Annual report pursuant to Section 13 and 15(d)

STOCKHOLDERS' EQUITY

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STOCKHOLDERS' EQUITY
 12 Months Ended
Dec. 31, 2023
Equity [Abstract]  
STOCKHOLDERS' EQUITY STOCKHOLDERS' EQUITY
During the year ended December 31, 2023, the Company paid $264.3 million, or $0.54 per share, in cash dividends compared to $211.6 million, or $0.43 per share, during the same period in 2022.
On September 6, 2023, the Company entered into an underwriting agreement (the “Underwriting Agreement”) with LOR, Inc. (“LOR”) (a company controlled by Mr. Gary W. Rollins and certain members of his family) and Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, as representatives of the several underwriters (the “Underwriters”), relating to the offer by LOR of 38,724,100 shares of the Company’s common stock, par value $1.00 per share (the “Common Stock”), at a public offering price of $35.00 per share (the “Offering”). In connection with the Offering, LOR granted the Underwriters an option to purchase up to an additional 5,785,714 shares of Common Stock (the “Optional Shares”). The Offering, including the sale of the Optional Shares, closed on September 11, 2023. The Company did not sell any shares in the Offering and did not receive any proceeds from the Offering. In addition, the Company completed the repurchase of 8,724,100 of the shares of Common Stock offered in the Offering for approximately $300 million at $34.39 per share.
As we repurchase our common stock, we reduce common stock for par value of the shares repurchased, with the excess of the purchase price over par value recorded as a reduction to additional paid-in capital and retained earnings.
The Company did not repurchase shares on the open market during the years ended December 31, 2023 and 2022.
The Company repurchases shares from employees for the payment of their taxes on restricted shares that have vested. The Company repurchased $10.8 million and $7.1 million during the years ended December 31, 2023 and 2022, respectively.
During the year ended December 31, 2023, the Company also issued $2.0 million of shares to employees in connection with the Employee Stock Purchase Plan ("ESPP") discussed below.
Stock Compensation Plans
Time-Lapsed Restricted Shares and Performance Share Unit Awards
Time-lapsed restricted share awards and restricted stock units (“restricted shares”) have been issued to officers and other employees, and annual share awards are made to non-employee directors, under the Company’s Employee Stock Incentive Plan. Additionally, in 2023, performance share units ("PSUs") were granted to the Company's executive officers. The PSUs will vest and convert to shares of common stock at the end of a three-year performance period upon the Company's successful achievement of certain financial and market performance goals.
The Company recognizes compensation expense for the unvested portion of awards outstanding over the remainder of the service period. The compensation cost recorded for these awards is based on the Company's closing stock price at the grant
date less the cost of estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods to reflect actual forfeitures. For PSUs that are granted with a total shareholder return ("TSR") component, management estimates the fair value using a Monte Carlo simulation valuation model, as these awards are subject to a market condition.
Restricted shares and PSUs provide for the issuance of a share of the Company’s common stock at no cost to the holder and generally vest after a certain stipulated number of years from the grant date, depending on the terms of the issue. Restricted shares and PSUs typically vest over approximately one to six-year periods. During these years, grantees of certain awards receive all dividends declared and retain voting rights for the granted shares. The agreements under which the one-time grant of restricted stock is issued provide that shares awarded may not be sold or otherwise transferred until restrictions established under the plans have lapsed.
The Company issued time-lapsed restricted shares and PSUs of 0.7 million, 0.9 million, and 0.8 million for the years ended December 31, 2023, 2022, and 2021, respectively. The Company issues new shares from its authorized but unissued share pool. At December 31, 2023, approximately 5.9 million shares of the Company’s common stock were reserved for issuance.
The following table summarizes the components of the Company’s stock-based compensation programs recorded as expense:
(in thousands) 2023 2022 2021
Restricted shares and PSUs:
Compensation expense $ 24,222  $ 20,816  $ 14,865 
The total income tax benefit related to stock-based compensation awards recognized in income was $5.2 million, $4.7 million, and $3.2 million for the years ended December 31, 2023, 2022, and 2021, respectively. As of December 31, 2023 and 2022, $50.0 million and $52.3 million, respectively, of total unrecognized compensation cost related to restricted shares and PSUs are expected to be recognized over a weighted average period of approximately 2.8 years and 3.5 years at December 31, 2023 and 2022, respectively.
The following table summarizes information on unvested awards outstanding as of December 31, 2023, 2022 and 2021.
(number of shares in thousands) Number of
Shares		 Weighted
Average
Grant-Date
Fair Value
Unvested as of December 31, 2020 2,870 $ 20.36 
Forfeited (191) 25.34 
Vested (861) 16.67 
Granted 778 37.04 
Unvested as of December 31, 2021 2,596 $ 26.16 
Forfeited (90) 26.37 
Vested (675) 19.99 
Granted 854 30.12 
Unvested as of December 31, 2022 2,685 $ 28.97 
Forfeited (98) 29.83 
Vested (840) 26.87 
Granted 678 36.10 
Unvested as of December 31, 2023 2,425 $ 31.66 
Employee Stock Purchase Plan
On April 26, 2022, shareholders approved the Rollins, Inc. 2022 Employee Stock Purchase Plan (“ESPP”) which provides eligible employees with the option to purchase shares of Company common stock, at a discount, through payroll deductions during six-month offering periods. Initially, a maximum of 1,000,000 shares of the Company’s common stock
are authorized for issuance under the ESPP. Under the ESPP, shares of common stock may be purchased by eligible participants during defined purchase periods at 90% of the lesser of the closing price of the Company’s common stock on the first day or last day of each purchase period. The first offering period for the ESPP began on July 1, 2022. The Company recorded compensation expense of $0.4 million in connection with the ESPP for each of the years ended December 31, 2023 and 2022. Compensation expense for the ESPP is included in cost of services provided and sales, general and administrative expenses in our consolidated statements of income.