Rollins, Inc. Annual report pursuant to Section 13 and 15(d)

Annual report pursuant to Section 13 and 15(d)

ACQUISITIONS

ACQUISITIONS

12 Months Ended

Dec. 31, 2019

2. ACQUISITIONS

The Company has made 30 and 38 acquisitions during the years ended December 31, 2019, and 2018, respectively, some of which have been disclosed on various press releases and related Current Reports on Form 8-K.

Acquisition of Clark Pest Control:

The Company completed the acquisition of Clark Pest Control on April 30, 2019. Clark Pest Control is a leading pest management company in California and was the nation’s 8th largest pest management company according to PCT 100 rankings at the time of the acquisition, making it the largest Rollins acquisition since the Company acquired HomeTeam Pest Defense in 2008. Clark Pest Control services its customers from 26 service locations in 2 states. Clark Pest Control recorded revenues of approximately $139.2 million for the fiscal year ended December 31, 2018. The Company’s consolidated statements of income include the results of operations of Clark Pest Control for the period beginning April 30, 2019 through December 31, 2019.

The Company engaged an independent valuation firm to determine the allocation of the purchase price to goodwill and identifiable intangible assets. The valuation resulted in the allocation of $191.9 million to goodwill, $112.7 million to customer contracts, and $49.8 million to other intangible assets, principally tradenames. The finite-lived intangible assets, principally customer contracts, are being amortized over periods principally ranging from 5 to 10 years on a straight-lined basis.

The fair values of Clark Pest Control's assets and liabilities, at the date of acquisition, were as follows:

(in thousands)	at April 30, 2019
Assets and liabilities:
Trade accounts receivables	$	6,974
Materials and supplies		900
Other current assets		5,367
Equipment and property, net		65,535
Goodwill		191,853
Customer contracts		112,700
Trademarks & tradenames		49,300
Non-compete agreements		500
Accounts payable		(1,929	)
Accrued compensation and related liabilities		(5,678	)
Unearned revenues		(879	)
Contingent Consideration, short-term		(6,777	)
Other current liabilities		(5,452	)
Other long term liabilities		(9,352	)
Accrued insurance, less current portion		(1,870	)
Contingent Consideration, long-term		(5,923	)
Total	$	395,269

The unaudited pro forma financial information presented below gives effect to the Clark Pest Control acquisition as if it had occurred as of the beginning of our fiscal year 2018. The information presented below is for illustrative purposes only and is not necessarily indicative of results that would have been achieved if the acquisition had actually occurred as of the beginning of such years or results which may be achieved in the future.

	12 Months Ended
	December 31,
(in thousands, except per share amounts)	2019		2018
Revenues:
Customer Services	$	2,060,280	$	1,960,741
Costs And Expenses		1,798,984		1,640,120
Income Before Income Taxes		261,296		320,621
Provision For Income Taxes		57,813		79,070
Net Income	$	203,483	$	241,551
Net Income Per Share - Basic And Diluted	$	0.62	$	0.74
Dividends Paid Per Share	$	0.47	$	0.47
Weighted average participating shares outstanding - basic and diluted		327,477		327,291

Total cash purchase price for the Company’s acquisitions in 2019 and 2018 were $430.6 million and $76.8 million, respectively. The fair values of major classes of assets acquired and liabilities assumed along with the contingent consideration liability recorded during the valuation period of acquisition is included in the reconciliation of the total consideration as follows (in thousands):

December 31,	2019			2018
Accounts receivable	$	7,728		$	3,558
Materials and supplies		1,378			556
Equipment and property		68,704			7,374
Goodwill		204,162			25,605
Customer contracts		136,344			62,228
Other intangible assets		50,650			6,936
Current liabilities		(18,195	)		(21,536	)
Other assets and liabilities, net		(7,513	)		(3,089	)
Total consideration paid		443,258			81,632
Less: Contingent consideration liability		(12,700	)		(4,863	)
Total cash purchase price	$	430,558		$	76,769