10-Q 1 rol-20220930x10q.htm 10-Q
0000084839--12-312022Q3falsefalse4919110874924724360.220.190.570.580000084839us-gaap:ForeignExchangeForwardMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-07-012022-09-300000084839us-gaap:ForeignExchangeForwardMemberus-gaap:OtherNonoperatingIncomeExpenseMember2022-01-012022-09-300000084839us-gaap:ForeignExchangeForwardMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-07-012021-09-300000084839us-gaap:ForeignExchangeForwardMemberus-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-09-300000084839us-gaap:AdditionalPaidInCapitalMember2022-01-012022-09-300000084839us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300000084839us-gaap:AdditionalPaidInCapitalMember2021-01-012021-09-300000084839us-gaap:CommonStockMember2022-07-012022-09-300000084839us-gaap:CommonStockMember2022-01-012022-09-300000084839us-gaap:CommonStockMember2021-07-012021-09-300000084839us-gaap:CommonStockMember2021-01-012021-09-300000084839us-gaap:RetainedEarningsMember2022-09-300000084839us-gaap:AdditionalPaidInCapitalMember2022-09-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-09-300000084839us-gaap:RetainedEarningsMember2022-06-300000084839us-gaap:AdditionalPaidInCapitalMember2022-06-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-06-300000084839us-gaap:RetainedEarningsMember2021-12-310000084839us-gaap:AdditionalPaidInCapitalMember2021-12-310000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-12-310000084839us-gaap:RetainedEarningsMember2021-09-300000084839us-gaap:AdditionalPaidInCapitalMember2021-09-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-09-300000084839us-gaap:RetainedEarningsMember2021-06-300000084839us-gaap:AdditionalPaidInCapitalMember2021-06-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-06-300000084839us-gaap:RetainedEarningsMember2020-12-310000084839us-gaap:AdditionalPaidInCapitalMember2020-12-310000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2020-12-310000084839us-gaap:CommonStockMember2022-09-300000084839us-gaap:CommonStockMember2022-06-300000084839us-gaap:CommonStockMember2021-12-310000084839us-gaap:CommonStockMember2021-09-300000084839us-gaap:CommonStockMember2021-06-300000084839us-gaap:CommonStockMember2020-12-310000084839rol:TimeLapseRestrictedSharesIssued2004Member2022-09-300000084839rol:TimeLapseRestrictedSharesIssued2004Member2021-12-310000084839rol:TimeLapseRestrictedSharesIssued2004Member2021-01-012021-12-310000084839srt:MinimumMember2021-01-012021-09-300000084839srt:MaximumMember2021-01-012021-09-300000084839us-gaap:OtherNonoperatingIncomeExpenseMember2021-01-012021-09-300000084839us-gaap:NonUsMember2022-07-012022-09-300000084839rol:TermiteCompletionsBaitMonitoringRenewalsMember2022-07-012022-09-300000084839rol:ResidentialContractRevenueMember2022-07-012022-09-300000084839rol:OtherRevenuesMember2022-07-012022-09-300000084839rol:FranchiseRevenuesMember2022-07-012022-09-300000084839rol:CommercialContractRevenueMember2022-07-012022-09-300000084839country:US2022-07-012022-09-300000084839us-gaap:NonUsMember2022-01-012022-09-300000084839rol:TermiteCompletionsBaitMonitoringRenewalsMember2022-01-012022-09-300000084839rol:ResidentialContractRevenueMember2022-01-012022-09-300000084839rol:OtherRevenuesMember2022-01-012022-09-300000084839rol:FranchiseRevenuesMember2022-01-012022-09-300000084839rol:CommercialContractRevenueMember2022-01-012022-09-300000084839country:US2022-01-012022-09-300000084839us-gaap:NonUsMember2021-07-012021-09-300000084839rol:TermiteCompletionsBaitMonitoringRenewalsMember2021-07-012021-09-300000084839rol:ResidentialContractRevenueMember2021-07-012021-09-300000084839rol:OtherRevenuesMember2021-07-012021-09-300000084839rol:FranchiseRevenuesMember2021-07-012021-09-300000084839rol:CommercialContractRevenueMember2021-07-012021-09-300000084839country:US2021-07-012021-09-300000084839us-gaap:NonUsMember2021-01-012021-09-300000084839rol:TermiteCompletionsBaitMonitoringRenewalsMember2021-01-012021-09-300000084839rol:ResidentialContractRevenueMember2021-01-012021-09-300000084839rol:OtherRevenuesMember2021-01-012021-09-300000084839rol:FranchiseRevenuesMember2021-01-012021-09-300000084839rol:CommercialContractRevenueMember2021-01-012021-09-300000084839country:US2021-01-012021-09-300000084839rol:Acquisitions2021Member2022-01-012022-09-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-07-012022-09-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2022-01-012022-09-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-07-012021-09-300000084839us-gaap:AccumulatedOtherComprehensiveIncomeMember2021-01-012021-09-300000084839rol:Acquisitions2021Member2021-01-012021-12-310000084839us-gaap:RevolvingCreditFacilityMemberus-gaap:LetterOfCreditMember2019-04-300000084839us-gaap:RevolvingCreditFacilityMemberrol:SwinglineCreditFacilityMember2019-04-300000084839us-gaap:RevolvingCreditFacilityMember2019-04-300000084839us-gaap:RevolvingCreditFacilityMember2022-09-300000084839rol:TermLoanOneMember2022-09-300000084839rol:TermLoanTwoMember2022-01-270000084839us-gaap:RevolvingCreditFacilityMember2021-12-310000084839rol:TermLoanOneMember2021-12-310000084839rol:TermLoanOneMember2019-04-300000084839us-gaap:LetterOfCreditMember2022-09-300000084839us-gaap:LetterOfCreditMember2021-12-310000084839srt:MinimumMemberus-gaap:BuildingMember2022-09-300000084839srt:MaximumMemberus-gaap:VehiclesMember2022-09-300000084839srt:MaximumMemberus-gaap:BuildingMember2022-09-300000084839us-gaap:VehiclesMember2022-09-300000084839us-gaap:BuildingMember2022-09-300000084839us-gaap:NonUsMemberus-gaap:TrademarksAndTradeNamesMember2022-09-300000084839us-gaap:NonUsMemberus-gaap:OtherIntangibleAssetsMember2022-09-300000084839us-gaap:TrademarksAndTradeNamesMember2022-09-300000084839us-gaap:OtherIntangibleAssetsMember2022-09-300000084839us-gaap:CustomerContractsMember2022-09-300000084839us-gaap:NonUsMemberus-gaap:TrademarksAndTradeNamesMember2021-12-310000084839us-gaap:NonUsMemberus-gaap:OtherIntangibleAssetsMember2021-12-310000084839us-gaap:TrademarksAndTradeNamesMember2021-12-310000084839us-gaap:OtherIntangibleAssetsMember2021-12-310000084839us-gaap:CustomerContractsMember2021-12-310000084839us-gaap:TrademarksAndTradeNamesMember2022-09-300000084839us-gaap:InternetDomainNamesMember2022-09-300000084839us-gaap:TrademarksAndTradeNamesMember2021-12-310000084839us-gaap:InternetDomainNamesMember2021-12-310000084839rol:Acquisitions2022Member2022-01-012022-09-300000084839us-gaap:NonUsMemberus-gaap:CustomerContractsMember2022-09-300000084839us-gaap:NonUsMember2022-09-300000084839us-gaap:NonUsMemberus-gaap:CustomerContractsMember2021-12-310000084839us-gaap:NonUsMember2021-12-310000084839srt:MinimumMemberus-gaap:TrademarksAndTradeNamesMember2022-01-012022-09-300000084839srt:MinimumMemberus-gaap:PatentsMember2022-01-012022-09-300000084839srt:MinimumMemberus-gaap:NoncompeteAgreementsMember2022-01-012022-09-300000084839srt:MinimumMemberus-gaap:CustomerContractsMember2022-01-012022-09-300000084839srt:MaximumMemberus-gaap:TrademarksAndTradeNamesMember2022-01-012022-09-300000084839srt:MaximumMemberus-gaap:PatentsMember2022-01-012022-09-300000084839srt:MaximumMemberus-gaap:NoncompeteAgreementsMember2022-01-012022-09-300000084839srt:MaximumMemberus-gaap:CustomerContractsMember2022-01-012022-09-300000084839us-gaap:OtherIntangibleAssetsMember2022-01-012022-09-300000084839srt:MinimumMemberus-gaap:TrademarksAndTradeNamesMember2021-01-012021-12-310000084839srt:MinimumMemberus-gaap:PatentsMember2021-01-012021-12-310000084839srt:MinimumMemberus-gaap:NoncompeteAgreementsMember2021-01-012021-12-310000084839srt:MinimumMemberus-gaap:CustomerContractsMember2021-01-012021-12-310000084839srt:MaximumMemberus-gaap:TrademarksAndTradeNamesMember2021-01-012021-12-310000084839srt:MaximumMemberus-gaap:PatentsMember2021-01-012021-12-310000084839srt:MaximumMemberus-gaap:NoncompeteAgreementsMember2021-01-012021-12-310000084839srt:MaximumMemberus-gaap:CustomerContractsMember2021-01-012021-12-310000084839us-gaap:OtherIntangibleAssetsMember2021-01-012021-12-310000084839us-gaap:TrademarksAndTradeNamesMember2022-09-300000084839us-gaap:PatentsMember2022-09-300000084839us-gaap:OtherIntangibleAssetsMember2022-09-300000084839us-gaap:NoncompeteAgreementsMember2022-09-300000084839us-gaap:CustomerContractsMember2022-09-300000084839us-gaap:TrademarksAndTradeNamesMember2021-12-310000084839us-gaap:PatentsMember2021-12-310000084839us-gaap:OtherIntangibleAssetsMember2021-12-310000084839us-gaap:NoncompeteAgreementsMember2021-12-310000084839us-gaap:CustomerContractsMember2021-12-310000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-09-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-06-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-12-310000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-09-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-06-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2020-12-3100000848392021-01-012021-12-310000084839us-gaap:RetainedEarningsMember2022-07-012022-09-300000084839us-gaap:RetainedEarningsMember2022-01-012022-09-300000084839us-gaap:RetainedEarningsMember2021-07-012021-09-300000084839us-gaap:RetainedEarningsMember2021-01-012021-09-300000084839us-gaap:OtherCurrentAssetsMemberus-gaap:ForeignExchangeForwardMember2022-09-300000084839us-gaap:UnfundedPlanMemberrol:WalthamInc.Memberus-gaap:PensionPlansDefinedBenefitMember2022-09-300000084839rol:WalthamInc.Memberus-gaap:PensionPlansDefinedBenefitMember2022-01-012022-09-300000084839rol:WalthamInc.Memberus-gaap:PensionPlansDefinedBenefitMember2022-09-300000084839rol:OtherAccruedLiabilitiesNoncurrentMember2022-09-300000084839rol:OtherAccruedLiabilitiesNoncurrentMember2021-12-310000084839us-gaap:OtherNoncurrentAssetsMember2022-09-300000084839us-gaap:OtherNoncurrentAssetsMember2021-12-310000084839us-gaap:RevolvingCreditFacilityMemberrol:BloombergShortTermBankYieldIndexRateBsbyMember2022-09-300000084839us-gaap:RevolvingCreditFacilityMemberrol:BloombergShortTermBankYieldIndexRateBsbyMember2022-01-012022-09-300000084839us-gaap:SubsequentEventMember2022-10-252022-10-250000084839us-gaap:TrademarksAndTradeNamesMemberrol:Acquisitions2022Member2022-09-300000084839us-gaap:OtherIntangibleAssetsMemberrol:Acquisitions2022Member2022-09-300000084839us-gaap:CustomerContractsMemberrol:Acquisitions2022Member2022-09-300000084839us-gaap:OtherNoncurrentAssetsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:BondsMember2022-09-300000084839us-gaap:OtherCurrentAssetsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:BondsMember2022-09-300000084839us-gaap:FairValueInputsLevel2Memberus-gaap:BondsMember2022-09-300000084839us-gaap:OtherCurrentAssetsMemberus-gaap:FairValueInputsLevel2Memberus-gaap:BondsMember2021-12-310000084839rol:TimeLapseRestrictedSharesIssued2004Member2022-07-012022-09-300000084839rol:TimeLapseRestrictedSharesIssued2004Member2022-01-012022-09-300000084839rol:TimeLapseRestrictedSharesIssued2004Member2021-07-012021-09-300000084839rol:TimeLapseRestrictedSharesIssued2004Member2021-01-012021-09-300000084839us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300000084839us-gaap:NondesignatedMember2022-09-300000084839rol:SellCADBuyUSDFwdContractMember2022-09-300000084839rol:SellAUDBuyUSDFwdContractMember2022-09-300000084839us-gaap:LineOfCreditMember2022-01-012022-09-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-07-012022-09-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2022-01-012022-09-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-07-012021-09-300000084839us-gaap:FairValueInputsLevel3Memberus-gaap:FairValueMeasurementsRecurringMember2021-01-012021-09-300000084839rol:Acquisitions2022Member2022-09-300000084839us-gaap:FinanceReceivablesMember2022-07-012022-09-300000084839us-gaap:FinanceReceivablesMember2022-01-012022-09-300000084839us-gaap:FinanceReceivablesMember2021-01-012021-09-300000084839us-gaap:TradeAccountsReceivableMember2022-07-012022-09-3000000848392022-07-012022-09-300000084839us-gaap:TradeAccountsReceivableMember2022-01-012022-09-300000084839us-gaap:TradeAccountsReceivableMember2021-07-012021-09-300000084839us-gaap:FinanceReceivablesMember2021-07-012021-09-3000000848392021-07-012021-09-300000084839us-gaap:TradeAccountsReceivableMember2021-01-012021-09-3000000848392021-01-012021-09-300000084839us-gaap:TradeAccountsReceivableMember2022-09-300000084839us-gaap:FinanceReceivablesMember2022-09-3000000848392022-09-300000084839us-gaap:TradeAccountsReceivableMember2022-06-300000084839us-gaap:FinanceReceivablesMember2022-06-3000000848392022-06-300000084839us-gaap:TradeAccountsReceivableMember2021-12-310000084839us-gaap:FinanceReceivablesMember2021-12-3100000848392021-12-310000084839us-gaap:TradeAccountsReceivableMember2021-09-300000084839us-gaap:FinanceReceivablesMember2021-09-3000000848392021-09-300000084839us-gaap:TradeAccountsReceivableMember2021-06-300000084839us-gaap:FinanceReceivablesMember2021-06-3000000848392021-06-300000084839us-gaap:TradeAccountsReceivableMember2020-12-310000084839us-gaap:FinanceReceivablesMember2020-12-3100000848392020-12-3100000848392022-10-1700000848392022-01-012022-09-30xbrli:sharesiso4217:USDxbrli:purerol:propertyiso4217:USDxbrli:sharesrol:instrumentrol:itemrol:segment

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2022

Commission File Number 1-4422

ROLLINS, INC.

(Exact name of registrant as specified in its charter)

Delaware

51-0068479

(State or other jurisdiction of incorporation or organization)

(I.R.S. Employer 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)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

    

Trading Symbol(s)

    

Name of each exchange on which registered

Common Stock

 

ROL

 

NYSE

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      No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes      No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large Accelerated Filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

Emerging growth company

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes

No

 

Rollins, Inc. had 492,472,436 shares of its $1 par value Common Stock outstanding as of October 17, 2022.

ROLLINS, INC. AND SUBSIDIARIES

PART 1 FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2022, AND DECEMBER 31, 2021

(in thousands except share data)

(unaudited)

    

September 30, 

    

December 31, 

    

2022

    

2021

ASSETS

  

  

Cash and cash equivalents

$

121,876

$

105,301

Trade receivables, net of allowance for expected credit losses of $13,783 and $13,885, respectively

 

170,274

 

139,579

Financed receivables, short-term, net of allowance for expected credit losses of $1,779 and $1,463, respectively

 

32,253

 

26,152

Materials and supplies

 

28,572

 

28,926

Other current assets

 

45,981

52,422

Total current assets

 

398,956

 

352,380

Equipment and property, net of accumulated depreciation of $330,173 and $315,891, respectively

 

130,362

 

133,257

Goodwill

 

772,325

 

721,819

Customer contracts, net

 

319,382

 

325,929

Trademarks & tradenames, net

 

114,016

 

108,976

Other intangible assets, net

 

9,807

 

11,679

Operating lease right-of-use assets

 

270,365

 

244,784

Financed receivables, long-term, net of allowance for expected credit losses of $3,121 and $2,522, respectively

 

58,634

 

47,097

Other assets

 

38,636

 

34,949

Total assets

$

2,112,483

$

1,980,870

LIABILITIES

 

  

 

  

Accounts payable

$

42,874

$

44,568

Accrued insurance - current

 

40,424

 

36,414

Accrued compensation and related liabilities

 

95,694

 

97,862

Unearned revenues

 

166,866

 

145,122

Operating lease liabilities - current

 

82,611

 

75,240

Current portion of long-term debt

 

15,000

 

18,750

Other current liabilities

 

66,300

 

73,206

Total current liabilities

 

509,769

 

491,162

Accrued insurance, less current portion

 

35,257

 

31,545

Operating lease liabilities, less current portion

 

191,565

 

172,520

Long-term debt

 

109,878

 

136,250

Other long-term accrued liabilities

 

69,463

67,345

Total liabilities

 

915,932

 

898,822

Commitments and contingencies (see Note 11)

 

  

 

  

STOCKHOLDERS’ EQUITY

 

  

 

  

Preferred stock, without par value; 500,000 shares authorized, zero shares issued

 

 

Common stock, par value $1 per share; 800,000,000 shares authorized, 492,472,436 and 491,911,087 shares issued and outstanding, respectively

 

492,472

 

491,911

Additional paid in capital

 

113,995

 

105,629

Accumulated other comprehensive loss

 

(43,566)

 

(16,411)

Retained earnings

 

633,650

 

500,919

Total stockholders’ equity

 

1,196,551

 

1,082,048

Total liabilities and stockholders’ equity

$

2,112,483

$

1,980,870

The accompanying notes are an integral part of these condensed consolidated financial statements.

2

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands except per share data)

(unaudited)

    

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

REVENUES

  

  

  

  

Customer services

$

729,704

$

650,199

$

2,034,433

$

1,823,957

COSTS AND EXPENSES

 

  

 

  

 

  

 

  

Cost of services provided (exclusive of depreciation and amortization below)

 

348,158

 

305,474

 

980,316

 

864,888

Sales, general and administrative

 

213,581

 

194,261

 

612,353

 

539,951

Depreciation and amortization

 

24,282

 

23,617

 

73,454

 

70,519

Total operating expenses

586,021

523,352

1,666,123

1,475,358

OPERATING INCOME

143,683

126,847

368,310

348,599

Interest expense, net

 

846

 

222

 

2,294

 

1,334

Other (income), net

 

(1,980)

 

(447)

 

(5,170)

 

(33,598)

CONSOLIDATED INCOME BEFORE INCOME TAXES

 

144,817

 

127,072

 

371,186

 

380,863

PROVISION FOR INCOME TAXES

 

37,195

 

33,219

 

90,820

 

95,513

NET INCOME

$

107,622

$

93,853

$

280,366

$

285,350

NET INCOME PER SHARE - BASIC AND DILUTED

$

0.22

$

0.19

$

0.57

$

0.58

Weighted average shares outstanding - basic

 

492,316

 

492,069

 

492,285

 

492,058

Weighted average shares outstanding - diluted

 

492,430

 

492,069

 

492,398

 

492,058

DIVIDENDS PAID PER SHARE

$

0.10

$

0.08

$

0.30

$

0.24

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands)

(unaudited)

Three Months Ending

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

NET INCOME

$

107,622

$

93,853

$

280,366

$

285,350

Other comprehensive income (loss), net of tax:

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

(12,417)

 

(7,207)

 

(26,203)

 

(6,924)

Unrealized loss on available for sale securities

(952)

Change in derivatives

 

 

632

 

 

356

Other comprehensive income (loss), net of tax

 

(12,417)

 

(6,575)

 

(27,155)

 

(6,568)

Comprehensive income

$

95,205

$

87,278

$

253,211

$

278,782

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands)

(unaudited)

Accumulated Other

Common Stock

Paid-in-

Comprehensive

Retained

    

Shares

    

Amount

    

Capital

    

Income / (Loss)

    

Earnings

    

Total

Balance at June 30, 2022

492,417

$

492,417

$

109,070

$

(31,149)

$

575,229

$

1,145,567

Net Income

107,622

107,622

Other comprehensive income / (loss), net of tax:

 

 

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

 

 

 

(12,417)

 

 

(12,417)

Cash dividends

 

 

 

 

 

(49,201)

 

(49,201)

Stock compensation

 

55

 

55

 

4,902

 

 

 

4,957

Employee stock buybacks

 

 

 

23

 

 

 

23

Balance at September 30, 2022

 

492,472

$

492,472

$

113,995

$

(43,566)

$

633,650

$

1,196,551

Accumulated Other

Common Stock

Paid-in-

Comprehensive

Retained

    

Shares

    

Amount

    

Capital

    

Income / (Loss)

    

Earnings

    

Total

Balance at June 30, 2021

492,079

$

492,079

$

98,842

$

(10,890)

$

470,653

$

1,050,684

Net Income

93,853

93,853

Other comprehensive income / (loss), net of tax:

 

 

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

 

 

 

(7,207)

 

 

(7,207)

Change in derivatives

 

 

 

 

632

 

 

632

Cash dividends

 

 

 

 

 

(39,945)

 

(39,945)

Stock compensation

 

(22)

 

(22)

 

3,942

 

 

 

3,920

Employee stock buybacks

 

(8)

 

(8)

 

(300)

 

 

 

(308)

Balance at September 30, 2021

 

492,049

$

492,049

$

102,484

$

(17,465)

$

524,561

$

1,101,629

Accumulated Other

Common Stock

Paid-in-

Comprehensive

Retained

    

Shares

    

Amount

    

Capital

    

Income / (Loss)

    

Earnings

    

Total

Balance at December 31, 2021

491,911

$

491,911

$

105,629

$

(16,411)

$

500,919

$

1,082,048

Net Income

280,366

280,366

Other comprehensive income / (loss), net of tax:

Foreign currency translation adjustments

 

 

 

 

(26,203)

 

 

(26,203)

Unrealized losses on available for sale securities

(952)

(952)

Cash dividends

 

 

 

 

(147,635)

 

(147,635)

Stock compensation

 

786

 

786

 

15,128

 

 

 

15,914

Employee stock buybacks

 

(225)

 

(225)

 

(6,762)

 

 

 

(6,987)

Balance at September 30, 2022

 

492,472

$

492,472

$

113,995

$

(43,566)

$

633,650

$

1,196,551

Accumulated Other

Common Stock

Paid-in-

Comprehensive

Retained

    

Shares

    

Amount

    

Capital

    

Income / (Loss)

    

Earnings

    

Total

Balance at December 31, 2020

491,612

$

491,612

$

101,757

$

(10,897)

$

358,888

$

941,360

Net Income

285,350

285,350

Other comprehensive income / (loss), net of tax:

 

 

 

  

 

  

 

  

 

  

Foreign currency translation adjustments

 

 

  

 

(6,924)

 

 

(6,924)

Change in derivatives

 

 

  

 

356

 

 

356

Cash dividends

 

 

 

  

 

  

 

(119,677)

 

(119,677)

Stock compensation

 

728

 

728

 

11,034

 

 

 

11,762

Employee stock buybacks

 

(291)

 

(291)

 

(10,307)

 

 

 

(10,598)

Balance at September 30, 2021

 

492,049

$

492,049

$

102,484

$

(17,465)

$

524,561

$

1,101,629

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2022 AND 2021

(in thousands)

(unaudited)

Nine Months Ended

September 30, 

    

2022

    

2021

OPERATING ACTIVITIES

  

  

Net income

$

280,366

$

285,350

Adjustments to reconcile net income to net cash provided by operating activities:

 

Depreciation and amortization

 

73,454

 

70,519

Stock-based compensation expense

 

15,914

 

11,762

Provision for expected credit losses

 

13,593

 

8,522

Gain on sale of assets, net

(5,170)

(33,598)

Provision for deferred income taxes

 

2,210

 

2,221

Changes in operating assets and liabilities:

 

 

Trade accounts receivable and other accounts receivable

 

(40,872)

 

(34,294)

Financing receivables

 

(21,021)

 

(13,041)

Materials and supplies

 

295

 

3,780

Other current assets

 

(3,580)

 

(11,426)

Accounts payable and accrued expenses

 

(669)

 

(8,564)

Unearned revenue

 

19,655

 

20,685

Other long-term assets and liabilities

 

8,362

 

(3,005)

Net cash provided by operating activities

 

342,537

 

298,911

INVESTING ACTIVITIES

 

  

 

  

Acquisitions, net of cash acquired

 

(110,418)

 

(39,692)

Capital expenditures

 

(22,921)

 

(20,031)

Proceeds from sale of assets

 

9,822

 

70,967

Other investing activities, net

 

139

 

(140)

Net cash (used in) provided by investing activities

 

(123,378)

 

11,104

FINANCING ACTIVITIES

 

 

  

Payment of contingent consideration

 

(11,663)

 

(19,413)

Borrowings under term loan

 

252,000

 

Borrowings under revolving commitment

 

11,000

 

82,500

Repayments of term loan

 

(175,000)

 

(83,000)

Repayments of revolving commitment

 

(118,000)

 

(134,500)

Payment of dividends

 

(147,635)

 

(119,677)

Cash paid for common stock purchased

 

(6,987)

 

(10,598)

Net cash used in financing activities

 

(196,285)

 

(284,688)

Effect of exchange rate changes on cash

 

(6,299)

 

(6,149)

Net increase in cash and cash equivalents

 

16,575

 

19,178

Cash and cash equivalents at beginning of period

 

105,301

 

98,477

Cash and cash equivalents at end of period

$

121,876

$

117,655

Supplemental disclosure of cash flow information:

 

  

 

  

Cash paid for interest

$

3,229

$

681

Cash paid for income taxes, net

$

104,974

$

88,350

Non-cash additions to operating lease right-of-use assets

$

92,365

$

101,720

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

ROLLINS, INC. AND SUBSIDIARIES

NOTE 1.BASIS OF PREPARATION

Basis of Preparation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles, or U.S. GAAP, the instructions to Form 10-Q and applicable sections of SEC regulation S-X, and therefore do not include all information and footnotes required by accounting principles generally accepted in the United States of America for complete financial statements. There have been no material changes in the Company’s significant accounting policies or the information disclosed in the notes to the consolidated financial statements included in the Annual Report on Form 10-K of Rollins, Inc. (including its subsidiaries unless the context otherwise requires, “Rollins,” “we,” “us,” “our,” or the “Company”) for the year ended December 31, 2021. Accordingly, the quarterly condensed consolidated financial statements and related disclosures herein should be read in conjunction with the 2021 Annual Report on Form 10-K.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, revenue and expenses and certain financial statement disclosures. Estimates and assumptions are used for, but not limited to, accrued insurance, revenue recognition, right-of-use ("ROU") asset and liability valuations, accounts and financing receivable reserves, income tax contingency accruals and valuation allowances, contingency accruals and goodwill and other intangible asset valuations. Although these estimates are based on management's knowledge of current events and actions it may undertake in the future, actual results may ultimately differ from these estimates and assumptions.

The Company’s condensed consolidated financial statements reflect estimates and assumptions made by management that affect the reported amounts of assets and liabilities and related disclosures as of the date of the condensed consolidated financial statements. The Company considered the impact of COVID-19 and other economic trends on the assumptions and estimates used in preparing the condensed consolidated financial statements. In the opinion of management, all material adjustments necessary for a fair presentation of the Company’s financial results for the quarter have been made. These adjustments are of a normal recurring nature but complicated by the continued uncertainty surrounding COVID-19 and other economic trends. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of results for the entire year. The severity, magnitude and duration of certain economic trends, as well as the economic consequences of COVID-19, continue to be uncertain and are difficult to predict. Therefore, our accounting estimates and assumptions may change over time in response to COVID-19 and other economic trends and may change materially in future periods.

The Company operates as one reportable segment and the results of operations and its financial condition are not reliant upon any single customer.

NOTE 2.RECENT ACCOUNTING PRONOUNCEMENTS

Recently adopted accounting standards

In November 2021, the FASB issued Accounting Standards Update (“ASU”) 2021-10, “Government Assistance (Topic 832) – Disclosures by Business Entities about Government Assistance.” The amendments in this Update require disclosures about transactions with a government that have been accounted for by analogizing to a grant or contribution accounting model to increase transparency about (1) the types of transactions, (2) the accounting for the transactions, and (3) the effect of the transactions on an entity’s financial statements. The amendments in this Update are effective for financial statements issued for annual periods beginning after December 15, 2021. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

7

ROLLINS, INC. AND SUBSIDIARIES

Accounting standards issued but not yet adopted

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments-Credit Losses (Topic 326): Troubled Debt Restructurings and Vintage Disclosures.” The amendments in this Update eliminate the accounting guidance for troubled debt restructurings (TDRs) by creditors in Subtopic 310-40, Receivables-Troubled Debt Restructurings by Creditors, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. Additionally, for public business entities, the amendments in this Update require that an entity disclose current-period gross write-offs by year of origination for financing receivables. ASU 2022-02 is effective for fiscal years beginning after December 15, 2022. The adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

In June 2022, the FASB issued ASU 2022-03, “Fair Value Measurement (Topic 820): Fair Value Measurements of Equity Securities Subject to Contractual Sale Restrictions.” The amendments in this Update clarify the guidance in Topic 820 when measuring the fair value of an equity security subject to contractual restrictions that prohibit the sale of an equity security. This Update also introduces new disclosure requirements for equity securities subject to contractual sale restrictions that are measured at fair value. These amendments are effective for fiscal years beginning after December 15, 2023 and interim periods within those fiscal years. The Company does not currently own any equity securities and therefore the adoption of this ASU is not expected to have a material impact on the Company’s consolidated financial statements.

NOTE 3.ACQUISITIONS

The Company made 27 acquisitions during the nine-month period ended September 30, 2022, and 39 acquisitions for the year ended December 31, 2021. For the 27 acquisitions completed through September 30, 2022, the preliminary values of major classes of assets acquired and liabilities assumed recorded at the dates of acquisition, as adjusted during the valuation period, are included in the reconciliation of the total consideration as follows (in thousands):

    

September 30, 2022

Accounts receivable, net

$

2,926

Materials and supplies

 

439

Equipment and property

 

6,245

Goodwill

 

60,962

Customer contracts

 

44,377

Trademarks & tradenames

 

5,615

Other intangible assets

 

1,393

Current liabilities

 

(4,285)

Other assets and liabilities, net

 

(1,384)

Total consideration

$

116,288

Less: Acquisition holdback liabilities

 

(8,978)

Total cash purchase price

$

107,310

The Company also made a final payment of $3.1 million for a 2021 acquisition in 2022.

Goodwill from acquisitions represents the excess of the purchase price over the fair value of net assets of businesses acquired. The factors contributing to the amount of goodwill are based on strategic and synergistic benefits that are expected to be realized. For the nine months ended September 30, 2022, $61.0 million of goodwill was added related to the 27 acquisitions noted above. The recognized goodwill is expected to be deductible for tax purposes. The purchase price allocations for these acquisitions are preliminary until the Company obtains final information regarding these fair values.

8

ROLLINS, INC. AND SUBSIDIARIES

NOTE 4.REVENUE

The following tables present our revenues disaggregated by revenue source (in thousands).

Sales and usage-based taxes are excluded from revenues. No sales to an individual customer or in a country other than the United States accounted for 10% or more of the sales for the periods listed in the following table.

Revenue, classified by the major geographic areas in which our customers are located, was as follows:

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

    

2022

    

2021

    

2022

    

2021

(in thousands)

United States

$

676,408

$

602,336

$

1,884,571

$

1,686,371

Other countries

 

53,296

 

47,863

 

149,862

 

137,586

Total Revenues

$

729,704

$

650,199

$

2,034,433

$

1,823,957

Revenue from external customers, classified by significant product and service offerings, was as follows:

Three Months Ended

Nine Months Ended

September 30, 

September 30, 

(in thousands)

    

2022

    

2021

    

2022

    

2021

Residential revenue

$

337,878

$

307,747

$

922,448

$

835,871

Commercial revenue

 

243,478

 

218,648

 

683,748

 

618,183

Termite completions, bait monitoring, & renewals

 

139,668

 

117,423

 

406,155

 

350,791

Franchise revenues

4,068

4,128

11,960

11,698

Other revenues

 

4,612

 

2,253

 

10,122

 

7,414

Total Revenues

$

729,704

$

650,199

$

2,034,433

$

1,823,957

The Company records unearned revenue when we have either received payment or contractually have the right to bill for services in advance of the services or performance obligations being performed. Deferred revenue recognized in the three and nine months ended September 30, 2022 and 2021 was $51.6 million and $47.3 million, respectively and $152.5 and $139.6, respectively. Changes in unearned revenue were as follows:

    

Three Months Ended September 30, 

Nine Months Ended September 30, 

    

2022

    

2021

2022

    

2021

(in thousands)

Beginning balance

$

192,972

$

172,951

$

168,607

$

149,224

Deferral of unearned revenue

 

54,946

 

49,060

 

180,209

 

165,094

Recognition of unearned revenue

 

(51,553)

 

(47,316)

 

(152,451)

 

(139,623)

Ending balance

$

196,365

$

174,695

$

196,365

$

174,695

As of September 30, 2022, and December 31, 2021, the Company had long-term unearned revenue of $29.5 million and $18.4 million, respectively, recorded in other long-term accrued liabilities. Unearned short-term revenue is recognized over the next 12-month period. The majority of unearned long-term revenue is recognized over a period of five years or less with immaterial amounts recognized through 2033.

9

ROLLINS, INC. AND SUBSIDIARIES

NOTE 5.ALLOWANCE FOR CREDIT LOSSES

The Company is exposed to credit losses primarily related to accounts receivables and financed receivables derived from customer services revenue. To reduce credit risk for residential pest control accounts receivable, we promote enrollment in our auto-pay programs. In general, we may suspend future services for customers with past due balances. The Company’s credit risk is generally low with a large number of individuals and entities comprising Rollins’ customer base and dispersion across many different geographical regions.

The Company manages its financing receivables on an aggregate basis when assessing and monitoring credit risks. The Company’s established credit evaluation and monitoring procedures seek to minimize the amount of business we conduct with higher risk customers. The credit quality of a potential obligor is evaluated at the loan origination based on an assessment of the individual’s Beacon/credit bureau score. Rollins requires a potential obligor to have good credit worthiness with low risk before entering into a contract. Depending upon the individual’s credit score, the Company may accept with 100% financing, require a significant down payment or turn down the contract. Delinquencies of accounts are monitored each month. Financing receivables include installment receivable amounts, some of which are due subsequent to one year from the balance sheet dates.

The Company’s allowances for credit losses for trade accounts receivable and financed receivables are developed using historical collection experience, current economic and market conditions, reasonable and supportable forecasts, and a review of the current status of customers’ receivables. The Company’s receivable pools are classified between residential customers, commercial customers, large commercial customers, and financed receivables. Accounts are written off against the allowance for credit losses when the Company determines that amounts are uncollectible, and recoveries of amounts previously written off are recorded when collected. The Company stops accruing interest to these receivables when they are deemed uncollectible. Below is a roll forward of the Company’s allowance for credit losses for the three and nine months ended September 30, 2022 and 2021 (in thousands).

10

ROLLINS, INC. AND SUBSIDIARIES

Allowance for Credit Losses

    

Trade

    

Financed

    

Total

Receivables

Receivables

Receivables

Balance at June 30, 2022

$

13,666

$

4,554

$

18,220

Provision for expected credit losses

 

3,842

1,316

 

5,158

Write-offs charged against the allowance

 

(5,095)

(970)

 

(6,065)

Recoveries collected

 

1,370

 

1,370

Balance at September 30, 2022

$

13,783

$

4,900

$

18,683

Allowance for Credit Losses

Trade

Financed

Total

    

Receivables

    

Receivables

    

Receivables

Balance at June 30, 2021

$

13,863

$

4,341

$

18,204

Provision for expected credit losses

 

3,526

 

323

 

3,849

Write-offs charged against the allowance

 

(5,163)

 

(657)

 

(5,820)

Recoveries collected

 

1,247

 

 

1,247

Balance at September 30, 2021

$

13,473

$

4,007

$

17,480

Allowance for Credit Losses

Trade

Financed

Total

    

Receivables

    

Receivables

    

Receivables

Balance at December 31, 2021

$

13,885

$

3,985

$

17,870

Provision for expected credit losses

 

9,396

4,195

 

13,591

Write-offs charged against the allowance

 

(13,561)

(3,280)

 

(16,841)

Recoveries collected

 

4,063

 

4,063

Balance at September 30, 2022

$

13,783

$

4,900

$

18,683

Allowance for Credit Losses

Trade

Financed

Total

    

Receivables

    

Receivables

    

Receivables

Balance at December 31, 2020

$

16,854

$

3,231

$

20,085

Provision for expected credit losses

 

5,760

 

2,762

 

8,522

Write-offs charged against the allowance

 

(12,912)

 

(1,986)

 

(14,898)

Recoveries collected

 

3,771

 

 

3,771

Balance at September 30, 2021

$

13,473