Rollins 10-Q/A 2019-09-30

Filed 2019-10-31. 4 sections, 102K characters. Original on sec.gov · Markdown · JSON

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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

Amendment No. 1

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

For the quarterly period ended September 30, 2019

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

For the transition period from to

Commission File Number 1-4422

ROLLINS INC.

(Exact name of registrant as specified in its charter)

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

2170 Piedmont Road, N.E., Atlanta, Georgia

(Address of principal executive offices)

30324

(Zip Code)

(404) 888-2000

(Registrant's telephone number, including area code)

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

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

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

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

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

Large accelerated filer	x	Accelerated filer	o
Non-accelerated filer	o	Smaller reporting company	o
		Emerging growth company	o

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

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

Yes	o	No	x

Rollins, Inc. had 327,441,726 shares of its $1 par value Common Stock outstanding as of October 16, 2019.

ROLLINS, INC. AND SUBSIDIARIES

Explanatory Note

This Amendment No. 1 on Form 10-Q/A is being filed in order to correct certain inadvertent errors included in the pro forma financial information with respect to the Clark Pest Control acquisition appearing in Note 12 to the financial statements included in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2019 as originally filed with the Securities and Exchange Commission on October 25, 2019.

No other changes have been made to the Form 10–Q. This Amendment No. 1 speaks as of the original filing date of the Form 10–Q, does not reflect events that may have occurred subsequent to the original filing date and does not modify or update in any way other disclosures made in the original Form 10–Q.

ROLLINS, INC. AND SUBSIDIARIES

PART 1 FINANCIAL INFORMATION

Item 1. FINANCIAL STATEMENTS

CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2019, AND DECEMBER 31, 2018

(in thousands except share data)

	September 30,			December 31,
	2019			2018
	(Unaudited)
ASSETS
Cash and cash equivalents	$	104,362		$	115,485
Trade receivables, net of allowance for doubtful accounts of $15,736 and $13,080, respectively		132,065			104,016
Financed receivables, short-term, net of allowance for doubtful accounts of $1,726 and $1,691, respectively		23,821			18,454
Materials and supplies		17,500			15,788
Other current assets		46,440			32,278
Total current assets		324,188			286,021
Equipment and property, net		197,549			136,885
Goodwill		570,759			368,481
Customer contracts, net		283,830			178,075
Trademarks & tradenames, net		102,657			54,140
Other intangible assets, net		11,008			11,043
Operating lease, right-of-use assets		196,854			—
Financed receivables, long-term, net of allowance for doubtful accounts of $1,342 and $1,416 respectively		30,750			28,227
Benefit plan assets		25,949			—
Prepaid pension		—			5,274
Deferred income taxes		—			6,915
Other assets		21,249			19,063
Total assets	$	1,764,793		$	1,094,124
LIABILITIES
Accounts payable	$	32,932		$	27,168
Accrued insurance		29,817			27,709
Accrued compensation and related liabilities		78,699			77,741
Unearned revenues		132,915			116,005
Operating lease liabilities - current		63,952			—
Current portion of long-term debt		12,500			—
Other current liabilities		60,065			50,406
Total current liabilities		410,880			299,029
Accrued insurance, less current portion		34,157			33,867
Operating lease liabilities, less current portion		133,703			—
Long-term debt		313,500			—
Deferred income tax liability		7,971			—
Long-term accrued liabilities		57,685			49,320
Total liabilities		957,896			382,216
Commitments and contingencies
STOCKHOLDERS' EQUITY
Preferred stock, without par value; 500,000 shares authorized, zero shares issued		—			—
Common stock, par value $1 per share; 550,000,000 and 375,000,000 shares authorized, 327,441,726 and 327,308,079 shares issued and outstanding, respectively		327,442			327,308
Paid in capital		86,208			85,386
Accumulated other comprehensive loss		(26,746	)		(71,078	)
Retained earnings		419,993			370,292
Total stockholders' equity		806,897			711,908
Total liabilities and stockholders' equity	$	1,764,793		$	1,094,124

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

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF INCOME

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(in thousands except per share data)

(unaudited)

	Three Months Ended					Nine Months Ended
	September 30,					September 30,
	2019		2018			2019			2018
REVENUES
Customer services	$	556,466	$	487,739		$	1,509,492		$	1,376,942
COSTS AND EXPENSES
Cost of services provided		268,718		236,287			739,309			673,202
Depreciation and amortization		21,690		16,867			58,505			50,149
Pension settlement loss		49,898		—			49,898			—
Sales, general and administrative		167,168		145,072			468,584			414,938
Gain on sale of assets, net		27		(314	)		(406	)		(678	)
Interest expense, net		2,826		(63	)		4,451			70
INCOME BEFORE INCOME TAXES		46,139		89,890			189,151			239,261
PROVISION FOR INCOME TAXES		2,078		23,262			36,569			58,566
NET INCOME	$	44,061	$	66,628		$	152,582		$	180,695
NET INCOME PER SHARE - BASIC AND DILUTED	$	0.13	$	0.20		$	0.47		$	0.55
DIVIDENDS PAID PER SHARE	$	0.11	$	0.09		$	0.32		$	0.28
Weighted average participating shares outstanding - basic and diluted		327,459		327,321			327,490			327,283

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

ROLLINS, INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE EARNINGS

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(in thousands)

(unaudited)

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2019			2018			2019			2018
NET INCOME	$	44,061		$	66,628		$	152,582		$	180,695
Other comprehensive earnings (loss)
Pension settlement		45,990			—			45,990			—
Change in derivative values		(118	)		—			(375	)		—
Foreign currency translation adjustments		(4,110	)		(611	)		(1,283	)		(8,681	)
Other comprehensive earnings (loss)		41,762			(611	)		44,332			(8,681	)
Comprehensive earnings	$	85,823		$	66,017		$	196,914		$	172,014

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

ROLLINS, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS EQUITY

FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2019 AND 2018

(In thousands) (unaudited)


	Common Stock				Paid-in-capital		Accumulated Other Comprehensive income/ (loss)			Retained Earnings		Total
	Shares		Amount
Balance at June 30, 2018		327,326	$	327,326	$	78,212	$	(54,026	)	$	344,299	$	695,811
Net Income		—		—		—		—			6

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Item 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

As of September 30, 2019, the Company maintained an investment portfolio (included in cash and cash equivalents) subject to short-term interest rate risk exposure. The Company is subject to interest rate risk exposure through borrowings on its $175.0 million revolving credit facility and $250 million term loan facility. The Company is also exposed to market risks arising from changes in foreign exchange rates. See Note 13 to Part I, Item 1 for a discussion of the Company’s investments in derivative financial instruments to manage risks of fluctuations in foreign exchange rates. The Company believes that this foreign exchange rate risk will not have a material impact upon the Company’s results of operations going forward. There have been no material changes to the Company’s market risk exposure since the end of fiscal year 2018.

Item 4. CONTROLS AND PROCEDURES

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 our disclosure controls and procedures, as defined in rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of September 30, 2019 (the “Evaluation Date”). Based on this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of the Evaluation Date to ensure that the information required to be included in reports filed under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in SEC rules and forms.

In addition, management’s quarterly evaluation identified no changes in our internal control over financial reporting during the third quarter that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. As of September 30, 2019, we did not identify any material weaknesses in our internal controls, and therefore no corrective actions were taken.

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ROLLINS, INC. AND SUBSIDIARIES

PART II OTHER INFORMATION

	Item 1.	Legal Proceedings

See Note 5 to Part I, Item 1 for discussion of certain litigation.

	Item 1A.	Risk Factors

See the Company’s risk factors disclosed in the Company’s Annual Report on Form 10-K for the year ended December 31, 2018.

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ROLLINS, INC. AND SUBSIDIARIES

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds.

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Shares repurchased by Rollins and affiliated purchases during the third quarter ended September 30, 2019 were as follows:

					Total number of shares		Maximum number of
	Total number		Weighted-Average		purchased as part		shares that may yet
	of shares		price paid		of publicly announced		be purchased under
Period	Purchased (1)		per share		repurchases (2)		repurchase plan
July 1 to 30, 2019		—	$	—		—		7,610,416
August 1 to 31, 2019		2,847		35.77		—		7,610,416
September 1 to 30, 2019		—		—		—		7,610,416
Total		2,847	$	35.77		—		7,610,416

	(1)	Includes repurchases from employees for the payment of taxes on vesting of restricted shares in the following amounts: July 2019: 0; August 2019: 2,847; and September 2019: 0.

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

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ROLLINS, INC. AND SUBSIDIARIES

Exhibits.

(a)	Exhibits

	(3) (i)	(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.

		(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.

		(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.

		(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.

		(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.

		(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.

		(G) Certificate of Amendment of Certificate of Incorporation of Rollins, Inc. dated April 23, 2019, incorporated herein by reference to Exhibit 3(i)(G) filed with the Registrant’s 10-Q filed on April 26, 2019.

	(ii)	Amended and Restated By-laws of Rollins, Inc., incorporated herein by reference to exhibit 3(ii) as filed with its Form 10-Q for the quarter ended March 31, 2017.

	(4)	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.

	(31.1)	Certification of Chief Executive Officepror Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	(31.2)	Certification of Chief Financial Officer Pursuant to Item 601(b)(31) of Regulation S-K, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

	(32.1)	Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

	(101.INS)	XBRL Instance Document

	(101.SCH)	XBRL Taxonomy Extension Schema Document

	(101.CAL)	XBRL Taxonomy Extension Calculation Linkbase Document

	(101.DEF)	XBRL Taxonomy Extension Definition Linkbase Document

	(101.LAB)	XBRL Taxonomy Extension Label Linkbase Document

	(101.PRE)	XBRL Taxonomy Extension Presentation Linkbase Document

	+	Portions of this exhibit (indicated by asterisks) have been omitted.

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ROLLINS, INC. AND SUBSIDIARIES

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	ROLLINS, INC.
	(Registrant)

Date: October 31, 2019	By:	/s/ Gary W. Rollins
		Gary W. Rollins
		Vice Chairman and Chief Executive Officer
		(Principal Executive Officer)

Date: October 31, 2019	By:	/s/ Paul E. Northen
		Paul E. Northen
		Senior Vice President, Chief Financial Officer and Treasurer
		(Principal Financial and Accounting Officer)

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