Rollins, Inc. (ROL)
Q2 2010 Earnings Conference Call
July 28, 2010 10:00 AM ET
Marilyn Meek – Financial Relations Board
Gary W. Rollins – CEO, President & COO
Harry J. Cynkus – CFO & Treasurer
Clinton Fendley – Davenport
James Clement – Sidoti & Company
Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the Rollins Inc. Q2 2010 Conference Call. During today’s presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be open for questions. (Operator instructions) This conference is being recorded today, Wednesday, July 28, 2010.
I would now like to turn the conference over to Marilyn Meek. Please go ahead, ma’am.
Thank you. By now you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact our office at 212-827-3746. We will send you a release and make sure you’re on the company’s distribution list.
There will be a replay of the call, which will begin one hour after the call and run for one week. The replay can be accessed by dialing 1800-406-7325 with the pass code of 4329321. Additionally, the call is being webcast over at www.viavid.com and a replay will be available for 90 days.
On the line with me today are Gary Rollins, President and Chief Executive Officer; and Harry Cynkus, Senior Vice President, Chief Financial Officer and Treasurer. Management will make some opening remarks and then we’ll open up the line to your questions.
Gary, would you like to begin?
Gary W. Rollins
Yes, thank you, Marilyn. Good morning and thanks to all of you for joining us on our second quarter 2010 conference call. Harry will read our forward-looking statement and disclaimer and then we’ll begin.
Harry J. Cynkus
Thanks, Gary. Our earnings release discusses our business outlook and contains certain forward-looking statements. These particular forward-looking statements and all other statements that may be made on this call excluding historical facts are subject to a number of risks and uncertainties and actual results may differ materially from any statements we make today.
Please refer to today’s press release and our SEC filings, including the risk factor section on our Form 10-K for the year ended December 31, 2009, for more information on the risk factors that could cause actual results to differ.
Gary W. Rollins
Thank you, Harry. We’re very pleased to report that all business lines contributed positively to the second quarter financial results where revenues for the quarter rose 5% and net income was up 8.7%. This marks the 17
consecutive quarter of earnings improvement. We continue to experience solid performance in residential pest control revenue which were up 4.7%, the highest increase that we’ve seen in this service since the fourth quarter of 2006. This is particularly gratifying coming off of last year’s second quarter on residential pest control was down 1.8%. Commercial pest control reported an increase in revenues of 5.4% while our termite business grew 4.2%. Additionally, we’re seeing a strong growth in our ancillary services.
Our mosquito season is now in full force and at the end of January, we saw an almost 20% increase in this business over last year. And as discussed last quarter, we continue to see a lot of that bug activity with a lot of press coverage. As net bugs remain a major concern the country, this business is rapidly growing as well. We believe that our positive financial performance is an indication that our strategy to steal shamelessly throughout all of our brands is paying off. The sharing of best practices concerning price increases, new customer pricing and new customer acquisition is benefiting all concerned. In the end, however, it all comes down to the many positive contributions our employees make every day. We take pride in our strong emphasis on recruiting high-quality individuals when needed and more importantly, pride in retaining our base of excellent employees. At the same time, we foster an environment in which all of our employees have the opportunity for career advancement.
We were therefore pleased to announce earlier this month that Steve Levitt (ph) rejoined Orkin in 1994 has been promoted to assistant to the President of Orkin, USA. That was recently, Steve was a Senior Region Manager for Orkin in the Pacific division responsible for four regions in the West Coast customer care center. Steve is relocating through Atlanta and will be focusing on among other things, maximizing Orkin’s residential pest control growth. We’re also pleased to have Bob Cipriano (ph) and Greg Thalman (ph) join our home office support organization. Bob brings over 25 years of human resource expertise to Rollins, came through his senior level positions at Kimberly Clark and General Electric. He joins Rollins as Assistant Vice President of Human Resources and will oversee five division human resource areas for Orkin. In a people business like ours, this is a big responsibility.
We’re very proud to have Greg Baughman (ph) join our company as Director of Technical Services, including 18 years at the National Pest Management Association. He has worked in the pest control industry for almost 30 years. Greg will provide technical support and service guidance to Orkin branches nationwide. As I mentioned, Rollins is a people company and we are rightfully so proud of these three and all of our team. As many of you are aware, strategic acquisitions are an important aspect of our business plan. And over the last ten years, we have acquired five significant pest control companies that today represents over a third of our business. At that end, at mid-month, we announced that we have signed a definitive agreement to acquire Waltham Services, Inc. (ph), established in 1893. By the way, it was hard to find the business older than Orkin but we did. Waltham is New England’s oldest and finest pest control company. We’re extremely pleased that they will be joining our family of brands. Their outstanding management team and talented associates will greatly enhance our service network in the important Northeast market.