Rollins (ROL) 10-K risk factor changes: FY2020 vs FY2019

Discussions of [removed: 2017] [added: 2018] items and year-to-year comparisons of [removed: 2018] [added: 2019] and [removed: 2017] [added: 2018] 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 [removed: [Form 10-K](http://www.sec.gov/Archives/edgar/data/84839/000117120019000087/i19083_rol-10k.htm)] [added: Form 10-K] for the year ended December 31, [removed: 2018.][added: 2019.]

Rollins, Inc. (the [removed: “Company”), was originally incorporated in 1948, under the laws of the state of Delaware as Rollins Broadcasting, Inc. The Company] [added: “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 the United States, Canada, Australia, Europe, and Asia with international franchises in [removed: Mexico,] Canada, Central and South America, the Caribbean, the Middle East, Asia, Europe, [added: Africa,] and [removed: Africa.][added: Australia.]

The Company has [removed: only] one reportable segment, its pest and termite control business.

| Years ended December 31, | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | |

| Revenues | | $ | [removed: 2,015,477] [added: 2,161,220] | | | $ | [removed: 1,821,565] [added: 2,015,477] | | | $ | [removed: 1,673,957] [added: 1,821,565] | | | | [removed: 10.6] [added: 7.2] | | | | [removed: 8.8] [added: 10.6] | |

| Cost of services provided | | | [removed: 993,593] [added: 1,048,592] | | | | [removed: 894,437] [added: 993,593] | | | | [removed: 819,943] [added: 894,437] | | | | [removed: (11.1] [added: (5.5] | ) | | | [removed: (9.1] [added: (11.1] | ) |

| Depreciation and amortization | | | [removed: 81,111] [added: 88,329] | | | | [removed: 66,792] [added: 81,111] | | | | [removed: 56,580] [added: 66,792] | | | | [removed: (21.4] [added: (8.9] | ) | | | [removed: (18.0] [added: (21.4] | ) |

| Pension settlement loss | | | [removed: 49,898] [added: —] | | | | [removed: —] [added: 49,898] | | | | — | | | | N/M | | | | N/M | |

| Sales, general and administrative | | | [removed: 623,379] [added: 656,207] | | | | [removed: 550,698] [added: 623,379] | | | | [removed: 503,433] [added: 550,698] | | | | [removed: (13.2] [added: (5.3] | ) | | | [removed: (9.4] [added: (13.2] | ) |

| [removed: Gain] [added: Loss/(gain)] on sales of assets, net | | | [removed: (581] [added: 1,599] | [removed: )] | | | [removed: (875] [added: (581] | ) | | | [removed: (242] [added: (875] | ) | | | [removed: (33.6] [added: (375.2] | ) | | | [removed: 261.6] [added: (33.6] | [added: )] |

| Interest expense/(income), net | | | [removed: 6,917] [added: 5,082] | | | | [removed: (220] [added: 6,917] | [removed: )] | | | [removed: (259] [added: (220] | ) | | | [removed: N/M] [added: 26.5] | | | | [removed: (15.1] [added: N/M] | [removed: )] |

| Income before income taxes | | | [removed: 261,160] [added: 354,720] | | | | [removed: 310,733] [added: 261,160] | | | | [removed: 294,502] [added: 310,733] | | | | [removed: (16.0] [added: 35.8] | [removed: )] | | | [removed: 5.5] [added: (16.0] | [added: )] |

| Provision for income taxes | | | [removed: 57,813] [added: 93,896] | | | | [removed: 79,070] [added: 57,813] | | | | [removed: 115,378] [added: 79,070] | | | | [removed: 26.9] [added: (62.4] | [added: )] | | | [removed: 31.5] [added: 26.9] | |

| Net income | | $ | [removed: 203,347] [added: 260,824] | | | $ | [removed: 231,663] [added: 203,347] | | | $ | [removed: 179,124] [added: 231,663] | | | | [removed: (12.2] [added: 28.3] | [removed: )] | | | [removed: 29.3] [added: (12.2] | [added: )] |

[removed: 2019] [added: 2020] marked the Company’s [removed: 22nd] [added: 23rd] consecutive year of [removed: improved] [added: increased] revenues.

Revenues for the year rose [removed: 10.6] [added: 7.2] percent to [removed: $2.015] [added: $2.161] billion compared to [removed: $1.822] [added: $2.015] billion for the prior year.

Income before income taxes [removed: decreased 16.0%] [added: increased 35.8%] to [removed: $261.2] [added: $354.7] million compared to [removed: $310.7] [added: $261.2] million the prior year.

Net income [removed: decreased 12.2%] [added: increased 28.3%] to [removed: $203.3] [added: $260.8] million, with earnings per diluted share of [removed: $0.62] [added: $0.53] compared to [removed: $231.7] [added: $203.3] million, or [removed: $0.71] [added: $0.41] per diluted share for the prior year.

Results of [removed: Operations—2019] [added: Operations—2020] Versus [removed: 2018][added: 2019]

The Company’s revenues increased to [removed: $2.015] [added: $2.161] billion in [removed: 2019,] [added: 2020,] a [removed: 10.6%] [added: 7.2%] increase compared to [removed: 2018.][added: 2019.]

Sales, general and administrative expense were [removed: 30.9%] [added: 30.4%] of revenues in [removed: 2019] [added: 2020] compared to [removed: 30.2%] [added: 30.9%] in [removed: 2018.][added: 2019.]

The Company’s depreciation and amortization expense [added: as a percent of revenue] increased [removed: 21.4%] [added: 2.5%] to [removed: 4.0%] [added: 4.1%] in [removed: 2019] [added: 2020] compared to [removed: 3.7%] [added: 4.0%] in [removed: 2018.][added: 2019.]

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

Revenues for the year ended December 31, [removed: 2019] [added: 2020] were [removed: $2.015] [added: $2.161] billion, an increase of [removed: $194 million] [added: $145.7 million,] or [removed: 10.6%] [added: 7.2%,] from [removed: 2018] [added: 2019] revenues of [removed: $1.822] [added: $2.015] billion.

Growth [removed: and pricing] accounted for approximately [removed: 4.8%] [added: 3.8%] of our increase, and our acquisitions contributed the remaining revenue growth.

Approximately 80% of the Company’s pest control revenue was recurring in [removed: 2019,] [added: 2020,] as well as [removed: 2018.][added: in 2019.]

The Company’s foreign operations accounted for approximately [added: 7% and] 8% of total revenues for [removed: each of] the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

The Company established new franchises in several international countries around the globe in [removed: 2019] [added: 2020 while closing or acquiring others,] for a total of [removed: 97] [added: 94] Orkin international [removed: franchises, one Canadian Critter Control franchise,] [added: franchises] and [removed: ten] [added: nine] Australia franchises at December 31, [removed: 2019,] [added: 2020,] compared to [removed: 86] [added: 97] Orkin international franchises, [removed: two] [added: one] Canadian Critter Control franchises and ten Australia franchises at December 31, [removed: 2018.][added: 2019.]

International and domestic franchising revenue was less than 1% of the Company’s revenues for [removed: 2019.][added: 2020.]

Orkin had [removed: 147] [added: 143] and [removed: 133] [added: 147] franchises (domestic and international) at December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] respectively.

Revenue from franchising was up [removed: 3.2%] [added: 5.6%] in [removed: 2019] [added: 2020] compared to [removed: 2018] [added: 2019] as the Company continued to expand Orkin’s international footprint and recognition of initial franchise fees.

For the twelve months ended December 31, [removed: 2019,] [added: 2020,] cost of services provided increased [removed: $99.2 million] [added: $55.0 million,] or [removed: 11.1%,] [added: 5.5%,] compared to the twelve months ended December 31, [removed: 2018.][added: 2019.]

For the twelve months ended December 31, [removed: 2019,] [added: 2020,] depreciation and amortization increased [removed: $14.3] [added: $7.2] million, or [removed: 21.4%] [added: 8.9%,] compared to the twelve months ended December 31, [removed: 2018.][added: 2019.]

The dollar increase was primarily due to depreciation increasing [removed: $6.3 million] [added: $4.0 million,] or [removed: 20.7%] [added: 10.9%,] from the depreciation of acquired and purchased assets and depreciation from various IT related projects.

Amortization of intangible assets increased [removed: $8.0 million] [added: $3.2 million,] or [removed: 22.1%] [added: 7.3%,] for [removed: 2019] [added: 2020] due to the additional amortization of customer contracts from several acquisitions over the last year, including a full year of [removed: OPC Services and Aardwolf Pestkare, acquired in early and mid-2018, respectively, and the 2019 acquisition of] [added: amortization for] Clark Pest Control [added: acquired] in [removed: April,] [added: April 2019,] as well as several smaller foreign and domestic companies.

For the twelve months ended December 31, [removed: 2019,] [added: 2020,] sales, general and administrative (SG&A) expenses increased [removed: $72.7] [added: $32.8] million, or [removed: 13.2%] [added: 5.3%,] compared to the twelve months ended December 31, [removed: 2018.][added: 2019.]

SG&A [removed: increased] [added: decreased] to [removed: 30.9%] [added: 30.4%] of revenues for the year ended December 31, [removed: 2019] [added: 2020] compared to [removed: 30.2%] [added: 30.9%] in [removed: 2018.][added: 2019.]

[removed: The Company] [added: Conversely, we] incurred higher than normal expenses in 2019 related to acquisition preparation and integration [removed: as well as expenses related to the pension settlement activities.][added: activities for Clark Pest Control.]

_Gain [added: / Loss] on Sales of [removed: assets,] [added: Assets,] Net_

[removed: Gain] [added: The Company recorded a $1.6 million net loss] on sales of [removed: assets, net decreased to $0.6 million] [added: assets] for the year ended December 31, [removed: 2019] [added: 2020] compared to [removed: $0.9] [added: a net gain on sales of assets of $0.6] million in [removed: 2018.][added: 2019.]

| Accelerated stock vesting expense | | | 6,691 | | | | — | | | | — | | | | | | | | | |

The drop in net income from 2018 to 2019 was primarily attributed to the pension settlement loss recorded in 2019.

COVID-19 Pandemic Impact

As the pandemic challenges grew early in 2020, the Company made numerous operational adjustments to address the economic, health and safety challenges from the COVID-19 pandemic.

These included new COVID-related procedures, modified customer service and related protocols, daily health screenings before entering shared offices, and a transition to remote work locations to reduce concentrations of personnel in offices where appropriate.

Cost containment efforts included furloughs, layoffs, elimination of non-essential travel, postponing capital expenditures, and temporary salary reductions for upper management, among other actions.

Customer retention during the pandemic is less predictable, and of greater immediate concern compared with our normal operations, however, our residential pest and termite control business has remained reasonably consistent with some growth over prior years.

With many sheltering or working from home, we have experienced higher than normal demand for our residential services.

Our commercial pest control business has been more adversely impacted, as it crosses multiple industries such as healthcare, food processing, logistics, grocery, retail and hospitality.

Each of these industries is being impacted differently by the pandemic.

Many of our commercial customers continue to operate as “essential” businesses; however, unfortunately there are a notable number of others that have closed, at least temporarily.

We expect this impact will persist through much of 2021 until the majority of the population has been vaccinated against the virus.

The Company’s residential and termite revenues grew 13.4% and 9.6%, respectively, in 2020 compared to 2019 while our commercial pest control revenues fell by 0.5%.

While we have a substantial amount of intangible assets on our balance sheet, based on our revenue growth this year, we do not anticipate any significant long-term loss in revenues or cash flows that would approach a level for impairment of intangible assets.

All of our critical supply-chain vendors have remained operational, and we have engaged additional new sources to supplement our existing suppliers, especially for critical PPE and other COVID-19 related items.

Fleet suppliers and support vendors continue to serve our needs.

Gross margin increased to 51.5% for 2020 from 50.7% in 2019.

Rollins’ net income of $260.8 million in 2020 was an increase of $57.5 million, or 28.3%, compared to $203.3 million in 2019.

Net profit margin improved to 12.1% in 2020 from 10.1% in 2019.

We experienced strong growth in residential pest control, increasing 13.4%, while termite and ancillary revenues grew 9.6%.

Year over year commercial revenues were down 0.5% as commercial pest control was negatively impacted by the COVID-19 virus due to various levels of government-driven shutdowns.

The Company’s revenue mix for the year ended December 31, 2020 consisted primarily of 45% residential pest control, 36% commercial pest control and 19% termite and ancillary revenues (such as moisture control, insulation, deck and gutter work).

During 2020, the Company chose to forgo the normal mid-year price increase, which historically contributes approximately 1.0% to our annual revenue growth.

The Company continued its strategy of buying back Critter Control franchises during 2020, resulting in a drop in franchises to 79 at December 31, 2020, compared to 85 at December 31, 2019.

Gross margin for the year increased to 51.5% for 2020 from 50.7% in 2019.

Margin improvements were driven primarily from lower service wage growth compared to revenue growth, and from fleet savings driven by improvements in our routing and scheduling efficiencies and lower fuel prices.

The Company eliminated any non-essential spending at the start of the pandemic which lowered expenses in several areas.

Travel restrictions reduced typical training, site visits and conference costs.

The Company’s 2020 losses came primarily from liquidating the pension plan assets from the 2019 pension plan settlement.

The Company’s effective tax rate increased to 26.5% in 2020 compared to 22.1% in 2019, due primarily to state and foreign income tax changes and limited tax deductibility for the accelerated stock vesting expense recognized in 2020.

| Net cash provided by operating activities | | $ | 435,785 | | | $ | 319,573 | | | $ | 299,401 | |

| Net cash (used in)/provided by financing activities | | | (281,273 | ) | | | 111,686 | | | | (175,412 | ) |

The Company sold illiquid benefit plan asset investments during 2020 and used $18.0 million and $11.0 million of the $31.8 million during the years ended December 31, 2020 and 2019, respectively, to fund its 401(k) match obligations.

As of December 31, 2020, the Company had approximately $1.2 million remaining of benefit plan assets which will likely be reverted to the Company per ERISA regulations in 2021.

The Company has one remaining pension in one of its wholly-owned subsidiaries.

The Company invested approximately $23.2 million in capital expenditures during 2020 compared to $27.1 million and $27.2 million during 2019 and 2018, respectively.

The Company used $281.3 million in financing activities for the year ended December 31, 2020.

The Company repaid $88.5 million of its outstanding debt balance throughout 2020, net of borrowings, compared to borrowing $291.5 million during 2019, net of repayments.

The Company reclassified certain prior period amounts in the Statement of Cash Flows from Operating Activities to Financing Activities for payment of contingent consideration to conform to the current period presentation.

| Revolving commitment | | $ | 67,000 | | | $ | — | | | $ | — | | | $ | 67,000 | | | $ | — | |

| 14 |

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

All of the Company’s business lines experienced growth for the year, with residential pest control revenues up 11.3%, commercial pest control revenues up 8.9% and termite and ancillary services revenues up 11.6%, each compared to 2018.

Gross margin decreased to 50.7% for 2019 from 50.9% in 2018.

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.

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

Commercial pest control represented approximately 38% of the Company’s revenue in 2019 and grew 8.9%.

Acquisitions from foreign companies, which are primarily commercial, contributed to the increase, as well as increases in sales, an emphasis on closing leads, and better cancellation rates.

Commercial pest control was negatively impacted by foreign currency exchange rates as our foreign companies are heavily commercial.

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

| 15 |

The Company implemented its traditional price increase program in June 2019.

Around 1% of the Company’s revenue increase is attributable to pricing actions.

The Company had 84 Critter Control franchises at December 31, 2019, up 4 from 2018.

Gross margin for the year decreased to 50.7% for 2019 compared to 50.9% for 2018 due to increased participation rates in our enhanced 401(k) match to employees and an increase in group insurance premiums in 2019.

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

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.

The Company also had increased use of outside professional services in IT projects as well as other projects.

| 16 |

For the year ended December 31, 2018, the Company earned $0.2 million in net interest income on cash balances in the Company’s various cash accounts.

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

| Net cash provided by operating activities | | $ | 309,188 | | | $ | 286,272 | | | $ | 235,370 | |

| Net cash used in financing activities | | | 127,655 | | | | (162,283 | ) | | | (130,263 | ) |

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.

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 | | | | — | | | | — | | | | — | |

As of December 31, [removed: 2019,] [added: 2020,] the revolving commitment had outstanding borrowings of [removed: $101.5] [added: $67.0] million and the term loan had outstanding borrowings of [removed: $190.0] [added: $136.0] million.

Additionally, the Company maintained [removed: $32.9] [added: $35.1] million in Letters of Credit.

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

| 22 |

| --- |

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

To the Stockholders of Rollins, Inc.:

The management of Rollins, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Rollins, Inc. maintains a system of internal accounting controls designed to provide reasonable assurance, at a reasonable cost, that assets are safeguarded against loss or unauthorized use and that the financial records are adequate and can be relied upon to produce financial statements in accordance with accounting principles generally accepted in the United States of America.

The internal control system is augmented by written policies and procedures, an internal audit program and the selection and training of qualified personnel.

This system includes policies that require adherence to ethical business standards and compliance with all applicable laws and regulations.

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, 2019 based on criteria established in the 2013 Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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.

Based on this evaluation, management’s assessment is that Rollins, Inc. maintained effective internal control over financial reporting as of December 31, 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, 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.

| | | |

| /s/ Gary W. Rollins | | /s/ Paul E. Northen |

| Gary W. Rollins Vice Chairman and Chief Executive Officer | | Paul E. Northen Senior Vice President, Chief Financial Officer and Treasurer |

Atlanta, Georgia

February 28, 2020

| 23 |

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING

Board of Directors and Stockholders’

Rollins, Inc.

Opinion on internal control over financial reporting

We have audited the internal control over financial reporting of Rollins, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 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, 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, 2019, and our report dated February 28, 2020 expressed an unqualified opinion on those financial statements.

Basis for opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Controls over Financial Reporting.

Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB.

Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion.

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.

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

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

_Economic conditions may [added: materially] adversely affect our business._

Our ability to remain productive and profitable will depend substantially on our ability to attract and retain [removed: skilled workers.][added: sales and service operations professional workers, develop leadership and implement diversity, equity and inclusion initiatives.]

The demand for [removed: skilled] employees is high, and the supply is [removed: very] limited.

A significant increase in the wages paid [added: and benefits offered] by competing employers could result in a reduction in our [removed: skilled] labor force, increases in [removed: wage rates paid by us,] [added: our labor costs,] or both.

If either of [added: paid] these events occurred, our capacity and profitability could be diminished, and our growth potential could be impaired.

_We [removed: may not be able] [added: face risks regarding our ability] to maintain our competitive position in the pest control industry in the future._

Our revenues and earnings [removed: may be] [added: are] affected by changes in competitors’ [removed: prices,] [added: prices] and general economic issues.

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

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

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

[removed: We rely] [added: The Company also relies] on, among other things, commercially available vendors, cyber protection systems, software, tools and monitoring to provide security for processing, transmission and storage of [removed: this] [added: protected] information and data.

We have also implemented policies and [removed: procedures] [added: procedures, internal training, system controls, and constant monitoring and audit processes] to [added: protect the Company from internal and external vulnerabilities and to] comply with consumer privacy laws in the areas in which we operate.

Activities by [removed: third parties, advances] [added: bad actors, changes] in computer and software capabilities and encryption technology, new tools and [removed: discoveries] [added: discoveries, cloud applications, changes in multi-jurisdictional regulations,] and other events or developments may [removed: facilitate or] result in a compromise or breach of our systems.

Any compromises, [removed: breaches or] [added: breaches, application] errors [removed: in applications] [added: or human mistakes] related to our systems or failures to comply with applicable standards could [removed: cause damage to our reputation and interruptions in] [added: not only disrupt] our [added: financial] operations, including our customers’ ability to pay for our services and products by credit card or their willingness to purchase our services and [removed: products and] [added: products, but] could [added: also] result in [removed: a violation] [added: violations] of applicable laws, regulations, orders, industry standards or agreements and subject us to costs, penalties and liabilities which could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

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

We are unable to predict whether [removed: environmental] [added: such] laws will, in the future, materially affect our operations and financial [removed: condition.][added: condition or whether any changes will require us to incur substantial increases in costs in order to comply with such changes.]

Penalties for noncompliance with these laws may include [added: investigations, criminal sanctions or civil remedies, including, but not limited to,] cancellation of licenses, fines, and other corrective actions, which [removed: would] [added: could] negatively affect our [removed: future] [added: business,] financial [removed: results.][added: condition and results of operations.]

Each [removed: franchising] [added: franchised] brand also provides training and support to franchisees.

This could [added: materially] adversely impact our business, financial position, results of operations and cash flows.

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®, HomeTeam Pest Defense®, TAEXX®, Clark Pest Control®, Western Pest Services®, Northwest Exterminating®, Critter Control®, IFC®, Trutech®, Waltham Pest Services®, OPC Services®, Perma Treat Pest and Termite Control®, Crane Pest Control®, [added: Murray Pest Control®, Allpest®, Statewide Pest Control®,] Safeguard the Pest Control People®, Aardwolf [added: Pestkare®, Adams] Pest [removed: Control®] [added: Control™, McCall®] and others.

[removed: We] [added: Although we] have [removed: not] sought to register or protect [removed: every one] [added: many] of our marks either in the United States or in [removed: every country] [added: the countries] in which they are or may be [removed: used.][added: used, we have not sought to protect our marks in every country.]

The Company is a “Controlled Company” because a group that includes the Company’s Chairman of the [removed: Board, R.][added: Board and Chief Executive Officer, Gary W.]

Rollins, [removed: who is the Vice Chairman] and [removed: Chief Executive Officer, and a director of the Company, and] certain companies under [removed: their] [added: his] control, controls in excess of fifty percent of the Company’s voting power.

Rollins, Inc.’s executive officers, directors and their affiliates hold directly, or through indirect beneficial ownership, in the aggregate, approximately [removed: 57] [added: 54] percent of the Company’s outstanding shares of common stock.

General

Rollins, 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 and independent franchises to both residential and commercial customers in the United States, Canada, Australia, Europe, and Asia with international franchises in Canada, Central and South America, the Caribbean, Europe, the Middle East, Asia, Africa, and Australia.

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 in the Notes to the Financial Statements (Part II, Item 8, of this Form 10-K).

The Company has one reportable segment, its pest and termite control business.

Revenue, operating profit and identifiable assets for this segment, which includes the United States, Canada, Central and South America, the Caribbean, Europe, the Middle East, Asia, Africa, and Australia are included in Item 8 of this document, “Financial Statements and Supplementary Data” beginning on page 26.

The Company’s results of operations and its financial condition are not reliant upon any single customer or a few customers or the Company’s foreign operations.

Three-for-Two Stock Split

All share and per share data presented have been adjusted to account for the three-for-two stock split effective December 10, 2020.

Common Stock Repurchase Program

At the July 24, 2012 Quarterly Board of Directors’ meeting, the Board authorized the purchase of 16.9 million shares of the Company’s common stock.

During the years ended December 31, 2020 and 2019, the Company did not repurchase shares on the open market.

In total, there are 11.4 million additional shares authorized to be repurchased under prior Board approval.

The repurchase program does not have an expiration date.

Franchising Programs

Orkin Franchises

The Company, through its wholly-owned subsidiary Orkin Systems, LLC (“Orkin Systems”), began its domestic Orkin franchise program in the U.S. in 1994, and established its first international franchise in 2000.

It has since expanded to Central and South America, the Caribbean, Europe, the Middle East, Asia, and Africa.

The Company continues to expand its growth through the franchise program of its Orkin brand.

This program is primarily used in smaller markets where it is currently not economically efficient to establish and operate a company-owned Orkin branch.

Domestic Orkin franchises are subject to a contractual buyback provision at Orkin System’s option with a pre-determined purchase price using a formula applied to revenues of the franchise.

International Orkin franchise agreements also contain an optional buyback provision, but it is subject to the franchisee’s renewal option.

| | | At December 31, | | | | | | | | | | |

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

| Orkin franchises | | 2020 | | | | 2019 | | | | 2018 | | |

| Domestic franchises | | | 49 | | | | 50 | | | | 47 | |

| International franchises | | | 94 | | | | 97 | | | | 86 | |

| Total Orkin franchises | | | 143 | | | | 147 | | | | 133 | |

| 3 |

Critter Control Franchises

The Company expands its animal control growth through the franchise program of its wholly-owned subsidiary, Critter Control, Inc. (“Critter Control”).

The Company has purchased several Critter Control locations from its franchise owners while renaming and converting several previous Trutech, LLC locations to Critter Control locations.

The majority of Critter Control’s locations are franchised.

Critter Control franchises are subject to a contractual buyback provision at Critter Control’s option with a pre-determined purchase price using a formula applied to revenues of the franchise.

| | | At December 31, | | | | | | | | | | |

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

| Critter Control franchises | | 2020 | | | | 2019 | | | | 2018 | | |

| Domestic franchises | | | 79 | | | | 84 | | | | 80 | |

| International franchises | | | 0 | | | | 1 | | | | 1 | |

| Total Critter Control franchises | | | 79 | | | | 85 | | | | 81 | |

_Our operations could be affected by pending and ongoing litigation._

In the normal course of business, we and some of our subsidiaries are defendants in a number of lawsuits or arbitrations, which allege that plaintiffs have been damaged.

The Company does not believe that any pending claim, proceeding or litigation, either alone or in the aggregate, will have a material adverse effect on the Company’s financial position; 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 year.

_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 the Company’s proprietary of confidential information.

We could be subject to interruption of our business operations, private litigation, reputational damage and costly penalties._

_Our operations may be adversely affected if we are unable to comply with regulatory and environmental laws._

Our business is significantly affected by environmental laws and other regulations relating to the pest control industry and by changes in such laws and the level of enforcement of such laws.

We are unable to predict the level of enforcement of existing laws and regulations, how such laws and regulations may be interpreted by enforcement agencies or court rulings, or whether additional laws and regulations will be adopted.

We believe our present operations substantially comply with applicable federal and state environmental laws and regulations.

We also believe that compliance with such laws has had no material adverse effect on our operations to date.

However, such environmental laws are changed frequently.

Randall Rollins, and his brother, Gary W.

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

We are [added: also] involved [added: from time to time] in certain environmental matters primarily arising in the normal course of business.

In the normal course of business, the Company and its subsidiaries are involved in, and will continue to be involved in, various claims, arbitrations, contractual disputes, investigations, and regulatory and litigation matters relating to, and arising out of, our businesses and our operations.

These matters may involve, but are not limited to, allegations that our services or vehicles caused damage or injury, claims that our services did not achieve the desired results, claims related to acquisitions and allegations by federal, state or local authorities of violations of regulations or statutes.

We evaluate pending and threatened claims and establish loss contingency reserves based upon outcomes we currently believe to be probable and reasonably estimable.

We do not believe that the ultimate resolution of the claims we are currently involved in will have a material adverse effect on our business, results of operations, financial condition, cash flow and prospects; 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.

As previously disclosed, the SEC is conducting an investigation, which the Company believes is primarily focused on how it established accruals and reserves at period-ends and the impact of those accruals and reserves on reported earnings.

The investigation relates to period-ends for periods beginning January 1, 2015.

The Company is fully cooperating with the SEC’s investigation.

The Company cannot predict the outcome of this investigation.

The Company’s Audit Committee retained independent counsel to conduct an internal investigation into matters related to the SEC investigation and, in particular, the Company’s processes for establishing reserves for each quarter in the relevant periods.

The internal investigation was concluded in October 2020.

The Company, after consultation with the Audit Committee and the independent counsel, believes that its financial statements filed with the SEC on Forms 10-K and 10-Q for the relevant periods fairly present in all material respects its financial condition, results of operations and cash flows as of their respective balance sheet dates and for the periods then ended.

See Part I, Item 1.A. for additional discussion of related Risk Factors.

See Note 15 to Part I, Item 1 for discussion of certain litigation.

| 13 |

| --- |

In the normal course of business, certain of the Company’s subsidiaries are defendants in a number of lawsuits, claims or arbitrations which allege that the subsidiaries’ services caused damage.

We are actively contesting each of these matters.

[removed: UNITED STATES][added: UNITED STATES]

[removed: SECURITIES] [added: SECURITIES] AND EXCHANGE [removed: COMMISSION][added: COMMISSION]

[removed: Washington,] [added: Washington,] D.C. [removed: 20549][added: 20549]

[removed: FORM 10-K][added: FORM 10-K]

[removed: For the fiscal year ended December] [added: FOR THE FISCAL YEAR ENDED DECEMBER] 31, [removed: 2019][added: 2020]

[removed: ROLLINS, INC.][added: ROLLINS, INC.]

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

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

| Large [removed: accelerated] [added: Accelerated] Filer | x | [removed: |] Accelerated filer | o | [removed: |]

| Non-accelerated filer | o | [removed: |] Smaller reporting company | o | [removed: |]

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

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

The aggregate market value of Rollins, Inc. Common Stock held by non-affiliates on June 30, [removed: 2019] [added: 2020] was [removed: $5,063,827,695] [added: $6,322,406,653] based on the reported last sale price of common stock on June 30, [removed: 2019,] [added: 2020,] which is the last business day of the registrant’s most recently completed second fiscal quarter.

Rollins, Inc. had [removed: 327,779,714] [added: 492,141,926] shares of Common Stock outstanding as of January 31, [removed: 2020.][added: 2021.]

Portions of the Proxy Statement for the [removed: 2020] [added: 2021] Annual Meeting of Stockholders of Rollins, Inc. are incorporated by reference into Part III, Items 10-14.

[removed: |] Rollins, Inc. [removed: | | | | |]

[removed: |] Form 10-K [removed: | | | | |]

[removed: |] For the Year Ended December 31, [removed: 2019 | | | | |][added: 2020]

[removed: |] Table of Contents [removed: | | | | |]

| | | | [removed: |] Page |

| [removed: Part I |] [added: [Part I](#i21062a001)] | | | |

| [Item [removed: 1.](#i20108a001) |] [added: 1.](#i21062a002)] | [removed: [Business.](#i20108a001)] | [added: [Business.](#i21062a002)] | 3 |

| [Item [removed: 1.A.](#i20108a002)] [added: 1.A.](#i21062a003)] | | [Risk [removed: Factors.](#i20108a002) |] [added: Factors.](#i21062a003)] | [removed: 6] [added: 7] |

| [Item [removed: 1.B.](#i20108a003)] [added: 1.B.](#i21062a004)] | | [Unresolved Staff [removed: Comments.](#i20108a003) |] [added: Comments.](#i21062a004)] | [removed: 9] [added: 13] |

| [Item [removed: 2.](#i20108a004) |] [added: 2.](#i21062a005)] | [removed: [Properties.](#i20108a004)] | [added: [Properties.](#i21062a005)] | [removed: 10] [added: 13] |

| [Item [removed: 3.](#i20108a005)] [added: 3.](#i21062a006)] | | [Legal [removed: Proceedings.](#i20108a005) |] [added: Proceedings.](#i21062a006)] | [removed: 10] [added: 13] |

| [Item [removed: 4.](#i20108a006)] [added: 4.](#i21062a007)] | | [Mine Safety [removed: Disclosures.](#i20108a006) |] [added: Disclosures.](#i21062a007)] | [removed: 10] [added: 14] |

| [Item [removed: 4.A.](#i20108a007)] [added: 4.A.](#i21062a008)] | | [Information about our Executive [removed: Officers](#i20108a007) |] [added: Officers](#i21062a008)] | [removed: 11] [added: 14] |

| [removed: Part II |] [added: [Part II](#i21062a009)] | | | |

| [Item [removed: 5.](#i20108a008)] [added: 5.](#i21062a010)] | | [Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity [removed: Securities.](#i20108a008) |] [added: Securities.](#i21062a010)] | [removed: 12] [added: 15] |

| [Item [removed: 6.](#i20108a009)] [added: 6.](#i21062a011)] | | [Selected Financial [removed: Data.](#i20108a009) |] [added: Data.](#i21062a011)] | [removed: 14] [added: 17] |

| [Item [removed: 7.](#i20108a010)] [added: 7.](#i21062a012)] | | [Management’s Discussion and Analysis of Financial Condition and Results of [removed: Operations.](#i20108a010) |] [added: Operations.](#i21062a012)] | [removed: 14] [added: 17] |

| [Item [removed: 7.A.](#i20108a011)] [added: 7.A.](#i21062a013)] | | [Quantitative and Qualitative Disclosures about Market [removed: Risk.](#i20108a011) |] [added: Risk.](#i21062a013)] | [removed: 22] [added: 25] |

| [Item [removed: 8.](#i20108a012)] [added: 8.](#i21062a014)] | | [Financial Statements and Supplementary [removed: Data.](#i20108a012) |] [added: Data.](#i21062a014)] | [removed: 27] [added: 26] |

| [Item [removed: 9.](#i20108a013)] [added: 9.](#i21062a015)] | | [Changes in and Disagreements with Accountants on Accounting and Financial [removed: Disclosures.](#i20108a013) |] [added: Disclosures.](#i21062a015)] | [removed: 63] [added: 67] |

| [Item [removed: 9.A.](#i20108a014)] [added: 9.A.](#i21062a016)] | | [Controls and [removed: Procedures.](#i20108a014) |] [added: Procedures.](#i21062a016)] | [removed: 63] [added: 67] |

| [Item [removed: 9.B.](#i20108a015)] [added: 9.B.](#i21062a017)] | | [Other [removed: Information.](#i20108a015) |] [added: Information.](#i21062a017)] | [removed: 63] [added: 67] |

| [removed: Part III |] [added: [Part III](#i21062a018)] | | | |

| [Item [removed: 10.](#i20108a016)] [added: 10.](#i21062a019)] | | [Directors, Executive Officers and Corporate [removed: Governance.](#i20108a016) |] [added: Governance.](#i21062a019)] | [removed: 64] [added: 68] |

| [Item [removed: 11.](#i20108a017)] [added: 11.](#i21062a020)] | | [Executive [removed: Compensation.](#i20108a017) |] [added: Compensation.](#i21062a020)] | [removed: 64] [added: 68] |

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

| | | | |

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C.7262(b)) by the registered public accounting firm that prepared or issued its audit report.

Yes x No o

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

| | | | |

| | | | |

| | | | |

| | | [Signatures.](#i21062a026) | 73 |

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

| | | |

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

| | | | | | |

| | | | | |

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

| --- |

Item 1.

Business

General

Rollins, Inc. (the “Company”) was originally incorporated in 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 the United States, Canada, Australia, Europe, and Asia with international franchises in Mexico, Canada, Central and South America, the Caribbean, Europe, the Middle East, Asia, Africa, and Australia.

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 in the Notes to the Financial Statements (Part II, Item 8, of this Form 10-K).

The Company has only one reportable segment, its pest and termite control business.

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

The Company’s results of operations and its financial condition are not reliant upon any single customer or a few customers or the Company’s foreign operations.

Three-for-Two Stock Split

All share and per share data presented have been adjusted to account for the three-for-two stock split effective December 10, 2018.

Common Stock Repurchase Program

At the July 24, 2012 Quarterly Board of Directors’ meeting, the Board authorized the purchase of 11.3 million shares of the Company’s common stock.

During the years ended December 31, 2019 and 2018, the Company did not repurchase shares on the open market.

In total, there are 7.6 million additional shares authorized to be repurchased under prior Board approval.

The repurchase program does not have an expiration date.

Backlog

Backlog services and orders are usually provided within the month following the month of order receipt, except in the area of prepaid pest control and bait monitoring services, which are usually provided within twelve months of order receipt.

The Company does not have a material portion of its business that may be subject to renegotiation of profits or termination of contracts at the election of a governmental entity.

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

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

| Backlog | | $ | 7,137 | | | $ | 5,837 | | | $ | 4,875 | |

| 3 |

Franchising Programs

Orkin Franchises

The Company, through its wholly-owned subsidiary Orkin Systems, LLC, began its Orkin franchise program in the U.S. in 1994, and established its first international franchise in 2000.

It has since expanded to Mexico, Central and South America, the Caribbean, Europe, the Middle East, Asia, and Africa.

The Company continues to expand its growth through the franchise program of its Orkin brand.

This program is primarily used in smaller markets where it is currently not economically efficient to locate a company-owned Orkin branch.

Domestic franchisees are subject to a contractual buyback provision at Orkin’s option with a pre-determined purchase price using a formula applied to revenues of the franchise; however, the franchisee has the prior right of renewal of the agreement.

International franchise agreements also contain an optional buyback provision, subject to the franchisee’s renewal option.

| | | At December 31, | | | | | | | | | | |

| [removed: Name] [added: Name] | | [removed: Age] [added: Age] | | [removed: Office] [added: | | Office] with [removed: Registrant] [added: Registrant] | | [removed: Date] [added: Date] First [removed: Elected to] [added: Elected to] Present [removed: Office] [added: Office] |

| Gary W. Rollins (1) [removed: (2)] | | [removed: 75] [added: 76] | | [removed: Vice] [added: | |] Chairman and Chief Executive Officer | | [removed: 7/24/2001] [added: August 25, 2020] |

| Paul E. Northen (4) | | [removed: 55] [added: 56] | | [added: | |] Senior Vice President, Chief Financial Officer and Treasurer | | [removed: 1/26/2016] [added: January 26, 2016] |

| Elizabeth B. Chandler (5) | | [removed: 56] [added: 57] | | [added: | |] Vice President, General Counsel and Corporate Secretary | | [removed: 1/1/2018] [added: January 1, 2018] |

| | [removed: (2)] [added: (1)] | Gary W. Rollins was [added: named Chairman of Rollins, Inc in August 2020. He was] elevated to Vice Chairman 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. |

| | [removed: (3)] [added: (2)] | John Wilson joined the Company in 1996 and has held various positions of increasing responsibility, serving as a technician, sales inspector, branch manager, region manager, vice president and division president. His most senior positions have included [added: President and Chief Operating Officer of Rollins, Inc.,] Vice President of Rollins, Inc., Southeast Division President, Atlantic Division Vice President and Central Commercial [removed: region manager.] [added: Region Manager.] Mr. Wilson was elevated to [removed: President and Chief Operating Officer] [added: Vice Chairman] in [removed: January 2013.] [added: August 2020.] |

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

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

| John F. Wilson (2) | | 63 | | | | Vice Chairman and Assistant to the Chairman | | August 25, 2020 |

| Jerry E. Gahlhoff Jr. (3) | | 48 | | | | President and Chief Operating Officer | | August 25, 2020 |

| | | | | | | | | |

| | (3) | Jerry E. Gahlhoff Jr. was named the President and Chief Operating Officer of Rollins, Inc. in August 2020. He came to the Company in the HomeTeam acquisition in 2008 and has successfully managed several areas of the Company with increasing responsibility. He most recently led the Rollins Specialty Brands team of HomeTeam, Clark, Northwest, Western Pest, Waltham Pest, OPC pest control companies as well as the Rollins Human Resources department. |

| 14 |

| 10 |

| --- |

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

| R. Randall Rollins (1) | | 88 | | Chairman of the Board of Directors | | 10/22/1991 |

| John F. Wilson (3) | | 62 | | President and Chief Operating Officer | | 1/23/2013 |

| | (1) | R. Randall Rollins and Gary W. Rollins are brothers. |

| 11 |

As of January 31, [removed: 2020,] [added: 2021,] there were [removed: 7,852] [added: 7,760] holders of record of the Company’s common stock.

During the years ended December 31, [removed: 2019] [added: 2020] and [removed: 2018,] [added: 2019,] the Company did not repurchase shares on the open market.

In total, there [removed: remain 7.6] [added: remains 11.4] million additional shares authorized to be repurchased under prior Board approval.

| [added: |] (1) | Includes repurchases from employees for the payment of taxes on vesting of restricted shares in the following amounts: October [removed: 2019: 0;] [added: 2020: 703;] November [removed: 2019: 848;] [added: 2020: 2,147;] and December [removed: 2019: 1,210.] [added: 2020: 0.] |

| [added: |] (2) | [removed: The Company has] [added: In 2012, the Company’s Board authorized] a share repurchase plan [removed: adopted in 2012,] to repurchase up to [removed: 11.25] [added: 5.0] million shares of the Company’s common stock. [added: The split-adjusted authorized shares under the share repurchase plan are 16.9 million shares.] |

][added: GRAPH)](https://www.sec.gov/Archives/edgar/data/84839/000117120021000076/i21062001.jpg)]

| October 1 to 31, 2020 | | | 703 | | | $ | 35.87 | | | | — | | | | 11,415,625 | |

| November 1 to 30, 2020 | | | 2,147 | | | | 39.67 | | | | — | | | | 11,415,625 | |

| December 1 to 31, 2020 | | | — | | | | — | | | | — | | | | 11,415,625 | |

| Total | | | 2,850 | | | $ | 38.73 | | | | — | | | | 11,415,625 | |

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

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

| 15 |

Copyright© 2020 Standard & Poor’s, a division of S&P Global.

All rights reserved.

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

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

| | | 2015 | | | | 2016 | | | | 2017 | | | | 2018 | | | | 2019 | | | | 2020 | | |

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

| Rollins Inc. | | | 100.00 | | | | 133.86 | | | | 188.22 | | | | 223.35 | | | | 209.10 | | | | 375.31 | |

| S&P500 | | | 100.00 | | | | 109.54 | | | | 130.81 | | | | 122.65 | | | | 158.07 | | | | 183.77 | |

| S&P 500 Commercial Services & Supplies | | | 100.00 | | | | 122.83 | | | | 145.76 | | | | 144.16 | | | | 199.28 | | | | 237.88 | |

| 16 |

| October 1 to 31, 2019 | | | — | | | $ | — | | | | — | | | | 7,610,416 | |

| November 1 to 30, 2019 | | | 848 | | | | 38.79 | | | | — | | | | 7,610,416 | |

| December 1 to 31, 2019 | | | 1,210 | | | | 33.18 | | | | — | | | | 7,610,416 | |

| Total | | | 2,058 | | | $ | 35.49 | | | | — | | | | 7,610,416 | |

| --- | --- |

| 12 |

| | | | | | | | |

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

| | | 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 |

All share and per share data presented in the following table have been adjusted for the three-for-two stock split effective December 10, [removed: 2018.][added: 2020.]

| Years ended December 31, | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | | | [removed: 2016] [added: 2017] | | | | [removed: 2015] [added: 2016] | | |

| Revenues | | $ | [removed: 2,015,477] [added: 2,161,220] | | | $ | [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] | |

| Income before taxes | | [added: $] | [removed: 261,160] [added: 354,720] | | | [added: $] | [removed: 310,733] [added: 261,160] | | | [added: $] | [removed: 294,502] [added: 310,733] | | | [added: $] | [removed: 260,636] [added: 294,502] | | | [added: $] | [removed: 243,178] [added: 260,636] | |

| Net income | | $ | [removed: 203,347] [added: 260,824] | | | $ | [removed: 231,663] [added: 203,347] | | | $ | [removed: 179,124] [added: 231,663] | | | $ | [removed: 167,369] [added: 179,124] | | | $ | [removed: 152,149] [added: 167,369] | |

| Dividends per share | | $ | [removed: 0.47] [added: 0.33] | | | $ | [removed: 0.47] [added: 0.31] | | | $ | [removed: 0.37] [added: 0.31] | | | $ | [removed: 0.33] [added: 0.25] | | | $ | [removed: 0.28] [added: 0.22] | |

| Net cash provided by operating activities | | $ | [removed: 309,188] [added: 435,785] | | | $ | [removed: 286,272] [added: 319,573] | | | $ | [removed: 235,370] [added: 299,401] | | | $ | [removed: 226,525] [added: 235,370] | | | $ | [removed: 196,356] [added: 226,525] | |

| Net cash used in investing activities | | $ | [removed: (455,107] [added: (162,395] | ) | | $ | [removed: (101,375] [added: (455,107] | ) | | $ | [removed: (154,175] [added: (101,375] | ) | | $ | [removed: (76,842] [added: (154,175] | ) | | $ | [removed: (69,942] [added: (76,842] | ) |

| Net cash [removed: provided by/(used in)] [added: (used in)/provided by] financing activities | | $ | [removed: 127,655] [added: (281,273] | [added: )] | | $ | [removed: (162,283] [added: 111,686] | [removed: )] | | $ | [removed: (130,263] [added: (175,412] | ) | | $ | [removed: (136,371] [added: (130,263] | ) | | $ | [removed: (97,216] [added: (136,371] | ) |

| Depreciation | | $ | [removed: 36,646] [added: 40,623] | | | $ | [removed: 30,364] [added: 36,646] | | | $ | [removed: 27,381] [added: 30,364] | | | $ | [removed: 24,725] [added: 27,381] | | | $ | [removed: 19,354] [added: 24,725] | |

| Amortization of intangible assets | | $ | [removed: 44,465] [added: 47,706] | | | $ | [removed: 36,428] [added: 44,465] | | | $ | [removed: 29,199] [added: 36,428] | | | $ | [removed: 26,177] [added: 29,199] | | | $ | [removed: 25,168] [added: 26,177] | |

| Capital expenditures | | $ | [removed: (27,146] [added: (23,229] | ) | | $ | [removed: (27,179] [added: (27,146] | ) | | $ | [removed: (24,680] [added: (27,179] | ) | | $ | [removed: (33,081] [added: (24,680] | ) | | $ | [removed: (39,495] [added: (33,081] | ) |

| Current assets | | $ | [removed: 309,787] [added: 314,777] | | | $ | [removed: 286,021] [added: 309,787] | | | $ | [removed: 262,795] [added: 286,021] | | | $ | [removed: 290,171] [added: 262,795] | | | $ | [removed: 269,434] [added: 290,171] | |

| Total assets | | $ | [removed: 1,744,376] [added: 1,845,900] | | | $ | [removed: 1,094,124] [added: 1,744,376] | | | $ | [removed: 1,033,663] [added: 1,094,124] | | | $ | [removed: 916,538] [added: 1,033,663] | | | $ | [removed: 848,651] [added: 916,538] | |

| Stockholders’ equity | | $ | [removed: 815,750] [added: 941,360] | | | $ | [removed: 711,908] [added: 815,750] | | | $ | [removed: 653,924] [added: 711,908] | | | $ | [removed: 568,545] [added: 653,924] | | | $ | [removed: 524,029] [added: 568,545] | |

| Earnings per share - Basic | | $ | 0.53 | | | $ | 0.41 | | | $ | 0.47 | | | $ | 0.37 | | | $ | 0.34 | |

| Earnings per share - Diluted | | $ | 0.53 | | | $ | 0.41 | | | $ | 0.47 | | | $ | 0.37 | | | $ | 0.34 | |

| Total debt | | $ | 203,000 | | | $ | 291,500 | | | $ | — | | | $ | — | | | $ | — | |

| Number of shares outstanding at year-end | | | 491,612 | | | | 491,146 | | | | 490,962 | | | | 490,482 | | | | 490,031 | |

| Earnings per share - Basic | | $ | 0.62 | | | $ | 0.71 | | | $ | 0.55 | | | $ | 0.51 | | | $ | 0.47 | |

| Earnings per share - Diluted | | $ | 0.62 | | | $ | 0.71 | | | $ | 0.55 | | | $ | 0.51 | | | $ | 0.47 | |

| Number of shares outstanding at year-end | | | 327,431 | | | | 327,308 | | | | 326,988 | | | | 326,688 | | | | 327,830 | |

| [added: At] December 31, | | [added: 2020 | | | |] 2019 | | | | 2018 | | |

| Cash and cash equivalents [added: at end of year] | | $ | [added: 98,477 | | | $ |] 94,276 | | | $ | 115,485 | |

| Trade receivables, net of allowance for [removed: doubtful accounts] [added: expected credit losses] of [removed: $16,699] [added: $16,854] and [removed: $13,285,] [added: $16,699,] respectively | | | [removed: 122,766] [added: 126,337] | | | | [removed: 104,016] [added: 122,766] | |

| Financed receivables, short-term, net of allowance for [removed: doubtful accounts] [added: expected credit losses] of [removed: $1,675] [added: $1,297] and [removed: $1,845,] [added: $1,675,] respectively | | | [removed: 22,267] [added: 23,716] | | | | [removed: 18,454] [added: 22,267] | |

| Materials and supplies | | | [removed: 19,476] [added: 30,843] | | | | [removed: 15,788] [added: 19,476] | |

| Other current assets | | | [removed: 51,002] [added: 35,404] | | | | [removed: 32,278] [added: 51,002] | |

| Total current assets | | | [removed: 309,787] [added: 314,777] | | | | [removed: 286,021] [added: 309,787] | |

| Equipment and property, net | | | [removed: 195,533] [added: 178,052] | | | | [removed: 136,885] [added: 195,533] | |

| Goodwill | | | [removed: 572,847] [added: 653,176] | | | | [removed: 368,481] [added: 572,847] | |

| Customer contracts, net | | | [removed: 273,720] [added: 298,949] | | | | [removed: 178,075] [added: 273,720] | |

| Trademarks and tradenames, net | | | [removed: 102,539] [added: 109,044] | | | | [removed: 54,140] [added: 102,539] | |

| Other intangible assets, net | | | [removed: 10,525] [added: 10,777] | | | | [removed: 11,043] [added: 10,525] | |

| Operating lease, right-of-use assets, net | | | [removed: 200,727] [added: 212,342] | | | | [removed: —] [added: 200,727] | |

| Financed receivables, long-term, net of allowance for [removed: doubtful accounts] [added: expected credit losses] of [removed: $1,284] [added: $1,934] and [removed: $1,536] [added: $1,284] respectively | | | [removed: 30,792] [added: 38,187] | | | | [removed: 28,227] [added: 30,792] | |

| Benefit plan assets | | | [removed: 21,565] [added: 1,198] | | | | [removed: —] [added: 21,565] | |

| Deferred income taxes | | | [removed: 2,180] [added: 2,222] | | | | [removed: 6,915] [added: 2,180] | |

| Other assets | | | [removed: 24,161] [added: 27,176] | | | | [removed: 19,063] [added: 24,161] | |

| Total assets | | $ | [removed: 1,744,376] [added: 1,845,900] | | | $ | [removed: 1,094,124] [added: 1,744,376] | |

| Accounts payable | | $ | [removed: 35,234] [added: 64,596] | | | $ | [removed: 27,168] [added: 35,234] | |

| Accrued insurance | | | [removed: 30,441] [added: 31,675] | | | | [removed: 27,709] [added: 30,441] | |

| Accrued compensation and related liabilities | | | [removed: 81,943] [added: 91,011] | | | | [removed: 77,741] [added: 81,943] | |

| Unearned revenues | | | [removed: 122,825] [added: 131,253] | | | | [removed: 116,005] [added: 122,825] | |

| Operating lease liabilities-current | | | [removed: 66,117] [added: 73,248] | | | | [removed: —] [added: 66,117] | |

| Current portion of long-term debt | | | [removed: 12,500] [added: 17,188] | | | | [removed: —] [added: 12,500] | |

| Other current liabilities | | | [removed: 60,975] [added: 63,540] | | | | [removed: 50,406] [added: 60,975] | |

| Total current liabilities | | | [removed: 410,035] [added: 472,511] | | | | [removed: 299,029] [added: 410,035] | |

| Accrued insurance, less current portion | | | [removed: 34,920] [added: 36,067] | | | | [removed: 33,867] [added: 34,920] | |

| Operating lease liabilities, less current portion | | | [removed: 135,651] [added: 140,897] | | | | [removed: —] [added: 135,651] | |

| Long-term debt | | | [removed: 279,000] [added: 185,812] | | | | [removed: —] [added: 279,000] | |

| Deferred income tax liability | | | [removed: 9,927] [added: 10,612] | | | | [removed: —] [added: 9,927] | |

| Long-term accrued liabilities | | | [removed: 59,093] [added: 58,641] | | | | [removed: 49,320] [added: 59,093] | |

| Total liabilities | | | [removed: 928,626] [added: 904,540] | | | | [removed: 382,216] [added: 928,626] | |

| Common stock, par value $1 per share; 550,000,000 shares authorized, [removed: 327,430,846] [added: 491,612,059] and [removed: 327,308,079] [added: 491,146,269] shares issued and outstanding, respectively | | | [removed: 327,431] [added: 491,612] | | | | [removed: 327,308] [added: 491,146] | |

| Paid in capital | | | [removed: 89,413] [added: 101,757] | | | | [removed: 85,386] [added: 89,413] | |

| Accumulated other comprehensive loss | | | [removed: (21,109] [added: (10,897] | ) | | | [removed: (71,078] [added: (21,109] | ) |

| Total [removed: stockholders'] [added: stockholders’] equity | | | [removed: 815,750] [added: 941,360] | | | | [removed: 711,908] [added: 815,750] | |

| Total liabilities and [removed: stockholders'] [added: stockholders’] equity | | $ | [removed: 1,744,376] [added: 1,845,900] | | | $ | [removed: 1,094,124] [added: 1,744,376] | |

| Years ended December 31, | | [removed: 2019] [added: 2020] | | | | [removed: 2018] [added: 2019] | | | | [removed: 2017] [added: 2018] | | |

| Customer services | | $ | [removed: 2,015,477] [added: 2,161,220] | | | $ | [removed: 1,821,565] [added: 2,015,477] | | | $ | [removed: 1,673,957] [added: 1,821,565] | |

| Cost of services [removed: provided] [added: provided, exclusive of depreciation and amortization] | | | [removed: 993,593] [added: 1,048,592] | | | | [removed: 894,437] [added: 993,593] | | | | [removed: 819,943] [added: 894,437] | |

MANAGEMENT’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

To the Stockholders of Rollins, Inc.:

The management of Rollins, Inc. and subsidiaries is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

Rollins, Inc. maintains a system of internal accounting controls designed to provide reasonable assurance, at a reasonable cost, that assets are safeguarded against loss or unauthorized use and that the financial records are adequate and can be relied upon to produce financial statements in accordance with accounting principles generally accepted in the United States of America.

The internal control system is augmented by written policies and procedures, an internal audit program and the selection and training of qualified personnel.

This system includes policies that require adherence to ethical business standards and compliance with all applicable laws and regulations.

Under the supervision and with the participation of our management, including our principal executive officer and principal financial and accounting officer, we conducted an evaluation of the effectiveness of the design and operation of internal controls over financial reporting, as of December 31, 2020 based on criteria established in the 2013 Internal Control—Integrated 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, 2020.

The independent registered public accounting firm, Grant Thornton LLP has audited the consolidated financial statements as of and for the year ended December 31, 2020, and has also issued their report on the effectiveness of the Company’s internal control over financial reporting, included in this report on page 27.

| | | |

| /s/ Gary W. Rollins | | /s/ Paul E. Northen |

| Gary W. Rollins | | Paul E. Northen |

| | | |

| Chairman and Chief Executive Officer | | Senior Vice President, Chief Financial Officer and Treasurer |

| Principal Executive Officer | | Principal Financial and Accounting Officer |

Atlanta, Georgia

| 26 |

|  |

| | | |

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

| grant thornton llp 1100 Peachtree St.NE, Suite 1200 Atlanta, GA 30309 D +1 404 330 2000 F +1 404 330 2047 | | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON INTERNAL CONTROL OVER FINANCIAL REPORTING Board of Directors and Stockholders Rollins, Inc. Opinion on internal control over financial reporting We have audited the internal control over financial reporting of Rollins, Inc. (a Delaware corporation) and subsidiaries (the “Company”) as of December 31, 2020, 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, 2020, 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, 2020, and our report dated February 26, 2021 expressed an unqualified opinion on those financial statements. Basis for opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and limitations of internal control over financial reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ GRANT THORNTON LLP Atlanta, Georgia February 26, 2021 |

| | | |

| GT.COM | | Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership. |

|  |

| | | |

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

| grant thornton llp 1100 Peachtree St.NE, Suite 1200 Atlanta, GA 30309 D +1 404 330 2000 F +1 404 330 2047 | | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ON CONSOLIDATED FINANCIAL STATEMENTS AND SCHEDULE Board of Directors and Stockholders Rollins, Inc. Opinion on the financial 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, 2020 and 2019, 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, 2020, 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, 2020 and 2019, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020, 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, 2020, 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 February 26, 2021 expressed an unqualified opinion. Basis for opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. |

| | | |

| GT.COM | | Grant Thornton LLP is the U.S. member firm of Grant Thornton International Ltd (GTIL). GTIL and each of its member firms are separate legal entities and are not a worldwide partnership. |

|  |

| | Critical audit matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates 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 matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. _Accrued Insurance – workers’ compensation and vehicle liability_ As described further in Note 1 to the financial statements, the Company retains, up to certain policy-specified limits, certain risks related to workers’ compensation and vehicle liability. The estimated costs of existing and future claims under the retained loss programs 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 - workers’ compensation and vehicle liability and related expense (“accrued insurance”) as a critical audit matter. The principal considerations for our determination that accrued insurance is a critical audit matter are that accrued insurance liability has higher risk of estimation uncertainty due to the loss development factors and inherent assumptions in actuarial methods used in determining the required liability. The estimation uncertainty and complexity of the actuarial methods utilized involved especially subjective auditor judgment and an increased extent of effort, including the need to involve an auditor-engaged actuarial specialist. Our audit procedures related to the accrued insurance reserve included the following, among others: |

| | • | Obtained an understanding, evaluated the design and tested operating effectiveness of key controls relating to accrued insurance, including, but not limited to, controls that (1) validate that claims were reported and submitted accurately and timely, (2) validate the underlying data maintained by the Company and the third-party administrator used to develop the accrued insurance reserve was complete and accurate, and (3) verify the third-party actuarial report used in developing the accrued insurance reserve was reviewed by the Company’s management. |

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

| | • | Utilized an auditor-engaged specialist in evaluating management’s methods and assumptions, including the reasonableness of the selected loss development factors utilized by management, as well as performing a retrospective review to validate the assumptions utilized by management, to identify indicators of potential bias. |

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

| | • | Tested the underlying data maintained by the Company and the third-party administrator, which was submitted to the Company’s actuary to develop the accrued insurance reserve, for completeness and accuracy. |

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

| | |

| | /s/ GRANT THORNTON LLP We have served as the Company’s auditor since 2004. Atlanta, Georgia February 26, 2021 |

| December 31, | | 2020 | | | | 2019 | | |

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

| | | | | | | | | |

| Prepaid pension | | | — | | | | 5,274 | |

| Retained earnings | | | 420,015 | | | | 370,292 | |

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

| Weighted average shares outstanding - basic | | | 327,477 | | | | 327,291 | | | | 326,982 | |

| Weighted average shares outstanding - diluted | | | 327,477 | | | | 327,291 | | | | 326,982 | |

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

| Balance at December 31, 2016 | | | 326,688 | | | $ | 326,688 | | | | — | | | $ | — | | | $ | 77,452 | | | $ | (70,075 | ) | | $ | 234,480 | | | $ | 568,545 | |

| Net Income | | | | | | | | | | | | | | | — | | | | | | | | | | | | 179,124 | | | | 179,124 | |

| Cash dividends | | | | | | | | | | | | | | | | | | | | | | | | | | | (122,017 | ) | | | (122,017 | ) |

| Stock compensation | | | 651 | | | | 651 | | | | | | | | | | | | 11,965 | | | | | | | | (217 | ) | | | 12,399 | |

| Employee stock buybacks | | | (351 | ) | | | (351 | ) | | | | | | | | | | | (8,012 | ) | | | | | | | 117 | | | | (8,246 | ) |

| Provision for bad debts | | | 15,145 | | | | 13,606 | | | | 10,455 | |

| Net cash provided by operating activities | | | 309,188 | | | | 286,272 | | | | 235,370 | |

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

| Net cash provided by/(used in) financing activities | | | 127,655 | | | | (162,283 | ) | | | (130,263 | ) |

| Cash and cash equivalents at end of year | | $ | 94,276 | | | $ | 115,485 | | | $ | 107,050 | |

Orkin, LLC.

See Recent Accounting Guidance for discussion of the new FASB, ASU 2016-13 which provides updated guidance on measuring expected credit losses to be implemented in 2020.

Short-term investments, included in cash and cash equivalents, are stated at cost, which approximates fair market value.

If the fair value of the reporting unit is lower than its carrying value, then the Company will compare the implied fair value of goodwill to its carrying value.

Impairment losses are recognized whenever the implied fair value of goodwill is less than its carrying value.

| Common stock | | | 325,046 | | | | 324,529 | | | | 323,891 | |

| Basic and diluted shares outstanding (in shares) | | | 327,477 | | | | 327,291 | | | | 326,982 | |

| Distributed earnings | | $ | 0.47 | | | $ | 0.47 | | | $ | 0.37 | |

| Undistributed earnings | | | 0.15 | | | | 0.24 | | | $ | 0.18 | |

| | | $ | 0.62 | | | $ | 0.71 | | | $ | 0.55 | |

| Distributed earnings | | $ | 0.43 | | | $ | 0.47 | | | $ | 0.35 | |

| Undistributed earnings | | | 0.15 | | | | 0.24 | | | | 0.18 | |

| | | $ | 0.58 | | | $ | 0.71 | | | $ | 0.53 | |

The Company anticipates that should there be any losses from franchisees, these losses would be recouped by terminating the franchisee and re-selling the territory.

The Company adopted ASU 2016-02, Leases (ASC 842), on January 1, 2019 using the modified retrospective approach and did not restate comparative periods as permitted by ASU 2018-11, Leases (Topic 842): Targeted Improvements.

We have elected the transition package of practical expedients, which permitted us not to reassess our prior conclusions regarding lease identification, lease classification and initial direct cost.

The new standard also provides practical expedients for an entity’s ongoing accounting.

We elected the short-term lease recognition exemption.

Accordingly, the Company does not recognize right of use assets or lease liabilities, for existing short-term leases of those assets in transition.

Upon adoption, the Company recognized operating lease right-of-use assets and liabilities of $195.7 million and $195.5 million, and a $0.2 million adjustment to beginning retained earnings.

The Company adopted ASU 2018-02, “Income Statement—Reporting Comprehensive Income (ASC 220): Reclassification of Certain Tax Effects from Accumulated Other Comprehensive Income”, which allows a reclassification from accumulated other comprehensive income to retained earnings for stranded tax effects resulting from the Tax Cuts and Jobs Act of 2017 (“Tax Reform Act”).

The Company adopted ASU 2018-02 effective January 1, 2019 and elected not to recognize a cumulative-effect adjustment.

Based on management’s evaluation as of December 31, [removed: 2019,] [added: 2020,] 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.

_Management’s Report on Internal Control Over Financial Reporting_—Management’s Report on Internal Control Over Financial Reporting is contained on page [removed: 23.][added: 26.]

_Changes in Internal Controls_—There were no changes in our internal control over financial reporting during the fourth quarter of [removed: 2019] [added: 2020] that materially affected or are reasonably likely to materially affect these controls.

The effectiveness of our internal control over financial reporting as of December 31, 2020 has been audited by Grant Thornton LLP, an independent registered public accounting firm, as stated in its report on page 27.

None

| 67 |

None.

| 63 |

Information concerning directors and executive officers is included in the Company’s Proxy Statement for its [removed: 2019] [added: 2020] Annual Meeting of Stockholders (the “Proxy Statement”), in the section titled “Proposal 1: Election of Directors”.

Information about executive officers is contained on page [removed: 11] [added: 14] of this document.

In addition, the Company has adopted a Code of Business Conduct and Ethics for Directors and Executive [removed: Officer] [added: Officers] and Related Party Transactions policy.

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: 28, 2020] [added: 27, 2021] is incorporated herein by reference.

The following table sets forth certain information regarding equity compensation plans as of December 31, [removed: 2019.][added: 2020.]

| Plan Category | | [removed: ( A )] [added: (A)] | | | | [removed: ( B )] [added: (B)] | | | | [removed: ( C )] [added: (C)] | | |

| Equity compensation plans approved by security holders | | | [removed: 2,310,101] [added: 2,870,231] | | | | | | | | [removed: 5,466,484] [added: 7,347,097] | |

| | 1. | Includes [removed: 5,466,484] [added: 7,374,097] 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. |

| 68 |

| Total | | | 2,870,231 | | | | — | | | | 7,347,097 | (1) |

| 64 |

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

| 69 |

| 65 |

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

| [removed: |] 1. | [added: |] Consolidated financial statements listed in the accompanying Index to Consolidated Financial Statements and Schedule are filed as part of this report. |

| [removed: |] 2. | [added: |] The financial statement schedule listed in the accompanying Index to Consolidated Financial Statements and Schedule is filed as part of this report. |

| [removed: |] 3. | [added: |] Exhibits listed in the accompanying Index to Exhibits are filed as part of this report. The following such exhibits are management contracts or compensatory plans or arrangements: |

| [removed: |] _(b)_ | _Exhibits_ (inclusive of item 3 above): |

| [removed: (4)(a)] [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. |

| [removed: (4)(b)] [added: (4) (b)] | | Description of Registrant’s Securities. |

| (10) (m) | | Real Estate Purchase Agreement by and between RCI [removed: -] [added: –] King, Inc., and Clarksons California Properties, a California limited partnership. |

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

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

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

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

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

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

| | | [removed: Vice] Chairman and Chief Executive Officer |

| | Date: | February [removed: 28, 2020] [added: 26, 2021] |

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

| Date: | February [removed: 28, 2020] [added: 26, 2021] | | Date: | February [removed: 28, 2020] [added: 26, 2021] |

| Financial statements and reports | [removed: Page Number From This] [added: Page Number From This] Form 10-K |

| [Management’s Report on Internal Control Over Financial [removed: Reporting](#i19083b001)] [added: Reporting](#i21062b001)] | [removed: 23] [added: 26] |

| [Report of Independent Registered Public Accounting Firm [removed: On] [added: on] Internal Control Over Financial [removed: Reporting](#i19083b002)] [added: Reporting](#i21062b002)] | [removed: 24] [added: 27] |

| [Report of Independent Registered Public Accounting Firm on the Consolidated Financial Statements and [removed: Schedule](#i19083b003)] [added: Schedule](#i21062b003)] | [removed: 25] [added: 28] |

| [Consolidated Statements of Financial Position as of December 31, [removed: 2019] [added: 2020] and [removed: 2018](#i19083b004)] [added: 2019](#i21062b004)] | [removed: 27] [added: 30] |

| [Consolidated Statements of Income for each of the three years in the period ended December 31, [removed: 2019](#i19083b005)] [added: 2020](#i21062b005)] | [removed: 28] [added: 31] |

| [Consolidated Statements of Comprehensive Earnings for each of the three years in the period ended December 31, [removed: 2019](#i19083b006)] [added: 2020](#i21062b006)] | [removed: 29] [added: 32] |

| [Consolidated Statements of Stockholders’ Equity for each of the three years in the period ended December 31, [removed: 2019](#i19083b007)] [added: 2020](#i21062b007)] | [removed: 30] [added: 33] |

| [Consolidated Statements of Cash Flows for each of the three years in the period ended December 31, [removed: 2019](#i19083b008)] [added: 2020](#i21062b008)] | [removed: 31] [added: 34] |

| [Notes to Consolidated Financial [removed: Statements](#i19083b009)] [added: Statements](#i21062b009)] | [removed: 32] [added: 35] – [removed: 62] [added: 66] |

[removed: | Schedule] [added: SCHEDULE] II – [removed: Valuation and Qualifying Accounts | 71 |][added: VALUATION AND QUALIFYING ACCOUNTS]

[removed: SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS][added: | [Schedule II – Valuation and Qualifying Accounts](#i21062b010) | 75 |]

| [removed: |] [added: (in thousands)] | | Balance at Beginning of [removed: Period] [added: Year] | | | | [added: Adoption of ASC 326 | | | |] Charged to Costs and Expenses | | | | Net (Deductions) Recoveries | | | | Balance at End of [removed: Period] [added: Year] | | [added: |]

| [removed: Year ended December 31,] 2019 | | $ | 16,666 | | | $ | [added: — | | | $ |] 15,145 | | | $ | (12,153 | ) | | $ | 19,658 | |

| [removed: Year ended December 31,] 2018 | | $ | 14,706 | | | $ | [added: — | | | $ |] 13,606 | | | $ | (11,646 | ) | | $ | 16,666 | |

| Exhibit Number | | [added: |] Exhibit Description |

| (3) (i) | | [added: |] [(A) Restated Certificate of Incorporation of Rollins, Inc. dated July 28, 1981, incorporated herein by reference to Exhibit (3)(i)(A) as filed with the registrant’s Form 10-Q filed August 1, 2005.](http://www.sec.gov/Archives/edgar/data/84839/000008483905000070/exhibit3ia.txt) |

| | | [added: |] [(B) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated August 20, 1987, incorporated herein by reference to Exhibit 3(i)(B) filed with the registrant’s 10-K filed March 11, 2005.](http://www.sec.gov/Archives/edgar/data/84839/000008483905000028/f03ib.txt) |

| | | [added: |] [(C) Certificate of Change of Location of Registered Office and of Registered Agent dated March 22, 1994, incorporated herein by reference to Exhibit (3)(i)(C) filed with the registrant’s Form 10-Q filed August 1, 2005.](http://www.sec.gov/Archives/edgar/data/84839/000008483905000070/exhibit3ic.txt) |

| | | [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, 2006.](http://www.sec.gov/Archives/edgar/data/84839/000008483906000070/ex3id.htm) |

| | | [added: |] [(E) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated 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) |

| | | [added: |] [(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.](http://www.sec.gov/Archives/edgar/data/84839/000155278115000727/e00291_ex3.htm) |

| | | | | |

| | Harry J. Cynkus, Director |

| | Jerry W. Nix, Director |

| | Susan R. Bell, Director |

| | Patrick J. Gunning, Director |

| --- | --- |

| February 26, 2021 | |

| --- | --- |

| 74 |

| | | Allowance for Expected Credit Losses | | | | | | | | | | | | | | | | | | |

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

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

| 2020 | | $ | 19,658 | | | $ | (3,330 | ) | | $ | 17,536 | | | $ | (13,779 | ) | | $ | 20,085 | |

| 75 |

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

| 76 |

| | | | |

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

| | | | |

| 77 |

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

| 66 |

| 67 |

| 68 |

| | | |

| | R. Randall Rollins, Director |

| | James B. Williams, Director |

| | Bill J. Dismuke, Director |

| February 28, 2020 | |

| 69 |

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

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

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

| Year ended December 31, 2017 | | $ | 14,600 | | | $ | 10,455 | | | $ | (10,349 | ) | | $ | 14,706 | |