Rollins (ROL) 10-K risk factor changes: FY2019 vs FY2018

Rollins, Inc. (the [removed: “Company”)] [added: “Company”),] was originally incorporated in [removed: 1948] [added: 1948,] under the laws of the state of Delaware as Rollins Broadcasting, Inc. The Company is an international service company with headquarters located in Atlanta, Georgia, providing pest and termite control services through its wholly-owned subsidiaries to both residential and commercial customers in [removed: North America,] [added: the United States, Canada,] Australia, [added: Europe,] and [removed: Europe] [added: Asia] with international franchises in [added: Mexico, Canada,] Central [removed: America,] [added: and] South America, the Caribbean, the Middle East, Asia, [removed: the Mediterranean,] Europe, [removed: Africa,] and [removed: Mexico.][added: Africa.]

| | | [added: (in thousands)] | | | | | | | | | | | | % Better/(worse) compared [added: to prior year] | | | | | | |

| Years ended December 31, | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | |

| Revenues | | [removed: $] [added: $] | [removed: 1,821,565] [added: 2,015,477] | | | $ | [removed: 1,673,957] [added: 1,821,565] | | | $ | [removed: 1,573,477] [added: 1,673,957] | | | | [removed: 8.8] [added: 10.6] | | | | [removed: 6.4] [added: 8.8] | |

| Cost of services provided | | | [removed: 894,437] [added: 993,593] | | | | [removed: 819,943] [added: 894,437] | | | | [removed: 772,348] [added: 819,943] | | | | [removed: (9.1] [added: (11.1] | [removed: )] [added: )] | | | [removed: (6.2] [added: (9.1] | ) |

| Depreciation and amortization | | | [removed: 66,792] [added: 81,111] | | | | [removed: 56,580] [added: 66,792] | | | | [removed: 50,902] [added: 56,580] | | | | [removed: (18.0] [added: (21.4] | [removed: )] [added: )] | | | [removed: (11.2] [added: (18.0] | ) |

| Sales, general and administrative | | | [removed: 550,698] [added: 623,379] | | | | [removed: 503,433] [added: 550,698] | | | | [removed: 490,528] [added: 503,433] | | | | [removed: (9.4] [added: (13.2] | [removed: )] [added: )] | | | [removed: (2.6] [added: (9.4] | ) |

| Gain on sales of assets, net | | | [removed: (875] [added: (581] | [removed: )] [added: )] | | | [removed: (242] [added: (875] | ) | | | [removed: (777] [added: (242] | ) | | | [removed: 261.6] [added: (33.6] | [added: )] | | | [removed: (68.9] [added: 261.6] | [removed: )] |

| Interest [removed: income,] [added: expense/(income),] net | | | [removed: (220] [added: 6,917] | [removed: )] | | | [removed: (259] [added: (220] | ) | | | [removed: (160] [added: (259] | ) | | | [removed: (15.1] [added: N/M] | [removed: )] | | | [removed: 61.9] [added: (15.1] | [added: )] |

| Income before income taxes | | | [removed: 310,733] [added: 261,160] | | | | [removed: 294,502] [added: 310,733] | | | | [removed: 260,636] [added: 294,502] | | | | [removed: 5.5] [added: (16.0] | [added: )] | | | [removed: 13.0] [added: 5.5] | |

| [removed: Provisions] [added: Provision] for income taxes | | | [removed: 79,070] [added: 57,813] | | | | [removed: 115,378] [added: 79,070] | | | | [removed: 93,267] [added: 115,378] | | | | [removed: 31.5] [added: 26.9] | | | | [removed: (23.7] [added: 31.5] | [removed: )] |

| Net income | | [removed: $] [added: $] | [removed: 231,663] [added: 203,347] | | | $ | [removed: 179,124] [added: 231,663] | | | $ | [removed: 167,369] [added: 179,124] | | | | [removed: 29.3] [added: (12.2] | [added: )] | | | [removed: 7.0] [added: 29.3] | |

[removed: 2018] [added: 2019] marked the Company’s [removed: 21st] [added: 22nd] consecutive year of improved [removed: revenues and profits.][added: revenues.]

Revenues for the year rose [removed: 8.8] [added: 10.6] percent to [removed: $1.822] [added: $2.015] billion compared to [removed: $1.674] [added: $1.822] billion for the prior year.

Income before income taxes [removed: increased 5.5%] [added: decreased 16.0%] to [removed: $310.7] [added: $261.2] million compared to [removed: $294.5] [added: $310.7] million the prior year.

Net income [removed: increased 29.3%] [added: decreased 12.2%] to [removed: $231.7] [added: $203.3] million, with earnings per diluted share of [removed: $0.71] [added: $0.62] compared to [removed: $179.1] [added: $231.7] million, or [removed: $0.55] [added: $0.71] per diluted share for the prior year.

All of the Company’s business lines experienced growth for the year, with residential pest control revenues up [removed: 9.1%,] [added: 11.3%,] commercial pest control revenues up [removed: 6.0%] [added: 8.9%] and termite and ancillary services revenues up [removed: 12.8%,] [added: 11.6%,] each compared to [removed: 2017.][added: 2018.]

Results of [removed: Operations—2018] [added: Operations—2019] Versus [removed: 2017][added: 2018]

The Company’s revenues increased to [removed: $1.822] [added: $2.015] billion in [removed: 2018, an 8.8%] [added: 2019, a 10.6%] increase compared to [removed: 2017.][added: 2018.]

Gross margin decreased to [removed: 50.9%] [added: 50.7%] for [removed: 2018] [added: 2019] from [removed: 51.0%] [added: 50.9%] in [removed: 2017.][added: 2018.]

Sales, general and administrative expense were [removed: 30.2%] [added: 30.9%] of revenues in [removed: 2018] [added: 2019] compared to [removed: 30.1%] [added: 30.2%] in [removed: 2017.][added: 2018.]

The Company’s depreciation and amortization [removed: margin] [added: expense] increased [removed: 0.3 percentage points] [added: 21.4%] to [removed: 3.7%] [added: 4.0%] in [removed: 2018] [added: 2019] compared to [removed: 3.4%] [added: 3.7%] in [removed: 2017.][added: 2018.]

Rollins continued to expand our global brand recognition with acquisitions in the United [removed: States, Canada, Singapore,] [added: States] and [removed: Australia] [added: Canada] as well as [removed: expanding] [added: expanded] our Orkin international franchise program in numerous countries around the globe.

The Company [removed: is now in 57 countries and] continues to seek new international opportunities.

Revenues for the year ended December 31, [removed: 2018] [added: 2019] were [removed: $1.822] [added: $2.015] billion, an increase of [removed: $147.6] [added: $194] million or [removed: 8.8%] [added: 10.6%] from [removed: 2017] [added: 2018] revenues of [removed: $1.674] [added: $1.822] billion.

Growth and pricing accounted for approximately [removed: 5.3%] [added: 4.8%] of our [removed: increase] [added: increase,] and our acquisitions contributed the remaining revenue growth.

Commercial pest control represented approximately [removed: 39%] [added: 38%] of the Company’s revenue in [removed: 2018] [added: 2019] and grew [removed: 6.0%.][added: 8.9%.]

The Company’s termite business, which represented approximately 18% of the Company’s revenue, grew [removed: 12.8%] [added: 11.6%] in [removed: 2018] [added: 2019] due to acquisitions, increases in termite [removed: baiting and pretreatments,] [added: baiting,] and ancillary service sales (such as moisture control, insulation and deck and gutter work).

The Company implemented its traditional price increase program in June [removed: 2018.][added: 2019.]

Approximately 80% of the Company’s pest control revenue was recurring in [removed: 2018,] [added: 2019,] as well as [removed: 2017.][added: 2018.]

The Company’s foreign operations accounted for approximately 8% of total revenues for each of the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

The Company established new franchises in several international countries around the globe in [removed: 2018] [added: 2019] for a total of [removed: 86] [added: 97] Orkin international franchises, [removed: two] [added: one] Canadian Critter Control [removed: franchises,] [added: franchise,] and ten [removed: Orkin] Australia franchises at December 31, [removed: 2018,] [added: 2019,] compared to [removed: 81] [added: 86] Orkin international franchises, two Canadian Critter Control franchises and [removed: eleven Orkin] [added: ten] Australia [removed: Franchises] [added: franchises] at December 31, [removed: 2017.][added: 2018.]

International and domestic franchising revenue was less than 1% of the Company’s revenues for [removed: 2018.][added: 2019.]

Orkin had [removed: 133] [added: 147] and [removed: 128] [added: 133] franchises (domestic and international) at December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] respectively.

The Company had [removed: 80] [added: 84] Critter Control franchises at December 31, [removed: 2018, down 9] [added: 2019, up 4] from [removed: 2017.][added: 2018.]

Revenue from franchising was up [removed: 30.4%] [added: 3.2%] in [removed: 2018] [added: 2019] compared to [removed: 2017] [added: 2018] as [removed: we] [added: the Company continued to] expand Orkin’s international footprint and recognition of initial franchise [removed: fees, partially offset by the decreases associated with acquired franchises from Critter Control.][added: fees.]

For the twelve months ended December 31, [removed: 2018,] [added: 2019,] cost of services provided increased [removed: $74.5] [added: $99.2] million or [removed: 9.1%,] [added: 11.1%,] compared to the twelve months ended December 31, [removed: 2017.][added: 2018.]

Gross margin for the year decreased to [removed: 50.9%] [added: 50.7%] for [removed: 2018] [added: 2019] compared to [removed: 51.0%] [added: 50.9%] for [removed: 2017] [added: 2018] due to [removed: unfavorable personnel related costs as we] increased [added: participation rates in] our [removed: 401k] [added: enhanced 401(k)] match to employees and [removed: experienced] an increase in group insurance premiums in [removed: 2018 and an increase in payroll taxes and FICA taxes.][added: 2019.]

For the twelve months ended December 31, [removed: 2018,] [added: 2019,] depreciation and amortization increased [removed: $10.2] [added: $14.3] million, or [removed: 18.0%] [added: 21.4%] compared to the twelve months ended December 31, [removed: 2017.][added: 2018.]

The dollar increase was primarily due to depreciation increasing [removed: $3.0] [added: $6.3] million or [removed: 10.9% as we depreciate] [added: 20.7% from the depreciation of] acquired and purchased assets and depreciation from various IT related projects.

Discussions of 2017 items and year-to-year comparisons of 2018 and 2017 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 on our Annual report on [Form 10-K](http://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_rol-10k.htm) for the year ended December 31, 2018.

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| Pension settlement loss | | | 49,898 | | | | — | | | | — | | | | N/M | | | | N/M | |

Service salaries and personnel related expenses for the 401(k) match were impacted by the Clark Pest Control acquisition.

Rollins’ net income of $203.3 million in 2019 was a decrease of $28.3 million or 12.2% compared to $231.7 million in 2018.

Net profit margin declined to 10.1% in 2019 from 12.7% in 2018.

In our first 50 years, we have grown to over 2.4 million customers who are served in 65 countries, and those countries represent 73.6% of the world’s GDP.

Residential pest control, which represented approximately 43% of the Company’s revenue, increased 11.3% driven largely by the Clark Pest Control acquisition, which is mainly residential.

Other factors such as increases in leads received, leads sold, a lower cancellation rate, and pricing, as well as increased TAEXX® homebuilder installations also contributed to the increase in residential pest control revenue.

The Australia franchises operate under the Murray Pest Control and Scientific Pest Management names.

Integration of acquisitions resulted in slight increases in service salaries percentages.

The Company incurred higher than normal expenses in 2019 related to acquisition preparation and integration as well as expenses related to the pension settlement activities.

The enhanced 401(k) match enticed more of the Company’s workforce to save for their futures.

Administrative salaries were up due to increased office headcount and wages.

Medical and casualty insurance expenses were up for the year.

Interest expense, net for the year ended December 31, 2019 was $6.9 million, driven largely by new borrowings to fund acquisitions, among other things.

The Company’s effective tax rate was 22.1% in 2019 compared to 25.4% in 2018, due primarily to state and foreign income taxes and beneficial adjustments related to the pension settlement.

| | | | | | | | | | | | | |

| | | (in thousands) | | | | | | | | | | |

| Years ended December 31, | | 2019 | | | | 2018 | | | | 2017 | | |

The Company settled its obligations under the Rollins, Inc. Pension Plan without making any additional contributions during the years ended December 31, 2019, 2018 or 2017.

The plan assets exceeded the plan benefit obligations, and $31.8 million remained after the combination of lump sum payments to participants, the purchase of a group annuity contract, and payments to the Pension Benefit Guaranty Corporation.

The Company has evaluated the ERISA allowable opportunities for utilization of the excess pension assets including funding other employee benefits.

The Company used $11.0 million of the $31.8 million to fund its 401(k) match obligation during the year ended December 31, 2019, and plans to continue funding future benefit plan obligations, with a possible reversion of any remaining pension assets to the Company per ERISA regulations.

No contributions were made during 2018 or 2017.

The expenditures for the Company’s acquisitions were funded through existing cash balances, borrowings on our line of credit, a term loan, and other operating cash flows.

The Company borrowed $291.5 million throughout 2019, net of repayments, primarily to fund the investing activities notes above.

| Line of credit | | $ | 101,500 | | | $ | — | | | $ | — | | | $ | 101,500 | | | $ | — | |

| Revolver Term Loan | | | 190,000 | | | | 12,500 | | | | 35,938 | | | | 141,562 | | | | — | |

| Acquisition contingent payments | | | 21,434 | | | | 14,005 | | | | 7,429 | | | | — | | | | — | |

| Acquisition holdbacks | | | 27,697 | | | | 16,477 | | | | 11,220 | | | | — | | | | — | |

| Non-cancelable operating leases | | | 219,381 | | | | 72,916 | | | | 98,134 | | | | 31,708 | | | | 16,623 | |

| Non compete agreements | | | 323 | | | | 323 | | | | — | | | | — | | | | — | |

| Other notes payable | | | 19 | | | | 19 | | | | — | | | | — | | | | — | |

| Total (2) | | $ | 561,198 | | | $ | 116,240 | | | $ | 153,565 | | | $ | 274,770 | | | $ | 16,623 | |

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| --- | --- |

Risks above specified limits are managed through either high deductible insurance or a non-affiliated group captive insurance member arrangement.

_Defined benefit pension plans_ — The Company had two defined benefit pension plans; the Rollins, Inc. Defined Benefit Plan and the Waltham Services, LLC Hourly Employee Pension Plan.

At December 31, 2018, the Company utilized a termination liability approach.

| | | (in thousands) | | | | | | | | | | | | to prior year | | | | | | |

_Overview_

Rollins’ net income of $231.7 million in 2018 was an increase of $52.5 million or 29.3% over $179.1 million in 2017.

Net profit margin improved to 12.7% in 2018 from 10.7% in 2017.

_Revenues_

Residential pest control, which represented approximately 42% of the Company’s revenue, increased 9.1% driven by an increase in sold units, lead closure, a better cancellation rate, and pricing, as well as increased TAEXX® homebuilder installations, and acquisitions.

Critter Control Operations, Inc., a wholly-owned subsidiary of the Company, has begun the process of purchasing Critter Control franchises.

_Cost of Services Provided_

Administrative Salaries were up due to increased office wages as well as an increase in restricted share amortization as we granted our long-term employees time-lapse restricted stock which is amortized over one year.

The Company experienced higher fleet costs as gasoline prices per gallon rose and miles driven increased with acquisitions and additional work, which was partially offset by the usage of our routing and scheduling system.

Leased vehicle costs increased as we added to our fleet and leased vehicle prices increased.

Professional services and Maintenance and repairs increased due to outside consultants and maintenance contracts on various IT projects and equipment.

_Depreciation and Amortization_

_Sales, General and Administrative_

The Company increased its 401k match to employees and granted a one-time vested stock grant during the year which increased personnel related costs and administrative salaries, respectively.

Group insurance premiums were up for the year as well as payroll taxes.

_Gain on Sales of assets, Net_

Interest income for each year is due to interest received on cash balances in the Company’s various cash accounts.

_Taxes_

The Company’s 2018 net income was positively affected by the TCJA which was signed in to law on December 22, 2017.

The estimated positive impact of the enactment of the TCJA was a $38.4 million decrease to tax expense, which was a direct increase to net income.

2017 had an $11.6 million increase in tax as follows: $8.0 million from transition tax on foreign earnings, $2.9 million from the revaluation of deferred tax assets, and $0.7 million from reductions in tax benefits on stock compensation.

This resulted in a $0.05 per diluted share decrease in net income for the 2018 fiscal year.

Results of Operations—2017 Versus 2016

The Company’s revenues increased to $1.674 billion in 2017, a 6.4% increase compared to 2016.

Gross margin increased to 51.0% for 2017 from 50.9% in 2016.

Sales, general and administrative expense were 30.1% of revenues in 2017 compared to 31.2% in 2016.

The Company’s depreciation and amortization margin increased 0.2 percentage points to 3.4% in 2017 compared to 3.2% in 2016.

Rollins’ net income of $179.1 million in 2017 was an increase of $11.7 million or 7.0% over $167.4 million in 2016.

Net profit margin improved to 10.7% in 2017 from 10.6% in 2016.

Rollins continued to expand our global brand recognition with acquisitions in the United States and Canada as well as expanding our Orkin international franchise program in numerous countries around the globe.

The Company was in 53 countries at the end of 2017 and continues to seek new international opportunities.

Revenues for the year ended December 31, 2017 were $1.674 billion, an increase of $100.5 million or 6.4% from 2016 revenues of $1.573 billion.

Growth occurred across all service lines and brands with our Canadian and Australian companies being hindered by unfavorable foreign currency exchange rates.

Organic growth and pricing accounted for approximately 4.5% of our increase and our acquisitions contributed the remaining revenue growth.

Commercial pest control represented approximately 40% of the Company’s revenue in 2017 and grew 5.1% due to increases in sales, an emphasis on closing leads, increased bed bug revenue, and acquisitions.

Commercial pest control was negatively impacted by foreign currency exchange as Orkin Canada and Rollins Australia are heavily commercial.

Residential pest control, which represented approximately 42% of the Company’s revenue, increased 6.4% driven by an increase in lead closure, pricing, as well as increased TAEXX® homebuilder installations, and acquisitions.

The Company’s termite business, which represented approximately 18% of the Company’s revenue, grew 9.7% in 2017 due to acquisitions, increases in drywood fumigations and ancillary service sales (such as moisture control and insulation).

The Company implemented its traditional price increase program in June 2017.

[removed: The] [added: Additionally, the] Company [removed: maintains approximately] [added: maintained] $32.9 million in [removed: letters] [added: Letters] of [removed: credit.][added: Credit.]

Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of internal controls over financial reporting, as of December 31, [removed: 2018] [added: 2019] based on criteria established in the 2013 Internal Control—Integrated [removed: framework] [added: Framework] issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Based on this evaluation, management’s assessment is that Rollins, Inc. maintained effective internal control over financial reporting as of December 31, [removed: 2018.][added: 2019.]

The independent registered public accounting firm, Grant Thornton LLP has audited the consolidated financial statements as of and for the year ended December 31, [removed: 2018,] [added: 2019,] and has also issued their report on the effectiveness of the Company’s internal control over financial reporting, included in this report on page 24.

[removed: _Opinion] [added: Opinion] on internal control over financial [removed: reporting_][added: reporting]

We have audited the internal control over financial reporting of Rollins, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in the 2013 _Internal Control—Integrated Framework_ issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”).

In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in the 2013 _Internal Control—Integrated Framework_ issued by COSO.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the consolidated financial statements of the Company as of and for the year ended December 31, [removed: 2018,] [added: 2019,] and our report dated [removed: March 1, 2019] [added: February 28, 2020] expressed an unqualified opinion on those financial statements.

[removed: _Basis] [added: Basis] for [removed: opinion_][added: opinion]

[removed: _Definition] [added: Definition] and limitations of internal control over financial [removed: reporting_][added: reporting]

[removed: _Opinion] [added: Opinion] on the financial [removed: statements_][added: statements]

We have audited the accompanying consolidated statements of financial position of Rollins, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the related consolidated statements of income, comprehensive earnings, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] and the related notes and financial statement schedule included under item 15(a) (collectively referred to as the “financial statements”).

In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] and the results of its operations and its cash flows for each of the three years in the period ended December 31, [removed: 2018,] [added: 2019,] in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”), the Company’s internal control over financial reporting as of December 31, [removed: 2018,] [added: 2019,] based on criteria established in the 2013 _Internal Control—Integrated Framework_ issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”), and our report dated [removed: March 1, 2019] [added: February 28, 2020] expressed an unqualified opinion.

The Company maintained an investment portfolio (included in cash and cash equivalents) subject to short-term interest rate risk exposure.

The Company is subject to interest rate risk exposure through borrowings on its $175.0 million revolving credit facility and $250.0 million term loan facility.

As of December 31, 2019, the revolving commitment had outstanding borrowings of $101.5 million and the term loan had outstanding borrowings of $190.0 million.

The Company is also exposed to market risks arising from changes in foreign exchange rates.

The Company believes that this foreign exchange rate risk will not have a material impact upon the Company’s results of operations going forward.

For a discussion of the Company’s activities to manage risks relative to fluctuations in foreign currency exchange rates, see Note 11 to the accompanying financial statements.

We have elected to exclude our wholly-owned subsidiary, Clark Pest Control of Stockton, Inc, a 2019 acquisition, from Management’s evaluation of Internal Controls over Financial Reporting as of December 31, 2019.

This acquisition constituted 21.8% of total assets as of December 31, 2019 and 4.7% of revenues for the year then ended.

Refer to Notes 1 and 2 in the consolidated financial statements for further discussion of this acquisition and its impact on Rollins, Inc.’s financial statements.

Management has commenced evaluation of the design of the internal control environment and expects to include this entity in evaluation of ICFR effective December 31, 2020.

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February 28, 2020

Our audit of, and opinion on, the Company’s internal control over financial reporting does not include the internal control over financial reporting of Clark Pest Control of Stockton, Inc., a wholly-owned subsidiary, whose financial statements reflect total assets and revenues constituting 21.8 and 4.7 percent, respectively, of the related consolidated financial statement amounts as of and for the year ended December 31, 2019.

As indicated in Management’s Report, Clark Pest Control of Stockton, Inc. was acquired during 2019.

Management’s assertion on the effectiveness of the Company’s internal control over financial reporting excluded internal control over financial reporting of Clark Pest Control of Stockton, Inc.

February 28, 2020

Change in accounting principle

As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019, due to the adoption of Accounting Standards Codification Topic 842, _Leases_.

Basis for opinion

Critical audit matters

The critical audit matters communicated below are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

_Business Combinations – Acquisition of Clark Pest Control of Stockton, Inc._

As described further in Notes 1 and 2 to the Company’s consolidated financial statements, the company completed the acquisition of Clark Pest Control of Stockton, Inc. (“Clark”) on April 30, 2019.

The Company allocated the purchase price to the identifiable intangible assets acquired based on their respective fair values.

We identified the Company’s determination of the fair value of the identified intangible assets acquired in the Clark acquisition as a critical audit matter.

The principal considerations for our determination that the fair value of identified intangible assets in the acquisition of Clark is a critical audit matter are because of the significant estimates management makes to determine their fair value.

This requires a high degree of auditor judgment and an increased extent of effort, including the need to involve our valuation specialists, when performing audit procedures to evaluate the reasonableness of management’s assumptions related to the discount rates, customer attrition, and revenue growth projections.

Our audit procedures related to the determination of the fair value of acquired intangible assets in the Clark acquisition included the following, among others.

We tested the effectiveness of controls relating to the accounting for the Clark acquisition, which included the models used to determine the fair value of major classes of intangible assets along with any contingent consideration liabilities.

We inspected the purchase agreement for this acquisition.

We utilized valuation specialists to assess the reasonableness of the significant assumptions utilized by management within the models.

We recalculated the calculation and support for the opening entry and subsequent recording of the entry for the Clark acquisition.

_Accrued Insurance_

As described further in Note 1 to the financial statements, Rollins, Inc. (the “Company”) retains, up to certain policy-specified limits, certain risks related to general liability, workers’ compensation, and vehicle and equipment liability costs.

The estimated costs of existing and future claims under the retained loss program are accrued based upon historical trends as incidents occur, whether reported or unreported (although actual settlement of the claims may not be made until future periods) and may be subsequently revised based on developments relating to such claims.

We identified accrued insurance reserves and related expenses (“accrued insurance”) as a critical audit matter.

The principal considerations for our determination that accrued insurance is a critical audit matter are that the accrual for accrued insurance has higher risk of estimation uncertainty due to the loss development factors and inherent assumptions in actuarial methods used in determining the required reserves.

The estimation uncertainty and complexity of the actuarial methods utilized resulted in auditor judgment when assessing if management’s accrual for accrued insurance was determined utilizing a reasonable basis and was materially correct.

On October 31, 2012, the Company entered into a Revolving Credit Agreement with SunTrust Bank and Bank of America, N.A. for an unsecured line of credit of up to $175.0 million, which includes a $75.0 million letter of credit subfacility, and a $25.0 million swingline subfacility.

The Credit Agreement was amended on October 30, 2014 to extend the maturity date to October 31, 2018 and add three optional one year extensions.

On October 27, 2015 the Company exercised a one year extension option to extend the maturity date to October 31, 2019.

As of December 31, 2018, no borrowings were outstanding under the line of credit or under the swingline subfacility.

March 1, 2019

_Our business depends on our strong brands, and failing to maintain and enhance our brands [added: and develop a positive client reputation] could hurt our ability to retain and expand our base of customers._

Our strong brands, Rollins, Orkin, HomeTeam Pest Defense, [added: Clark Pest Control,] Western Pest Services, Northwest Pest Control, The Industrial Fumigant Company, Crane Pest Control, Waltham Services, Trutech, PermaTreat, Critter Control, [removed: Allpest,] Safeguard Pest Control, Aardwolf Pestkare, OPC Services, and other strong brands have significantly contributed to the success of our business.

Maintaining and enhancing our brands will depend largely on our ability to remain a service leader and continue to provide [removed: high-quality,] [added: high-quality] pest control [removed: products and] services that are truly [removed: useful] [added: beneficial] and play a meaningful role in people’s lives.

[removed: As] [added: If] consumers restrict their discretionary expenditures, we may suffer a decline in revenues from our residential service lines.

_Expanding into international markets presents unique [removed: challenges] [added: challenges,] and our expansion efforts with respect to international operations may not be successful._

Additionally, foreign currency exchange rates and fluctuations [removed: thereof] may have an adverse effect on the financial results of our international operations.

We believe that the principal competitive factors in the market areas that we serve are service quality, [removed: and] product availability, terms of guarantees, reputation for safety, technical proficiency and price.

In the normal course of business, [added: we and] some of [removed: the Company’s] [added: our] subsidiaries are defendants in a number of lawsuits or arbitrations, which allege that plaintiffs have been damaged.

_Our operations could be affected if there is unauthorized access of personal, financial, or other data or information about our customers, employees, third parties, or of [added: the] Company’s proprietary of confidential information.

Our information technology systems, as well as the information technology systems of our [removed: third party] [added: third-party] business partners and service providers, can contain personal, financial, health, or other information that is entrusted to us by our customers and employees.

Our information technology systems also contain [added: the] Company’s and its wholly-owned subsidiaries’ proprietary and other confidential information related to our business, such as business plans and product development initiatives.

Also, a breach of data security [added: or failure to comply with rigorous consumer privacy requirements] could expose us to customer [removed: litigation] [added: litigation, regulatory actions] and costs related to the reporting and handling of such a [added: violation or] breach.

Our franchisees, subcontractors, and vendors are contractually obligated to operate their businesses in accordance with the standards set forth in our agreements with [removed: them.][added: them and applicable laws and regulations.]

Our reputation, business, financial position, results of operations and cash flows could be materially adversely [removed: impacted] [added: impacted,] and the price of our common stock could decline.

Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names and other intellectual property rights we own or license, particularly our registered brand names and service marks, Orkin®, Orkin Canada®, [removed: AcuridSM, Western Pest Services®, the Industrial Fumigant Company®,] HomeTeam Pest Defense®, TAEXX®, [removed: Critter] [added: Clark Pest] Control®, [added: Western Pest Services®,] Northwest [added: Exterminating®, Critter Control®, IFC®, Trutech®, Waltham] Pest [added: Services®, OPC Services®, Perma Treat Pest and Termite] Control®, [removed: Allpest®, Murray®, Safeguard®] [added: Crane Pest Control®, Safeguard the Pest Control People®, Aardwolf Pest Control®] and others.

Rollins, Inc.’s executive officers, directors and their affiliates hold directly, or through indirect beneficial ownership, in the aggregate, approximately [removed: 56] [added: 57] percent of the Company’s outstanding shares of common stock.

[added: | |] Item [removed: 1.B.][added: 1.B. | Unresolved Staff Comments |]

We continue to develop strategies and innovative tools to gain a deeper understanding of customer acquisition, retention and client replacement in order to more effectively expand and retain our customer base.

We have also implemented policies and procedures to comply with consumer privacy laws in the areas in which we operate.

| --- | --- | --- |

None.

| 9 |

| --- |

Unresolved Staff Comments

None

In addition, the Company defends employment related cases and claims from time to [removed: time.][added: time, which may include claims on a representative or class action basis alleging wage and hour law violations.]

Management does not believe that any pending claim, proceeding or litigation, either alone or in the [removed: aggregate] [added: aggregate,] will have a material adverse effect on the Company’s financial position, results of operations or liquidity; however, it is possible that an unfavorable outcome of some or all of the matters, however unlikely, could result in a charge that might be material to the results of an individual quarter or year.

| --- | --- | --- |

Item 4.

Mine Safety Disclosures.

Not applicable.

For the fiscal year ended December 31, [removed: 2018][added: 2019]

| [removed: Title] [added: Title] of each [removed: class] [added: class] | [added: Trading Symbol(s)] | [removed: Exchange] [added: Name of each exchange] on which [removed: registered] [added: registered] |

| [removed: Common] [added: Common] Stock, $1 Par [removed: Value] [added: Value] | [added: ROL] | [removed: The] [added: The] New York Stock [removed: Exchange] [added: Exchange] |

Indicate by check mark whether the registrant has submitted electronically [removed: and posted on its corporate Web site, if any,] every Interactive Data File required to be submitted [removed: and posted] 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 [removed: and post] such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated [removed: filer or] [added: filer,] a smaller reporting [added: company, or an emerging growth] company.

See the definitions of “large accelerated filer,” “accelerated [removed: filer” and] [added: filer,”] “smaller reporting [removed: company”] [added: company,” and emerging growth company] in Rule 12b-2 of the Exchange Act.

| Non-accelerated filer | o | | Smaller reporting company | o | [removed: (Do not check if a smaller reporting company)] |

| [added: | | |] Emerging growth company | o | | [removed: | | |]

The aggregate market value of Rollins, Inc. Common Stock held by non-affiliates on June 30, [removed: 2018] [added: 2019] was [removed: $5,080,852] [added: $5,063,827,695] based on the reported last sale price of common stock on June 30, [removed: 2018,] [added: 2019,] which is the last business day of the registrant’s most recently completed second fiscal quarter.

Rollins, Inc. had [removed: 327,532,811] [added: 327,779,714] shares of Common Stock outstanding as of January 31, [removed: 2019.][added: 2020.]

Portions of the Proxy Statement for the [removed: 2019] [added: 2020] Annual Meeting of Stockholders of Rollins, Inc. are incorporated by reference into Part III, Items 10-14.

| For the Year Ended December 31, [removed: 2018] [added: 2019] | | | | |

| [Item [removed: 1.](#i19083a001_v1)] [added: 1.](#i20108a001)] | | [removed: [Business.](#i19083a001_v1)] [added: [Business.](#i20108a001)] | | 3 |

| [Item [removed: 1.A.](#i19083a002_v1)] [added: 1.A.](#i20108a002)] | | [Risk [removed: Factors.](#i19083a002_v1)] [added: Factors.](#i20108a002)] | | 6 |

| [Item [removed: 1.B.](#i19083a003_v1)] [added: 1.B.](#i20108a003)] | | [Unresolved Staff [removed: Comments.](#i19083a003_v1)] [added: Comments.](#i20108a003)] | | 9 |

| [Item [removed: 2.](#i19083a004_v1)] [added: 2.](#i20108a004)] | | [removed: [Properties.](#i19083a004_v1)] [added: [Properties.](#i20108a004)] | | [removed: 9] [added: 10] |

| [Item [removed: 3.](#i19083a005_v1)] [added: 3.](#i20108a005)] | | [Legal [removed: Proceedings.](#i19083a005_v1)] [added: Proceedings.](#i20108a005)] | | 10 |

| [Item [removed: 4.](#i19083a006_v1)] [added: 4.](#i20108a006)] | | [Mine Safety [removed: Disclosures.](#i19083a006_v1)] [added: Disclosures.](#i20108a006)] | | 10 |

| [Item [removed: 5.](#i19083a008_v1)] [added: 5.](#i20108a008)] | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities.](#i19083a008_v1)] [added: Securities.](#i20108a008)] | | [removed: 11] [added: 12] |

| [Item [removed: 6.](#i19083a009_v1)] [added: 6.](#i20108a009)] | | [Selected Financial [removed: Data.](#i19083a009_v1)] [added: Data.](#i20108a009)] | | [removed: 13] [added: 14] |

| [Item [removed: 7.](#i19083a010_v1)] [added: 7.](#i20108a010)] | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations.](#i19083a010_v1)] [added: Operations.](#i20108a010)] | | 14 |

| [Item [removed: 7.A.](#i19083a011_v1)] [added: 7.A.](#i20108a011)] | | [Quantitative and Qualitative Disclosures about Market [removed: Risk.](#i19083a011_v1)] [added: Risk.](#i20108a011)] | | 22 |

| [Item [removed: 8.](#i19083a012_v1)] [added: 8.](#i20108a012)] | | [Financial Statements and Supplementary [removed: Data.](#i19083a012_v1)] [added: Data.](#i20108a012)] | | [removed: 26] [added: 27] |

| [Item [removed: 9.](#i19083a013_v1)] [added: 9.](#i20108a013)] | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosures.](#i19083a013_v1)] [added: Disclosures.](#i20108a013)] | | 63 |

| [Item [removed: 9.A.](#i19083a014_v1)] [added: 9.A.](#i20108a014)] | | [Controls and [removed: Procedures.](#i19083a014_v1)] [added: Procedures.](#i20108a014)] | | 63 |

| [Item [removed: 9.B.](#i19083a015_v1)] [added: 9.B.](#i20108a015)] | | [Other [removed: Information.](#i19083a015_v1)] [added: Information.](#i20108a015)] | | 63 |

| [Item [removed: 10.](#i19083a016_v1)] [added: 10.](#i20108a016)] | | [Directors, Executive Officers and Corporate [removed: Governance.](#i19083a016_v1)] [added: Governance.](#i20108a016)] | | [removed: 63] [added: 64] |

| [Item [removed: 11.](#i19083a017_v1)] [added: 11.](#i20108a017)] | | [Executive [removed: Compensation.](#i19083a017_v1)] [added: Compensation.](#i20108a017)] | | 64 |

| [Item [removed: 12.](#i19083a018_v1)] [added: 12.](#i20108a018)] | | [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder [removed: Matters.](#i19083a018_v1)] [added: Matters.](#i20108a018)] | | 64 |

| [Item [removed: 13.](#i19083a019_v1)] [added: 13.](#i20108a019)] | | [Certain Relationships and Related Party Transactions, and Director [removed: Independence.](#i19083a019_v1)] [added: Independence.](#i20108a019)] | | [removed: 64] [added: 65] |

| [Item [removed: 14.](#i19083a020_v1)] [added: 14.](#i20108a020)] | | [Principal Accounting Fees and [removed: Services.](#i19083a020_v1)] [added: Services.](#i20108a020)] | | [removed: 64] [added: 65] |

| [Item [removed: 15.](#i19083a021_v1)] [added: 15.](#i20108a021)] | | [Exhibits, Financial Statement [removed: Schedules.](#i19083a021_v1)] [added: Schedules.](#i20108a021)] | | [removed: 65] [added: 66] |

| | | [Schedule [removed: II.](#i19083a023_v1)] [added: II.](#i20108a023)] | | [removed: 70] [added: 71] |

| | | [Exhibit [removed: Index.](#i19083a024_v1)] [added: Index.](#i20108a024)] | | [removed: 71] [added: 72] |

The Company is an international service company with headquarters located in Atlanta, Georgia, providing pest and termite control services through its wholly-owned subsidiaries to both residential and commercial customers in [removed: North America,] [added: the United States, Canada,] Australia, [added: Europe,] and [removed: Europe] [added: Asia] with international franchises in [added: Mexico, Canada,] Central [added: and South] America, the Caribbean, [added: Europe,] the Middle East, Asia, [removed: the Mediterranean, Europe,] Africa, [removed: Canada, Australia,] and [removed: Mexico.][added: Australia.]

[removed: Services] [added: Our pest and termite control services] are performed through a contract that specifies the pricing arrangement with the customer.

For a listing of the Company’s Subsidiaries, see Note 1 - Summary of Significant Accounting Policies [removed: of] [added: in the] Notes to the Financial Statements (Part II, Item 8, of this Form 10-K).

Revenue, operating profit and identifiable assets for this segment, which includes the United States, Canada, [removed: Australia,] [added: Mexico,] Central [added: and South] America, the Caribbean, [added: Europe,] the Middle East, Asia, [removed: the Mediterranean, Europe,] Africa, and [removed: Mexico] [added: Australia] are included in Item 8 of this document, “Financial Statements and Supplementary Data” on pages [removed: 26] [added: 27] and [removed: 27.][added: 28.]

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the Company did not repurchase shares on the open market.

| December 31, | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| [Item 4.A.](#i20108a007) | | [Information about our Executive Officers](#i20108a007) | | 11 |

| | | [Signatures.](#i20108a022) | | 69 |

| December 31, | | 2019 | | | | 2018 | | | | 2017 | | |

10-K 1 i19083_rol-10k.htm

| | | Name of each |

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

| [Item 4.A.](#i19083a007_v1) | | [Executive Officers of the Registrant.](#i19083a007_v1) | | 10 |

| | | [Signatures.](#i19083a022_v1) | | 68 |

The Company owns or leases over [removed: 500] [added: 550] branch offices and operating facilities used in its business as well as the Rollins Training Center located in Atlanta, Georgia, the Rollins Customer Service Center located in Covington, Georgia, and the Pacific Division Administration and Training Center in Riverside, California.

| --- | --- | --- |

| 9 |

| --- |

| R. Randall Rollins (1) | | [removed: 87] [added: 88] | | Chairman of the Board of Directors | | 10/22/1991 |

| Gary W. Rollins (1) (2) | | [removed: 74] [added: 75] | | Vice Chairman and Chief Executive Officer | | 7/24/2001 |

| John F. Wilson (3) | | [removed: 61] [added: 62] | | President and Chief Operating Officer | | 1/23/2013 |

| Paul E. Northen (4) | | [removed: 54] [added: 55] | | Senior Vice President, Chief Financial Officer and Treasurer | | 1/26/2016 |

| Elizabeth B. Chandler (5) | | [removed: 55] [added: 56] | | Vice President, General Counsel and Corporate Secretary | | 1/1/2018 |

| | (2) | Gary W. Rollins was elevated to Vice Chairman [removed: Rollins] [added: of Rollins, Inc.] in January 2013. He was elected to the office of Chief Executive Officer in July 2001. In February 2004, he was named Chairman of Orkin, LLC. |

| | (4) | Paul E. Northen joined Rollins in 2015 as [removed: CFO] [added: Chief Financial Officer] and [removed: Corporate] Treasurer. He was promoted to Vice President of Rollins, Inc. in January [removed: 2016.] [added: 2016, and Senior Vice President of Rollins, Inc. in April 2018.] He began his career with UPS in 1985 and brings a wealth of [removed: Tax, Risk Management] [added: tax, risk management] and [removed: Audit] [added: audit] experience as well as strong international exposure to Rollins. Prior to joining Rollins, Mr. Northen was Vice President of International Finance and Accounting-Global Business Services for UPS. He previously held the positions of [removed: CFO] [added: Chief Financial Officer] of UPS’ Asia Pacific Region based in Hong Kong, and as Vice President of Finance in UPS’ Pacific and Western Regions. |

| | (5) | Elizabeth (Beth) Brannen Chandler joined Rollins in 2013 as Vice President and General Counsel. In [removed: 2016,] [added: 2017,] Beth assumed responsibility for the Risk Management and Internal Audit groups. She was appointed to Corporate Secretary in January 2018. Before joining Rollins, Mrs. Chandler was [removed: vice president, general counsel] [added: Vice President, General Counsel] and [removed: corporate secretary] [added: Corporate Secretary] for Asbury Automotive. Prior to working with Asbury, Mrs. Chandler served as city attorney for the City of Atlanta; and she served as [removed: vice president, assistant general counsel] [added: Vice President, Assistant General Counsel] and [removed: corporate secretary] [added: Corporate Secretary] for Mirant Corp. |

Not applicable.

| | Item 4.A. | Information about our Executive Officers. |

| --- | --- | --- |

| --- | --- | --- |

| 11 |

| --- |

As of January 31, [removed: 2019,] [added: 2020,] there were [removed: 3,502] [added: 7,852] holders of record of the Company’s common stock.

During the years ended December 31, [removed: 2018] [added: 2019] and [removed: 2017,] [added: 2018,] the Company did not repurchase shares on the open market.

| [added: Period] | | Total number [added: of shares purchased (1)] | | | | Weighted [added: average price paid per share] | | | | [added: Total number of shares] purchased as part of [added: publicly announced repurchase plans (2)] | | | | [added: Maximum number of] shares that may yet be [added: purchased under the repurchase plans] | | |

| October 1 to 31, [removed: 2018] [added: 2019] | | | — | | | $ | — | | | | — | | | | 7,610,416 | |

| November 1 to 30, [removed: 2018] [added: 2019] | | | [removed: —] [added: 848] | | | | [removed: —] [added: 38.79] | | | | — | | | | 7,610,416 | |

| December 1 to 31, [removed: 2018] [added: 2019] | | | [removed: —] [added: 1,210] | | | | [removed: —] [added: 33.18] | | | | — | | | | 7,610,416 | |

| Total | | | [removed: —] [added: 2,058] | | | $ | [removed: —] [added: 35.49] | | | | — | | | | 7,610,416 | |

| [removed: |] (1) | Includes repurchases from employees for the payment of taxes on vesting of restricted shares in the following amounts: October [removed: 2018:] [added: 2019:] 0; November [removed: 2018: 0;] [added: 2019: 848;] and December [removed: 2018: 0.] [added: 2019: 1,210.] |

| [removed: |] (2) | The Company has a share repurchase plan adopted in 2012, to repurchase up to 11.25 million shares of the Company’s common stock. [removed: The plan has no expiration date.] |

The following graph sets forth a [removed: five year] [added: five-year] comparison of the cumulative total stockholder return based on the performance of the stock of the Company as compared with both a broad equity market index and an industry index.

[removed: ][added: ]

| --- | --- |

| --- | --- |

| | | | | | | | |

| --- | --- | --- | --- | --- | --- | --- | --- |

| | | 12/14 | 12/15 | 12/16 | 12/17 | 12/18 | 12/19 |

| | | | | | | | |

| Rollins Inc. | | 100.00 | 119.30 | 158.37 | 221.12 | 260.67 | 242.52 |

| S&P 500 | | 100.00 | 101.38 | 113.51 | 138.29 | 132.23 | 173.86 |

| S&P 500 Commercial Services & Supplies | | 100.00 | 96.70 | 121.62 | 146.98 | 147.70 | 207.01 |

| 13 |

| | | | | | | | | | | Total number of shares | | | | Maximum number of | | |

| | | of shares | | | | average price | | | | publicly announced | | | | purchased under the | | |

| Period | | purchased (1) | | | | paid per share | | | | repurchase plans (2) | | | | repurchase plans | | |

| --- | --- | --- |

| 11 |

Rollins, Inc., S&P 500 Index and S&P 500 Commercial Services & Supplies composite index

| Cumulative Total Shareholder Return $ at Fiscal Year End | | 2013 | | | | 2014 | | | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| Rollins, Inc. | | | 100.00 | | | | 111.17 | | | | 132.63 | | | | 176.07 | | | | 245.82 | | | | 289.79 | |

| S&P 500 | | | 100.00 | | | | 113.69 | | | | 115.26 | | | | 129.05 | | | | 157.22 | | | | 150.33 | |

| S&P 500 Commercial Services & Supplies | | | 100.00 | | | | 114.86 | | | | 111.07 | | | | 139.68 | | | | 168.82 | | | | 169.65 | |

The following summary financial data of Rollins highlights selected financial data and should be read in conjunction with the [added: audited] financial statements [added: and related notes] included elsewhere in this document.

All share and per share data presented in the following table have been adjusted for the three-for-two stock [removed: splits] [added: split] effective [removed: March 10, 2015 and] December 10, 2018.

| Years ended December 31, | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | | | [removed: 2014] [added: 2015] | | |

| Revenues | | [removed: $] [added: $] | [removed: 1,821,565] [added: 2,015,477] | | | $ | [removed: 1,673,957] [added: 1,821,565] | | | $ | [removed: 1,573,477] [added: 1,673,957] | | | $ | [removed: 1,485,305] [added: 1,573,477] | | | $ | [removed: 1,411,566] [added: 1,485,305] | |

| Income before taxes | | | [removed: 310,733] [added: 261,160] | | | | [removed: 294,502] [added: 310,733] | | | | [removed: 260,636] [added: 294,502] | | | | [removed: 243,178] [added: 260,636] | | | | [removed: 219,484] [added: 243,178] | |

| Net income | | [removed: $] [added: $] | [removed: 231,663] [added: 203,347] | | | $ | [removed: 179,124] [added: 231,663] | | | $ | [removed: 167,369] [added: 179,124] | | | $ | [removed: 152,149] [added: 167,369] | | | $ | [removed: 137,664] [added: 152,149] | |

| Earnings per share [removed: –] [added: -] Basic | | [removed: $] [added: $] | [removed: 0.71] [added: 0.62] | | | $ | [removed: 0.55] [added: 0.71] | | | $ | [removed: 0.51] [added: 0.55] | | | $ | [removed: 0.47] [added: 0.51] | | | $ | [removed: 0.42] [added: 0.47] | |

| Earnings per share [removed: –] [added: -] Diluted | | [removed: $] [added: $] | [removed: 0.71] [added: 0.62] | | | $ | [removed: 0.55] [added: 0.71] | | | $ | [removed: 0.51] [added: 0.55] | | | $ | [removed: 0.47] [added: 0.51] | | | $ | [removed: 0.42] [added: 0.47] | |

| Dividends per share | | [removed: $] [added: $] | [removed: 0.47] [added: 0.47] | | | $ | [removed: 0.37] [added: 0.47] | | | $ | [removed: 0.33] [added: 0.37] | | | $ | [removed: 0.28] [added: 0.33] | | | $ | [removed: 0.23] [added: 0.28] | |

| Net cash provided by operating activities | | [removed: $] [added: $] | [removed: 286,272] [added: 309,188] | | | $ | [removed: 235,370] [added: 286,272] | | | $ | [removed: 226,525] [added: 235,370] | | | $ | [removed: 196,356] [added: 226,525] | | | $ | [removed: 194,146] [added: 196,356] | |

| Net cash used in investing activities | | [added: $] | [removed: (101,375] [added: (455,107] | [removed: )] [added: )] | | [added: $] | [removed: (154,175] [added: (101,375] | ) | | [added: $] | [removed: (76,842] [added: (154,175] | ) | | [added: $] | [removed: (69,942] [added: (76,842] | ) | | [added: $] | [removed: (89,471] [added: (69,942] | ) |

| Net cash [removed: used in] [added: provided by/(used in)] financing activities | | [added: $] | [removed: (162,283] [added: 127,655] | [removed: )] | | [added: $] | [removed: (130,263] [added: (162,283] | ) | | [added: $] | [removed: (136,371] [added: (130,263] | ) | | [added: $] | [removed: (97,216] [added: (136,371] | ) | | [added: $] | [removed: (106,519] [added: (97,216] | ) |

| Depreciation | | [added: $] | [removed: 30,364] [added: 36,646] | | | [added: $] | [removed: 27,381] [added: 30,364] | | | [added: $] | [removed: 24,725] [added: 27,381] | | | [added: $] | [removed: 19,354] [added: 24,725] | | | [added: $] | [removed: 16,627] [added: 19,354] | |

| Amortization of intangible assets | | [added: $] | [removed: 36,428] [added: 44,465] | | | [added: $] | [removed: 29,199] [added: 36,428] | | | [added: $] | [removed: 26,177] [added: 29,199] | | | [added: $] | [removed: 25,168] [added: 26,177] | | | [added: $] | [removed: 26,882] [added: 25,168] | |

| Capital expenditures | | [removed: $] [added: $] | [removed: (27,179] [added: (27,146] | [removed: )] [added: )] | | $ | [removed: (24,680] [added: (27,179] | ) | | $ | [removed: (33,081] [added: (24,680] | ) | | $ | [removed: (39,495] [added: (33,081] | ) | | $ | [removed: (28,739] [added: (39,495] | ) |

| Current assets | | [removed: $] [added: $] | [removed: 286,021] [added: 309,787] | | | $ | [removed: 262,795] [added: 286,021] | | | $ | [removed: 290,171] [added: 262,795] | | | $ | [removed: 269,434] [added: 290,171] | | | $ | [removed: 241,194] [added: 269,434] | |

| Total assets | | [added: $] | [removed: 1,094,124] [added: 1,744,376] | | | [added: $] | [removed: 1,033,663] [added: 1,094,124] | | | [added: $] | [removed: 916,538] [added: 1,033,663] | | | [added: $] | [removed: 848,651] [added: 916,538] | | | [added: $] | [removed: 808,162] [added: 848,651] | |

| Stockholders’ equity | | [removed: $] [added: $] | [removed: 711,908] [added: 815,750] | | | $ | [removed: 653,924] [added: 711,908] | | | $ | [removed: 568,545] [added: 653,924] | | | $ | [removed: 524,029] [added: 568,545] | | | $ | [removed: 462,676] [added: 524,029] | |

| Number of shares outstanding at year-end | | | [removed: 327,308] [added: 327,431] | | | | [removed: 326,988] [added: 327,308] | | | | [removed: 326,688] [added: 326,988] | | | | [removed: 327,830] [added: 326,688] | | | | [removed: 327,425] [added: 327,830] | |

| --- | --- | --- |

_Rollins, Inc. and Subsidiaries_

| 13 |

| --- |

[removed: CONSOLIDATED] [added: | CONSOLIDATED] STATEMENTS OF FINANCIAL [removed: POSITION][added: POSITION | | | | | | | | |]

[removed: _Rollins,] [added: | Rollins,] Inc. and [removed: Subsidiaries_][added: Subsidiaries | | | | | | | | |]

| [removed: _(in] [added: (in] thousands except share [removed: information)_] [added: information)] | | | | | | | | |

| December 31, | | [removed: 2018] [added: 2019] | | | | [added: 2018 | | | |] 2017 | | |

| Cash and cash equivalents [added: at end of year] | | [removed: $] [added: $] | [removed: 115,485] [added: 94,276] | | | $ | [added: 115,485 | | | $ |] 107,050 | |

| Trade receivables, net of allowance for doubtful accounts of [removed: $13,285] [added: $16,699] and [removed: $11,814,] [added: $13,285,] respectively | | | [removed: 104,016] [added: 122,766] | | | | [removed: 97,802] [added: 104,016] | |

| [removed: Financing] [added: Financed] receivables, short-term, net of allowance for doubtful accounts of [removed: $1,845] [added: $1,675] and [removed: $1,535,] [added: $1,845,] respectively | | | [removed: 18,454] [added: 22,267] | | | | [removed: 17,263] [added: 18,454] | |

| Materials and supplies | | | [removed: 15,788] [added: 19,476] | | | | [removed: 14,983] [added: 15,788] | |

| Other current assets | | | [removed: 32,278] [added: 51,002] | | | | [removed: 25,697] [added: 32,278] | |

| Total [removed: Current Assets] [added: current assets] | | | [removed: 286,021] [added: 309,787] | | | | [removed: 262,795] [added: 286,021] | |

| Equipment and property, net | | | [removed: 136,885] [added: 195,533] | | | | [removed: 134,088] [added: 136,885] | |

| Goodwill | | | [removed: 368,481] [added: 572,847] | | | | [removed: 346,514] [added: 368,481] | |

| Customer contracts, net | | | [removed: 178,075] [added: 273,720] | | | | [removed: 152,869] [added: 178,075] | |

| Trademarks and tradenames, net | | | [removed: 54,140] [added: 102,539] | | | | [removed: 49,998] [added: 54,140] | |

| Other intangible assets, net | | | [removed: 11,043] [added: 10,525] | | | | [removed: 11,550] [added: 11,043] | |

| [removed: Financing] [added: Financed] receivables, long-term, net of allowance for doubtful accounts of [removed: $1,536] [added: $1,284] and [removed: $1,357] [added: $1,536] respectively | | | [removed: 28,227] [added: 30,792] | | | | [removed: 20,414] [added: 28,227] | |

| Prepaid pension | | | [removed: 5,274] [added: —] | | | | [removed: 17,595] [added: 5,274] | |

| Deferred income taxes | | | [removed: 6,915] [added: 2,180] | | | | [removed: 18,420] [added: 6,915] | |

| Other assets | | | [removed: 19,063] [added: 24,161] | | | | [removed: 19,420] [added: 19,063] | |

| Total [removed: Assets] [added: assets] | | [removed: $] [added: $] | [removed: 1,094,124] [added: 1,744,376] | | | $ | [removed: 1,033,663] [added: 1,094,124] | |

| Accounts payable | | [removed: $] [added: $] | [removed: 27,168] [added: 35,234] | | | $ | [removed: 26,161] [added: 27,168] | |

| Accrued insurance | | | [removed: 27,709] [added: 30,441] | | | | [removed: 28,018] [added: 27,709] | |

| Accrued compensation and related liabilities | | | [removed: 77,741] [added: 81,943] | | | | [removed: 73,016] [added: 77,741] | |

| Other current liabilities | | | [removed: 50,406] [added: 60,975] | | | | [removed: 58,345] [added: 50,406] | |

| Total current liabilities | | | [removed: 299,029] [added: 410,035] | | | | [removed: 294,569] [added: 299,029] | |

| Accrued insurance, less current portion | | | [removed: 33,867] [added: 34,920] | | | | [removed: 34,245] [added: 33,867] | |

| Long-term accrued liabilities | | | [removed: 49,320] [added: 59,093] | | | | [removed: 50,925] [added: 49,320] | |

| Total [removed: Liabilities] [added: liabilities] | | | [removed: 382,216] [added: 928,626] | | | | [removed: 379,739] [added: 382,216] | |

| Preferred stock, without par value; 500,000 [added: shares] authorized, zero shares issued | | | [removed: —] [added: —] | | | | — | |

| Common stock, par value $1 per share; [removed: 375,000,000] [added: 550,000,000] shares authorized, [removed: 327,308,079] [added: 327,430,846] and [removed: 326,988,265] [added: 327,308,079] shares [removed: issued,] [added: issued and outstanding,] respectively | | | [removed: 327,308] [added: 327,431] | | | | [removed: 326,988] [added: 327,308] | |

| [removed: Paid-in-capital] [added: Paid in capital] | | | [removed: 85,386] [added: 89,413] | | | | [removed: 81,405] [added: 85,386] | |

| Accumulated other comprehensive loss | | | [removed: (71,078] [added: (21,109] | [removed: )] [added: )] | | | [removed: (45,956] [added: (71,078] | ) |

| Retained earnings | | | [removed: 370,292] [added: 420,015] | | | | [removed: 291,487] [added: 370,292] | |

| Total [removed: Stockholders’ Equity] [added: stockholders' equity] | | | [removed: 711,908] [added: 815,750] | | | | [removed: 653,924] [added: 711,908] | |

| Total [removed: Liabilities] [added: liabilities] and [removed: Stockholders’ Equity] [added: stockholders' equity] | | [removed: $] [added: $] | [removed: 1,094,124] [added: 1,744,376] | | | $ | [removed: 1,033,663] [added: 1,094,124] | |

[removed: CONSOLIDATED] [added: | CONSOLIDATED] STATEMENTS OF [removed: INCOME][added: INCOME | | | | | | | | | | | | |]

| [removed: _(in] [added: (in] thousands except [removed: per] share [removed: data)_] [added: information)] | | | | | | | | | | | | |

| Years ended December 31, | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | |

| Customer services | | $ | [removed: 1,821,565] [added: 2,015,477] | | | $ | [removed: 1,673,957] [added: 1,821,565] | | | $ | [removed: 1,573,477] [added: 1,673,957] | |

| Cost of services provided | | | [removed: 894,437] [added: 993,593] | | | | [removed: 819,943] [added: 894,437] | | | | [removed: 772,348] [added: 819,943] | |

| Operating lease, right-of-use assets, net | | | 200,727 | | | | — | |

| Benefit plan assets | | | 21,565 | | | | — | |

| Unearned revenues | | | 122,825 | | | | 116,005 | |

| Operating lease liabilities-current | | | 66,117 | | | | — | |

| Current portion of long-term debt | | | 12,500 | | | | — | |

| Operating lease liabilities, less current portion | | | 135,651 | | | | — | |

| Long-term debt | | | 279,000 | | | | — | |

| Deferred income tax liability | | | 9,927 | | | | — | |

| Rollins, Inc. and Subsidiaries | | | | | | | | | | | | |

| Pension settlement loss | | | 49,898 | | | | — | | | | — | |

| TOTAL COSTS AND EXPENSES | | | 1,754,317 | | | | 1,510,832 | | | | 1,379,455 | |

| TOTAL PROVISION FOR INCOME TAXES | | | 57,813 | | | | 79,070 | | | | 115,378 | |

| Rollins, Inc. and Subsidiaries | | | | | | | | | | | | |

| Interest rate swap, net of tax | | | (277 | ) | | | — | | | | — | |

| Rollins, Inc. and Subsidiaries | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Impact of adoption of ASC 842 | | | | | | | | | | | | | | | | | | | | | | | | | | | 212 | | | | 212 | |

| Net Income | | | | | | | | | | | | | | | — | | | | | | | | | | | | 203,347 | | | | 203,347 | |

| Other comprehensive income | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Pension settlement loss, net of tax | | | | | | | | | | | | | | | | | | | | | | | 46,022 | | | | | | | | 46,022 | |

| Interest rate swaps, net of tax | | | | | | | | | | | | | | | | | | | | | | | (277 | ) | | | | | | | (277 | ) |

| Cash dividends | | | | | | | | | | | | | | | | | | | | | | | | | | | (153,836 | ) | | | (153,836 | ) |

| Stock compensation | | | 387 | | | | 387 | | | | | | | | | | | | 13,772 | | | | | | | | | | | | 14,159 | |

| Employee stock buybacks | | | (264 | ) | | | (264 | ) | | | | | | | | | | | (9,745 | ) | | | | | | | | | | | (10,009 | ) |

| Balance at December 31, 2019 | | | 327,431 | | | $ | 327,431 | | | | — | | | $ | — | | | $ | 89,413 | | | $ | (21,109 | ) | | $ | 420,015 | | | $ | 815,750 | |

| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |

| Rollins, Inc. and Subsidiaries | | | | | | | | | | | | |

| Net Income | | $ | 203,347 | | | $ | 231,663 | | | $ | 179,124 | |

| Pension settlement loss | | | 49,898 | | | | — | | | | — | |

| Borrowings under term loan | | | 250,000 | | | | — | | | | — | |

| Borrowings under revolving commitment | | | 190,000 | | | | — | | | | — | |

| Repayments of long term debt | | | (148,500 | ) | | | — | | | | — | |

| Non-cash additions to operating lease right-of-use assets | | $ | 75,782 | | | $ | — | | | $ | — | |

| | | | | | | | | | | | | |

On April 30, 2019, the Company acquired Clark Pest Control of Stockton, Inc. (“Clark Pest Control”) located in Lodi, CA.

At the time of the acquisition, Clark Pest Control was a leading pest management company in California and the nation’s 8th largest pest management company according to PCT 100 rankings.

Clark Pest Control services its customers from 26 service locations in 2 states.

| Unearned revenue | | | 116,005 | | | | 109,029 | |

| 26 |

| --- |

| --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- | --- |

| | | | 1,510,832 | | | | 1,379,455 | | | | 1,312,841 | |

| | | | 79,070 | | | | 115,378 | | | | 93,267 | |

| | | | | | | | | | | | | | | | | | | | | | | Accumulated | | | | | | | | | | |

| Balance at December 31, 2015 | | | 328,130 | | | $ | 328,130 | | | | (300 | ) | | $ | (300 | ) | | $ | 69,762 | | | $ | (71,178 | ) | | $ | 197,615 | | | $ | 524,029 | |

| Net Income | | | | | | | | | | | | | | | | | | | | | | | | | | | 167,369 | | | | 167,369 | |

| Cash Dividends | | | — | | | | — | | | | — | | | | — | | | | — | | | | — | | | | (109,002 | ) | | | (109,002 | ) |

| Common Stock Purchased (1) | | | (1,254 | ) | | | (1,254 | ) | | | — | | | | — | | | | — | | | | — | | | | (21,465 | ) | | | (22,719 | ) |

| Common Stock Retired | | | (300 | ) | | | (300 | ) | | | 300 | | | | 300 | | | | — | | | | — | | | | — | | | | | |

| Stock Compensation | | | 582 | | | | 582 | | | | — | | | | — | | | | 12,027 | | | | — | | | | (194 | ) | | | 12,415 | |

| Employee Stock Buybacks | | | (470 | ) | | | (470 | ) | | | — | | | | — | | | | (8,036 | ) | | | — | | | | 157 | | | | (8,349 | ) |

| Excess Tax Benefit on Share-based payments | | | — | | | | — | | | | — | | | | — | | | | 3,699 | | | | — | | | | — | | | | 3,699 | |

(1) Charges to Retained Earnings are from purchases of the Company’s Common Stock.

| Excess tax benefits from share-based payments | | | — | | | | — | | | | (3,699 | ) |

| Excess tax benefits from share-based payments | | | — | | | | — | | | | 3,699 | |

On January 7, 2019, Rollins, Inc. (the “Company”) and certain of its affiliates entered into certain agreements providing for the acquisition (the “Acquisition”) of a pest control business as follows: (a) a Stock Purchase Agreement among the Company, Clark Pest Control of Stockton, Inc. (“Clark Pest Control”), JJT King, Inc., and the stockholders of Clark Pest Control pursuant to which the Company will acquire all of the issued and outstanding shares of Clark Pest Control, (b) a Real Estate Purchase Agreement between RCI-King, Inc., a wholly-owned subsidiary of the Company, and Clarkson California Properties pursuant to which an affiliate of the Company will acquire certain real estate used in Clark Pest Control’s business, and (c) an Asset Purchase Agreement between King Distribution, Inc., a wholly-owned subsidiary of the Company, and Geotech Supply Co., LLC pursuant to which an affiliate of the Company will acquire certain assets used in the business of distributing certain equipment and supplies related to the pest control business of Clark Pest Control.

Subject to post-closing adjustments, the final purchase is expected to be in the area of $400 million including the real estate assets.

The purchase price was negotiated at arm’s-length and the agreement contains customary representations, warranties, noncompetition agreements and holdback provisions.

The Closing of the Acquisition is subject to the satisfaction of customary conditions, including the truth and accuracy of the representations and warranties of the sellers, the performance of the obligations of the sellers and the receipt of regulatory clearance.

The Company intends to fund purchase of the Acquisition with a combination of cash on hand, use of its revolving credit agreement and a new term loan.

The Company expects the acquisition to close during the first or second quarters of 2019.

The Company maintains a large cash position in the United States while having no third-party debt to service.

Realized gains and losses and declines in value judged to be other than temporary on available-for-sale securities are included as a component of interest income.

| | | | 327,291 | | | | 326,981 | | | | 327,366 | |

In May 2014, the Financial Accounting Standards Board (“FASB”) and International Accounting Standards Board issued their converged standard on revenue recognition Accounting Standards Update (“ASU”) No. 2014-09, Revenue from Contracts with Customers: Topic 606.

This ASU replaces nearly all existing U.S. GAAP guidance on revenue recognition.

The standard prescribes a five-step model for recognizing revenue, the application of which will require significant judgment.

The FASB issued ASU 2015-14 in August 2015 which resulted in a deferral of the original effective date of ASU 2014-09.

During 2016, the FASB issued four ASUs that address implementation issues and correct or improve certain aspects of the new revenue recognition guidance, including ASU 2016-08, Principal versus Agent Considerations (Reporting Revenue Gross versus Net), ASU 2016-10, Identifying Performance Obligations and Licensing, ASU 2016-12, Narrow-Scope Improvements and Practical Expedients and ASU 2016-20, Technical Corrections and Improvements to Topic 606, Revenue from Contracts with Customers.

These ASUs do not change the core principles in the revenue recognition guidance outlined above.

ASU No. 2014-09 and the related ASUs referenced above are effective for Rollins, Inc. beginning January 1, 2018.

The Company has completed its detailed review of all global revenue arrangements in accordance with these ASUs and the adoption of these ASUs January 1, 2018 has had no impact on its consolidated financial statements.

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flow Classification of Certain Cash Receipts and Cash Payments, which addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows.

Earlier adoption is permitted for any entity in any interim or annual reporting period.

In February 2016, the FASB issued ASU 2016-02, Leases (ASC 842), which requires a lessee to recognize right-of-use assets (ROUs) and liabilities on the balance sheet for leases with lease terms greater than 12 months.

Leases will be classified as finance or operating, with classification affecting the pattern and classification of expense recognition in the statement of income.

ASU 2016-02 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018.

| --- | --- | --- |

Based on management’s evaluation as of December 31, [removed: 2018,] [added: 2019,] in which the principal executive officer and principal financial officer of the Company participated, the principal executive officer and principal financial officer have concluded that the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) are effective, at the reasonable assurance level to ensure that the information required to be disclosed by the Company in the reports that it files or submits under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

_Changes in Internal Controls_—There were no changes in our internal control over financial reporting during the fourth quarter of [removed: 2018] [added: 2019] that materially affected or are reasonably likely to materially affect these controls.

| --- | --- | --- |

| --- | --- | --- |

None.

| 63 |

| --- |

None

Information about executive officers is contained on page [removed: 10] [added: 11] of this document.

| --- | --- | --- |

| 63 |

| --- |

| --- | --- | --- |

The information under the captions “Capital Stock” and “Election of Directors” included in the Proxy Statement for the Annual Meeting of Stockholders to be held April [removed: 23, 2019] [added: 28, 2020] is incorporated herein by reference.

The following table sets forth certain information regarding equity compensation plans as of December 31, [removed: 2018.][added: 2019.]

| [removed: Plan Category] | | Number of Securities To Be Issued Upon Exercise of Outstanding Options, Warrants and Rights [removed: (A)] | | | | Weighted Average Exercise Price of Outstanding Options, Warrants and Rights [removed: (B)] | | | | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column [removed: (A)) (C)] [added: (A)] | | |

| Equity compensation plans [added: not] approved by security holders | | | [removed: 2,724,456] [added: —] | | | [removed: $] | — | | | | [removed: 5,933,319] [added: —] | |

| Equity compensation plans [removed: not] approved by security holders | | | [removed: —] [added: 2,310,101] | | | [removed: $] | [removed: —] | | | | [removed: —] [added: 5,466,484] | |

| | [removed: (1)] [added: 1.] | Includes [removed: 5,933,319] [added: 5,466,484] shares available for grant under the 2018 Employee Stock Incentive Plan. The 2018 Employee Stock Incentive Plan provides for awards of the Company’s common stock and awards that are valued in whole or in part by reference to the Company’s common stock apart from stock options and SARs including, without limitation, restricted stock, performance-accelerated restricted stock, performance stock, performance units, and stock awards or options valued by reference to book value or subsidiary performance. |

| 64 |

| --- |

| Plan Category | | ( A ) | | | | ( B ) | | | | ( C ) | | |

| Total | | | 2,310,101 | | | | — | | | | 5,466,484 | (1) |

| --- | --- | --- |

| Total | | | 2,724,456 | | | $ | — | | | | 5,933,319 | (1) |

| --- | --- | --- |

| --- | --- | --- |

| 65 |

| 64 |

[removed: _(a) Consolidated] [added: | | _(a)_ | _Consolidated] Financial Statements, Financial Statement Schedule and Exhibits._ [added: |]

| | | (D) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated April 25, 2006, incorporated herein by reference to Exhibit 3(i)(D) filed with the registrant’s 10-Q filed October 31, [removed: 2006] [added: 2006.] |

| | | (E) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated [removed: April,] [added: April] 26, 2011, incorporated herein by reference to Exhibit 3(i)(E) filed with the Registrant’s 10-K filed February 25, 2015. (F) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated April 28, 2015, incorporated herein by reference to Exhibit 3(i)(F) filed with the Registrant’s 10-Q filed on July 29, 2015. |

| [removed: (4)] [added: (4)(a)] | | Form of Common Stock Certificate of Rollins, Inc. incorporated herein by reference to Exhibit (4) as filed with its Form 10-K for the year ended December 31, 1998. |

| (10) (j) | | Revolving Credit Agreement dated as of [removed: October 31, 2012] [added: April 30, 2019] between Rollins, [removed: Inc.,] SunTrust Bank and Bank of America, [removed: N.A., incorporated herein by reference to Exhibit 99.1 as filed with its Form 8-K dated November 2, 2012.] [added: N.A.] |

| (101.INS) | | [removed: EX-101] [added: Inline XBRL] Instance Document |

| (101.SCH) | | [removed: EX-101] [added: Inline XBRL] Schema Document |

| (101.CAL) | | [removed: EX-101] [added: Inline XBRL] Calculation Linkbase Document |

| (101.LAB) | | [removed: EX-101] [added: Inline XBRL] Labels Linkbase Document |

| (101.PRE) | | [removed: EX-101] [added: Inline XBRL] Presentation Linkbase Document |

| (101.DEF) | | [removed: Ex-101] [added: Inline XBRL] Definition Linkbase Document |

| | Gary W. Rollins Vice Chairman and Chief Executive Officer (Principal Executive Officer) | | | Paul E. Northen [added: Senior] Vice President, Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer) |

| | Henry B. Tippie, [added: Lead] Director |

| [Management’s Report on Internal Control Over Financial [removed: Reporting](#i19083b001_v1)] [added: Reporting](#i19083b001)] | 23 |

| [Report of Independent Registered Public Accounting Firm On Internal Control Over Financial [removed: Reporting](#a_099)] [added: Reporting](#i19083b002)] | 24 |

| [Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements and [removed: Schedule](#a_100)] [added: Schedule](#i19083b003)] | 25 |

| [Consolidated Statements of Financial Position as of December 31, [removed: 2018] [added: 2019] and [removed: 2017](#i19083b004_v1)] [added: 2018](#i19083b004)] | [removed: 26] [added: 27] |

| [Consolidated Statements of Income for each of the three years in the period ended December 31, [removed: 2018](#i19083b005_v1)] [added: 2019](#i19083b005)] | [removed: 27] [added: 28] |

| [Consolidated Statements of Comprehensive Earnings for each of the three years in the period ended December 31, [removed: 2018](#i19083b006_v1)] [added: 2019](#i19083b006)] | [removed: 28] [added: 29] |

| [Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, [removed: 2018](#i19083b007_v1)] [added: 2019](#i19083b007)] | [removed: 29] [added: 30] |

| [Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, [removed: 2018](#i19083b008_v1)] [added: 2019](#i19083b008)] | [removed: 30] [added: 31] |

| [Notes to Consolidated Financial [removed: Statements](#i19083b009_v1)] [added: Statements](#i19083b009)] | [removed: 31] [added: 32] – [removed: 63] [added: 62] |

| Schedule II – Valuation and Qualifying Accounts | [removed: 70] [added: 71] |

| Year ended December 31, 2018 [removed: Allowance for doubtful accounts] | | $ | 14,706 | | | $ | 13,606 | | | $ | (11,646 | ) | | $ | 16,666 | |

| Year ended December 31, 2017 [removed: Allowance for doubtful accounts] | | $ | 14,600 | | | $ | 10,455 | | | $ | (10,349 | ) | | $ | 14,706 | |

| | | [(E) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated [removed: April,] [added: April] 26, 2011, incorporated herein by reference to Exhibit 3(i)(E) filed with the Registrant’s 10-K filed February 25, 2015.](http://www.sec.gov/Archives/edgar/data/84839/000155278115000273/e00088_ex3ie.htm) |

| [removed: (4)] [added: (4)(a)] | | [Form of Common Stock Certificate of Rollins, Inc. incorporated herein by reference to Exhibit (4) as filed with its Form 10-K for the year ended December 31, 1998.](http://www.sec.gov/Archives/edgar/data/84839/000104746999011738/0001047469-99-011738.txt) |

| (10.1)+ | | [removed: Membership] [added: [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, [removed: 2017.] [added: 2017.](http://www.sec.gov/Archives/edgar/data/84839/000117120017000410/i17466_ex10-1.htm)] |

| (10) (j) | | [Revolving Credit Agreement dated as of [removed: October 31, 2012] [added: April 30, 2019] between Rollins, [removed: Inc.,] SunTrust Bank and Bank of America, [removed: N.A., incorporated herein by reference to Exhibit 99.1 as filed with its Form 8-K dated November 2, 2012.](http://www.sec.gov/Archives/edgar/data/84839/000110465912073726/a12-25937_1ex99d1.htm)] [added: N.A.](http://www.sec.gov/Archives/edgar/data/84839/000117120019000278/i19356_ex10-1.htm)] |

| (21) | | [Subsidiaries of [removed: Registrant.](https://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_ex21.htm)] [added: Registrant.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex21.htm)] |

| (23.1) | | [Consent of Grant Thornton LLP, Independent Registered Public Accounting [removed: Firm.](https://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_ex23-1.htm)] [added: Firm.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex23-1.htm)] |

| (24) | | [Powers of Attorney for [removed: Directors.](https://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_ex24-1.htm)] [added: Directors.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex24-1.htm)] |

| (31.1) | | [Certification of Chief Executive Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_ex31-1.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex31-1.htm)] |

| (31.2) | | [Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_ex31-2.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex31-2.htm)] |

| (32.1) | | [Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of [removed: 2002.](https://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_ex32-1.htm)] [added: 2002.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex32-1.htm)] |

| (4)(b) | | Description of Registrant’s Securities. |

| (10) (k) | | 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) (l) | | 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) (m) | | Real Estate Purchase Agreement by and between RCI - King, Inc., and Clarksons California Properties, a California limited partnership. |

| | Date: | February 28, 2020 |

| Date: | February 28, 2020 | | Date: | February 28, 2020 |

| February 28, 2020 | |

| | | | Balance at Beginning of Period | | | | Charged to Costs and Expenses | | | | Net (Deductions) Recoveries | | | | Balance at End of Period | |

| | | Allowance for Doubtful Accounts | | | | | | | | | | | | | | |

| Year ended December 31, 2019 | | $ | 16,666 | | | $ | 15,145 | | | $ | (12,153 | ) | | $ | 19,658 | |

| (4)(b) | | [Description of Registrant’s Securities.](https://www.sec.gov/Archives/edgar/data/84839/000117120020000103/i20108_ex4b.htm) |

| (10) (k) | | [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.](http://www.sec.gov/Archives/edgar/data/84839/000117120019000188/i19231_ex10-1.htm) |

| (10) (l) | | [Asset Purchase Agreement among King Distribution, Inc., a Delaware corporation, Geotech Supply Co., LLC, a California limited liability company, and Clarksons California Properties, a California limited partnership.](http://www.sec.gov/Archives/edgar/data/84839/000117120019000188/i19231_ex10-2.htm) |

| (10) (m) | | [Real Estate Purchase Agreement by and between RCI - King, Inc., and Clarksons California Properties, a California limited partnership.](http://www.sec.gov/Archives/edgar/data/84839/000117120019000188/i19231_ex10-3.htm) |

| --- | --- | --- |

| (101.INS) | | Inline XBRL Instance Document |

| (101.SCH) | | Inline XBRL Schema Document |

| (101.CAL) | | Inline XBRL Calculation Linkbase Document |

| (101.LAB) | | Inline XBRL Labels Linkbase Document |

| (101.PRE) | | Inline XBRL Presentation Linkbase Document |

| (101.DEF) | | Inline XBRL Definition Linkbase Document |

| 104 | | Cover Page Interactive Data File (embedded within the Inline XBRL document) |

| 73 |

| 65 |

| (10) (k) | | First Amendment to Revolving Credit Agreement dated as of October 30, 2014 by and among Rollins, Inc., the lenders party thereto and SunTrust Bank and Bank of America, N.A., incorporated herein by reference to Exhibit 10(k) filed with the Registrant’s 10-K filed February 25, 2015. |

| | Date: | March 1, 2019 |

| Date: | March 1, 2019 | | Date: | March 1, 2019 |

| | Larry L. Prince, Director |

| March 1, 2019 | |

| | | For the years ended December 31, 2018, 2017 and 2016 | | | | | | | | | | | | | | |

| Year ended December 31, 2016 Allowance for doubtful accounts | | $ | 13,636 | | | $ | 11,257 | | | $ | (10,293 | ) | | $ | 14,600 | |

| (10) (k) | | [First Amendment to Revolving Credit Agreement dated as of October 30, 2014 by and among Rollins, Inc., the lenders party thereto and SunTrust Bank and Bank of America, N.A., incorporated herein by reference to Exhibit 10(k) filed with the Registrant’s 10-K filed February 25, 2015.](http://www.sec.gov/Archives/edgar/data/84839/000155278115000273/e00088_ex10k.htm) |