Rollins Inc 10-Q for FY2022 Q1

Rollins Inc (ROL)

10-Q 2022-04-28 For: 2022-03-31

Added on April 08, 2026

About this 10-Q

Rollins Inc filed this 10-Q on April 28, 2022, covering the quarter ended March 31, 2022 (FY2022 Q1).

Headline figures

Quarter ended March 31, 2022, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $590.68M; up 10.3% from $535.55M a year earlier
Net income: $72.45M; down 21.8% from net income of $92.64M a year earlier
Diluted EPS: $0.15; down 21.1% from $0.19 a year earlier


Exhibit No.	Exhibit Description	Incorporated By Reference	Filed Herewith
		Form	Date	Number
2.1	Stock Purchase Agreement by and among Rollins, Inc., Clark Pest Control of Stockton, Inc., the Stockholders of Clark Pest Control of Stockton, Inc. the Principals and the Stockholders Representative	10-Q	April 26, 2019	10.1
2.2	Asset Purchase Agreement among King Distribution, Inc., a Delaware corporation, Geotech Supply Co., LLC, a California limited liability company, and Clarksons California Properties, California limited partnership	10-Q	April 26, 2019	10.2
2.3	Real Estate Purchase Agreement by and between RCI – King, Inc., and Clarksons California Properties, a California limited partnership	10-Q	April 26, 2019	10.3
3.1	Restated Certificate of Incorporation of Rollins, Inc., dated July 28, 1981	10-Q	August 1, 2005	(3)(i)(A)
3.2	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated August 20, 1987	10-K	March 11, 2005	(3)(i)(B)
3.3	Certificate of Change of Location of Registered Office and of Registered Agent, dated March 22, 1994	10-Q	August 1, 2005	(3)(i)(C)
3.4	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 26, 2011	10-K	February 25, 2015	(3)(i)(E)
3.5	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 28, 2015	10-Q	July 29, 2015	(3)(i)(F)
3.6	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 23, 2019	10-Q	April 26, 2019	(3)(i)(G)
3.7	Certificate of Amendment of Certificate of Incorporation of Rollins, Inc., dated April 27, 2021	10-Q	July 30, 2021	(3)(i)(H)
3.8	Amended and Restated By-laws of Rollins, Inc., dated May 20, 2021	8-K	May 24, 2021	3.1
4.1	Form of Common Stock Certificate of Rollins, Inc.	10-K	March 26, 1999	(4)
4.2	Description of Registrant’s Securities	10-K	February 28, 2020	4(b)
10.1+	Membership Interest Purchase Agreement by and among Rollins, Inc., Northwest Exterminating Co., Inc. NW Holdings, LLC and the stockholders of Northwest Exterminating Co., Inc. dated as of July 24, 2017	10-Q	October 27, 2017	10.1
10.2*	Rollins, Inc. Amended and Restated Deferred Compensation Plan	S-8	November 18, 2005	4.1
10.3*	Form of Plan Agreement pursuant to the Rollins, Inc. Amended and Restated Deferred Compensation Plan	S-8	November 18, 2005	4.2
10.4*	Written description of Rollins, Inc. Performance-Based Incentive Cash Compensation Plan for Executive Officer	8-K	February 1, 2021	10(a)
10.5*	Forms of award agreements under the 2013 Cash Incentive Plan	10-K	February 24, 2017	10(d)
10.6*	2018 Stock Incentive Plan	DEF 14A	March 21, 2018	Appendix A
10.7*	Form of Restricted Stock Grant Agreement	8-K	April 28, 2008	10(d)
10.8*	Form of Time-Lapse Restricted Stock Agreement	10-Q	April 27, 2012	10.1
10.9*	Summary of Compensation Arrangements with Executive Officers	10-K	February 25, 2011	(10)(q)
10.10*	Summary of Compensation Arrangements with Non-Employee Directors	10-K	February 25, 2015	10(i)
10.11	Revolving Credit Agreement dated as of April 30, 2019 between Rollins, Inc. and SunTrust Bank and Bank of America, N.A.	10-K	February 28, 2020	10.1
10.12	Amended Credit Agreement dated as of January 27, 2022 between Rollins, Inc. and Truist Bank in its capacity as Administrative Agent and as a Lender and Bank of America, N.A. as a Lender	10-K	February 25, 2022	10.12

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Delaware	51-0068479
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	ROL	NYSE


Large Accelerated Filer	☒	Accelerated filer	☐
Non-accelerated filer	☐	Smaller reporting company	☐
		Emerging growth company	☐

☐
Yes	☐	No	☒


	March 31,		December 31,
	2022		2021
ASSETS
Cash and cash equivalents	$	258,338	$	105,301
Trade receivables, net of allowance for expected credit losses of $14,170 and $13,885, respectively		137,621		139,579
Financed receivables, short-term, net of allowance for expected credit losses of $1,236 and $1,463, respectively		26,631		26,152
Materials and supplies		29,062		28,926
Other current assets		44,860		52,422
Total current assets		496,512		352,380
Equipment and property, net of accumulated depreciation of $321,122 and $315,891, respectively		132,680		133,257
Goodwill		730,139		721,819
Customer contracts, net		318,806		325,929
Trademarks & tradenames, net		109,520		108,976
Other intangible assets, net		10,090		11,679
Operating lease right-of-use assets		241,043		244,784
Financed receivables, long-term, net of allowance for expected credit losses of $2,614 and $2,522, respectively		46,192		47,097
Other assets		46,161		34,949
Total assets	$	2,131,143	$	1,980,870
LIABILITIES
Accounts payable	$	38,586	$	44,568
Accrued insurance		37,724		36,414
Accrued compensation and related liabilities		76,291		97,862
Unearned revenues		156,516		145,122
Operating lease liabilities - current		74,463		75,240
Current portion of long-term debt		15,000		18,750
Other current liabilities		82,317		73,206
Total current liabilities		480,897		491,162
Accrued insurance, less current portion		32,218		31,545
Operating lease liabilities, less current portion		169,839		172,520
Long-term debt		280,783		136,250
Other long-term accrued liabilities		59,877		67,345
Total liabilities		1,023,614		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, 492,460,649 and 491,911,087 shares issued and outstanding, respectively		492,461		491,911
Additional paid in capital		104,783		105,629
Accumulated other comprehensive loss		(13,874)		(16,411)
Retained earnings		524,159		500,919
Total stockholders’ equity		1,107,529		1,082,048
Total liabilities and stockholders’ equity	$	2,131,143	$	1,980,870


	Three Months Ended
	March 31,
	2022		2021
REVENUES
Customer services	$	590,680	$	535,554
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		295,378		261,552
Sales, general and administrative		178,785		162,208
Depreciation and amortization		24,847		23,596
Total operating expenses		499,010		447,356
OPERATING INCOME		91,670		88,198
Interest expense, net		568		606
Other income, net		(1,279)		(32,260)
CONSOLIDATED INCOME BEFORE INCOME TAXES		92,381		119,852
PROVISION FOR INCOME TAXES		19,936		27,209
NET INCOME	$	72,445	$	92,643
NET INCOME PER SHARE - BASIC AND DILUTED	$	0.15	$	0.19
Weighted average shares outstanding - basic		492,213		492,003
Weighted average shares outstanding - diluted		492,325		492,003
DIVIDENDS PAID PER SHARE	$	0.10	$	0.08


						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	—		—		—		—		72,445		72,445
Other comprehensive income / (loss), net of tax:
Foreign currency translation adjustments	—		—		—		3,127		—		3,127
Unrealized losses on available for sale securities	—		—		—		(590)		—		(590)
Cash dividends	—		—		—		—		(49,205)		(49,205)
Stock compensation	757		757		5,381		—		—		6,138
Employee stock buybacks	(207)		(207)		(6,227)		—		—		(6,434)
Balance at March 31, 2022	492,461	$	492,461	$	104,783	$	(13,874)	$	524,159	$	1,107,529


	March 31, 2022
Accounts receivable, net	$	88
Materials and supplies		149
Equipment and property		1,148
Goodwill		4,455
Customer contracts		8,165
Trademarks & tradenames		2
Other intangible assets		405
Current liabilities		(30)
Other assets and liabilities, net		17
Total consideration paid	$	14,399
Less: Contingent consideration liability		(1,176)
Total cash purchase price	$	13,223


	Three Months Ended
	March 31,
(in thousands)	2022		2021
Residential revenue	$	259,259	$	235,179
Commercial revenue		205,787		188,697
Termite completions, bait monitoring, & renewals		119,706		105,694
Franchise revenues		3,737		3,459
Other revenues		2,191		2,525
Total Revenues	$	590,680	$	535,554


	Three Months Ended March 31,
	2022		2021
(in thousands)
Beginning balance	$	168,607	$	149,224
Deferral of unearned revenue		61,635		55,379
Recognition of unearned revenue		(49,909)		(45,837)
Ending balance	$	180,333	$	158,766



	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		3,204		1,054		4,258
Write-offs charged against the allowance		(4,248)		(1,189)		(5,437)
Recoveries collected		1,329		—		1,329
Balance at March 31, 2022	$	14,170	$	3,850	$	18,020


Goodwill (in thousands):
Balance at December 31, 2020	$	653,176
Additions		69,264
Adjustments due to currency translation		(621)
Balance at December 31, 2021		721,819
Additions		4,455
Measurement adjustments		2,572
Adjustments due to currency translation		1,293
Balance at March 31, 2022	$	730,139



	March 31, 2022						December 31, 2021
			Accumulated		Carrying				Accumulated		Carrying			Useful Life
	Gross		Amortization		Value		Gross		Amortization			Value		in Years
Amortizable intangible assets:
Customer contracts	$	557,164	$	(238,358)	$	318,806	$	551,277	$	(225,348)		$	325,929	3-20
Trademarks and tradenames		12,904		(6,783)		6,121		12,784		(6,492)			6,292	7-20
Non-compete agreements		13,362		(6,364)		6,998		13,125		(5,573)			7,552	3-20
Patents		6,946		(6,502)		444		6,946		(5,509)			1,437	3-15
Other assets		2,217		(1,796)		421		2,150		(1,687)			463	10
Total amortizable intangible assets	$	592,593	$	(259,803)		332,790	$	586,282	$	(244,609)			341,673
Indefinite-lived intangible assets:
Trademarks and tradenames						103,399							102,684
Internet domains						2,227							2,227
Total indefinite-lived intangible assets						105,626							104,911
Total customer contracts and other intangible assets					$	438,416						$	446,584


(in thousands)
2022 (excluding the three months ended March 31, 2022)	$	44,867
2023		55,441
2024		51,857
2025		42,806
2026		38,422


		Three Months Ended March 31,
(in thousands, except Other Information)
Lease Classification	Financial Statement Classification	2022			2021
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	26		$	60
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		24,023			22,634
Total lease expense		$	24,049		$	22,694

Other Information:
Weighted-average remaining lease term - operating leases			5.5 years			5.7 years
Weighted-average discount rate - operating leases			3.54	%		3.85	%
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		$	23,758		$	22,457


	Operating
(in thousands)
2022 (excluding the three months ended March 31, 2022)	$	62,839
2023		67,440
2024		43,519
2025		26,295
2026		16,493
2027		12,119
Thereafter		44,593
Total Future Minimum Lease Payments		273,298
Less: Amount representing interest		28,996
Total future minimum lease payments, net of interest	$	244,302


	Three Months Ended
	March 31,
(in thousands)	2022		2021
Beginning balance	$	25,156	$	35,744
New acquisitions and revaluations		1,176		2,067
Payouts		(3,051)		(4,926)
Interest on outstanding contingencies		126		279
Charge offset, forfeit and other		(8)		(188)
Ending balance	$	23,399	$	32,976


	Number of	Sell		Buy
FX Forward Contracts	Instruments	Notional		Notional
Sell AUD/Buy USD Fwd Contract	20	$	3,200	$	2,356
Sell CAD/Buy USD Fwd Contract	20		20,000		15,826
Total	40			$	18,182


	Three Months Ended
	March 31,
(in thousands)	2022		2021
Time lapse restricted stock:
Pre-tax compensation expense	$	6,138	$	3,921
Tax benefit		(1,324)		(886)
Restricted stock expense, net of tax	$	4,814	$	3,035


		Weighted
		Average
	Number of	Grant-Date
(number of shares in thousands)	Shares	Fair Value
Unvested Restricted Stock at December 31, 2021	2,596	$	26.26
Forfeited	(14)		25.52
Vested	(595)		19.39
Granted	771		29.70
Unvested Restricted Stock at March 31, 2022	2,758	$	28.74


	Three Months Ended March 31,				Variance		As a % of Revenue
(in thousands)	2022		2021		$	%	2022	2021
REVENUES
Customer services	$	590,680	$	535,554	55,126	10.3	100.0	100.0
COSTS AND EXPENSES
Cost of services provided (exclusive of depreciation and amortization below)		295,378		261,552	33,826	12.9	50.0	48.8
Sales, general and administrative		178,785		162,208	16,577	10.2	30.3	30.3
Depreciation and amortization		24,847		23,596	1,251	5.3	4.2	4.4
Total operating expenses		499,010		447,356	51,654	11.5	84.5	83.5
OPERATING INCOME		91,670		88,198	3,472	3.9	15.5	16.5
Interest expense, net		568		606	(38)	(6.3)	0.1	0.1
Other income, net		(1,279)		(32,260)	30,981	(96.0)	(0.2)	(6.0)
CONSOLIDATED INCOME BEFORE INCOME TAXES		92,381		119,852	(27,471)	(22.9)	15.6	22.4
PROVISION FOR INCOME TAXES		19,936		27,209	(7,273)	(26.7)	3.4	5.1
NET INCOME	$	72,445	$	92,643	(20,198)	(21.8)	12.3	17.3


	Consolidated Net Revenues
(in thousands)	2022		2021		2020
First Quarter	$	590,680	$	535,554	$	487,901
Second Quarter		—		638,204		553,329
Third Quarter		—		650,199		583,698
Fourth Quarter		—		600,343		536,292
Year to date	$	590,680	$	2,424,300	$	2,161,220


				Total number of
		Weighted-		shares purchased as	Maximum number of
	Total number of	average		part of publicly	shares that may yet be
	shares	price paid		announced	purchased under the
Period	purchased (1)	per share		repurchases (2)	repurchase plan (2)
January 1 to 31, 2022	202,920	$	31.02	—	11,415,625
February 1 to 28, 2022	482		30.85	—	11,415,625
March 1 to 31, 2022	3,739		30.09	—	11,415,625
Total	207,141	$	31.00	—	11,415,625


	ROLLINS, INC.
	(Registrant)

Date: April 28, 2022	By:	/s/ Gary W. Rollins
		Gary W. Rollins
		Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date: April 28, 2022	By:	/s/ Traci Hornfeck
		Traci Hornfeck
		Chief Accounting Officer
		(Principal Accounting Officer)


Date: April 28, 2022	/s/ Gary W. Rollins
	Gary W. Rollins, Chairman and Chief Executive Officer
	(Principle Executive Officer)


Date: April 28, 2022	/s/ Julie Bimmerman
	Julie Bimmerman
	Interim Chief Financial Officer and Treasurer
	(Principal Financial Officer)


Date: April 28, 2022	By:	/s/ Gary W. Rollins
		Gary W. Rollins Chairman and Chief Executive Officer (Principle Executive Officer)

Date: April 28, 2022	By:	/s/ Julie Bimmerman
		Julie Bimmerman Interim Chief Financial Officer and Treasurer (Principal Financial Officer)