Rollins, Inc. Quarterly report pursuant to Section 13 or 15(d)

Quarterly report pursuant to Section 13 or 15(d)

LEASES

LEASES

6 Months Ended

Jun. 30, 2019

Future Commitments Under Operating Leases

NOTE 8. LEASES

The Company leases certain buildings, vehicles, and equipment in order to reduce the risk associated with ownership. The Company elected the practical expedient approach permitted under ASC 842 not to include short-term leases with a duration of 12 months or less on the balance sheet. As of June 30, 2019 and December 31, 2018, all leases were classified as operating leases. Building leases generally carry terms of 5 to 10 years with annual rent escalations at fixed amounts per the lease. Vehicle leases generally carry a fixed term of one year with renewal options to extend the lease on a monthly basis resulting in lease terms up to 5 years depending on the class of vehicle. The exercise of renewal options is at the Company's sole discretion. It is reasonably certain that the Company will exercise the renewal options on its vehicle leases. The measurement of right-of-use assets and liabilities for vehicle leases includes the fixed payments associated with such renewal periods. We separate lease and nonlease components of contracts. Our lease agreements do not contain any material variable payments, residual value guarantees, early termination penalties or restrictive covenants.

ROLLINS, INC. AND SUBSIDIARIES

The Company uses the rate implicit in the lease when available; however, most of our leases do not provide a readily determinable implicit rate. Accordingly, we estimate our incremental borrowing rate based on information available at lease commencement.

(in thousands)
Lease Classification	Financial Statement Classification	Six Months Ended June 30, 2019
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	71
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		19,115
Total lease expense		$	19,186

Other Information
Weighted-average remaining lease term - operating leases			4.08
Weighted-average discount rate - operating leases			3.94
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases			18,865

Lease Commitments

Future minimum lease payments at June 30, 2019 were as follows:

(in thousands)	Operating Leases
2019 (excluding the six months ended June 30, 2019)	$	35,805
2020		61,245
2021		45,685
2022		27,575
2023		14,278
2024		9,031
Thereafter		14,965
Total future minimum lease payments		208,584
Less: Amount representing interest		17,016
Total future minimum lease payments, net of interest	$	191,568

Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of $99.9 million for building leases and $108.7 million for vehicle leases. As of June 30, 2019, the Company had no additional future obligations for leases that had not yet commenced.

Future commitments under operating leases as of December 31, 2018 are as summarized:

(in thousands)	Operating Leases
2019	$	28,751
2020		18,024
2021		14,463
2022		11,142
2023		8,998
Thereafter		16,234
Total future minimum lease payments, net of interest	$	97,612

Future commitments presented in the table above exclude lease payments in renewal periods for which it is reasonably certain that the Company will exercise the renewal option.