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

Quarterly report pursuant to Section 13 or 15(d)

LEASES

LEASES

9 Months Ended

Sep. 30, 2019

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 September 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.

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	Nine Months Ended September 30, 2019
Short-term lease cost	Cost of services provided, Sales, general, and administrative expenses	$	135
Operating lease cost	Cost of services provided, Sales, general, and administrative expenses		19,361
Total lease expense		$	19,496

Other Information
Weighted-average remaining lease term - operating leases			4.00
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			19,091

ROLLINS, INC. AND SUBSIDIARIES

Lease Commitments

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

(in thousands)	Operating Leases
2019 (excluding the nine months ended September 30, 2019)	$	18,791
2020		66,981
2021		51,969
2022		33,688
2023		17,716
2024		9,492
Thereafter		15,257
Total future minimum lease payments		213,894
Less: Amount representing interest		16,239
Total future minimum lease payments, net of interest	$	197,655

Total future minimum lease payments for operating leases, including the amount representing interest, are comprised of $96.4 million for building leases and $117.5 million for vehicle leases. As of September 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 were 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.