Rollins Inc. ( ROL)

Q3 2010 Earnings Call

October 27, 2010 10:00 am ET

Executives

Marilyn Meek - IR

Gary Rollins - President, CEO & COO

Harry Cynkus - Treasurer, SVP & CFO

Analysts

Clinton Fendley - Davenport and Company

Jamie Clement

Presentation

Operator

Good day ladies and gentlemen and thank you for standing by. Welcome to the Rollins Inc.Q3 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 question. (Operator Instructions) this conference is being recorded today, and the date is 27 October 2010.

I would now like to turn the conference over to Marilyn Meek from the Financial Relations Board, please go ahead.

Marilyn Meek

Thank you. By now you should have all received a copy of the press release however if any one is missing a copy and would like to receive one, please contact our office at 212-827-3746 and we will send you a release and make sure you are 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 4372650. Additionally the call is being webcast 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.

The management will make some opening remarks and then we will open up the line to your questions. Gary would you like to begin.

Gary Rollins

Yes thank you Marilyn. Good morning and thanks all of you for joining us on our third quarter 2010 conference call. Harry will read our forward-looking statements and disclaimer and then we will begin.

Harry 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 have been 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 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 Rollins

Thank you, Harry. We are very pleased with the record results for both the quarter and the first nine months of this year. With revenues increasing 6.4% over the last year’s third quarter and 5.2% up year-to-date. On August 1 we completed the acquisition of Waltham Service, a leading New England pest control company that was established in 1893 even before Orkin started.

Excluding the contributions that Waltham made to our results residential pest control posted an impressive 5.5% increase in revenues and the highest growth rate we’ve seen in residential revenue since the third quarter of 2006. Commercial revenues increased 6%, aided by strong growth in fumigations while termite increased approximately 1% over last year’s third quarter. These strong revenue results contributed to a 12.2% increase in net income.

As we discussed on our second quarter call, our focus this year has been on increasing new sales yield. Simply yield is the end product after we get a lead to sell the lead and perform the start of the account. Our team along with ( ECG) worked together to develop five simple ways for our employees to better engage customers to improve customer yield and customer retention.

We want to make it easier for the customers to work with us and our results have been positive. Given the publicity that bed bug have received I will be remiss if I failed to recognize their impact on our quarter. I have always looked with pride at the growth rate of our mosquito service which is increasing at better than 20% annually, but our bed bug business is leaving the mosquitoes in the dust.

Needless to say bed bug demand continues to grow and represents over 4 million in revenue in this quarter alone, up over 75% from the same quarter last year. While we don’t have any clear cut evidence as to what further impact this high level of ventures and publicity will have on our residential pest control revenue, we have no doubt that the bed bug invasion has made consumers more conscious of other pest problems. Specifically as it relates to the health and property causing them to have greater concerns about their living environment. Such housing concern of this nature is always good for our business. We know our training efforts are a significant contributor to the success of the company. This area is also one of the reasons that we have continued in named the Training Magazine’s Top 125 list of organizations that excel in human capital development. Most of our award winning training is generated from the Rollins Learning Center in Atlanta and we are proud to say that all of the Rollins pest control brands are benefiting to some degree from this excellent stores of knowledge and education.

Let me share some of our recent training initiatives. In the third quarter we conducted four certificated field trainer courses, certainly we invest routine rate in the train to trainer as it gives us more training leverage. We now have a total of 357 certificated field trainers, 63 of our employees signed up for mastering the art of front line customer service training. 552 students completed the introductory technical training and 225 students completed new higher sales training.

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