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Rollins Inc. Reports Operating Results (10-Q)

October 30, 2009 | About:
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10qk

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Rollins Inc. (ROL) filed Quarterly Report for the period ended 2009-09-30.

Rollins Inc. provides services to both residential and commercial customers. The four primary services provided are termite and pest control protective services lawn care and plantscaping. Orkin Exterminating Company Inc. a wholly owned subsidiary (Orkin) is one of the world's largest termite and pest control companies. Rollins Protective Services a division of the Registrant is a pioneer in developing customized wired and wireless electronic security systems. Rollins Inc. has a market cap of $1.81 billion; its shares were traded at around $18.22 with a P/E ratio of 24.3 and P/S ratio of 1.8. The dividend yield of Rollins Inc. stocks is 1.6%. Rollins Inc. had an annual average earning growth of 13.2% over the past 5 years.

Highlight of Business Operations:

On October 28, 2009, Rollins, Inc. reported its 14th consecutive quarter of improved earnings of $22.7 million for the quarter ended September 30, 2009, as compared to $19.8 million for the prior year quarter, a 14.8% improvement. Revenues increased 3.2% to $286.9 million for the quarter while earnings for the quarter ended September 30, 2009 were $0.23 per diluted share, a 15.0% improvement over the $0.20 per diluted share reported the prior year quarter.

Rollins continues to be financially solid generating $92.2 million in cash from operations year to date. The Company has paid back, as of September 30, 2009, $45.0 million of the $90.0 million borrowed in April 2008 to finance the HomeTeam Pest Defense acquisition. In addition, the Company repurchased 146,300 shares of common stock at a weighted average price of $17.81 per share during the third quarter bringing the total number of shares repurchased year-to-date to 1,450,100 at a weighted average price of $16.28. In total, approximately 3.2 million additional shares may be repurchased under the Companys share purchase program.

The Company invested approximately $9.8 million in capital expenditures during the first nine months ended September 30, 2009, compared to $10.1 million during the same period in 2008, and expects to invest approximately $4.0 million for the remainder of 2009. Capital expenditures for the first nine months consisted primarily of the purchase of equipment replacements and technology related projects. During the first nine months ended September 30, 2009, the Company made expenditures for acquisitions totaling $5.4 million, compared to $136.5 million during the same period in 2008. Cash on hand and borrowings under a senior unsecured revolving credit facility primarily funded expenditures for acquisitions. A total of $20.9 million was paid in cash dividends ($0.21 per share) during the first nine months of 2009, compared to $18.9 million or ($0.1875 per share) during the same period in 2008. The Company repurchased 1.5 million shares during the first nine months of 2009 of its $1 par value common stock at a weighted average price of $16.28. The capital expenditures and cash dividends were funded through existing cash balances, operating activities and borrowings under a senior unsecured revolving credit facility. The Company continues to seek new acquisitions.

The Companys $26.2 million of total cash at September 30, 2009, includes approximately $5.3 million invested in various money market funds. The remaining $20.9 million of cash at September 30, 2009 is primarily cash held at various banking institutions. Approximately $17.1 million is held in cash accounts at international bank institutions and the remaining $3.8 million is primarily held in non-interest-bearing accounts at various domestic banks. Late in 2008 and later updated in August 2009, the Federal Deposit Insurance Corporation approved a final rule to strengthen the agencys Temporary Liquidity Guarantee Program. This program guarantees newly issued senior unsecured debt of banks, thrifts, and certain holding companies, and provides full coverage of non-interest bearing deposit transaction accounts. Under this program, participating institutions will be able to provide customers full coverage (above the current $250,000 level) on non-interest bearing accounts, which currently will be in effect until June 30, 2010. All of the domestic banks where our balances exceed $250,000 are participating in this program.

On March 28, 2008, the Company entered into a definitive Asset Purchase Agreement dated as of March 28, 2008 to acquire, through the purchase of assets, the business of HomeTeam Pest Defense, which provides termite and pest control services to homebuilders, businesses and homeowners. The aggregate amount paid was a combination of $47.7 million in cash on hand, as well as $90.0 million in borrowings from the below mentioned credit facility, totaling $137.7 million. The Company closed the purchase of the HomeTeam Pest Defense acquisition on April 3, 2008. Through the period ended September 30, 2009, the Company paid back, $45.0 million of the $90.0 million that was borrowed to fund the HomeTeam acquisition.

On March 28, 2008, the Company entered into a Revolving Credit Agreement with SunTrust Bank and Bank of America, N.A. for an unsecured line of credit of up to $175 million, which includes a $75 million letter of credit subfacility, and a $10 million swingline subfacility. As of September 30, 2009, borrowings of $45.0 million were outstanding under the line of credit and no borrowings were outstanding under the swingline subfacility. The Company maintains approximately $34.9 million in letters of credit, which reduces its borrowing capacity under the credit facility. These letters of credit are required by the Companys fronting insurance companies and/or certain states, due to the Companys self-insured status, to secure various workers compensation and casualty insurance contracts, although the Company believes that it has adequate liquid assets, funding sources and insurance accruals to accommodate such claims. The Revolving Credit Agreement is guaranteed by certain of Rollins domestic subsidiaries. The maturity date of the Credit Agreement is March 27, 2013. Outstanding balances of individual tranches under the Credit Agreement currently mature in 2009. Revolving loans under the Revolving Credit Agreement bear interest at one of the following two rates, at the Companys election:

Read the The complete ReportROL is in the portfolios of Richard Aster Jr of Meridian Fund.

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