -- FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
<TABLE>
ROLLINS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
(In thousands except share data)
<CAPTION>
(Unaudited)
March 31, December 31,
1999 1998
----------- -----------
<S> <C> <C> <C>
ASSETS
Cash and Short-Term Investments ...................... $ 646 $ 1,244
Marketable Securities ................................ 109,296 110,229
Trade Receivables, Net ............................... 38,523 42,353
Materials and Supplies ............................... 14,193 13,335
Deferred Income Taxes ................................ 19,452 20,083
Other Current Assets ................................. 14,026 11,864
----------- -----------
Current Assets ................................... 196,136 199,108
Equipment and Property, Net .......................... 36,431 35,466
Intangible Assets .................................... 40,566 40,602
Deferred Income Taxes ................................ 43,344 44,369
Other Assets ......................................... 7,885 7,720
----------- -----------
Total Assets ..................................... $ 324,362 $ 327,265
=========== ===========
LIABILITIES
Capital Lease Obligations ............................ $ 3,473 $ 3,419
Accounts Payable ..................................... 16,243 10,890
Accrued Insurance ................................... 16,971 18,348
Accrued Payroll ...................................... 17,661 18,400
Unearned Revenue ..................................... 17,827 15,210
Other Expenses ....................................... 46,280 48,826
----------- -----------
Current Liabilities .............................. 118,455 115,093
Capital Lease Obligations ............................ 5,201 6,090
Accrued Insurance .................................... 37,945 38,975
Accrual for Termite Contracts ........................ 61,144 66,350
Long-Term Accrued Liabilities ........................ 22,716 20,522
----------- -----------
Total Liabilities ................................ 245,461 247,030
----------- -----------
Commitments and Contingencies
STOCKHOLDERS' EQUITY
Common Stock, par value $1 per share; 99,500,000
shares authorized; 30,475,841 and 30,488,741
shares issued at March 31, 1999 and
December 31, 1998, respectively .................. 30,476 30,489
Earnings Retained .................................... 48,425 49,746
----------- -----------
Total Stockholders' Equity ........................... 78,901 80,235
----------- -----------
Total Liabilities and Stockholders' Equity ........... $ 324,362 $ 327,265
=========== ===========
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
2
<PAGE>
<TABLE>
ROLLINS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS) AND EARNINGS RETAINED
(In thousands except share data)
(Unaudited)
<CAPTION>
Quarters Ended
March 31,
----------------------------
1999 1998
------------ ------------
<S> <C> <C> <C>
REVENUES
Customer Services ................................... $ 129,886 $ 122,965
------------ ------------
COSTS AND EXPENSES
Cost of Services Provided ........................... 76,857 76,909
Depreciation and Amortization ....................... 2,405 2,092
Sales, General and Administrative ................... 50,998 49,431
Interest Income ..................................... (1,125) (2,622)
------------ ------------
129,135 125,810
------------ ------------
INCOME (LOSS) BEFORE INCOME TAXES ............................... 751 (2,845)
------------ ------------
PROVISION (BENEFIT) FOR INCOME TAXES
Current ............................................. (1,395) (3,311)
Deferred ............................................ 1,679 2,230
------------ ------------
284 (1,081)
------------ ------------
NET INCOME (LOSS) ............................................... $ 467 $ (1,764)
============ ============
EARNINGS RETAINED
Balance at Beginning of Period ...................... 49,746 112,365
Cash Dividends ...................................... (1,524) (4,988)
Common Stock Purchased and Retired .................. (134) (1,596)
Other ............................................... (130) 13
------------ ------------
BALANCE AT END OF PERIOD ........................................ $ 48,425 $ 104,030
============ ============
EARNINGS (LOSS) PER SHARE - BASIC AND DILUTED ................... $ 0.02 $ (0.05)
============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC ..................... 30,486,038 33,269,785
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED ................... 30,493,701 33,284,705
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
3
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<CAPTION>
Quarters Ended
March 31,
----------------------
1999 1998
--------- ---------
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net Income (Loss) ............................... $ 467 $ (1,764)
Adjustments to Reconcile Net Income (Loss) to Net
Cash Provided by (Used in) Operating Activities:
Depreciation and Amortization ............... 2,405 2,092
Provision for Deferred Income Taxes ......... 1,679 2,230
Other, Net .................................. (133) 106
(Increase) Decrease in Assets:
Trade Receivables ........................... 3,839 5,014
Materials and Supplies ...................... (856) (1,437)
Other Current Assets ........................ (2,162) (2,826)
Other Non-Current Assets .................... 64 192
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses ....... 2,068 (5,749)
Unearned Revenue ............................ 2,617 1,521
Accrued Insurance ........................... (2,407) (966)
Accrual for Termite Contracts ............... (5,206) (3,660)
Long-Term Accrued Liabilities ............... 2,194 1,472
--------- ---------
Net Cash Provided by (Used in) Operating
Activities .................................... 4,569 (3,775)
--------- ---------
INVESTING ACTIVITIES
Purchases of Equipment and Property ............. (3,208) (3,516)
Net Cash Used for Acquisition of Companies ...... (169) (210)
Marketable Securities, Net ...................... 684 85
--------- ---------
Net Cash Used in Investing Activities ........... (2,693) (3,641)
--------- ---------
FINANCING ACTIVITIES
Dividends Paid .................................. (1,524) (4,988)
Common Stock Purchased and Retired .............. (143) (1,678)
Payments on Capital Leases ...................... (835) (766)
Other ........................................... 28 41
--------- ---------
Net Cash Used in Financing Activities ........... (2,474) (7,391)
--------- ---------
Net Decrease in Cash and Short-Term
Investments ................................... (598) (14,807)
Cash and Short-Term Investments
at Beginning of Period ........................ 1,244 125,842
--------- ---------
Cash and Short-Term Investments
at End of Period .............................. $ 646 $ 111,035
========= =========
<FN>
The accompanying notes are an integral part of these
consolidated financial statements.
</FN>
</TABLE>
4
<PAGE>
ROLLINS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. BASIS OF PREPARATION
The consolidated financial statements included herein have
been prepared by the Company, 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 Company's annual report on Form 10-K for the
year ended December 31, 1998.
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 Company as of March 31, 1999 and December 31,
1998, and the results of operations and cash flows for the
quarters ended March 31, 1999 and 1998. Operating results for
the quarter ended March 31, 1999 are not necessarily
indicative of the results that may be expected for the year
ended December 31, 1999.
In 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 130 (SFAS
130), "Reporting Comprehensive Income," effective for fiscal
years beginning after December 15, 1997. For the quarters
ended March 31, 1999 and 1998, comprehensive income is not
materially different from net income and, as a result, the
impact of SFAS 130 is not reflected in the Company's
consolidated financial statements included herein.
Certain amounts for prior periods have been reclassified to
conform with the current period consolidated financial
statement presentation. Such reclassifications had no effect
on previously reported net income.
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.
5
<PAGE>
NOTE 3. EARNINGS PER SHARE
Pursuant to the provisions of Statement of Financial
Accounting Standards No. 128, "Earnings Per Share," the
number of weighted average shares used in computing basic and
diluted earnings per share (EPS) are as follows (in
thousands):
<TABLE>
<CAPTION>
Quarters Ended March 31
1999 1998
<S> <C> <C>
-------- --------
Basic EPS .......................... 30,486 33,270
Effect of Dilutive Stock Options ... 8 15
-------- --------
Diluted EPS ........................ 30,494 33,285
======== ========
</TABLE>
NOTE 4. SUBSEQUENT EVENT
On April 30, 1999, the Company's wholly-owned subsidiary,
Orkin Exterminating Company, Inc. (Orkin), acquired the pest
elimination business operations of PRISM, a subsidiary of SC
Johnson Professional. The acquisition will be accounted for
as a purchase.
In addition, on April 30, 1999, the Company and SC Johnson
Professional entered into a joint venture, Acurid Retail
Services, L.L.C. (Acurid Retail), created to provide pest
elimination services to customers in the retail market and
will jointly contribute existing customers to the joint
venture. The Company owns 50% of the joint venture.
PRISM's commercial pest control operations recorded revenues
of approximately $25.0 million during the company's most
recent fiscal year. The Company does not expect the
above-mentioned transactions to have a material impact on the
Company's financial statements.
6
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
The Company reported net income of $467,000 or $0.02 per share for the quarter
compared to a net loss of $1.8 million or $0.05 per share for the comparable
quarter in 1998. Revenues for the first quarter ended March 31, 1999 increased
5.6% to $129.9 million.
The improvement in earnings for the quarter resulted primarily from
quarter-over-quarter increases in both pest and termite control revenue and a
decrease in Cost of Services Provided on both a dollar and percentage of
revenues basis. The improvements in revenue and Cost of Services Provided were
partially offset by a decrease in Interest Income and a $1.4 million increase in
Provision (Benefit) for Income Taxes.
The Company's revenue improvement for the fourth consecutive quarter continued
the positive momentum initiated in 1998. The Company believes the improvements
in revenue and net income resulted from the strategic programs initiated in 1998
and 1997 to build recurring revenue, expand the Company's commercial pest
control business and contain termite claims costs.
On May 3, 1999, the Company announced a major achievement in its strategic plan
to accelerate the growth of its commercial business. The Company closed, on
April 30, 1999, on two strategic business transactions with SC Johnson
Professional - the acquisition of the commercial pest elimination business
operations of PRISM, a subsidiary of SC Johnson Professional, and the creation
of the Acurid Retail joint venture. For further discussion regarding these
transactions, see Note 4 to the accompanying consolidated financial statements.
Results of Operations
Revenues increased to $129.9 million for first quarter 1999 from $123.0 million
for the same period of 1998, primarily as a result of increases in pest control
customer base and in average termite completion and annual renewal prices. The
Company believes the increase in pest control customer base resulted from the
success of its more consumer-friendly selling and treatment programs.
Cost of Services Provided was approximately $52,000 lower than the prior year
quarter and improved to represent 59.2% of revenues compared with 62.5% for the
same quarter of the prior year. The improvement was primarily attributable to
reductions in termite claims experience and operating insurance costs, partially
offset by increased pest and termite service salaries resulting from increased
revenue and headcount.
Selling, General and Administrative increased $1.6 million or 3.2% but decreased
as a percentage of revenues to 39.3% compared with 40.2% for the same quarter of
the prior year. The improvement as a percentage of revenues was primarily due to
reduced administrative staffing, partially offset by increases in average wages
and training costs, and to reductions in telephone and postage resulting from
cost savings initiatives implemented during the quarter.
Interest Income decreased $1.5 million or 57.1% primarily due to lower invested
funds over the same period of the prior year.
The Company's net tax provision of $284,000 for the quarter reflects increased
taxable income, as compared to a benefit of $1.1 million for the same quarter in
1998.
7
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Financial Condition
March 31, December 31,
(In thousands) 1999 1998
-------- --------
<S> <C> <C>
Cash and Short-Term Investments .. $ 646 $ 1,244
Marketable Securities ............ 109,296 110,229
-------- --------
109,942 111,473
Working Capital .................. 77,681 84,015
Current Ratio .................... 1.7 1.7
- --------------------------------------------------------------------------------
</TABLE>
The Company's financial position remains solid. The Company believes its current
cash balances and future cash flows from operating activities will be sufficient
to finance its current operations and obligations, and fund expansion of the
business for the foreseeable future. The Company's cash flow provided by
operating activities was $4.6 million in first quarter 1999 compared with cash
used in operating activities of $3.8 million in the same period of 1998. This
increase resulted primarily from favorable changes in working capital related
primarily to differences in the timing of accounts payable and higher net income
from operations in 1999, adjusted for non-cash items.
Net trade receivables decreased $3.8 million in first quarter 1999 due primarily
to decreased financed termite sales. Trade receivables include amounts due
subsequent to one year from the balance sheet date, approximating $ 7.3 million
and $11.0 million at March 31, 1999 and 1998, respectively.
The Company invested approximately $3.4 million in capital expenditures and
acquisitions in first quarter 1999, and expects to invest between $40 and $50
million in 1999, inclusive of improvements to its management information
systems. Capital expenditures in first quarter 1999 consisted primarily of
equipment replacements and upgrades. During the quarter, $1.5 million was paid
in cash dividends and $143,000 was paid for repurchases of 9,100 shares of the
Company's Common Stock. These repurchased shares were retired during the
quarter. The capital expenditures, acquisitions, cash dividends and stock
repurchases were primarily funded through existing cash balances and operating
activities. The Company maintains a $40.0 million unused line of credit, which
is available for future acquisitions and growth, if needed.
In 1997 and 1998, Orkin received letters from the Federal Trade Commission (FTC)
advising of its investigation of the pest control industry - more specifically,
the termite and moisture control practices of the industry - and requesting
certain information voluntarily from the Company. Orkin has voluntarily provided
the information requested and has advised of the Company's intention to continue
to cooperate fully with this investigation. At this point in time, it is too
early to determine the impact, if any, of this investigation.
Year 2000 Issues
Aware that the Year 2000 (Y2K) information technology programming issue could
have a significant potential impact on its future operations and financial
reporting, the Company began its assessment and remediation processes in 1997
regarding its primary financial and operating systems. The Company's assessment
activities have included (1) identifying all software and operating systems -
both information technology (IT) systems and non-IT systems with embedded
technology - which are critical to operations and/or financial reporting, (2)
testing of such software and systems for Y2K compliancy, (3) obtaining
assurances from the Company's vendors and its large commercial customers, and
(4) assigning a manager for Y2K compliance and establishing a monthly readiness
reporting process to ensure that top management will be aware of each area and
step remaining to be done in order for the Company to become fully Y2K
compliant. The Company's remediation activities have included replacing certain
software and operating systems, followed by testing to ensure the Y2K compliancy
of the replacements.
8
<PAGE>
Based on its assessment and remediation activities to date, the Company believes
that its critical internal software and operating systems are Y2K compliant with
the exception of its bad debt collection system, its branch personal computers
(PCs), and its commercial division's national accounts system. The Company's bad
debt collection system is currently being updated and is expected to be Y2K
compliant by the end of third quarter 1999, and the branch PCs are expected to
be replaced by the end of third quarter 1999. The Company has formulated an
information technology plan for its national accounts system, and necessary
remediation efforts are expected to be concluded by the end of third quarter
1999. The total cost of Y2K expenditures to date as of March 31, 1999 was
approximately $19.1 million; the remaining Y2K remediation costs are anticipated
to be approximately $1.0 million.
Based on assurances from the majority of its vendors and large commercial
customers to date, the Company does not anticipate any material Y2K impact on
its operations or financial reporting at this time. The Company believes that
the worst case scenario will be some minor nuisances experienced by a small
number of its branches in January 2000.
The Company expects to have contingency plans in place by the end of 1999 that
address potential short-term business disruptions resulting from losses of
electricity and system malfunctions related to the ordering and delivering of
operating supplies and the printing of sales orders.
Impact of Recent Accounting Pronouncements
In 1998, the Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 133, "Accounting for Derivative Instruments and Hedging
Activities." The adoption of this standard, effective as of January 1, 2000, is
not expected to materially impact the results of operations or financial
condition of the Company.
Forward-Looking Statements
This Form 10-Q contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. The actual results of the
Company could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties, including without
limitation, general economic conditions; market risk; changes in industry
practices or technologies; the degree of success of the Company's termite
process reforms; climate and weather trends; competitive factors and pricing
practices; the Year 2000 programming issue; potential increases in labor costs;
uncertainties of litigation; and changes in various government laws and
regulations, including environmental regulations. All of the foregoing risks and
uncertainties are beyond the ability of the Company to control, and in many
cases the Company cannot predict the risks and uncertainties that could cause
its actual results to differ materially from those indicated by the
forward-looking statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company maintains an investment portfolio, comprised of U.S. Government and
corporate debt securities, which is subject to interest rate risk exposure. This
risk is managed through conservative policies to invest in high-quality
obligations. The Company has performed an interest rate sensitivity analysis
using a duration model over the near term with a 10% change in interest rates.
The Company's portfolio is not subject to material interest rate risk exposure
based on this analysis, and no material changes in market risk exposures or how
those risks are managed is expected.
9
<PAGE>
PART II -- OTHER INFORMATION
Item 2. Changes in Securities and Use of Proceeds.
On March 16, 1999, the Company acquired the pest elimination
business of Ramco Exterminating Company, Inc. in exchange for
82,548 shares of the Company's Common Stock. The market value
of the Common Stock issued was approximately $1.4 million,
which the Company believes approximates the fair value of the
net assets acquired. Since the issuance of these shares was
not a public issuance, these shares of Common Stock were
exempt from registration under the Securities Act of 1933, as
amended, Section 4, Paragraph 2.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
(3)(i) Restated Certificate of Incorporation of Rollins,
Inc. is incorporated herein by reference to Exhibit
3(i) as filed with its Form 10-K for the year
ended December 31, 1997.
(ii) By-laws of Rollins, Inc.
(4) Form of Common Stock Certificate of Rollins, Inc.
is incorporated herein by reference to Exhibit (4)
as filed with its Form 10-K for the year ended
December 31, 1998.
(27) Financial Data Schedule (For Commission Use Only)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during first
quarter 1999.
10
<PAGE>
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.
ROLLINS, INC.
(Registrant)
Date: May 10, 1999 By: /s/ Gary W. Rollins
------------------------------------
Gary W. Rollins
President and Chief Operating Officer
(Member of the Board of Directors)
Date: May 10, 1999 By: /s/ Harry J. Cynkus
------------------------------------
Harry J. Cynkus
Chief Financial Officer and Treasurer
(Principal Financial and Accounting
Officer)
11
<PAGE>
REVISED BY-LAWS
OF
ROLLINS, INC.
(JULY 26, 1988)
OFFICES
FIRST: The registered office of the corporation shall be located at 2170
Piedmont Road, N.E., in the City of Atlanta, Georgia, and the registered agent
in charge of said office shall be C T Corporation.
CORPORATE SEAL
SECOND: The corporate seal shall have inscribed thereon the name of the
corporation, the year of its incorporation and the words "Incorporated
Delaware."
MEETINGS OF STOCKHOLDERS
THIRD: The annual meeting of stockholders for the election of directors
shall be held on the fourth Tuesday of April at such office of the corporation
as may be designated by the Board of Directors and included in the notice of
such meeting, in each year, or if that day be a legal holiday, on the next
succeeding day not a legal holiday, at which meeting they shall elect by ballot,
by plurality vote, a board of directors and may transact such other business as
may come before the meeting.
Special meetings of the stockholders may be called at any time by the
chairman and shall be called by the chairman or secretary on the request in
writing or by vote of a majority of the directors or at the request in writing
of stockholders of record owning a majority in amount of the capital stock
outstanding and entitled to vote.
<PAGE>
All such meetings of the stockholders shall be held at such place or
places, within or without the State of Delaware, as may from time to time be
fixed by the board of directors or as shall be specified and fixed by the
respective notices or waivers of notice thereof.
Each stockholder entitled to vote shall, at every meeting of the
stockholders, be entitled to one vote in person or by proxy, signed by him, for
each share of voting stock held by him, but no proxy shall be voted on after the
meeting of stockholders for which such proxy was solicited and which has been
adjourned sine die. Such right to vote shall be subject to the right of the
board of directors to close the transfer books or to fix a record date for
voting stockholders as hereinafter provided and if the directors shall not have
exercised such right, no share of stock shall be voted on at any election for
directors which shall have been transferred on the books of the corporation
within twenty days next preceding such election.
Notice of all meetings shall be mailed by the secretary to each stockholder
of record entitled to vote, at his or her last known post office address, not
less than ten days before any annual or special meeting.
The holders of a majority of the stock outstanding and entitled to vote
shall constitute a quorum, but the holders of a smaller amount may adjourn from
time to time without further notice until a quorum is secured.
DIRECTORS
FOURTH: The property and business of this Corporation shall be managed by a
Board of up to nine Directors. The Directors shall be divided into three
classes. The first class (Class I) shall consist of two (2) Directors and the
term of office of such class shall expire at the next Annual Meeting of
Stockholders in 1978. The second class (Class II) shall consist of two (2)
Directors and the term of office of such class shall expire at the Annual
Meeting of Stockholders in 1979. The third class (Class III) shall consist of
two (2) Directors and the term of office of such third class shall expire at the
Annual Meeting of Stockholders in 1980. Should the number of Directors be
increased or decreased in the future, no class of Directors shall have more than
one Director more than any other class of Directors. At each annual election
commencing at
2
<PAGE>
the Annual Meeting of Stockholders in 1978, the successors to the class of
Directors whose term expires at that time shall be elected to hold office for
the term of three years to succeed those whose term expires, so that the term of
office of one class of Directors shall expire in each year. Each Director shall
hold office for the term for which he is elected or appointed or until his
successor shall be elected and qualified, or until his death or until he shall
resign.
POWERS OF DIRECTORS
FIFTH: The board of directors shall have, in addition to such powers as are
hereinafter expressly conferred on it, all such powers as may be exercised by
the corporation, subject to the provisions of the statute, the certificate of
incorporation and the by-laws.
The board of directors shall have power:
To purchase or otherwise acquire property, rights or privileges for the
corporation, which the corporation has power to take, at such prices and on such
terms as the board of directors may deem proper.
To pay for such property, rights or privileges in whole or in part with
money, stock, bonds, debentures or other securities of the corporation, or by
the delivery of other property to the corporation.
To create, make and issue mortgages, bonds, deeds of trust, trust
agreements and negotiable or transferable instruments and securities, secured by
mortgages or otherwise, and to do every other act and thing necessary to
effectuate the same.
To appoint agents, clerks, assistants, factors, employees and trustees, and
to dismiss them at its discretion, to fix their duties and emoluments and to
change them from time to time and to require security as it may deem proper. Any
employee appointed by the board may be given such designation or title as the
board shall determine; however, any such designation or title given any such
employee shall not be deemed to constitute such employee a corporate officer
under Article EIGHTH of these by-laws.
To confer on any officer of the corporation the power of selecting,
discharging or suspending such employees.
3
<PAGE>
To determine by whom and in what manner the corporation's bills, notes,
receipts, acceptances, endorsements, checks, releases, contracts or other
documents shall be signed.
MEETING OF DIRECTORS
SIXTH: After such annual election of directors, the newly elected directors
may meet for the purpose of organization, the election of officers and the
transaction of other business, at such place and time as shall be fixed by the
stockholders at the annual meeting, and, if a majority of the directors be
present at such place and time as shall be fixed by the stockholders at the
annual meeting, and, if a majority of the directors be present at such place and
time, no prior notice of such meeting shall be required to be given to the
directors. The place and time of such meeting may also be fixed by written
consent of the directors.
Regular meetings of the directors shall be held annually following the
stockholders meeting on the fourth Tuesday of April and quarterly on the fourth
Tuesdays of July, October and January of each year at the executive office of
the corporation in Atlanta, Georgia, or elsewhere and at other times as may be
fixed by resolution of the board.
Special meetings of the directors may be called by the chairman on two
days' notice in writing or on one day's notice by telegraph to each director and
shall be called by the chairman in like manner on the written request of two
directors.
Special meetings of the directors may be held within or without the State
of Delaware at such places as is indicated in the notice or waiver of notice
thereof.
A majority of the directors shall constitute a quorum, but a smaller number
may adjourn from time to time, without further notice, until a quorum is
secured.
COMPENSATION OF DIRECTORS
AND MEMBERS OF COMMITTEES
SEVENTH: Directors and members of standing committees shall receive such
compensation for
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attendance at each regular or special meeting as the board shall from time to
time prescribe.
OFFICERS OF THE CORPORATION
EIGHTH: The officers of the corporation shall be a chairman, a president, a
secretary, a treasurer and such other officers as may from time to time be
chosen by the board of directors. The chairman and the president shall be chosen
from among the directors.
One person may hold more than one office.
The officers of the corporation shall hold office until their successors
are chosen and qualify in their stead. Any officer chosen or appointed by the
board of directors may be removed either with or without cause at any time by
the affirmative vote of a majority of the whole board of directors. If the
office of any officer or officers becomes vacant for any reason, the vacancy
shall be filled by the affirmative vote of a majority of the whole board of
directors.
DUTIES OF THE CHAIRMAN
NINTH: The chairman shall be the chief executive officer of the
corporation. It shall be his duty to preside at all meetings of stockholders and
directors; to have general and active management of the business of the
corporation; and to see that all orders and resolutions of the board of
directors are carried into effect. The chairman shall be vested with all the
powers and be required to perform all the duties of the president in his absence
or disability.
DUTIES OF THE PRESIDENT
TENTH: The president shall be the chief operating officer of the
corporation. It shall be his duty to execute all contracts, agreements, deeds,
bonds, mortgages and other obligations and instruments, in the name of the
corporation, and to affix the corporate seal thereto when authorized by the
board.
He shall have the general supervision and direction of the other officers
of the corporation and shall
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see that their duties are properly performed.
The president shall be vested with all the powers and be required to
perform all the duties of the chairman in his absence or disability.
CHAIRMAN PRO TEM
ELEVENTH: In the absence or disability of the chairman and the president,
the board may appoint from their own number a chairman.
SECRETARY
TWELFTH: The secretary shall attend all meetings of the corporation, the
board of directors, the executive committee and standing committees. He shall
act as clerk thereof and shall record all of the proceedings of such meetings in
a book kept for that purpose. He shall give proper notice of meetings of
stockholders and directors and shall perform such other duties as shall be
assigned to him by the president or the chairman of the board of directors.
TREASURER
THIRTEENTH: The treasurer shall have custody of the funds and securities of
the corporation and shall keep full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all moneys
and other valuable effects in the name and to the credit of the corporation in
such depositories as may be designated by the board of directors.
He shall keep an account of stock registered and transferred in such manner
and subject to such regulations as the board of directors may prescribe.
He shall give the corporation a bond, if required by the board of
directors, in such sum and in form and with security satisfactory to the board
of directors for the faithful performance of the duties of his office and the
restoration to the corporation, in case of his death, resignation or removal
from office, of all books, papers, vouchers, money and other property of
whatever kind in his possession, belonging to the corporation. He shall perform
such other duties as the board of directors may from time to time prescribe or
require.
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DUTIES OF OFFICERS MAY BE DELEGATED
FOURTEENTH: In case of the absence or disability of any officer of the
corporation or for any other reason deemed sufficient by a majority of the
board, the board of directors may delegate his powers or duties to any other
officer or to any director for the time being.
CERTIFICATES OF STOCK
FIFTEENTH: Certificates of stock shall be signed by the chairman or the
president and either the treasurer, assistant treasurer, secretary or assistant
secretary. If a certificate of stock be lost or destroyed, another may be issued
in its stead upon proof of such loss or destruction and the giving of a
satisfactory bond of indemnity, in an amount sufficient to indemnify the
corporation against any claim. A new certificate may be issued without requiring
bond when, in the judgment of the directors, it is proper to do so. Certificates
may be signed by facsimile signature if so ordered by the board of directors.
TRANSFER OF STOCK
SIXTEENTH: All transfers of stock of the corporation shall be made upon its
books by the holder of the shares in person or by his lawfully constituted
representative, upon surrender of certificates of stock for cancellation.
The corporation shall have authority to appoint transfer agents and
registrars by resolution of the board of directors.
CLOSING OF TRANSFER BOOKS
SEVENTEENTH: The board of directors shall have power to close the stock
transfer books of the corporation for a period not exceeding sixty days
preceding the date of any meeting of stockholders or the date for payment of any
dividend or the date for the allotment of rights or the date when any change or
conversion or exchange of capital stock shall go into effect or for a period of
not exceeding sixty days in connection with obtaining the consent of
stockholders for any purpose; provided, however, that in lieu of closing the
stock transfer books as aforesaid, the by-laws may fix or authorize the board of
directors to fix in
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<PAGE>
advance a date, not exceeding sixty days preceding the date of any meeting of
stockholders or the date for the payment of any dividend, or the date for the
allotment of rights or the date when any change or conversion or exchange of
capital stock shall go into effect, or a date in connection with obtaining such
consent, and in such case such stockholders and only such stockholders as shall
be stockholders of record on the date so fixed shall be entitled to such notice
of, and to vote at such meeting and any adjournment thereof, or to receive
payment of such dividend, or to receive such allotment of rights, or to exercise
such rights, or to give such consent, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record date
fixed as aforesaid.
STOCKHOLDERS OF RECORD
EIGHTEENTH: The corporation shall be entitled to treat the holder of record
of any share or shares of stock as the holder in fact thereof and accordingly
shall not be bound to recognize any equitable or other claim to or interest in
such share on the part of any other person whether or not is shall have express
or other notice thereof, save as expressly provided by the laws of Delaware.
FISCAL YEAR
NINETEENTH: The fiscal year of the corporation shall begin on the first day
of January in each year.
DIVIDENDS
TWENTIETH: Dividends upon the capital stock may be declared by the board of
directors at any regular or special meeting and may be paid in cash or in
property or in shares of the capital stock. Before paying any dividend or making
any distribution of profits, the directors may set apart out of any of the funds
of the corporation available for dividends a reserve or reserves for any proper
purpose and may alter or abolish any such reserve or reserves.
8
<PAGE>
CHECKS FOR MONEY
TWENTY-FIRST: All checks, drafts or orders for the payment of money shall
be signed by the treasurer or by such other officer or officers as the board of
directors may from time to time designate. No check shall be signed in blank.
The board of directors also from time to time may authorize specified employees
to sign checks on the corporation's accounts.
BOOKS AND RECORDS
TWENTY-SECOND: The books, accounts and records of the corporation except as
otherwise required by the laws of the State of Delaware, may be kept within or
without the State of Delaware, at such place or places as may from time to time
be designated by the by-laws or by resolution of the directors.
NOTICES
TWENTY-THIRD: Notice required to be given under the provisions of these
by-laws to any director, officer or stockholder shall not be construed to mean
personal notice, but may be given in writing by depositing the same in a post
office or letter-box, in a postpaid sealed wrapper, addressed to such
stockholder, officer or director at such address as appears on the books of the
corporation, and such notice shall be deemed to be given at the time when the
same shall be thus mailed. Any stockholder, officer or director may waive, in
writing, any notice, required to be given under these by-laws whether before or
after the time stated therein.
AMENDMENTS OF BY-LAWS
TWENTY-FOURTH: These by-laws may be amended, altered, repealed, or added to
at any regular meeting of the stockholders or board of directors or at any
special meeting called for that purpose, by affirmative vote of a majority of
the stock issued and outstanding and entitled to vote or of a majority of the
directors in office, as the case may be.
9
<PAGE>
INDEMNIFICATION OF DIRECTORS
OFFICERS AND EMPLOYEES
TWENTY-FIFTH: Indemnification. The Corporation shall indemnify, in the
manner and to the fullest extent now or hereafter permitted by the General
Corporation Law of the State of Delaware, any person (or the estate of any
person) who was or is a party to, or is threatened to be made a party to, any
threatened, pending or completed action, suit or proceeding, whether or not by
or in the right of the Corporation, and whether civil, criminal, administrative,
investigative or otherwise, by reason of the fact that such person is or was a
director, officer or General Counsel of the Corporation, or is or was serving at
the request of the Corporation as a director, officer of General Counsel of
another corporation, partnership, joint venture, trust or other enterprise. The
indemnification provided herein shall be made if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interest of
the Corporation, and, with respect to any criminal action or proceeding, has not
reasonable cause to believe his conduct was unlawful; except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been determined to be liable for gross negligence
or willful misconduct in the performance of his duty to the Corporation. Such
determination may be made by a majority of a committee composed of the directors
not involved in the matter in controversy (whether or not a quorum). To the full
extent permitted by law, the indemnification provided herein shall include
expenses (including attorneys' fees), judgements, fines and amounts paid in
settlement, and, in the manner provided by law, any such expenses may be paid by
the Corporation in advance of the final disposition of such action, suit or
proceeding. The indemnification provided herein shall not be deemed to limit the
right of the Corporation to indemnify any other employee for any such expenses
to the full extent provided by the law, nor shall it be deemed exclusive of any
other rights to which any person seeking indemnification from the Corporation
may be entitled under any agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his official capacity and as to act
in another capacity while holding such office. The Corporation may, to
10
<PAGE>
the full extent permitted by law, purchase and maintain insurance on behalf of
any such person against any liability which may be asserted against him.
RESTRICTIONS ON STOCK OWNERSHIP
TWENTY-SIXTH: Not more than one-fifth of the shares of stock of this
corporation outstanding at any time shall be owned (of record) or voted by or
for the account of aliens or their representatives or by or for the account of a
foreign government or representatives thereof or by or for the account of any
corporation organized under the laws of a foreign country. The company or its
transfer agent reserves the right to require any person or corporation tendering
shares for transfer on its books to exhibit evidence of citizenship and no
shares of the corporation will be transferred should the recording of such
transfer result in more than twenty percent (20%) of the outstanding and issued
stock of the corporation being registered in the name of an alien or
representative of an alien.
No person shall be elected an officer or director of the company who is not
at the time of his election a citizen of the United States of America.
At the discretion of the board of directors or its officers to whom the
board delegates authority in connection with the printing of stock certificates
to be issued by the corporation, a legend may be placed on such certificates,
reading as follows:
"Federal law restricts the ownership of shares in the issuing corporation
to aliens within certain limits. No certificate will be received and transferred
if the result thereof will be to cause more than twenty percent (20%) of the
issued and outstanding stock of the corporation to be registered in the name or
for the account of aliens (including foreign governments or subdivisions
thereof) or their representative."
11
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
Registrant's unaudited financial statements contained in its report on Form 10-Q
for the quarterly period ended March 31, 1999 and is qualified in its entirety
by reference to such financial statements.
</LEGEND>
<CIK> 0000084839
<NAME> ROLLINS, INC.
<MULTIPLIER> 1,000
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<EXCHANGE-RATE> 1.0
<CASH> 646
<SECURITIES> 109,296
<RECEIVABLES> 43,696
<ALLOWANCES> 5,173
<INVENTORY> 14,193
<CURRENT-ASSETS> 196,136
<PP&E> 78,503
<DEPRECIATION> 42,072
<TOTAL-ASSETS> 324,362
<CURRENT-LIABILITIES> 118,455
<BONDS> 0
0
0
<COMMON> 30,476
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<TOTAL-LIABILITY-AND-EQUITY> 324,362
<SALES> 0
<TOTAL-REVENUES> 129,886
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