ITEM 1. BUSINESS
(a) GENERAL DEVELOPMENT OF BUSINESS.
Since the beginning of the calendar year, Rollins, Inc. and its subsidiaries have continued to operate and grow in the same principal services for homes and businesses.
(b) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The response to Item 1.(b) is incorporated by reference from the table under the caption "Business Segment Information," on page 22 of the 1995 Annual Report to Stockholders.
(c) NARRATIVE DESCRIPTION OF BUSINESS.
(1)(i) The Registrant is a national company with headquarters located in Atlanta, Georgia, providing services to both residential and commercial customers. The four primary services provided are termite and pest control, protective services, lawn care and plantscaping. Additionally, the revenues by business segment are incorporated by reference to the table under the caption "Business Segment Information" on page 22 of the 1995 Annual Report to Stockholders.
Orkin Exterminating Company, Inc., a wholly owned subsidiary (Orkin), founded in 1901, is one of the world's largest termite and pest control companies. It provides customized services to approximately 1.6 million customers through a network of 386 branches serving customers in 49 states, the District of Columbia, the Bahamas, Canada, Mexico, and Puerto Rico. It provides customized pest control services to homes and businesses, including hotels, food service establishments, dairy farms and transportation companies. Orkin's continuous regular service provides protection against household pests, rodents and termites. Orkin's Lawn Care Division provides fertilization, weed and insect control, seeding, aeration of lawns, and tree and shrub care from 23 branches serving customers in nine states. Orkin's Plantscaping Division designs, installs and maintains green and flowering plants from ten branches and services customers in 21 states and the District of Columbia. It provides services to hotels, shopping malls, restaurants, and office buildings.
Rollins Protective Services, a division of the Registrant, was established in 1969. Services are provided from 51 branches serving customers in 41 states and the District of Columbia. A pioneer in developing customized wired and wireless electronic security systems, it provides full-service capabilities from system design and installation to maintenance and monitoring services. Full-service includes guaranteed maintenance programs, 24-hour emergency repairs, and 24-hour alarm monitoring services.
(ii) The Registrant has made no announcement of, nor did any information become public about, a new line of business or product requiring the investment of a material amount of the Registrant's total assets.
(iii) Sources and availability of raw materials present no particular problem to the Registrant, since its businesses are primarily in service-related industries.
(iv) Governmental licenses, patents, trademarks and franchises are of minor importance to the Registrant's service operations. Local licenses and permits are required in order for the Registrant to conduct its termite and pest control, protective services, lawn care and plantscaping operations in certain localities. In view of the widespread operations of the Registrant's service operations, the failure of a few local governments to license a facility would not have a material adverse effect on the results of operations of the Registrant.
(v) The business of the Registrant is affected by the seasonal nature of the Registrant's termite and pest control, lawn care and plantscaping service operations (Orkin Exterminating Company, Inc.). The metamorphosis of termites in the spring and summer (the occurrence of which is determined by the timing of the change in seasons) has historically resulted in an increase in the revenue and income of the Registrant's termite and pest control operations during such period. Lawn care services are seasonal and coincide with
the growing seasons of lawns. Plantscaping operations experience seasonal increases in revenues and operating income generated by the division's Exterior Color and Holiday programs offered during the spring and late fall.
(vi) Inapplicable.
(vii) The Registrant and its subsidiaries do not have a material part of their business that is dependent upon a single customer or a few customers, the loss of which would have a material effect on the business of the Registrant.
(viii) The dollar amount of service contracts and backlog orders as of the end of the Registrant's 1995 and 1994 calendar years was approximately $15,508,000 and $16,063,000, respectively. Backlog services and orders are usually provided within the month following the month of receipt, except in the area of prepaid pest control and alarm monitoring where services are usually provided within twelve months of receipt.
(ix) Inapplicable.
(x) The Registrant believes that each of its businesses competes favorably with competitors within its respective area. Orkin Exterminating Company, Inc. is one of the world's largest termite and pest control companies. Rollins Protective Services is a pioneer and one of the leaders in residential and commercial security. Orkin Lawn Care is one of the largest lawn care companies. Orkin Plantscaping is the industry's second largest company with operations in ten major markets.
The principal methods of competition in the Registrant's termite and pest control business are service and guarantees, including the money-back guarantee on termite and pest control, and the termite retreatment and damage repair guarantee to qualified homeowners. Competition in the plantscaping and lawn care businesses is based on providing customized services together with guarantees, with the Registrant offering the same money-back guarantee for the services. The principal method of competition in the residential protection business of the Registrant is the provision of customized emergency protection services to meet the particular needs of each customer.
(xi) Expenditures by the Registrant on research activities relating to the development of new products or services are not significant. Some of the new and improved service methods and products are researched, developed and produced by unaffiliated universities and companies. Also a portion of these methods and products are produced to the specifications provided by the Registrant.
(xii) The capital expenditures, earnings and competitive position of the Registrant and its subsidiaries are not materially affected by compliance with Federal, state and local provisions which have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment.
(xiii) The number of persons employed by the Registrant and its subsidiaries as of the end of 1995 was 8,956.
(d) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT SALES.
Inapplicable.
ITEM 2.
ITEM 2. PROPERTIES.
The Registrant's administrative headquarters and central warehouse, both of which are owned by the Registrant, are located at 2170 Piedmont Road, N.E., Atlanta, Georgia 30324. The Registrant owns or leases several hundred branch offices and operating facilities used in its businesses. None of the branch offices, individually considered, represents a materially important physical property of the Registrant. The facilities are suitable and adequate to meet the current and reasonably anticipated future needs of the Registrant.
ITEM 3.
ITEM 3. LEGAL PROCEEDINGS.
During November 1995, Orkin and the Attorney General of Missouri and private plaintiffs reached an agreement in settlement of a class action regarding treatments for termites for residential customers with basement homes contracted for between January 1, 1987 and May 15, 1993. The Attorney General and the
private plaintiffs raised concerns that Orkin's initial termite protection treatment for these customers was incomplete. Orkin maintains that its customers have received treatment consistent with industry practices. In order to best serve its customers and to avoid the continued expense of litigation, Orkin has agreed to reinspect the basement homes of all applicable customers and apply additional termiticide, if needed. In the event a customer covered by this agreement has suffered termite damage as a result of insufficient termiticide, Orkin has agreed to repair the customer's basement home. The presiding judge of the Circuit Court of the City of St. Louis approved the settlement on December 13, 1995. The resolution does not constitute an admission of wrongdoing by the Company and did not have a material adverse effect on the Company's financial position, results of operations, or liquidity.
In the normal course of business, the Company is a defendant in a number of lawsuits which allege that plaintiffs have been damaged as a result of the rendering of services by Company personnel and equipment. The Company is actively contesting these actions. It is the opinion of Management that the outcome of these actions will not have a material adverse effect on the Company's financial position, results of operations, or liquidity.
ITEM 4.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Inapplicable.
ITEM 4.A. EXECUTIVE OFFICERS OF THE REGISTRANT.
Each of the executive officers of the Registrant was elected by the Board of Directors to serve until the Board of Directors' meeting immediately following the next annual meeting of stockholders or until his earlier removal by the Board of Directors or his resignation. The following table lists the executive officers of the Registrant and their ages, offices with the Registrant, and the dates from which they have continually served in their present offices with the Registrant.
- ------------------------ (1) R. Randall Rollins and Gary W. Rollins are brothers.
(2) Gene L. Smith served as the Registrant's Vice President of Finance for the period 12/30/85 to 1/21/91.
PART II
ITEM 5.
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Information containing dividends and stock prices on page 12 and the principal markets on which common shares are traded on page 25 of the 1995 Annual Report to Stockholders are incorporated herein by reference. The number of stockholders of record on December 31, 1995 was 3,764.
ITEM 6.
ITEM 6. SELECTED FINANCIAL DATA.
Selected Financial Data on pages 10 and 11 of the 1995 Annual Report to Stockholders is incorporated herein by reference.
ITEM 7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.
Management's Discussion and Analysis of Financial Condition and Results of Operations included on pages 13 through 15 of the 1995 Annual Report to Stockholders is incorporated herein by reference. The effects of inflation on operations were not material for the periods being reported.
ITEM 8.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following consolidated financial statements and supplementary data of the Registrant and its consolidated subsidiaries, included in the 1995 Annual Report to Stockholders, are incorporated herein by reference.
Financial Statements:
Statements of Income for each of the three years in the period ended December 31, 1995, page 17.
Statements of Earnings Retained for each of the three years in the period ended December 31, 1995, page 17.
Statements of Financial Position as of December 31, 1995 and 1994, page 16.
Statements of Cash Flows for each of the three years in the period ended December 31, 1995, page 18.
Notes to Financial Statements, pages 19 through 23.
Report of Independent Auditors, page 24.
Supplementary Data:
Quarterly Information, page 12.
ITEM 9.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Inapplicable.
PART III
ITEM 10.
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The response to Item 10, applicable to the Directors of the Registrant, is incorporated herein by reference to the information set forth under the caption "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996. Additional information concerning executive officers is included in Part I, Item 4.A. of this Form 10-K.
Based solely on its review of copies of forms received by it pursuant to Section 16(a) of the Securities Exchange Act of 1934, as amended, or written representations from certain reporting persons, Registrant believes that during the fiscal year ended December 31, 1995 all filing requirements applicable to its officers, directors, and greater than 10% stockholders were complied with.
ITEM 11.
ITEM 11. EXECUTIVE COMPENSATION.
The response to Item 11 is incorporated herein by reference to the information set forth under the caption "Executive Compensation" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996.
ITEM 12.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The response to Item 12 is incorporated herein by reference to the information set forth under the captions "Capital Stock" and "Election of Directors" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996.
ITEM 13.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The section entitled "Compensation Committee Interlocks and Insider Participation" and "Executive Compensation" in the Proxy Statement for the Annual Meeting of Stockholders to be held April 23, 1996, and related footnotes and information are incorporated herein by reference.
PART IV
ITEM 14.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
The following are filed as part of this report:
(a) 1. Financial Statements
The following financial statements are incorporated herein by reference to portions of the 1995 Annual Report to Stockholders included with this Form 10-K:
Statements of Income for each of the three years in the period ended December 31, 1995, page 17.
Statements of Earnings Retained for each of the three years in the period ended December 31, 1995, page 17.
Statements of Financial Position as of December 31, 1995 and 1994, page 16.
Statement of Cash Flows for each of the three years in the period ended December 31, 1995, page 18.
Notes to Financial Statements, pages 19 through 23.
Report of Independent Auditors, page 24.
(a) 2. Financial Statement Schedule
II Valuation and Qualifying Accounts
Schedules not listed above have been omitted as either not applicable, immaterial or disclosed in the financial statements or notes thereto.
(a) 3. Exhibits (3)(i) The Company's Certificate of Incorporation is incorporated herein by reference to Exhibit (3)(a) as filed with its Form 10-K for the year ended December 31, 1992.
(ii) By-laws of Rollins, Inc. are incorporated herein by reference to Exhibit 3(b) as filed with its Form 10-K for the year ended December 31, 1993.
(10) Rollins, Inc. 1984 Employee Incentive Stock Option Plan is incorporated herein by reference to Exhibit (10) filed with the Company's Form 10-K for the year ended December 31, 1991.
Rollins, Inc. 1994 Employee Stock Incentive Plan is incorporated herein by reference to Exhibit A of the March 18, 1994 Proxy Statement for the Annual Meeting of Stockholders held on April 26, 1994.
(13) Portions of the Annual Report to Stockholders for the year ended December 31, 1995 which are specifically incorporated herein by reference.
(21) Subsidiaries of Registrant.
(23) Consent of Independent Public Accountants.
(24) Powers of Attorney for Directors.
(27) Financial Data Schedule.
(b) No reports on Form 8-K were required to be filed by the Company for the quarter ended December 31, 1995.
SIGNATURES
Pursuant to the requirements of Section 13 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.
By: /s/ R. RANDALL ROLLINS
----------------------------------- R. Randall Rollins Chairman of the Board of Directors (Principal Executive Officer) March 27, 1996
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
The Directors of Rollins, Inc. (listed below) executed a power of attorney appointing Gary W. Rollins their attorney-in-fact, empowering him to sign this report on their behalf.
Wilton Looney, Director John W. Rollins, Director Henry B. Tippie, Director James B. Williams, Director Bill J. Dismuke, Director
/s/ GARY W. ROLLINS - ---------------------------------- Gary W. Rollins, As Attorney-in-Fact & Director, President and Chief Operating Officer March 27, 1996
ROLLINS, INC. AND SUBSIDIARIES INDEX TO FINANCIAL STATEMENTS AND SCHEDULE
CONSOLIDATED FINANCIAL STATEMENTS OF ROLLINS, INC. AND SUBSIDIARIES:
The Registrant's 1995 Annual Report to Stockholders, portions of which are filed with this Form 10-K, contains on pages 16 through 24 the consolidated financial statements for the years ended December 31, 1995, 1994 and 1993 and the report of Arthur Andersen LLP on the financial statements for the years then ended. These financial statements and the report of Arthur Andersen LLP are incorporated herein by reference. The financial statements include the following:
Statements of Income for each of the three years in the period ended December 31, 1995.
Statements of Earnings Retained for each of the three years in the period ended December 31, 1995.
Statements of Financial Position as of December 31, 1995 and 1994.
Statements of Cash Flows for each of the three years in the period ended December 31, 1995.
Notes to Financial Statements.
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE, Page 9. SCHEDULE
Schedules not listed above have been omitted as either not applicable, immaterial or disclosed in the financial statements or notes thereto.
REPORT OF INDEPENDENT AUDITORS ON FINANCIAL STATEMENT SCHEDULE
To the Directors and the Stockholders of Rollins Inc.:
We have audited, in accordance with generally accepted auditing standards, the financial statements included in Rollins, Inc.'s annual report to stockholders incorporated by reference in this Form 10-K, and have issued our report thereon dated February 12, 1996. Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The schedule listed in Item 14 of this Form 10-K is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Atlanta, Georgia February 12, 1996
ROLLINS, INC. AND SUBSIDIARIES SCHEDULE II-VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1995, 1994 AND 1993 (IN THOUSANDS OF DOLLARS)
- ------------------------ NOTE: (1) Deductions represent the write-off of uncollectible receivables, net of recoveries.
(2) Includes a Special Charge of $12,000,000 ($7,440,000 after tax benefit or $.21 per share) relating to the write off of doubtful accounts at September 30, 1995, in the consumer finance operation, Rollins Acceptance Company.
EXHIBITS
EXHIBIT INDEX