Exhibit 13
FIVE-YEAR FINANCIAL SUMMARY
Rollins, Inc. and Subsidiaries
- -------------------------------------------------------------------------------------------------------------
(In thousands except per share data) 1998 1997 1996 1995 1994
- -------------------------------------------------------------------------------------------------------------
OPERATIONS SUMMARY
Revenues $ 549,136 $ 538,639 $ 532,785 $ 529,788 $ 507,722
Income (Loss) from Continuing
Operations After Income Taxes 3,177 (104,781) 22,386 38,661 46,017
Income From Discontinued
Operations After Income Taxes 3,410 106,278 409 616 3,544
Net Income 6,587 1,497 22,795 39,277 49,561
Earnings (Loss) Per Share:
Continuing Operations 0.10 (3.09) 0.63 1.08 1.29
Discontinued Operations 0.11 3.13 0.01 0.02 0.10
--------- --------- --------- --------- ---------
Basic and Diluted 0.21 0.04 0.64 1.10 1.39
Dividends per Share 0.50 0.60 0.58 0.56 0.50
- -------------------------------------------------------------------------------------------------------------
FINANCIAL POSITION
Total Assets $ 327,265 $ 432,680 $ 296,656 $ 306,111 $ 285,922
Working Capital 84,015 170,900 117,176 140,865 132,879
Long-Term Debt -- -- -- -- --
Stockholders' Equity 80,235 145,644 190,290 214,318 193,633
Shares Outstanding at Year-End 30,489 33,279 34,594 35,858 35,826
- -------------------------------------------------------------------------------------------------------------
2
QUARTERLY INFORMATION
- --------------------------------------------------------------------------------
STOCK PRICES AND DIVIDENDS
(Rounded to the nearest 1/8)
Stock Prices Dividends Stock Prices Dividends
1998 High Low Paid 1997 High Low Paid
- ---------------------------------------------------------------------------------------------------------------------
First Quarter $ 21 5/8 $ 19 1/2 $ .15 First Quarter $ 19 7/8 $ 18 3/4 $ .15
Second Quarter 21 1/8 19 1/2 .15 Second Quarter 20 1/8 18 5/8 .15
Third Quarter 20 7/8 16 7/8 .15 Third Quarter 24 5/8 19 1/4 .15
Fourth Quarter 17 7/8 15 1/4 .05 Fourth Quarter 24 1/2 19 7/8 .15
THE NUMBER OF STOCKHOLDERS OF RECORD AS OF DECEMBER 31, 1998 WAS 3,061.
- ------------------------------------------------------------------------------------------------------
PROFIT AND LOSS INFORMATION
(In thousands except per share data) First Second Third Fourth
- ------------------------------------------------------------------------------------------------------
1998
Revenues $ 122,965 $ 155,050 $ 144,493 $ 126,628
Income (Loss) from Continuing Operations (1,764) 6,913 880 (2,852)
Income from Discontinued Operations -- -- -- 3,410
Net Income (Loss) (1,764) 6,913 880 558
Earnings (Loss) per Share
Continuing Operations (.05) .21 .03 (.09)
Discontinued Operations .00 .00 .00 .11
--------- --------- --------- ---------
Basic and Diluted (.05) .21 .03 .02
- ------------------------------------------------------------------------------------------------------
1997
Revenues $ 126,951 $ 154,371 $ 140,287 $ 117,030
Income (Loss) from Continuing Operations 5,095 6,219 (11,863) (104,232)
Income from Discontinued Operations 49 100 9,529 96,600
Net Income (Loss) 5,144 6,319 (2,334) (7,632)
Earnings (Loss) per Share
Continuing Operations .15 .19 (.36) (3.07)
Discontinued Operations .00 .00 .29 2.84
--------- --------- --------- ---------
Basic and Diluted .15 .19 (.07) (.23)
- ------------------------------------------------------------------------------------------------------
1996
Revenues $ 119,978 $ 153,929 $ 138,728 $ 120,150
Income from Continuing Operations 6,183 12,716 3,355 132
Income (Loss) from Discontinued Operations 204 125 (49) 129
Net Income 6,387 12,841 3,306 261
Earnings per Share
Continuing Operations .17 .36 .09 .01
Discontinued Operations .01 .00 .00 .00
--------- --------- --------- ---------
Basic and Diluted .18 .36 .09 .01
- ------------------------------------------------------------------------------------------------------
8
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
% Change From Prior Year
Increase/(Decrease)
(IN THOUSANDS) 1998 1997 1996 1998 1997
- -----------------------------------------------------------------------------------------------------------------------
Revenues $ 549,136 $ 538,639 $ 532,785 1.9 % 1.1 %
Income (Loss) From Continuing
Operations After Income Taxes 3,177 (104,781) 22,386 103.0 N/M
Income From Discontinued
Operations After Income Taxes 3,410 106,278 409 (96.8) N/M
Net Income 6,587 1,497 22,795 340.0 (93.4)
- -----------------------------------------------------------------------------------------------------------------
GENERAL OPERATING COMMENTS
The Company strengthened its single focus on its Orkin Pest Control (Orkin)
business in 1998 by its non-pest control business divestitures in 1997, a
renewed emphasis on building recurring revenue, a further expansion of its
commercial business, and aggressive termite control claims reduction
initiatives. Revenue grew 1.9% to $549.1 million in 1998 and 8.2% in the fourth
quarter compared to the same period last year. The revenue increase positively
impacted income from continuing operations and net income.
During the year, the Company announced the hiring and appointment of James
A. McKinney and Harry J. Cynkus to the respective positions of Chief Operating
Officer of Orkin and Chief Financial Officer, and the promotion of Michael W.
Knottek to the position of Vice President and Secretary. These executives have
distinguished backgrounds in the management of service corporations and broaden
the strong pool of talented managers already in place at Rollins, Inc.
CONTINUING OPERATIONS - 1998 VERSUS 1997
The Company's 1.9% increase in revenues was due primarily to growth in
recurring pest control revenue resulting from the success of our more
consumer-friendly selling and treatment programs and to an increase in termite
renewal revenue resulting from higher average renewal prices. Revenue was also
impacted positively by the Company's ten pest control acquisitions in 1998,
including two companies in Canada. These revenue increases were partially offset
by a decline in termite sales revenue caused by placing our emphasis on changing
contracts and sales practices that were initiated in response to the
capabilities of modern-day termiticides, new building materials and construction
practices.
Cost of Services Provided decreased on both a dollar and percentage of
revenues basis, primarily due to reductions in termite claims experience and
operating insurance costs. Sales, General and Administrative expenses also
decreased on both a dollar and percentage of revenues basis, primarily due to
reduced expenditures related to Year 2000 system modifications and to lower bad
debt expense. The Company's net tax provision of $1.9 million, as compared to a
benefit of $64.2 million in 1997, reflects increased taxable income in 1998.
Key programs implemented in 1998 included improved sales and service
programs to meet the changing demands of today's busy customers. We also
introduced a premium brand of service for our commercial customers, Acurid-SM-;
related activities included the opening of additional commercial branches,
improved service technology, expanded guarantees, and new vehicle and uniform
identification. As a result of these programs, we achieved strong gains in
customer base and revenues in this division.
We implemented aggressive changes in sales policies, treatment standards
and guarantees offered in termite control. These internal enhancements, along
with extensive reinspection, retreatment and repair programs, in conjunction
with the establishment of our national quality control department, allow us to
more effectively provide termite control service to all our new and existing
customers. These termite remediation expenditures in 1998 were charged against
the Accrual for Termite Contracts. We provided an advanced termite training
course, developed exclusively by the Company in partnership with Texas A&M, to
Orkin employees who have previously completed both in-branch and classroom
termite control training. This program provides the best termite training in the
industry.
We began an evaluation of our management information systems in 1998 to
improve communications with the branches and strengthen management reporting and
focus. These improvements will provide branch managers with timely, key data
needed to more efficiently manage daily operations.
Through the investments made in 1998 and the successes we have seen to date
in regards to increased sales, improved customer service and satisfaction, and
improved employee retention, we believe that the Company is better positioned
for long-term growth in customer base, revenues and profits. The
quarter-over-quarter improvement in revenue and profit achieved in the fourth
quarter provides positive momentum for 1999.
9
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
CONTINUING OPERATIONS - 1997 VERSUS 1996
The Company's revenues increased 1.1% over 1996 due primarily to increases
in customer base and recurring pest control and termite renewal revenues,
partially offset by the continuing decrease in termite sales revenue resulting
from a disappointing termite season in 1997 and restrictive changes in sales
policies in response to rising termite claims. The shortfall in termite sales,
increased insurance costs and termite claims, and other operating expense
increases correspondingly impacted income.
Programs in development during 1997 were designed to address customer
retention issues and to explore alternative sales and service strategies. Test
results for those programs were favorable, and they were expanded nationwide in
1998. Additionally, the field management organization was strengthened via the
reorganization of three previous residential divisions into six new geographic
divisions.
Over the past several years, the termite treatment segment of the pest
control industry has faced great challenges in solving property owners' termite
problems. Some of the reasons for the increased difficulty in protecting
structures have been changes in building practices and materials that have
increased the property owners' potential for termites; the negative impact of
post-Chlordane termiticides, which may only last for a few years instead of
decades; and laws and regulations restricting certain retreatment practices. All
of the above factors have caused termite service providers to experience
elevated levels of termite claims.
The Company responded to these industry-wide conditions by undertaking
broad changes in its own termite processes. New quality control and field
training programs, more thorough communication to customers concerning conducive
conditions, and restrictions on the sale of certain structures were initiated
during mid-1997.
As a result of the factors described above and new information which became
available in 1997, a Provision for Termite Contracts of $117.0 million was
recorded related to the anticipated costs of reinspections, repair obligations,
and associated labor, chemicals, and other costs incurred relative to termite
work performed prior to December 31, 1997.
The termite protection guarantee period on new sales was also changed in
order to bring warranties for our customers more in line with the confirmed
effectiveness of the newer termiticide chemicals that have been used since 1987.
During the fourth quarter of 1997, an additional $15.0 million was provided
for estimated liabilities related to the Company's self-insurance program for
automobile, workers' compensation, and general liability. Additionally, reserves
for bad debts were strengthened by $8.0 million during the fourth quarter.
DISCONTINUED OPERATIONS
In 1997, the Company estimated its liabilities associated with its divested
operations and recorded a Gain on Disposal, net of taxes, of $106.1 million on
the sales of the Orkin Lawn Care and Plantscaping businesses and the Rollins
Protective Services division. These divestitures were completed as part of the
Company's shift towards a single operational focus on its core pest control
business. In the fourth quarter of 1998, the Company recorded an additional
gain, net of taxes, of $3.4 million as a result of the reevaluation of the
Company's liabilities for costs associated with these discontinued operations.
YEAR 2000 ISSUES
Aware that the Year 2000 (Y2K) information technology programming issue
could have a significant potential impact on its future operations and financial
reporting, the Company began its assessment and remediation processes in 1997
regarding its primary financial and operating systems. The Company's assessment
activities have included (1) identifying all software and operating systems -
both information technology (IT) systems and non-IT systems with embedded
technology - which are critical to operations and/or financial reporting, (2)
testing of such software and systems for Y2K compliancy, and (3) obtaining
assurances from the Company's vendors and its large commercial customers. The
Company's remediation activities have included replacing certain software and
operating systems, followed by testing to ensure the Y2K compliancy of the
replacements.
Based on its assessment and remediation activities to date, the Company
believes that its critical internal software and operating systems are Y2K
compliant with the exception of its bad debt collection system, its branch
personal computers (PCs), and its commercial division's national accounts
system. The Company's bad debt collection system is currently being updated and
is expected to be Y2K compliant by the end of the first quarter 1999, and the
branch PCs are expected to be replaced by the end of the second quarter 1999.
The Company is currently formulating an information technology plan for its
national accounts system. This plan is expected to be finalized by the end of
the first quarter 1999, and any necessary remediation efforts are expected to be
concluded by the end of 1999. The total cost of Y2K expenditures to date as of
December 31, 1998 was approximately $19.0 million; the remaining Y2K remediation
costs are anticipated to be approximately $1.0 million.
Based on assurances from the majority of its vendors and large commercial
customers to date, the Company does not anticipate any material Y2K impact on
its operations or financial reporting at this time. The Company believes that
the worst case scenario will be some minor nuisances experienced by a small
number of its branches in January 2000.
The Company expects to have contingency plans in place by the end of 1999
that address potential short-term business disruptions resulting from losses of
electricity and system malfunctions related to the ordering and delivering of
operating supplies and the printing of sales orders.
10
MANAGEMENT'S DISCUSSION AND ANALYSIS (continued)
FINANCIAL CONDITION
% Change From Prior Year
Increase/(Decrease)
(DOLLARS IN THOUSANDS) 1998 1997 1996 1998 1997
- --------------------------------------------------------------------------------------------------------------
Cash and Short-Term
Investments $1,244 $ 125,842 $ 12,150
Marketable Securities 110,229 75,037 84,785
------------------------------------------
111,473 200,879 96,935 (44.5)% 107.2%
Working Capital 84,015 170,900 117,176 (50.8) 45.8
Current Ratio 1.7 2.3 2.7 (26.1) (14.8)
Total Assets 327,265 432,680 296,656 (24.4) 45.9
- ----------------------------------------------------------------------------------------------------------------------
Rollins, Inc.'s financial position remains solid. The Company believes its
current cash balances and future cash flows from operating activities will be
sufficient to finance its current operations and obligations, and
fund expansion of the business for the foreseeable future. The Company's cash
flow used in operating activities was $679,000 for 1998 compared with cash flow
provided of $5.7 million and $51.9 million for 1997 and 1996, respectively. The
1998 decrease resulted from working capital changes related primarily to lower
divestiture and remediation liabilities, partially offset by higher income from
continuing operations, adjusted for non-cash items. The 1997 decrease was due
primarily to decreased income.
Interest income increased 18.4% due to the increase in average funds
invested in short-term investments and marketable securities, largely from the
1997 divestitures.
Net trade receivables decreased $6.8 million in 1998, due primarily to
decreased financed termite sales. Trade receivables include amounts due
subsequent to one year from the balance sheet date, approximating $9.0 million
and $13.9 million at the end of 1998 and 1997, respectively.
The Company invested $13.9 million in capital expenditures and acquisitions
in 1998 and expects to invest between $30 and $40 million in 1999, inclusive of
improvements to its management information systems. A total of $16.1 million was
paid in cash dividends in 1998. In the fourth quarter of 1998, regular quarterly
dividends were reduced from 15 cents per share to 5 cents per share to better
balance the relationship between earnings, dividends and future stock
repurchases. During the year, a total of $56.2 million was paid for repurchases
of 2.8 million shares, or 8.3%, of the Company's Common Stock. These repurchased
shares were retired in 1998; an additional 1.6 million shares may be repurchased
under the current authorization. The capital expenditures, acquisitions, cash
dividends and stock repurchases were primarily funded through existing cash
balances. The Company maintains a $40.0 million unused line of credit, which is
available for future acquisitions and growth, if needed.
In 1997 and 1998, Orkin received letters from the Federal Trade Commission
(FTC) advising of its investigation of the pest control industry - more
specifically, the termite and moisture control practices of the industry--and
requesting certain information voluntarily from the Company. Orkin has
voluntarily provided the information requested and has advised of the Company's
intention to continue to cooperate fully with this investigation. At this point
in time, it is too early to determine the impact, if any, of this investigation.
MARKET RISK
The Company maintains an investment portfolio, comprised of U.S. Government
and corporate debt securities, which is subject to interest rate risk exposure.
This risk is managed through conservative policies to invest in high-quality
obligations. The Company has performed an interest rate sensitivity analysis
using a duration model over the near term with a 10% change in interest rates.
The Company's portfolio is not subject to material interest rate risk exposure
based on this analysis, and no material changes in market risk exposures or how
those risks are managed is expected.
IMPACT OF RECENT ACCOUNTING PRONOUNCEMENTS
In 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 133, "Accounting for Derivative Instruments
and Hedging Activities." The adoption of this standard, effective as of January
1, 2000, is not expected to materially impact the results of operations or
financial condition of the Company.
FORWARD-LOOKING STATEMENTS
This Annual Report contains forward-looking statements within the meaning
of the Private Securities Litigation Reform Act of 1995. The actual results of
the Company could differ materially from those indicated by the forward-looking
statements because of various risks and uncertainties, including without
limitation, general economic conditions; market risk; changes in industry
practices or technologies; the degree of success of the Company's termite
process reforms; climate and weather trends; competitive factors and pricing
practices; the Year 2000 programming issue; potential increases in labor
costs; uncertainties of litigation; and changes in various government laws
and regulations, including environmental regulations. All of the foregoing
risks and uncertainties are beyond the ability of the Company to control, and
in many cases the Company cannot predict the risks and uncertainties that
could cause its actual results to differ materially from those indicated by
the forward-looking statements.
11
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
ROLLINS, INC. AND SUBSIDIARIES
- --------------------------------------------------------------------------------------------------------
At December 31, (In thousands except share data) 1998 1997
- --------------------------------------------------------------------------------------------------------
ASSETS
Cash and Short-Term Investments $ 1,244 $ 125,842
Marketable Securities 110,229 75,037
Trade Receivables, Net 42,353 49,166
Materials and Supplies 13,335 15,010
Deferred Income Taxes 20,083 24,826
Other Current Assets 11,864 11,737
--------- ---------
Current Assets 199,108 301,618
Equipment and Property, Net 35,466 34,639
Intangible Assets 40,602 39,383
Deferred Income Taxes 44,369 49,072
Other Assets 7,720 7,968
--------- ---------
Total Assets $ 327,265 $ 432,680
--------- ---------
--------- ---------
_______________________________________________________________________________________________________
LIABILITIES
Capital Lease Obligations $ 3,419 $ 3,138
Accounts Payable 10,890 25,420
Accrued Insurance 18,348 21,225
Accrued Payroll 18,400 16,013
Unearned Revenue 15,210 13,831
State Income Taxes Payable 7,188 12,057
Accrual for Termite Contracts 25,800 26,000
Other Expenses 15,838 13,034
--------- ---------
Current Liabilities 115,093 130,718
Capital Lease Obligations 6,090 9,239
Accrued Insurance 38,975 30,878
Accrual for Termite Contracts 66,350 91,000
Long-Term Accrued Liabilities 20,522 25,201
--------- ---------
Total Liabilities 247,030 287,036
--------- ---------
_______________________________________________________________________________________________________
Commitments and Contingencies
STOCKHOLDERS' Common Stock, par value $1 per share; 99,500,000
EQUITY shares authorized; 30,488,741 and 33,279,281
shares issued 30,489 33,279
Earnings Retained 49,746 112,365
--------- ---------
Total Stockholders' Equity 80,235 145,644
--------- ---------
Total Liabilities and Stockholders' Equity $ 327,265 $ 432,680
--------- ---------
--------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
12
CONSOLIDATED STATEMENTS OF INCOME
ROLLINS, INC. AND SUBSIDIARIES
- -----------------------------------------------------------------------------------------------------------
Years Ended December 31, (In thousands except per share data) 1998 1997 1996
- -----------------------------------------------------------------------------------------------------------
REVENUES
Customer Services $ 549,136 $ 538,639 $ 532,785
--------- --------- ---------
COSTS AND EXPENSES
Cost of Services Provided 327,463 362,225 302,929
Depreciation and Amortization 8,934 8,382 7,046
Provision for Termite Contracts -- 117,000 --
Sales, General and Administrative 216,596 227,622 192,669
Interest Income (8,981) (7,588) (5,967)
--------- --------- ---------
544,012 707,641 496,677
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS BEFORE INCOME TAXES 5,124 (169,002) 36,108
--------- --------- ---------
PROVISION (BENEFIT) FOR INCOME TAXES
Current (4,937) 6,021 15,273
Deferred 6,884 (70,242) (1,551)
--------- --------- ---------
1,947 (64,221) 13,722
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING
OPERATIONS 3,177 (104,781) 22,386
--------- --------- ---------
DISCONTINUED OPERATIONS
Operating Income, Less Income Tax Expense of
$119 and $250 in 1997 and 1996, Respectively -- 192 409
Gain on Disposal, Less Income Tax Expense of
$2,090 and $70,214 in 1998 and 1997, Respectively 3,410 106,086 --
--------- --------- ---------
INCOME FROM DISCONTINUED OPERATIONS 3,410 106,278 409
--------- --------- ---------
NET INCOME $ 6,587 $ 1,497 $ 22,795
--------- --------- ---------
--------- --------- ---------
EARNINGS (LOSS) PER SHARE
Continuing Operations $ .10 $ (3.09) $ .63
Discontinued Operations .11 3.13 .01
--------- --------- ---------
EARNINGS PER SHARE - BASIC AND DILUTED $ .21 $ .04 $ .64
--------- --------- ---------
--------- --------- ---------
CONSOLIDATED STATEMENTS OF EARNINGS RETAINED
ROLLINS, INC. AND SUBSIDIARIES
- ---------------------------------------------------------------------------------------------------------
Years Ended December 31, (In thousands except per share data) 1998 1997 1996
- ---------------------------------------------------------------------------------------------------------
Balance at Beginning of Year $ 112,365 $ 155,696 $ 224,009
Net Income 6,587 1,497 22,795
Cash Dividends (16,064) (20,360) (20,669)
Common Stock Purchased and Retired (53,429) (24,733) (24,916)
Common Stock in Treasury Retired -- -- (45,371)
Other 287 265 (152)
--------- --------- ---------
Balance at End of Year $ 49,746 $ 112,365 $ 155,696
--------- --------- ---------
--------- --------- ---------
DIVIDENDS PER SHARE $ .50 $ .60 $ .58
--------- --------- ---------
--------- --------- ---------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
13
CONSOLIDATED STATEMENTS OF CASH FLOWS
ROLLINS, INC. AND SUBSIDIARIES
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, (In thousands) 1998 1997 1996
- ------------------------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 6,587 $ 1,497 $ 22,795
Adjustments to Reconcile Net Income to Net Cash Provided
by (Used in) Operating Activities:
Provision for Termite Contracts - 117,000 -
Provision for Self-Insurance Reserves - 15,000 -
Provision for Bad Debts - 8,000 -
Depreciation and Amortization 8,934 8,382 7,046
Provision (Benefit) for Deferred Income Taxes 8,974 (69,228) 1,061
Discontinued Operations, Net of Taxes (3,410) (106,278) (409)
Other, Net 5,121 7,169 3,330
(Increase) Decrease in Assets:
Trade Receivables 7,087 7,505 9,313
Materials and Supplies 1,719 (3,388) (535)
Other Current Assets 1,638 (2,034) 4,250
Other Non-Current Assets 3,044 - (3,063)
Increase (Decrease) in Liabilities:
Accounts Payable and Accrued Expenses (15,167) 11,608 4,669
Unearned Revenue 1,379 2,154 525
Accrued Insurance 5,220 9,629 3,507
Accrual for Termite Contracts (24,850) - -
Long-Term Accrued Liabilities (6,955) (1,336) (558)
--------------------------------------------------
Net Cash Provided by (Used in) Operating Activities (679) 5,680 51,931
--------------------------------------------------
--------------------------------------------------
________________________________________________________________________________________________________________________________
INVESTING ACTIVITIES
Purchases of Equipment and Property (10,402) (8,956) (8,292)
Net Cash Used for Acquisition of Companies (3,517) (1,440) (2,373)
Net Proceeds from Sale of Discontinued Operations,
Net of Current Taxes Paid - 156,469 -
Marketable Securities, Net (35,033) 9,846 (19,661)
--------------------------------------------------
Net Cash Provided by (Used in) Investing Activities (48,952) 155,919 (30,326)
--------------------------------------------------
--------------------------------------------------
________________________________________________________________________________________________________________________________
FINANCING ACTIVITIES
Dividends Paid (16,064) (20,360) (20,669)
Common Stock Purchased and Retired (56,195) (26,083) (26,200)
Proceeds from Capital Leases - - 5,500
Payments on Capital Leases (2,868) (2,521) (1,314)
Other 160 300 420
--------------------------------------------------
Net Cash Used in Financing Activities (74,967) (48,664) (42,263)
--------------------------------------------------
NET CASH PROVIDED BY (USED IN) DISCONTINUED OPERATIONS - 757 (815)
--------------------------------------------------
Net Increase (Decrease) in Cash
and Short-Term Investments (124,598) 113,692 (21,473)
Cash and Short-Term Investments
at Beginning of Year 125,842 12,150 33,623
--------------------------------------------------
Cash and Short-Term Investments
at End of Year $ 1,244 $ 125,842 $ 12,150
--------------------------------------------------
--------------------------------------------------
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE CONSOLIDATED FINANCIAL
STATEMENTS.
14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996, ROLLINS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
1.SIGNIFICANT ACCOUNTING POLICIES
BUSINESS DESCRIPTION - Rollins, Inc. (the Company) is a national service
company with headquarters located in Atlanta, Georgia, providing pest control
and termite control services to both residential and commercial customers.
In 1998, the Company adopted Statement of Financial Accounting Standards No.
131 (SFAS 131), "Disclosures About Segments of an Enterprise and Related
Information." As the Company has only one reportable segment - its pest and
termite control business - the majority of the disclosures required by SFAS 131
do not apply to the Company. In regard to the general disclosures required by
SFAS 131, the Company's results of operations and its financial condition are
not significantly reliant upon any single customer or the Company's foreign
operations.
PRINCIPLES OF CONSOLIDATION - The consolidated financial statements of the
Company include the accounts of Rollins, Inc. and its subsidiaries. All
significant intercompany transactions and balances have been eliminated.
ESTIMATES USED IN THE PREPARATION OF CONSOLIDATED FINANCIAL STATEMENTS - The
preparation of the consolidated financial statements in conformity with
generally accepted accounting principles requires Management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated
financial statements and the reported amounts of revenues and expenses during
the reporting period. Actual results could differ from those estimates.
REVENUES - Revenue is recognized at the time services are performed.
CASH AND SHORT-TERM INVESTMENTS - The Company considers all investments with
a maturity of three months or less to be cash equivalents. Short-term
investments are stated at cost which approximates fair market value.
MARKETABLE SECURITIES - The Company's marketable securities are classified as
"available for sale" and have been recorded at current market value with an
offsetting adjustment to stockholders' equity.
MATERIALS AND SUPPLIES - Materials and supplies are recorded at the lower of
cost (first-in, first-out basis) or market.
EQUIPMENT AND PROPERTY - Depreciation and amortization, which includes the
amortization of assets recorded under capital leases, are provided principally
on a straight-line basis over the estimated useful lives of the related assets.
Annual provisions for depreciation are computed using the following asset lives:
buildings, 10 to 40 years; and furniture, fixtures, and operating equipment, 3
to 10 years. The cost of assets retired or otherwise disposed of and the related
accumulated depreciation and amortization are eliminated from the accounts in
the year of disposal with the resulting gain or loss credited or charged to
income. Expenditures for additions, major renewals and betterments are
capitalized and expenditures for maintenance and repairs are expensed as
incurred.
INSURANCE - The Company self-insures, up to specified limits, certain risks
related to general liability, workers' compensation and vehicle liability. The
estimated costs of existing and future claims under the self-insurance program
are accrued based upon historical trends as incidents occur, whether reported or
unreported (although actual settlement of the claims may not be made until
future periods) and may be subsequently revised based on developments relating
to such claims. These estimated outstanding claims have been reflected in the
Consolidated Statements of Financial Position in the line items entitled Accrued
Insurance.
ADVERTISING - Advertising expenses are charged to income during the year in
which they are incurred. The total advertising costs were approximately $27.5
million in 1998 and 1997, and $26.3 million in 1996.
INCOME TAXES - The Company follows the practice of providing for income taxes
based on Statement of Financial Accounting Standards No. 109, "Accounting for
Income Taxes", which requires recognition of deferred tax liabilities and assets
for the expected future tax consequences of events that have been included in
the consolidated financial statements or tax returns.
EARNINGS PER SHARE - In 1997, the Company adopted Statement of Financial
Accounting Standards No. 128, "Earnings Per Share" (EPS), which requires
companies to present basic EPS and diluted EPS. Basic EPS is computed on the
basis of weighted-average shares outstanding. Diluted EPS is computed on the
basis of weighted-average shares outstanding plus common stock options
outstanding during the year which, if exercised, would have a dilutive effect on
EPS. Basic and diluted EPS are the same for all years reported.
A reconciliation of the number of weighted-average shares used in computing
basic and diluted EPS is as follows:
(IN THOUSANDS) 1998 1997 1996
- ------------------------------------------------------------------------
Basic EPS 31,973 33,896 35,478
Effect of Dilutive
Stock Options 30 28 46
---------- -------- ----------
Diluted EPS 32,003 33,924 35,524
---------- -------- ----------
---------- -------- ----------
STOCK-BASED COMPENSATION - During 1996, the Company adopted the
disclosure-only requirements of Statement of Financial Accounting Standards No.
123 (SFAS 123), "Accounting for Stock-Based Compensation." As permitted by SFAS
123, the Company continues to account for employee stock compensation plans
using the intrinsic value method prescribed by Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees".
See Note 9 to the consolidated financial statements for additional information.
15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996, ROLLINS, INC. AND SUBSIDIARIES
COMPREHENSIVE INCOME - In 1997, the Financial Accounting Standards Board
issued Statement of Financial Accounting Standards No. 130 (SFAS 130),
"Reporting Comprehensive Income," effective for fiscal years beginning after
December 15, 1997. For the years ended December 31, 1998, 1997 and 1996,
comprehensive income is not materially different from net income and, as a
result, the impact of SFAS 130 is not reflected in the Company's consolidated
financial statements.
RECLASSIFICATIONS - Certain amounts for previous years have been reclassified
to conform with the 1998 consolidated financial statement presentation.
2. CHANGES IN ACCOUNTING ESTIMATES
In the fourth quarter of 1997, the Company made certain changes in accounting
estimates totaling $23.0 million due to 1997 events and new information becoming
available. The Company's provision for its self-insurance program for
automobile, workers' compensation, and general liability was increased by $15.0
million. This provision has been reflected in the Consolidated Statements of
Income in the line item entitled Cost of Services Provided. The provision for
bad debts was also increased by $8.0 million and has been reflected in the
Consolidated Statements of Income in the line item entitled Sales, General and
Administrative.
In the fourth quarter of 1997, a provision for termite contracts of $117.0
million was recorded related to the estimated costs of reinspections,
reapplications, repair claims and associated labor, chemicals, and other costs
incurred relative to termite work performed prior to December 31, 1997. These
anticipated costs reflected the Company's response to current trends in the
termite treatment area of its operations and the pest control industry. The
provision was reflected in the 1997 Consolidated Statements of Income in the
line item entitled Provision for Termite Contracts. The related liabilities at
December 31, 1998 and 1997, reflecting the estimated costs incurred but as yet
unpaid related to termite work performed prior to these dates, have been
reflected in the Consolidated Statements of Financial Position in the line items
entitled Accrual for Termite Contracts.
3. DISCONTINUED OPERATIONS
In October 1997, the Company sold its Rollins Protective Services (RPS)
business segment for approximately $200.0 million in cash. In July 1997, the
Company sold its Lawn Care and Plantscaping divisions for approximately $37.0
million in cash. In 1997, the Company estimated its liabilities associated with
these divested operations and recorded a gain from the sales of RPS and the Lawn
Care and Plantscaping divisions of $106.1 million, net of taxes. In the fourth
quarter of 1998, the Company reevaluated its liabilities associated with these
divested operations and recorded an additional gain of $3.4 million, net of
taxes.
The Company's results of operations for the years ended December 31, 1997 and
1996 have been restated for the divestitures of the RPS business segment and the
Lawn Care and Plantscaping divisions. The results of operations of these
divested operations and the gains on their disposal have been reflected in the
Consolidated Statements of Income in the section entitled Discontinued
Operations.
Summarized financial information for the discontinued operations is as
follows:
(IN THOUSANDS) 1997 1996
- -----------------------------------------------------------------
Revenues $ 64,721 $ 94,646
Income Before
Income Taxes 311 659
Net Income 192 409
Assets - 35,321
Liabilities - 12,127
Net Assets of Discontinued
Operations $ - $ 23,194
4. TRADE RECEIVABLES
Trade receivables, net, at December 31, 1998, totaling $42.4 million and at
December 31, 1997, totaling $49.2 million are net of allowances for doubtful
accounts of $5.3 million and $9.3 million, respectively. Trade receivables
include installment receivable amounts which are due subsequent to one year from
the balance sheet dates. These amounts were approximately $9.0 million and $13.9
million at the end of 1998 and 1997, respectively. The carrying amount of
installment receivables approximates fair value because the interest rates
approximate market rates.
5. EQUIPMENT AND PROPERTY
Equipment and property are presented at cost less accumulated depreciation
and are detailed as follows:
(IN THOUSANDS) 1998 1997
- -----------------------------------------------------------------
Buildings $ 9,759 $ 7,584
Operating Equipment 44,805 42,163
Furniture and Fixtures 8,542 9,790
Computer Equipment Under
Capital Leases 8,736 8,736
------------ -----------
71,842 68,273
Less - Accumulated
Depreciation 39,704 37,002
------------ -----------
32,138 31,271
Land 3,328 3,368
------------ -----------
$35,466 $34,639
------------ -----------
------------ -----------
16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996, ROLLINS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
6. INTANGIBLE ASSETS
Intangible assets represent goodwill arising from acquisitions and are stated
at cost less accumulated amortization. Intangibles which arose from acquisitions
prior to November 1970 are not being amortized for financial statement purposes,
since, in the opinion of Management, there has been no decrease in the value of
the acquired businesses. Intangibles arising from acquisitions since November
1970 are being amortized over forty years.
7. INCOME TAXES
A reconciliation between taxes computed at the statutory rate on the Income
(Loss) From Continuing Operations Before Income Taxes and the Provision
(Benefit) for Income Taxes is as follows:
(IN THOUSANDS) 1998 1997 1996
- -----------------------------------------------------------------
Federal Income Taxes
at Statutory Rate $ 1,595 $ (64,680) $12,790
State Income Taxes
(Net of Federal Benefit) 367 268 1,368
Other (15) 191 (436)
-------- --------- -----------
$ 1,947 $ (64,221) $13,722
-------- --------- -----------
-------- --------- -----------
The Provision (Benefit) for Income Taxes was based on a 38.0% estimated
effective income tax rate on Income (Loss) From Continuing Operations Before
Income Taxes for the years ended December 31, 1998, 1997 and 1996. The effective
income tax rate differs from the annual federal statutory tax rate primarily
because of state income taxes.
During 1998, the Company received a refund of income taxes of $2.4 million,
net of payments. Income taxes remitted, related to both continuing and
discontinued operations, were $85.2 million and $9.4 million for the years ended
December 31, 1997 and 1996, respectively.
Components of the net deferred income tax assets (liabilities) at December 31,
1998 and 1997 include:
(IN THOUSANDS) 1998 1997
- -----------------------------------------------------
Termite Accrual $40,125 $ 49,720
Insurance Reserves 31,909 34,629
Safe Harbor Lease (11,449) (14,128)
Other 3,867 3,677
--------- ---------
$ 64,452 $73,898
--------- ---------
--------- ---------
8. COMMITMENTS AND CONTINGENCIES
The Company has capitalized lease obligations and several operating leases.
The minimum lease payments under the capital leases and non-cancelable operating
leases with terms in excess of one year, in effect at December 31, 1998, are
summarized as follows:
Capitalized Operating
(In Thousands) Leases Leases
- --------------------------------------------------------------
1999 $ 3,918 $ 18,989
2000 3,918 14,736
2001 2,231 9,157
2002 303 7,219
2003 - 6,272
Thereafter - 38,611
--------- ------------
10,370 $ 94,984
------------
------------
Amount Representing Interest (861)
---------
Present Value of Obligation 9,509
Portion Due Within One Year (3,419)
---------
Long-Term Obligations $6,090
---------
---------
Total rental expense under operating leases charged to operations was $25.4
million, $23.5 million, and $22.2 million for the years ended December 31, 1998,
1997 and 1996, respectively.
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.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996, ROLLINS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
9. EMPLOYEE BENEFIT PLANS
The Company maintains a noncontributory tax-qualified defined benefit
retirement plan (the Plan) covering all employees meeting certain age and
service requirements. The Plan provides benefits based on the average
compensation for the highest five years during the last ten years of credited
service (as defined) in which compensation was received, and the average
anticipated Social Security covered earnings. The Company funds the Plan with at
least the minimum amount required by ERISA. The funded status of the Plan and
the resulting accrued benefit liability are summarized as follows at December
31:
(IN THOUSANDS) 1998 1997
- ------------------------------------------------------------------
CHANGE IN BENEFIT OBLIGATION
Benefit Obligation at
Beginning of Year $66,908 $57,309
Service Cost 3,611 3,221
Interest Cost 5,182 4,437
Actuarial Loss 4,258 4,576
Benefits Paid (2,671) (2,635)
----------- ---------
Benefit Obligation at
End of Year 77,288 66,908
----------- ---------
CHANGE IN PLAN ASSETS
Fair Value of Plan Assets at
Beginning of Year 59,741 54,876
Actual Return on
Plan Assets 6,188 7,500
Benefits Paid (2,671) (2,635)
----------- ---------
Fair Value of Plan Assets at
End of Year 63,258 59,741
----------- ---------
Funded Status (14,030) (7,167)
Unrecognized Net
Actuarial Loss 8,621 5,485
Unrecognized Prior
Service Cost (226) (262)
----------- ---------
Accrued Benefit Liability $ (5,635) $ (1,944)
----------- ---------
----------- ---------
Accrued benefit liabilities at December 31, 1998
and 1997 of $5.6 million and $1.9 million, respectively, have been reflected in
the Consolidated Statements of Financial Position in the line item entitled
Other Expenses.
The weighted-average assumptions as of December 31 were as follows:
(IN THOUSANDS) 1998 1997 1996
- ----------------------------------------------------------------------
Discount Rate 7.0% 7.5% 7.5%
Expected Return on
Plan Assets 9.5% 9.5% 9.5%
Rate of Compensation
Increase 4.0% 4.5% 4.5%
The components of net periodic benefit cost for the past three years are
summarized as follows:
(IN THOUSANDS) 1998 1997 1996
- ------------------------------------------------------------------
Service Cost $ 3,611 $ 3,221 $3,141
Interest Cost 5,182 4,437 4,081
Expected Return on
Plan Assets (5,269) (5,007) (4,615)
Net Amortizations:
Amortization of Net
Asset - (575) (1,150)
Amortization of Net
Loss 203 - -
Amortization of Net Prior
Service Cost (36) (31) (31)
--------- --------- -----------
Net Periodic Benefit Cost $ 3,691 $ 2,045 $1,426
--------- --------- -----------
--------- --------- -----------
In 1998, the Company adopted Financial Accounting Standards Board No. 132
(SFAS 132), "Employers' Disclosures About Pensions and Other Postretirement
Benefits." The 1997 and 1996 amounts shown in the tables above have been
restated in accordance with the disclosures required by SFAS 132.
At December 31, 1998, the Plan's assets were comprised of listed common
stocks and U.S. Government and corporate securities. Included in the assets of
the Plan were shares of Rollins, Inc. Common Stock with a market value of $5.3
million.
18
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
YEARS ENDED DECEMBER 31, 1998, 1997 AND 1996, ROLLINS, INC. AND SUBSIDIARIES
- -------------------------------------------------------------------------------
The Company sponsors a deferred compensation 401(k) plan that is available to
substantially all employees with six months of service. The charges to expense
for the Company match were approximately $1.5 million in 1998, $1.7 million in
1997, and $1.6 million in 1996.
The Company has two Employee Incentive Stock Option Plans, the first adopted
in January 1994 (1994 Plan) and the second adopted in April 1998 (1998 Plan) as
a supplement to the 1994 Plan. An aggregate of 3.0 million shares of Common
Stock may be granted under various stock incentive programs sponsored by these
plans, at a price not less than the market value of the underlying stock on the
date of grant. Options may be issued under the 1994 Plan and the 1998 Plan
through January 2004 and April 2008, respectively, and expire ten years from the
date of grant, if not exercised.
Options are also outstanding under a prior Employee Incentive Stock Option
Plan (1984 Plan). Under this plan, 1.2 million shares of Common Stock were
subject to options granted during the ten-year period ended October 1994. The
options were granted at the fair market value of the shares on the date of grant
and expire ten years from the date of grant, if not exercised. No additional
options will be granted under the 1984 Plan.
Option transactions during the last three years for the 1998, 1994 and 1984
Plans are summarized as follows:
1998 1997 1996
- --------------------------------------------------------------------------------
Number of Shares Under Stock Options:
Outstanding at Beginning
of Year 359,785 300,132 257,611
Granted 890,000 197,600 75,000
Exercised (3,550) (7,657) (5,037)
Cancelled (101,615) (130,290) (27,442)
----------- ----------- --------------
Outstanding at End
of Year 1,144,620 359,785 300,132
Exercisable at End
of Year 106,960 80,405 92,458
Weighted-Average Exercise Price:
Granted $ 19.69 $ 19.25 $ 20.87
Exercised 13.18 12.47 12.95
Cancelled 20.77 22.57 24.47
Outstanding at End
of Year 20.42 22.29 24.18
Exercisable at End
of Year 23.40 23.31 21.40
----------- ----------- --------------
----------- ----------- --------------
Information with respect to options outstanding and options exercisable at
December 31, 1998 is as follows:
Average
Remaining
Exercise Number Contractual Number
Price Outstanding Life Exercisable
- ------------------------------------------------------------------------
$12.25 3,180 1.08 years 3,180
13.25 11,740 2.08 11,740
19.08 4,200 3.08 4,200
25.50 3,100 4.08 3,100
28.38 103,600 5.08 54,480
24.25 5,000 6.08 1,800
20.88 47,000 7.08 6,960
19.25 136,800 8.08 21,500
19.69 830,000 9.33 -
- -------- ----------- -------------- -------------
1,144,620 106,960
- -------- ----------- -------------- -------------
- -------- ----------- -------------- -------------
The Company applied Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees", in accounting for its stock options
and, accordingly, no compensation cost has been recognized for stock options in
the consolidated financial statements. Had the Company determined compensation
cost based on the fair value at the grant date of its stock options granted in
1998, 1997 and 1996 under SFAS 123 (See Note 1 to the consolidated financial
statements), the Company's net income, as disclosed on the Consolidated
Statements of Income, would have been reduced by approximately $578,000 in 1998,
$103,000 in 1997 and $45,000 in 1996. Earnings per share would have been reduced
by $.02 in 1998, with no earnings per share effect in 1997 and 1996.
The per share weighted-average fair value of stock options granted during
1998, 1997 and 1996 was $6.07, $5.34 and $6.37, respectively, on the date of
grant, using the Black-Scholes option-pricing model with the following
weighted-average assumptions:
1998 1997 1996
- --------------------------------------------------------------------------------
Risk-Free Interest Rate 6.04% 5.69% 5.63%
Expected Life, in Years 8 8 8
Expected Volatility 23.22% 18.55% 21.44%
Expected Dividend Yield 2.37% 2.17% 1.99%
- --------------------------------------------------------------------------------
19
REPORT OF MANAGEMENT
To the stockholders of Rollins, Inc.:
We have prepared the accompanying financial statements and related
information included herein for the years ended December 31, 1998, 1997, and
1996. The opinion of Arthur Andersen LLP, the Company's independent accountants,
on those financial statements is included herein. The primary responsibility for
the integrity of the financial information included in this annual report rests
with management. Such information was prepared in accordance with generally
accepted accounting principles, appropriate in the circumstances, based on our
best estimates and judgements and giving due consideration to materiality.
Rollins, Inc. maintains internal accounting control systems which are
adequate to provide reasonable assurance that assets are safeguarded from loss
or unauthorized use and which produce records adequate for preparation of
financial information. The system and controls and compliance therewith are
reviewed by an extensive program of internal audits and by our independent
accountants. There are limits inherent in all systems of internal accounting
control based on the recognition that the cost of such a system should not
exceed the benefit to be derived. We believe the Company's system provides this
appropriate balance.
The Board of Directors pursues its review and over sight role for
these financial statements through an Audit Committee composed of three outside
directors. The Audit Committee's duties include recommending to the Board of
Directors the appointment of an independent accounting firm to audit the
financial statements of Rollins, Inc. The Audit Committee meets periodically
with management and the Board of Directors. It also meets with representatives
of the internal and independent auditors and reviews the work of each to insure
that their respective responsibilities are being carried out and to discuss
related matters. Both the internal and independent accountants have direct
access to the Audit Committee.
/s/ R. Randall Rollins /s/ Harry J. Cynkus
- -------------------------- -------------------------
R. Randall Rollins Harry J. Cynkus
CHAIRMAN OF THE BOARD AND CHIEF FINANCIAL OFFICER
CHIEF EXECUTIVE OFFICER AND TREASURER
Atlanta, Georgia
February 16, 1999
REPORT OF INDEPENDENT ACCOUNTANTS
To the Directors and Stockholders of Rollins, Inc.:
We have audited the accompanying statements of financial position of
Rollins, Inc. (a Delaware Corporation) and subsidiaries as of December 31, 1998
and 1997 and the related statements of income, earnings retained and cash flows
for each of the three years in the period ended December 31, 1998. These
financial statements are the responsibility of the Company's management.
Our responsibility is to express an opinion on the financial statements based on
our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
from material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Rollins, Inc. and
subsidiaries as of December 31, 1998 and 1997 and the results of their
operations and their cash flows for each of the three years in the period ended
December 31, 1998 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Atlanta, Georgia
February 16 , 1999
20
- ----------------------------------------------------------------------------
Board of Director's
Photograph
- ----------------------------------------------------------------------------
(Standing from left): James B. Williams, Gary W. Rollins, John W. Rollins and
Henry B. Tippie;
(Seated from left): R. Randall Rollins, Bill J. Dismuke and Wilton Looney.
DIRECTORS
John W. Rollins
Chairman of the Board and Chief
Executive Officer of
Rollins Truck Leasing
Corp. (vehicle leasing and
transportation),
Chairman of the Board of
Dover Downs
Entertainment, Inc.
(entertainment complex)
Henry B. Tippie U
Chairman of the Board and Chief
Executive Officer of
Tippie Services, Inc.
(management
services)
R. Randall Rollins *
Chairman of the Board and Chief
Executive Officer of Rollins,
Inc., Chairman
of the Board and Chief
Executive Officer
of RPC, Inc. (oil and gas
field services,
and boat
manufacturing)
Wilton Looney U
Honorary Chairman of the Board
of Genuine Parts Company
(automotive parts distributor)
James B. Williams U
Chairman of the Executive Committee of
SunTrust Banks, Inc. (bank holding company)
Gary W. Rollins *
President and Chief
Operating
Officer of Rollins,
Inc.
Bill J. Dismuke
Retired President of
Edwards
Baking Company
* Member of the
Executive
Committee
U Member of the Audit
and Compensation Committees
OFFICERS
R. Randall Rollins
Chairman of the Board and Chief
Executive Officer
Gary W. Rollins
President and
Chief
Operating Officer
Harry J. Cynkus
Chief Financial Officer and
Treasurer
Michael W. Knottek
Vice President and
Secretary
STOCKHOLDERS'
INFORMATION
ANNUAL MEETING
The Annual Meeting of the Stockholders will be
held at 9:30 a.m. Tuesday, April 27, 1999, at the
Company's corporate offices in Atlanta, Georgia
TRANSFER AGENT AND REGISTRAR
For inquiries related to stock certificates,
including changes of address, lost certificates,
dividends, and tax forms, please contact:
SunTrust Bank
Stock Transfer Department
P.O. Box 4625
Atlanta, Georgia 30302
Telephone: 1-800-568-3476
STOCK EXCHANGE INFORMATION
The Common Stock of the Company is listed on the
New York and Pacific Stock Exchanges and traded on
the Philadelphia, Chicago and Boston Exchanges
under the symbol ROL.
DIVIDEND REINVESTMENT PLAN
This Plan provides a simple, convenient, and
inexpensive way for stockholders to invest cash
dividends in additional Rollins, Inc. shares. For
further information, contact SunTrust Bank, at the
above address or write to the Chief Financial
Officer at the Company's mailing address.
FORM 10-K
The Company's annual report on Form 10-K to the
Securities and Exchange Commission provides
certain additional information. Stockholders may
obtain a copy by contacting the Chief Financial
Officer at the Company's mailing address.
CORPORATE OFFICES
Rollins, Inc.
2170 Piedmont Road, N.E.
Atlanta, Georgia 30324
MAILING ADDRESS
Rollins, Inc.
P.O. Box 647
Atlanta, Georgia 30301
TELEPHONE
(404) 888-2000
21