Ms. Sams currently serves as a member of the Board of Directors of CoStar Group and Loop Industries, positions she has held since December 2019 and April 2021, respectively. Ms. Sams serves on the Audit Committee of Costar and the Audit and Compensation and Governance Committees of Loop Industries. Ms. Sams currently serves on the following non-profit boards: Princeton University, where she is Chair of the Board of Trustees and Chair of the Executive Committee, Board Development Committee and Compensation Committee; High Museum of Art in Atlanta; Woodruff Arts Center; The Westminster Schools; and Meals on Wheels, Atlanta, where she chairs the Development Committee. Ms. Sams received a J.D. from the University of Virginia School of Law, and a B.A. from Princeton University, where she graduated magna cum laude. |
| | | | | |
| John F. Wilson Vice-Chairman
Vice Chairman of the Board |
John F. Wilson has served as a Director of Rollins, Inc. since 2013, and as Vice Chairman of the Company since 2020. Mr. Wilson has extensive knowledge of the Company’s business and industry having served in various roles of increasing responsibility at the Company for over 26 years. He previously served as Vice President of the Company from 2011 to 2013, President and Chief Operating Officer of the Company from 2013 to 2020, and as President of Orkin, LLC from 2009 to 2013. Prior to these executive roles with the Company, Mr. Wilson held roles at the Company as sales inspector, branch manager, Central Commercial Region Manager, Atlantic Division Vice President, and President of the Southeast Division.
Mr. Wilson currently serves as a member of the Board of Directors of RPC, Inc. and Marine Products Corporation, positions he has held since April 2022. |
Our Board of Directors is currently composed of
teneleven members. In accordance with our Amended and Restated By-Laws, our Board is divided into three classes of directors. At the Annual Meeting,
fivefour director nominees are up for election this year. Each director’s term continues
until the Annual Meeting of Shareholders in 2027 or until the election and qualification of his or her successor, or such director’s earlier death or resignation. The nominees for election at the
20232024 Annual Meeting are now directors of the Company, with the exception of Mr.
HardinJones who is standing for election for the first time.
SixSeven other individuals serve as directors but are not standing for re-election because their terms as directors extend past this Annual Meeting pursuant to provisions of the Company’s Amended and Restated By-Laws, which provide for the election of directors for staggered terms, with each director serving a three-year term.
At the Annual Meeting, Messrs.
Gahlhoff, Gunning, MorrisonRollins, Hardin and
NixJones and Ms. Rollins will be nominated to serve as Class
III Directors to be elected for a three-year term expiring in
2026, and Mr. Hardin will be nominated to serve as a Class II Director to be elected for a one-year term expiring in 2024.2027. Unless authority is withheld, the proxy holders will vote for the election of each director nominee named above. Although management does not contemplate the possibility, in the event any nominee is not a candidate or is unable to serve as director at the time of the election, unless authority is withheld, the proxies will be voted for any nominee who shall be designated by the present Board of Directors and recommended by the Nominating and Corporate Governance Committee to fill such vacancy.
Our Board of Directors recommends a vote FOR the Class
I and II director nominees above.
Report of the Audit Committee Management is responsible for the Company’s system of internal control over financial reporting, the preparation of its consolidated financial statements in accordance with accounting principles generally accepted in the United States, and the financial reporting process, including management’s assessment of internal control over financial reporting (ICFR).
The Company’s independent registered public accounting firm is responsible for performing an integrated independent audit of the Company’s consolidated financial statements and management reports on ICFR in accordance with the standards of the Public Company Accounting Oversight Board (“PCAOB”) and for issuing reports thereon. The Audit Committee’s responsibility is generally to monitor and oversee these processes, as described in the Audit Committee Charter. It is not the duty of the Audit Committee to plan or conduct audits or to determine that the Company’s financial statements are complete and accurate and in accordance with generally accepted accounting principles; that is the responsibility of management. The Audit Committee presently consists of
threefour independent directors, all of whom are considered financially literate under NYSE rules.
In fulfilling its oversight responsibilities with respect to the year ended December 31,
2022,2023, the Audit Committee:
| ● | Approved the engagement and terms of service of Grant Thornton LLP as the Company’s independent registered public accounting firm for the year ended December 31, 2022; |
• | ● | Reviewed with management and the Company’s independent registered public accounting firm, the interim financial information included in the Company’s Forms 10-Q prior to the Forms 10-Q being filed with the SEC, as well as the financial information in each quarterly earnings release; |
Approved the engagement and terms of service of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the year ended December 31, 2023;
| ● | Reviewed and discussed with the Company’s management (including internal audit) and the Company’s independent registered public accounting firm, the audited consolidated statements of financial position of the Company as of December 31, 2022 and 2021 and the related statements of income, comprehensive earnings, stockholders’ equity and cash flows for each of the three years ended December 31, 2022 including the related footnotes and financial statement schedule, and the related ICFR; |
• | ● | Discussed with the Company’s independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC; and |
Reviewed with management and the Company’s independent registered public accounting firm, the interim financial information included in the Company’s Forms 10-Q prior to the Forms 10-Q being filed with the SEC, as well as the financial information in each quarterly earnings release;
| ● | Received from the Company’s independent registered public accounting firm the written disclosures and the letter in accordance with the requirements of the PCAOB regarding the firm’s communications with the Audit Committee concerning independence, and discussed with such firm, its independence from the Company. |
•Reviewed and discussed with the Company’s management (including internal audit) and the Company’s independent registered public accounting firm, the audited consolidated statements of financial position of the Company as of December 31, 2023 and 2022 and the related statements of income, comprehensive earnings, shareholders’ equity and cash flows for each of the three years ended December 31, 2023 including the related footnotes and financial statement schedule, and the related ICFR;
•Discussed with the Company’s independent registered public accounting firm matters required to be discussed by the applicable requirements of the PCAOB and the SEC; and
•Received from the Company’s independent registered public accounting firm the written disclosures and the letter in accordance with the requirements of the PCAOB regarding the firm’s communications with the Audit Committee concerning independence, and discussed with such firm its independence from the Company.
Based upon the review and discussions referred to previously, the Audit Committee recommended to the Board of Directors that the audited consolidated financial statements of
financial position of the Company and subsidiaries
as of December 31, 2022 and 2021 and the related statements of income, comprehensive earnings, stockholders equity and cash flows for each of the three years ended December 31, 2022 be included in the Company’s Annual Report on Form 10-K for the year ended December 31,
20222023 for filing with the SEC.
The Audit Committee also reappointed Deloitte & Touche LLP as the Company’s independent registered public accounting firm for 2024. Shareholders are being asked to ratify that selection at the Annual Meeting.
In giving its recommendation to the Board of Directors, the Audit Committee has relied on (i) management’s representation that such financial statements have been prepared with integrity and objectivity and in conformity with accounting principles generally accepted in the United States of America; and (ii) the reports of the Company’s independent registered public accounting firm with respect to such financial statements and related internal controls.
Respectfully submitted by the Audit Committee of the Board of Directors
Susan R. Bell, Chairperson
Donald P. Carson
This report of the Audit Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this proxy statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
Independent Registered Public Accounting Firm
Our
The Audit Committee
in accordance with its charter, routinely reviewsconducted a competitive selection process to determine the
performance and retention of our independent auditor, and in 2023, the Audit Committee determined that it is an appropriate time to revisit its selection of our independent auditor. Therefore, we have submitted a request for proposal to several independent registered public accounting firms, including our current independent registered public accounting firm, Grant Thornton LLP. The request for proposal asks that these firms submit proposals to serve as ourCompany’s independent registered public accounting firm for the fiscal year ending December 31, 2023.
After receivingThe Committee invited several public accounting firms to participate in this process, including Grant Thornton LLP, the Company’s independent registered public accounting firm for the fiscal year ended December 31, 2022. As a result of this process, following the review and
reviewing theseevaluation of proposals
from participating firms, on March 24, 2023, the
Audit Committee
will select and appoint anapproved the appointment of Deloitte & Touche LLP as the Company’s independent registered public accounting firm for the fiscal year ending December 31, 2023.
We currently expect to complete this process prior toOn the
Annual Meeting.In light of this ongoing process, we are not submitting a proposal forsame date, the ratification of appointmentAudit Committee approved the dismissal of Grant Thornton LLP at the Annual Meeting. While not required to do so, our practice has been to submit the selection of the independent auditor for ratification in order to ascertain the views of our stockholders, and we expect to resume this practice once a decision has been made. We also expect that representatives from Grant Thornton LLP, and in the event the Audit Committee does not engage Grant Thornton LLP as the Company’s independent auditorregistered public accounting firm.
Grant Thornton’s reports on the Company’s consolidated financial statements as of and for the fiscal year endingyears ended December 31, 2022 and 2021 did not contain any adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope, or accounting principles.
During the fiscal years ended December 31, 2022 and 2021, and the subsequent interim period through March 24, 2023, representatives fromthere were: (i) no disagreements within the independentmeaning of Item 304(a)(1)(iv) of Regulation S-Kbetween the Company and Grant Thornton on any matter of accounting principles or practices, financial statement disclosure, or auditing firmscope or procedure, which disagreements, if not resolved to Grant Thornton’s satisfaction, would have caused Grant Thornton to make reference thereto in their reports; and (ii) no reportable events within the meaning of Item 304(a)(1)(v) of Regulation S-K.
During the fiscal years ended December 31, 2022 and 2021 and the subsequent interim period through March 24, 2023, neither the Company nor anyone on its behalf consulted with Deloitte regarding: (i) the application of accounting principles to a specific transaction, either completed or proposed, or the type of audit opinion that has been engaged, willmight be rendered on the Company's financial statements, and neither a written report nor oral advice was provided to the Company that Deloitte concluded was an important factor considered by the Company in reaching a decision as to any accounting, auditing, or financial reporting issue; (ii) any matter that was the subject of a disagreement within the meaning of Item 304(a)(1)(iv) of Regulation S-K and the related instructions; or (iii) any reportable event within the meaning of Item 304(a)(1)(v) of Regulation S-K.
Deloitte & Touche LLP is considered by management to be well qualified. Representatives of Deloitte & Touche LLP are expected to be present at the
Annual Meetingannual meeting, and
that they will have the opportunity to make a statement if they desire to do so and
are expected to be available to respond to appropriate questions.
Fees of the Independent Registered Public Accounting Firm The following table presents fees for professional audit services and other services rendered to our companyCompany by Grant ThorntonDeloitte & Touche LLP for our fiscal yearsyear ended December 31, 20222023.
| | | | | |
| 2023 |
Audit Fees(1) | $ | 2,066,251 | |
| Audit-Related Fees | — | |
All Other Fees(2) | $ | 1,895 | |
| Total | $ | 2,068,146 | |
(1)Audit fees represent fees for professional services provided in connection with the integrated audit of our financial statements, including internal controls over financial reporting, review of our quarterly financial statements, and 2021. | | | | | |
| | 2022 | | 2021 |
Audit Fees(1) | | $ | 2,247,000 | | 2,123,000 |
Audit-Related Fees | | | — | | — |
All Other Fees | | | — | | — |
Total | | $ | 2,247,000 | | 2,123,000 |
audit services provided in connection with other statutory or regulatory filings.
(2) | (1) | Audit fees represent fees for professional services provided in connection with the integrated audit of our financial statements, including internal controls over financial reporting, review of our quarterly financial statements, and audit services provided in connection with other statutory or regulatory filings. |
Includes fees primarily related to subscription services.
All of the services described above were pre-approved by the Company’s Audit Committee or the Audit Committee’s Chairperson in accordance with the Company’s Audit and Non-Audit Services Preapproval Policy. The Audit Committee has determined that the payments made to its independent registered public accounting firm for these services are compatible with maintaining such auditors’ independence. All of the hours expended on the principal accountant’s engagement to audit the financial statements of the Company for the
years 2022 and 2021year 2023 were attributable to work performed by full-time, permanent employees of the principal accountant. The Committee has no pre-approval policies or procedures other than as set forth below.
The Audit Committee is directly responsible for the appointment and termination, compensation, and oversight of the work of the independent registered public accounting firm, including resolution of disagreements between management and the independent registered public accounting firm regarding financial reporting. The Audit Committee, or one or more members of the Committee, as may be delegated from time to time, is responsible for pre-approving all audit and non-audit services provided by the independent public accountants and ensuring that they are not engaged to perform the specific non-audit services proscribed by law or regulation. The decisions of any Audit Committee member to whom pre-approval authority is delegated must be presented to the full Audit Committee at its next scheduled meeting.
PROPOSAL 2:
ADVISORY (NON-BINDING) VOTE ON EXECUTIVE COMPENSATION
As required under the Dodd-Frank Wall Street Reform and Consumer Protection Act
RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Overview
The Audit Committee of 2010 (the “Dodd-Frank Act”), our Board of Directors is submitting a “Say on Pay” proposal for stockholder consideration. While the vote on executive compensation is nonbinding and solely advisory in nature, our Board of Directors and the Human Capital Management and Compensation Committee value the opinion of our stockholders and will review the voting results and seek to determine the causes of any significant negative voting result to better understand issues and concerns not previously presented. Stockholders who want to communicate with the Board of Directors or management should referhas appointed Deloitte & Touche LLP as the Company’s independent registered public accounting firm to “Stockholder Communications withaudit our consolidated financial statements for the fiscal year ending December 31, 2024. During fiscal 2023, Deloitte & Touche LLP served as our independent registered public accounting firm. Representatives of Deloitte & Touche LLP are expected to attend the annual meeting and will have the opportunity to respond to appropriate questions and, if they desire, to make a statement.
Although we are not required to seek ratification of this appointment, the Audit Committee and the Board of Directors
” on page 11 believes it is appropriate to do so. If shareholders do not ratify the appointment of
this proxy statementDeloitte & Touche LLP, the current appointment will stand, but the Audit Committee will consider the shareholder action in determining whether to retain Deloitte & Touche LLP as our independent registered public accounting firm for
additional information.Executive compensation is an important matter for our stockholders. The core of our executive compensation philosophy and practice continues to be to pay for performance. Our executive officers are compensated in a manner consistent with our strategy, competitive practice, sound corporate governance principles, and stockholder interests and concerns. We believe our compensation program is strongly aligned with the long-term interests of our stockholders. Compensation of our executive officers is designed to enable us to attract and retain talented and experienced senior executives to lead us successfully in a competitive environment.
Our named executive officers are identified on page 32, and the compensation of the named executive officers is described on pages 32-52, including the Compensation Discussion and Analysis (“CD&A”) on pages 32-43. The CD&A section of this proxy statement provides additional details on our executive compensation program, including our compensation philosophy and objectives and thefuture fiscal 2022 compensation of the named executive officers.
We are asking stockholders to vote on the following resolution:
“RESOLVED, that the compensation paid to the Company’s named executive officers pursuant to the compensation disclosure rules of the Securities and Exchange Commission, including the Compensation Discussion and Analysis, the compensation tables and any related material disclosed in the Company’s 2023 Proxy Statement, is hereby approved.”
As indicated above, the stockholder vote on this resolution will not be binding on us or the Board of Directors and will not be construed as overruling any decision by us or the Board. The vote will not be construed to create or imply any change to the fiduciary duties of the Board, or to create or imply any additional fiduciary duties for us or the Board.
The affirmative vote of a majority of the shares of our common stock present in person or represented by proxy and entitled to vote at the annual meeting is required for approval of this proposal. If you own shares through a bank, broker or other holder of record, you must instruct your bank, broker or other holder of record how to vote in order for them to vote your shares so that your vote can be counted on this proposal.
Currently, we hold stockholder advisory votes on executive compensation every three years, and the next such vote after this year’s vote is scheduled to occur in 2026.
years.
Our Board of Directors
unanimously recommends
that you vote “FOR” the approval, on an advisory (non-binding) basis, of the compensation of our named executive officers as disclosed in the Compensation Discussion and Analysis, the accompanying compensation tables, and the related narrative disclosure.
PROPOSAL 3:
ADVISORY (NON-BINDING) VOTE ON THE FREQUENCY OF STOCKHOLDER VOTES TO APPROVE EXECUTIVE COMPENSATION
Under the Dodd-Frank Act, we are also required to seek an advisory (non-binding) stockholder vote regarding the frequency of submission to stockholders of a “Say on Pay” advisory vote such as Proposal No. 2. The Dodd-Frank Act specifies that stockholders be given the opportunity to vote on our executive compensation programs either annually, every two years or every three years. Although this vote is advisory and nonbinding, our Board of Directors will review voting results and give serious consideration to the outcome of such voting. Our Board of Directors recognizes the importance of receiving regular input from our stockholders on important issues such as our compensation programs. Our Board also believes that a well-structured compensation program should include plans that drive creation of stockholder value over the long-term, and that it should receive advisory input from our stockholders. Accordingly, as indicated below, the Board recommends that you vote in favor of a three-year advisory vote on our compensation programs.
The stockholders voted in 2017 to conduct advisory votes to approve executive compensation every three years, and consistent with that vote, we are holding a new vote to approve executive compensation at the 2023 Annual Meeting of Stockholders. The advisory vote on the frequency of voting on executive compensation is to be held not less frequently than every six years, with the next such vote to be held at the 2029 Annual Meeting of Stockholders.
Stockholders may cast their vote on their preferred voting frequency by choosing the option of one year, two years, three years or abstain from voting when voting in response to the resolution set forth below:
“RESOLVED, that the holders of the common stock of the Company indicate, by their vote on this resolution, whether the vote on executive compensation should take place every one year, every two years or every three years.”
The option of one year, two years or three years that receives the highest number of votes cast by stockholders will be the frequency for the advisory vote on executive compensation that has been selected by stockholders. However, as indicated above, the stockholder vote on the frequency of nonbinding stockholder votes to approve executive compensation will not be binding on us or the Board and will not be construed as overruling any decision by us or the Board. The vote will not be construed to create or imply any change to the fiduciary duties of the Board, or to create or imply any additional fiduciary duties for us or the Board.
Currently, we hold stockholder advisory votes on executive compensation every three years, and the next such vote after this year’s vote is scheduled to occur in 2026.
Our Board of Directors unanimously recommends that you vote FOR the optionratification of “Once Every Three Years”the appointment of Deloitte & Touche LLP as the frequency with which stockholders are provided an advisory (non-binding) vote on executive compensation, as disclosed pursuant toCompany’s independent registered public accounting firm for the compensation disclosure rules of the SEC.
2024 fiscal year.
The following narratives summarize the business experience over at least the last five years of our current executive officers, other than Messrs. Rollins, Wilson and Gahlhoff, whose business experience is described above in the section titled “Information Regarding Director Nominees and Continuing Directors” on page 20.18. | | | | | |
| |
| Kenneth D. Krause, Executive Vice President, Chief Financial Officer and Treasurer, 48 49 |
| Kenneth D. Krause has served as the Executive Vice President, Chief Financial Officer and Treasurer of Rollins since September 2022. Prior to joining Rollins, Mr. Krause served as the Senior Vice President, Chief Financial Officer, Chief Strategy Officer and Treasurer of MSA Safety, Inc. from 2015 to 2022. Mr. KrauseHe also served in various other leadership roles at MSA Safety, Inc. with increasing levels of responsibility from 2006 to 2015. Prior to that,MSA Safety, Inc., Mr. Krause servedwas a senior manager in the audit practice of KPMG, an international accounting firm.
Mr. Krause currently serves as a Senior Manager at KPMG from 2004 to 2006.member of the Metro Atlanta Chamber Board of Directors. Mr. Krause received a Bachelor of Science in Business Administration - Accounting from Slippery Rock University and an MBA from the University of Pittsburgh Katz Graduate School of Business. Mr. KrauseHe is also a Certified Public Accountant. |
| CPA with inactive status in the state of Pennsylvania. |
| Elizabeth B. Chandler, Vice President, General Counsel and Corporate Secretary, 59 60 |
| Elizabeth B. Chandler joined Rollins in 2013 as Vice President and General Counsel. Ms. Chandler was appointed to Corporate Secretary in January 2018. In 2017, Ms. Chandler assumed responsibility for the Risk Management and Internal Audit groups. Before joining Rollins, Ms. Chandler served as Vice President, General Counsel and Corporate Secretary for Asbury Automotive from 2009 to 2012. Prior to that, Ms. Chandler served as city attorney for the City of Atlanta from 2006 to 2009, as Vice President, Assistant General Counsel and Corporate Secretary for Mirant Corp. from 2000 to 2006 and as an Associate and Partner at Troutman Pepper from 1988 to 1995 and from 1995 to 2000, respectively.
Ms. Chandler has been a board member of the Atlanta Beltline Partnership, Inc. and the Georgia Research Alliance, since 2017 and 2022, respectively. She also has served on the Advisory Board of Crider Foods since 2023. Ms. Chandler received a Bachelor of Business Administration in International Business and a Juris Doctorate from the University of Georgia. |
COMPENSATION DISCUSSION AND ANALYSIS This Compensation Discussion and Analysis describes our executive compensation program and provides an overview of how the Human Capital Management and Compensation Committee made compensation decisions in 20222023 for each of our named executive officers, which consistsconsist of our Principal Executive Officer, each person who served as our Principal Financial Officer, at any time during the fiscal year 2022, and the next three most highly-compensated executive officers (other than our Principal Executive Officer and Principal Financial Officer) who were serving in such capacity at the end of the fiscal year 2022.2023. For a complete understanding of the executive compensation program, this disclosure should be read in conjunction with the "Summary Compensation Table" on page 43 and other executive compensation-related disclosures included in this Proxy Statement. In fiscal 2022,2023, our named executive officers were:
| | | | | |
Named Executive Officer | Position with the Company in 2022 2023 |
Gary W. Rollins | Executive Chairman of the Board |
| Jerry E. Gahlhoff, Jr. | President and Chief Executive Officer |
Kenneth D. Krause(1) | Executive Vice President, Chief Financial Officer and Treasurer |
Julie K. Bimmerman(2)
| Vice President, Interim Chief Financial Officer and Treasurer
|
Jerry E. Gahlhoff, Jr.
| President and Chief Operating Officer
|
John F. Wilson | Vice Chairman and Assistant toof the Chairman Board |
Elizabeth B. Chandler | Vice President, General Counsel and Corporate Secretary |
| (1) | Mr. Krause was appointed to the role of Executive Vice President and Chief Financial Officer and Treasurer, effective September 1, 2022. |
| (2) | In connection with Mr. Krause’s appointment to the role of Executive Vice President and Chief Financial Officer and Treasurer, Ms. Bimmerman relinquished her responsibilities as Vice President, Interim Chief Financial Officer and Treasurer and returned to her role as Group Vice President - Finance, effective September 1, 2022. |
Executive Compensation Practices and Governance Policies
| | | | | | | | | | | |
| | What We Do | | | What We Don’t Do |
✓ |
A component of our named executive officers’ total compensation is directly linked to the Company’s performance.performance, and approximately 80% is "at risk". | x | No Short-Selling Under our or Derivatives Trading
Our Insider Trading Policy we prohibit our employees, including ourprohibits named executive officers (like all our employees and the members of our board of directors,directors) from short selling our securities.securities and from purchasing or selling derivatives. They (and our directors) are also subject to additional prohibitions on pledging. |
✓ | Align the Interests of Executives with those of Our StockholdersShareholders
Equity compensation represents a significant portion of our named executive officers’ total compensation. | x | No Guaranteed Base Salary Increases or Bonuses
We do not provide guaranteed base salary increases or guaranteed bonuses. |
✓ | Stock Ownership Guidelines
We maintain strong stock ownership requirements for our directors, executive officers and other key employees. | x | No Employment ContractThere are no agreementsExecutive Pension Plans or understandings between the CompanySERPs
We only maintain a deferred compensation plan and any executive officer that guarantee continued employment or guarantee any level of severance or compensation that is not subject to approval by our Human Capital Management and Compensation Committee.a standard 401(k) plan. |
✓ | Independent Compensation Committee
Our Human Capital Management and Compensation Committee is composed solely of independent directors. | | x
| No Executive Pension Plans or SERPs
We only maintain a deferred compensation plan and a standard 401(k) plan.
✓ | Independent Compensation Consultant
Our Human Capital Management and Compensation Committee directly retains an independent compensation consultant. | | |
✓ |
Clawback Policy In 2023, we adopted a Clawback Policy which provides certain triggers for mandatory recovery of erroneously awarded compensation. | | |
General Compensation Objectives and Guidelines The Company is engaged in a highly competitive industry. The success of the Company depends on our ability to attract and retain highly qualified and motivated executives. In order to accomplish this objective, we have endeavored to structure our executive compensation program in a fashion that gives our Human Capital Management and Compensation Committee the flexibility to take into account our operating performance and the individual performance of our executive officers. The Committee, with the assistance of its compensation consultant, used peer group benchmarking (as described under the heading titled “Peer Group Benchmarking Analysis” on page 41),39) to assess the comparability of the Company’s pay practices to ensureconfirm that the total compensation for the Company’s executive officers is competitive with marketplace practices.
The Human Capital Management and Compensation Committee endorses the philosophy that executive compensation should reflect Company performance and the contribution of executive officers to that performance. Our compensation policy is designed to achieve three fundamental objectives:
| ● | attract and retain qualified executives; |
| ● | motivate performance to achieve Company objectives; and |
| ● | align the interests of our executives with the long-term interests of the Company’s stockholders. |
•attract and retain qualified executives;
•motivate performance to achieve Company objectives; and
•align the interests of our executives with the long-term interests of the Company’s shareholders.
In pursuing our objectives, we strive to provide a balanced approach to compensation policies and practices which does not promote excessive risk-taking.
The Human Capital Management and Compensation Committee recognizes that there are many intangibles involved in evaluating performance and in motivating performance, and that determining an appropriate compensation level is a highly subjective endeavor.
Pursuant to our compensation philosophy, the total annual compensation of our executive officers is primarily made up of the following three elements:
| ● | base salary (fixed compensation), which is an important element to attract, retain and motivate our executives; |
| ● | annual performance-based cash incentive compensation (variable compensation), which is valuable in recognizing and rewarding Company and individual achievement; and |
| ● | grants of equity-based awards such as restricted stock (variable compensation), makes our executives “think like owners” and, therefore, aligns their interests with those of our stockholders. |
•base salary (fixed compensation), which is an important element to attract, retain and motivate our executives;
•annual performance-based cash incentive compensation (variable compensation), which is valuable in recognizing and rewarding Company achievement; and
•grants of equity-based awards such as restricted stock (variable compensation) and performance share units (variable compensation), which make our executives “think like owners” and, therefore, align their interests with those of our shareholders.
In addition, we provide retirement compensation plans, group welfare benefits and certain perquisites.
We believe that all elements of our executives’ total compensation provide highly motivational incentives that link the pay of our executives to the performance of our Company and enable us to attract and retain highly qualified and motivated executives in our very competitive market.
Fiscal 20222023 Named Executive Officer Compensation Details
The Company provides both fixed (salary) and variable (cash and equity incentive) compensation to its named executive officers. The following table sets forth information regarding each of the three core elements of compensation for the executive officers in 2022,2023, including a description of each element. In addition to these three core elements, the named executive officers participate in certain health and retirement plans, as well as receive certain perquisites and personal benefits, described in more detail under “Other Compensation” below.
| | | | | |
| Core Compensation Element | Description |
Base Salary | Fixed cash compensation based on each executive officer’s role, responsibilities, competitive market positioning, and individual performance. |
Annual Performance-Based Cash Incentive
| Annual performance-basedPerformance-based incentive cash compensation with target award amounts for each executive officer. Actual bonus amounts may be lower than target based on the achievement of certain Company performance goals and individual performance.
goals. |
Annual Equity Incentive
| Grants of stock-based awards currently in the form of time-lapsed restricted stock. stock and performance share units. |
The graphics below reflect the approximate general distribution of the three core elements of compensation earned or awarded for fiscal 20222023 by our CEO, and on average, by our named executive officers under the Company’s 20222023 Executive Bonus Plan and 2018 Stock Incentive Plan:
| | | | | | | | | | | | | | |
Fixed Compensation
15% | Variable 85% | | Fixed Compensation
26% | Variable 74% |
CEO
| OTHER NAMED EXECUTIVE OFFICERS
|
| 
|
| (1) | The numbers presented in the charts above are calculated in accordance with the presentation in the "Summary Compensation Table" on page 43. Accordingly, the cash incentive component consists of the cash bonuses actually paid out for 2023 performance, but the RSAs and PSUs are valued at fair value on the grant date. Actual value ultimately received by the named executive officers ("NEOs") with respect to these awards may be greater or lesser than the grant date fair value. Fixed compensation presented in the chart consists of base salary and does not include elements presented under the “All Other Compensation” columns in the "Summary Compensation Table." The numbers presented for “Other Named Executive Officers” are averaged for simplicity of presentation, but the mix for individual NEOs varies depending upon their role and responsibilities, as the Human Capital Management and Compensation Committee has deemed appropriate. The % shown in the salary component of the Other Named Executive Officer graphic above, includes the salary earned by Mr. Krause in 2022 which was prorated to his start date.
|
Base Salary
Base salary represents the fixed elementportion of the compensation of our executive officersthree core elements described above and is an important element of compensation intended to attract and retain qualified executives. The Human Capital Management and Compensation Committee reviews the base salaries of our executive officers each year as part of its annual review of our executive compensation program, with input from our CEO (except with respect to his own base salary). In making its determinations, the Human Capital Management and Compensation Committee gives consideration to our operating performance for the prior fiscal year and the individual executive’s performance. Base salary increases are not automatic or guaranteed.
20222023 Base Salary Adjustments
In
2022,2023, the Human Capital Management and Compensation Committee adjusted the base salaries of the Company’s named executive officers as follows:
| | | | | | | | | |
Named Executive Officer | | 2021 Salary | | 2022 Salary | | % Increase | |
Gary W. Rollins | | $ | 1,400,000 | | $ | 1,449,000 | | 3.5 | % |
Jerry E. Gahlhoff, Jr. | | $ | 600,000 | | $ | 690,000 | | 15.0 | % |
John F. Wilson | | $ | 950,000 | | $ | 983,250 | | 3.5 | % |
Elizabeth B. Chandler | | $ | 500,000 | | $ | 517,500 | | 3.5 | % |
| | | | | | | | | | | |
| Named Executive Officer | 2022 Salary | 2023 Salary | % Increase |
| Gary W. Rollins | $ | 1,449,000 | | $ | 1,449,000 | | — | % |
| Jerry E. Gahlhoff, Jr. | $ | 690,000 | | $ | 1,000,000 | | 44.9 | % |
| Kenneth D. Krause | $ | 675,000 | | $ | 702,000 | | 4.0 | % |
| John F. Wilson | $ | 983,250 | | $ | 400,000 | | (59.3) | % |
| Elizabeth B. Chandler | $ | 517,500 | | $ | 538,200 | | 4.0 | % |
The 15%44.9% increase in Mr. Gahlhoff’s base salary for 20222023 was made due to Mr. Gahlhoff’s increased responsibilities resulting from his assumption of the duties of Chief Executive Officer and Principal Executive Officer, as well as those of President, effective January 1, 2023. Mr. Krause's salary actually paid in connection with2022 was prorated for the portion of the year he was employed by the Company. This proration of salary is reflected in the "Summary Compensation Table" on page 43. The 59.3% decrease in Mr. Wilson’s base salary for 2023 was made due to the decrease in his role as President and Chief Operating Officer.responsibilities. Mr. Krause did not receiveand Ms. Chandler both received a salary adjustment in 2022 as he joined the Company in September 2022. Ms. Bimmerman also did not receive a salary adjustment in 2022 as the Human Capital Management and Compensation previously adjusted Ms. Bimmerman’s4% merit increase to their base salary to reflect a 24.9% increase in July 2021 in connection with her transition into the role as Interim Chief Financial Officer and Treasurer.salaries.
Performance-Based Cash Incentive In January 2022,February 2023, the Human Capital Management and Compensation Committee approved the terms of the Rollins, Inc. 20222023 Executive Bonus Plan for its named executive officers (the “Executive Bonus Plan”), which replaced the 2021 Performance-Based Incentive Cash Compensation2022 Executive Bonus Plan. Under the Executive Bonus Plan, the named executive officers have an opportunity to earn bonuses of up to a certain percent of each individual’s annual base salary upon the achievement of performance goals approved by the Human Capital Management and Compensation Committee. Such performance goals consist offor the Company’s and individual’s achievement of specific levels of one or more2023 Executive Bonus Plan consisted of the following three targeted financial measures: | ● | pre-tax profit plan achievement; and |
| ● | individual key operating initiatives. |
•revenue to plan; and
•pre-tax profit plan achievement.
The performance goals are pre-established
each year by the Human Capital Management and Compensation Committee for all named executive officers and measured annually.
No bonuses are payable underThe terms of the Executive Bonus Plan
if the goals are not approvedallow adjustments by the Human Capital Management and Compensation Committee
within 90 days afterto performance results to include or exclude, as appropriate, the
commencement of the performance period to which such goals relate.impact from significant business or product line acquisitions or sales and/or unusual or exceptional charges or revenue. We believe that the incentive-related provisions provide performance incentives that are beneficial to the Company and its
stockholders.The maximum performance-basedshareholders by aligning pay with Company performance. Individual key operating initiatives, which were used in 2022 for certain bonus opportunities, were not utilized in the Executive Bonus Plans for 2023, because the Human Capital Management and Compensation Committee determined that it would be most beneficial for the annual cash incentivebonuses to be fully aligned with overall Company performance.
Set forth below is the 2023 target payout opportunity with respect to each of the performance measures, expressed as a percentage of annual base salary, for each of theour named executive officers for fiscal 2022 is summarized inofficers:
| | | | | | | | | | | |
| Named Executive Officer | Target Bonus Opportunity for Pre-Tax Profit Element | Target Bonus Opportunity for Revenues Element | Total Target Bonus Opportunity |
| Gary W. Rollins | 80% | 45% | 125% |
| Jerry E. Gahlhoff, Jr | 90% | 60% | 150% |
| Kenneth D. Krause | 60% | 40% | 100% |
| John F. Wilson | 50% | 25% | 75% |
| Elizabeth B. Chandler | 45% | 30% | 75% |
For each of the table below. Awards earned in 2022two elements of the bonus, threshold performance – which requires achieving 95% of the performance goal under the Executive Bonus Plan were accruedCompany’s plan – results in 2022 and paida payout equal to 75% of the target bonus opportunity. Performance that exceeds the Company’s plan targets allows the officer to receive payouts exceeding the target bonus opportunity, in an amount scaling up to 125% of the target bonus opportunity, if actual performance equals 105% or more of the performance goal under the Company’s plan. If threshold performance is not achieved for a financial performance measure, there is no later than March 15, 2023.payout for that measure. For further information regarding the range of bonus opportunities granted in 2023, see “Grants of Plan-Based Awards in 2023” on page 45 | | |
|
| 2022 Performance-Based Cash Incentive
|
Named Executive Officer
|
| Maximum (% of Salary)
|
Gary W. Rollins
| | 150
|
Kenneth D. Krause(1)
| | 100
|
Julie K. Bimmerman
| | 40
|
Jerry E. Gahlhoff, Jr
| | 120
|
John F. Wilson
| | 125
|
Elizabeth B. Chandler
| | 75
|
| (1) | Mr. Krause’s 2022 maximum performance-based cash incentive was prorated to 50% of his annual base salary pursuant to the terms of the offer letter between the Company and Mr. Krause (as described in more detail below under the heading “Executive Employment Agreements”). |
Revenue to Plan Performance Goal
The Revenue to Plan performance-based cash incentive maximum payout for each of the named executive officers for fiscal 2022 is summarized in the table below:
| | |
|
| 2022 Eligible Revenue to Plan Performance Goal
|
Named Executive Officer
|
| Bonus Maximum (% of Salary)
|
Gary W. Rollins
| | 60
|
Kenneth D. Krause(1)
| | 40
|
Julie K. Bimmerman
| | 20
|
Jerry E. Gahlhoff, Jr
| | 40
|
John F. Wilson
| | 50
|
Elizabeth B. Chandler
| | 30
|
| (1) | Mr. Krause’s 2022 maximum revenue to plan performance goal was prorated to 20% pursuant to the terms of the offer letter between the Company and Mr. Krause (as described in more detail below under the heading “Executive Employment Agreements”). |
The minimum achievement of revenue to plan for the named executive officers to be eligible to earn a bonus under this performance goal of the Executive Bonus Plan was 95 percent. This performance goal for the plan in 20222023 was an 8.2a 7.8 percent year-over-year increase in revenue. Because theThe actual revenues achieved for 2023 represented a year-over-year increase in the Company’s revenue for 2022 was 11.2of 14 percent, which reflected a 102.8105.7 percent increase of plan for 2022, this resulted in2023. Therefore, each named executive officer receivingreceived 125% of the maximumtarget bonus targetopportunity for this performance goal.
the revenue element of the plan.
Pre-Tax Profit to Plan Performance GoalThe pre-tax profit
For 2023, the Human Capital Management and Compensation Committee elected to
plan performance-based cash incentive maximum payout for each of the named executive officers for fiscal 2022 is summarized in the table below: | | |
|
| 2022 Eligible Pre-Tax Profit to Plan Performance Goal
|
Named Executive Officer
|
| Bonus Maximum (% of Salary)
|
Gary W. Rollins
| | 90
|
Kenneth D. Krause(1)
| | 60
|
Julie K. Bimmerman
| | 20
|
Jerry E. Gahlhoff, Jr
| | 70
|
John F. Wilson
| | 75
|
Elizabeth B. Chandler
| | 45
|
| (1) | Mr. Krause’s 2022 maximum pre-tax profit to plan performance goal was prorated to 30% pursuant to the terms of the offer letter between the Company and Mr. Krause (as described in more detail below under the heading “Executive Employment Agreements”). |
The minimum growth in the Company’suse discretion to adjust pre-tax profit for 2022 to be eligible for a bonus was 90the impact of unusual or exceptional charges. Company performance, following this adjustment, equaled 103.6 percent andof the Company’s 2022 performance resulted in an actual achievement in pre-tax profit to plan of 100 percent. This resulted ingoal. Therefore, each named executive officer receivingreceived 115% of the maximumtarget bonus targetopportunity for this performance goal.
2022 Individual Key Operating Initiatives
In 2022, only Mr. Gahlhoff participated in the individual Key Operating Initiative (“KOI”) performance goal and was eligible to receive a bonus for achievement of such KOI as follows:
| | | | |
Named Executive Officer
| | Individual KOI
| | Eligible Bonus Maximum (%)
|
Jerry E. Gahlhoff, Jr.
| | Pest Control Cancellation Performance to Index or Improvement
| | 10
|
Mr. Gahlhoff did not receive a bonus for this performance goal as the Company did not reach its planned target for 2022.
The amount of bonuses under each performance componentelement of the Company’s Executive Bonus Plan is determined based upon straight-line interpolation of the applicable formula for each such component without the use of discretion. plan.
In addition to any bonuses earned under the Executive Bonus Plan, the Human Capital Management and Compensation Committee has the authority to award discretionary bonuses. No discretionary bonuses were awarded for 2022, with the exception of Mr. Krause, who received a one-time signing bonus in the amount of $500,000 and a one-time make-whole cash award in the amount of $430,0002023.
, to compensate him for amounts forfeited by his prior employer upon joining the Company.Equity-Based Awards
Pursuant to the terms of the Company’s 2018 Stock Incentive Plan, the Human Capital Management and Compensation Committee may grant stock options, stock appreciation rights and any other type of award valued by reference to (or otherwise based on) shares, including, without limitation, restricted stock, restricted stock units, performance accelerated restricted stock, performance stock and performance units, not to exceed a maximum of 225,000 shares during any fiscal year for any one individual.units. Equity-based awards are generally used by the Company as a tool to encourage retention and align the interest of our executives with those of our stockholders. In recent years, the Company has awarded time-lapse restricted stock in lieu of granting stock options. The terms and conditions of these awards are described in more detail below. In addition, in 2023, the Human Capital Management and Compensation Committee approved the grants of performance share units (“PSUs”) to the Company’s executive officers, such PSUs will be paid out over a three-year performance period upon the Company’s successful achievement of certain financial performance goals.shareholders. Awards under the 2018 Stock Incentive Plan are purely discretionary and may or may not be granted in any given fiscal year. ForIn 2023, the past three years, we have grantedequity component of compensation for named executive officers (as well as certain other employees) continued to include grants of time-lapse restricted stock to various employees, including our named executive officers,("
RSAs"), as in early January during our regularly scheduled meeting ofpast years. However, in 2023 the Human Capital Management and Compensation Committee during whichadjusted the Committee reviewsmix of equity grants to these individuals to feature performance share units (“PSUs”). The PSUs will cliff vest after three years based upon the Company’s successful achievement of certain financial performance goals and feature a TSR “Modifier,” as described in more detail below. This mix of equity is designed to continue providing alignment of our executive compensation program. Consistentprogram with this practice, the interests of our shareholders and link longer term compensation of our executives to longer term performance of the Company.
The Human Capital Management and Compensation Committee granted time-lapse restricted stock awards and performance share units to our named executive officers in January 2022, withFebruary 2023, as follows:
| | | | | | | | | | | |
| Name | 2023 Grants of Time-Lapse
Restricted Stock Awards | 2023 Grants of Performance Share Units(1) | Total 2023 Grants of Equity |
| Gary W. Rollins | 45,000 | 22,500 | 67,500 |
| Jerry E. Gahlhoff, Jr | 72,525 | 36,264 | 108,789 |
| Kenneth D. Krause | 29,100 | 14,550 | 43,650 |
| John F. Wilson | 8,250 | 4,125 | 12,375 |
| Elizabeth B. Chandler | 8,325 | 4,164 | 12,489 |
(1)The number of PSUs shown in this column represents the exceptiontotal number of Mr. Krause, as follows: | | | | | |
| | 2022 Grants of Time-Lapse | | | |
Name | | Restricted Stock Awards | | Grant Date Fair Value(1) |
Gary W. Rollins | | 120,000 | | $ | 3,564,000 |
Kenneth D. Krause(2) | | 73,186 | | $ | 2,500,034 |
Julie K. Bimmerman | | 20,000 | | $ | 594,000 |
Jerry E. Gahlhoff, Jr | | 40,000 | | $ | 1,188,000 |
John F. Wilson | | 50,000 | | $ | 1,485,000 |
Elizabeth B. Chandler | | 12,000 | | $ | 356,400 |
shares that would cliff vest assuming the Revenue CAGR and Adjusted EBITDA Margin goals are met at the target level, and the TSR Modifier would cliff vest at target level. The vesting conditions of the PSUs are described in more detail below under "
Terms of PSUs | (1) | These amounts reported in this column represent the aggregate grant date fair value of restricted Common Stock awarded to each named executive officer under our 2018 Stock Incentive Plan in accordance with FASB ASC Topic 718. Please refer to ."Note 14 – Stock-Based Compensation to our consolidated financial statements contained in our 2022 Form 10-K for the period ending December 31, 2022, for a discussion of the assumptions used in these computations. When calculating the amounts shown in this table, we have disregarded all estimates of forfeitures. Our 2022 Form 10-K has been included in our Annual Report and provided to our stockholders. |
| (2) | On September 1, 2022, pursuant to the terms of the offer letter between the Company and Mr. Krause (as described in more detail below under the heading “Executive Employment Agreements”), the Human Capital Management and Compensation Committee granted Mr. Krause a one-time equity award of time-based restricted stock that vests over a three-year period beginning on January 1, 2023, with one-third of the award vesting on that date and the remaining two-thirds vesting in equal portions on each subsequent anniversary of that date, subject to the terms and conditions of the Company’s 2018 Stock Incentive Plan. |
The amount of the aggregate stock-based awards to our named executive officers in any given year is influenced by the Company’s overall performance.many factors. The amount of each grant to our named executive officers is influenced in part by the Human Capital Management and Compensation Committee’s subjective assessment of each individual’s respective contributions to achievement of the Company’s long-term goals and objectives. In evaluating individual performance for these purposes, the Human Capital Management and Compensation Committee considers the overall contributions of executive management as a group and the Committee’s subjective assessment of each individual’s relative contribution to that performance rather than specific aspects of each individual’s performance over a short-term period. It is our expectation to continue yearly grants of restricted stock awards and performance share units to selected executives, although we reserve the right to modify or discontinue this or any of our other compensation practices at any time. Grants are made under our 2018 Stock Incentive Plan and the plan is administered pursuant
Terms of RSAs. Prior to Rule 16b-3 under the Exchange Act.Prior toJanuary 2022, all of our time-lapse restricted stock awards have had the same features. For awards of time-lapse restricted stock granted prior to January 2022,features and the shares vest one-fifth per year beginning on the second anniversary of the grant date. For awards of time-lapse restricted stock granted in 2022, the shares will vest one-fifth per year beginning on the first anniversary of the grant date. For awards of time-lapse restricted stock granted in 2023, the shares vest one-fourth per year beginning on the first anniversary of the grant date. For awards of time-lapse restricted stock granted in 2024, the shares will vest one-fourthone-third per year beginning on the first anniversary of the grant date. Time-lapse restricted shares have full voting and dividend rights. However, until the shares vest, they cannot be sold, transferred or pledged. Should the executive leave our employment or move to a lesser position for any reason prior to the vesting dates (other than due to death or disability), the unvested shares will be forfeited unless the Human Capital Management and Compensation Committee decides otherwise. In the event of a “change in control” as determined by the Board, all unvested restricted shares shall vest immediately.
Terms of PSUs.PSUs granted in 2023 will cliff vest and convert to shares of common stock at the end of a three-year performance period, if the performance and market targets are met and if the recipient has remained continuously employed by the Company through that date in a position of equivalent or greater responsibility. However, the Human Capital Management and Compensation Committee has retained discretion for certain determinations, and whether targets are met under the PSUs will be determined by the Human Capital Management and Compensation Committee in its discretion. The targets are difficult but achievable to obtain, and it is even more challenging to obtain the maximum level.
The 2023 PSUs are composed of 3 components, as described below.
1.Revenue CAGR component. Payout of this component at the threshold, target and maximum levels requires that the Company achieve 3-year CAGR (compound annual growth rate) in its revenues within a table set forth in the award agreement. 3-year CAGR (expressed as a percentage) is calculated by first dividing revenue for fiscal year 2025 by revenue for fiscal year 2022, then raising that quotient to the power of 1/3, and then subtracting 1.
2.Adjusted EBITDA Margin component. Payout of this component at the threshold, target and maximum levels requires that the Company achieve an aggregate Adjusted EBITDA Margin for the 3 fiscal years 2023, 2024, and 2025, within the table set forth in the award agreement. Adjusted EBITDA for this purpose is as defined in the Company’s SEC filings for the relevant periods. With respect to fiscal 2023, Adjusted EBITDA was calculated by adding back to GAAP net income charges for interest, taxes, depreciation and amortization, as well as those expenses resulting from the adjustments to the fair value of contingent consideration resulting from the acquisition of Fox Pest Control, restructuring costs related to restructuring and workforce reduction plans, and gains on the sale of businesses. 3-year Aggregate Adjusted EBITDA Margin is calculated by dividing the sum of 3 fiscal years Adjusted EBITDA by the sum of the corresponding 3 fiscal years Revenues. A reconciliation of 2023 Adjusted EBITDA and Adjusted EBITDA Margin to our 2023 GAAP net income is set forth in our Form 10-K for fiscal year ended December 31, 2023.
3.TSR Modifier component. Payout of this component occurs at the threshold, target and maximum levels if the Company’s 3-year Total Shareholder Return (“TSR”) for fiscal years 2023-2025, compared to the S&P 500 (“3-year Relative TSR”), falls within the table set forth in the award agreement. TSR is calculated as the profit or loss from net share price change over the period, including reinvestment of dividends.
The table below shows the number of shares that would be earned under each component for each NEO assuming target-level performance.
Target Level Payouts (in Shares) of 2023 PSUs by Component
| | | | | | | | | | | | | | |
| Name | Revenue CAGR | Adjusted EBITDA Margin | TSR Modifier | Total |
| Gary W. Rollins | 7,500 | 7,500 | 7,500 | 22,500 |
| Jerry E. Gahlhoff, Jr | 12,088 | 12,088 | 12,088 | 36,264 |
| Kenneth D. Krause | 4,850 | 4,850 | 4,850 | 14,550 |
| John F. Wilson | 1,375 | 1,375 | 1,375 | 4,125 |
| Elizabeth B. Chandler | 1,388 | 1,388 | 1,388 | 4,164 |
Termination of Employment. Except in the case of death or disability, PSUs are forfeited in their entirety if the recipient’s employment with the Company terminates for any reason prior to December 31, 2025. However, if termination of employment is due to death or disability, then the Revenue CAGR and the Adjusted EBITDA Margin components (but not the TSR Modifier) will vest and shares will be paid at target level, whether the performance goals are met or not, and without regard to the level at which such performance goals may be met.
Dividend Equivalents; No Voting Rights. PSU awards also include the right to “Dividend Equivalents” with respect to the underlying shares. Dividend equivalents are accrued over the performance period, in cash, based upon target payout level, subject to a true-up at the end of the three year cycle. Accrued Dividend Equivalents will be paid out upon vesting of the PSUs, but no such Dividend Equivalents will be payable to the extent the awards fail to vest or are forfeited, or the performance goals are not met.PSUs confer no voting rights with respect to the underlying shares prior to vesting and payout.
Health and Retirement Plans The named executive officers all participate in the Company’s regular employee benefit programs, including the 401(k) Plan with Company match, stock, group life insurance, group medical and dental coverage and other group benefit plans. The Company offers participation in an Employment Stock Purchase Plan that provides employee with a 10% discount on the purchase of Company stock. In 2022, all named executive officers were eligible to participate in the Company’s ESPP with the exception of Gary W. Rollins, due to Mr. Rollins’ beneficial ownership of more than 5% of Rollins’ stock. The Company also maintains a non-qualified retirement plan (the “Deferred Compensation Plan”) for our executives and highly compensated employees, and the Rollins 401(k) Savings Plan for the benefit of all of our eligible employees. The Deferred Compensation Plan provides other benefits as described below under the section titled “Non-Qualified Deferred Compensation.” Perquisites and Other Personal Benefits In addition to the total direct compensation and benefits described above, the Company provides its named executive officers with certain perquisites as approved by the Board and noted in the footnote to the "Summary Compensation Table below" on page 43 under the section titled “Executive Compensation.” These perquisites provide added security and efficiency. The specific perquisites provided to the named executive officers are as follows: | ● | All named executive officers are eligible to receive an automobile allowance, reimbursements for related vehicle expenses, and an annual executive physical. |
| ● | Mr. Rollins also receives the following perquisites: |
| o | use of the Company’s aircraft for personal travel; |
•All named executive officers are eligible to receive an automobile allowance, reimbursements for related vehicle expenses, and an annual executive physical.•Mr. Rollins also receives the following perquisites:
◦use of the Company’s aircraft for his personal travel;
| o | ◦payment of variable costs of Mr. Rollins' aircraft for his personal use; ◦personal use of the Company’s executive dining room; and ◦personal use of the Company’s storage space. personal use of the Company’s executive dining room; and
|
| o | personal use of the Company’s storage space. |
Executive Employment Arrangements
While we do not have employment agreements with any of our named executive officers, the initial terms and conditions of employment for
certain of our named executive officers are set forth in written employment offer
letters (as applicable).Kenneth D. Krause Offer Letter
In July 2022, the Company entered into anletters. Also, as part of modernization efforts, we are currently considering employment offer letter with Mr. Krause setting forth the termsagreements for certain of our named executive officers, which would likely provide for multiples of total cash compensation, including salary and conditions of his employment as Executive Vice President, Chief Financial Officerbonus, and Treasurer of the Company. Pursuant to the terms of Mr. Krause’s offer letter, Mr. Krause’s annual base salary is $675,000 and he is eligible to receive a target cash bonus opportunity equal to 100% of his annual base salary, prorated to 50% for 2022, subject to the terms and conditions of the Rollins, Inc. Executive Bonus Plan and the Human Capital Management and Compensation Committee’s approval of the performance goals. In connection with the commencement of Mr. Krause’s employment, the Company paid Mr. Krause a one-time signing bonus in the amount of $500,000 and a one-time make-whole cash award in the amount of $430,000 to compensate him for amounts forfeited by his prior employer upon joining the Company. Both cash payments were subject to normal withholdings, and subject to full repayment in the event Mr. Krause leaves the Company before twelve-months from his start date. Mr. Krause also received a one-time equity award of restricted stock units with a grant date fair market value of $2,500,000 based on the closing price of the Company’s stock on September 1, 2022, that will vest over a three-year period beginning on January 1, 2023, with one-third of the award vesting on that date and the remaining two-thirds vesting in equal portions on each subsequent anniversary of that date, subject to the terms and conditions of the Company’s 2018 Stock Incentive Plan. Mr. Krause is also eligible to receive an annual target equity opportunity of 200% of his annual base salary beginning in 2023, subject to the terms and conditions of the Company’s 2018 Stock Incentive Plan. In addition, Mr. Krause received relocation assistancea full or pro-rated basis, upon severance and/or severance in connection with his move to the Atlanta, Georgia area and is also eligible to participate in certain benefit programs available to similarly situated executivesa change of the Company and other benefit programs available to all full-time employees of the Company following the completion of sixty (60) days of service with the Company.
The terms of Mr. Krause’s offer letter were approved by the Human Capital Management and Compensation Committee. In determining Mr. Krause’s initial compensation arrangement, the Committee took into consideration Mr. Krause’s skills and experience and the competitive market for similar positions at other comparable companies based on a review of compensation data provided by the Committee’s compensation consultant.
control.
Compensation Setting Process Role of the Human Capital Management and Compensation Committee Under its charter, the Human Capital Management and Compensation Committee is responsible for, among other things:
| ● | reviewing our overall executive compensation philosophy and strategy, including base salary, performance-based incentive cash compensation, and equity-based grants, to ensure that the strategy supports our compensation policy; and |
| ● | reviewing and approving corporate goals and objectives relevant to the compensation of the executive officers, including the CEO, and evaluating each such executive officer’s performance in light of such goals and objectives, and setting each executive officer’s compensation based on this evaluation. |
•reviewing our overall executive compensation philosophy and strategy, including base salary, performance-based incentive cash compensation, and equity-based grants, to confirm that the strategy supports our compensation policy; and
•reviewing and approving corporate goals and objectives relevant to the compensation of the executive officers, including the CEO, and evaluating each such executive officer’s performance in light of such goals and objectives, and setting each executive officer’s compensation based on this evaluation.
The Human Capital Management and Compensation Committee is composed of three non-employee directors, Mr. Jerry W. Nix (Chairperson), Gregory B. Morrison and Louise S. Sams, each of whom is independent. Dr. Thomas Lawley served on the Human Capital Management and Compensation Committee until his retirement on April 26, 2022.
The Human Capital Management and Compensation Committee has the authority, in its sole discretion, to retain or obtain the advice of any compensation consultant, legal counselor or other advisor to assist the Committee in the performance of its duties, and shall be directly responsible for the appointment, compensation and oversight of the work of any such compensation consultant, legal counsel or other advisor so retained. The Human Capital Management and Compensation Committee may also, from time to time, and in its discretion, form andformally delegate all or a portion of its authority with respect to the executive officers to subcommittees; provided that such subcommittees must meet the Committee’s composition requirements set forth in its charter or under any applicable federal or state laws.
The Human Capital Management and Compensation Committee solicits input from the Chairman and the Chief Executive Officer and President with respect to the performance of the other executive officers and their compensation levels. The Vice President of
Total RewardsHuman Resources also provides the Human Capital Management and Compensation Committee with input as it pertains to the compensation of all executive officers.
The Role of Stockholder Say-on-Pay Votes
We provide our stockholders with the opportunity to cast a non-binding advisory vote on executive compensation (a “say-on-pay proposal”) every three years. At our annual meeting of stockholders held in April 2020, a substantial majority of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Human Capital Management and Compensation Committee believes this affirms the stockholders’ support of our approach to executive compensation. The stockholders voted to hold a say-on-pay advisory vote on executive compensation every three years, and the Board resolved to accept the stockholders’ recommendation. As a result, stockholders are being asked to vote on the Company’s non-binding advisory vote on executive compensation at the Company 2023 Annual Meeting of Stockholders, as described under the section titled “Proposal 2: Advisory (Non-Binding) Vote on Executive Compensation” on page 29. The Human Capital Management and Compensation Committee will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for our executive officers.
Role of the Human Capital Management and Compensation Committee ConsultantIn October
Since 2021,
uponMercer has served as the
recommendation of the Company’s management, the Human Capital Management and Compensation Committee approved the engagement of Mercer US LLC (“Mercer”) an independent executive compensation advisory firm, to serve as itsCompany's independent compensation consultant. In
doing soselecting Mercer the Human Capital Management and Compensation Committee reviewed information regarding the independence and potential conflicts of interest of Mercer. The Human Capital Management and Compensation Committee members took into account, among other things, the factors enumerated by the SEC and NYSE for evaluating compensation advisor independence, including, without limitation, the engagements and fees described below, and concluded that Mercer is independent and that no conflict of interest exists. Mercer attended all Human Capital Management and Compensation Committee meetings in
20222023 and advised the Human Capital Management and Compensation Committee with respect to
20222023 executive compensation decisions. The Human Capital Management and Compensation Committee at any time has sole authority to replace its compensation consultant, or from time to time, hire additional consultants, legal counsel and such other advisors as necessary to assist with the execution of its duties and responsibilities.
During Mercer’s engagement in 2022,2023, Mercer reviewed the Company’s director and executive officer compensation strategy and programs to ensureconfirm appropriateness and market-competitiveness. Mercer’s fees for director and executive compensation consulting services provided to the Human Capital Management and Compensation Committee in 20222023 were $$156,250145,978. During 2022, management retained
The Role of Shareholder Say-on-Pay Votes
We provide our shareholders with the servicesopportunity to cast a non-binding advisory vote on executive compensation (a “say-on-pay proposal”) every three years. At our annual meeting of Mercer to provide healthcare consulting services. The total fees paid for these servicesshareholders held in 2022 were $187,232. The services provided by Mercer to management were not in the purviewApril 2023, a substantial majority of the votes cast on the say-on-pay proposal were voted in favor of the proposal. The Human Capital Management and Compensation Committee believes this affirms the shareholders’ support of our approach to executive compensation. The shareholders voted to hold a say-on-pay advisory vote on executive compensation every three years, and thus did not require approval by such Committee.the Board accepted the shareholders’ recommendation. The Human Capital Management and Compensation Committee will continue to consider the outcome of our say-on-pay votes when making future compensation decisions for our executive officers.
Peer Group Benchmarking Analysis
As part of its executive compensation review for
2022,2023, the Human Capital Management and Compensation Committee asked Mercer to
develop aupdate the peer group that serves as a primary comparator group for assessing the competitiveness of the Company’s executive compensation. As part of this process, Mercer recommended a peer group comprised of
1518 companies, with each peer having revenue between 1/3 to 2.5 times the Company’s revenue. The appropriateness of the peer group was based on the industry, size, organizational type, and comparability of business
complexitycomplexity. The Peer Group companies generally had a majority of operations in the environmental and facilities services industry, and variations in their revenues, assets and market capitalization versus the Company were considered when the group was selected. Where possible, each company position was compared to industry data using functional counterparts or executives with similar roles at the peer companies, as well as compensation data disclosed in proxy statements filed in
2022.2023.
The Human Capital Management and Compensation Committee considered the peer group benchmarking analysis provided by Mercer comparing the compensation components of salary, annual incentives, long-term incentives, and total compensation of the Company’s CEO and other executive officers relative to pay programs of the selected peer group. The Human Capital Management and Compensation Committee believes the Company’s executive compensation program is fair, competitive with marketplace practices and effective in enhancing shareholder value.
The following companies were included in the Peer Group for 2022:2023:
| | | | | |
| Company Name | Industry |
ABM Industries Incorporated | Environmental and Facilities Services |
Brightview Holdings, Inc. | Environmental and Facilities Services |
The Brink's Company | Security and Alarm Services |
| Casella Waste Systems, Inc. | Environmental and Facilities Services |
Clean Harbors, Inc. | Environmental and Facilities Services |
Comfort Systems USA, Inc. | Construction and Engineering |
Frontdoor, Inc. | Specialized Consumer Services |
Harsco Corporation | Environmental and Facilities Services |
Healthcare Services, Group, Inc. | Diversified Support Services |
Iron Mountain Incorporated | Other Specialized REITs |
| Lennox International Inc. | Building Products |
The Scotts Miracle-Gro Company | Fertilizers and Agricultural Chemicals |
Service Corporation International | Specialized Consumer Services |
| Stericycle, Inc. | Environmental and Facilities Services |
Terminix Global Holdings, Inc. | Specialized Consumer Services |
Unifirst Corporation | Diversified Support Services |
US Ecology, Inc. | Environmental and Facilities Services |
Waste Connections, Inc. | Environmental and Facilities Services |
Policies Regarding Stock Ownership by Executive Officers
Stock Ownership Guidelines We currently have Stock Ownership Guidelines (the “Guidelines”) for our executive officers and other key executives as designated by the Human Capital Management and Compensation Committee. The purpose of these Guidelines is to align the interests of our executives with the interests of our stockholders.shareholders. The current Guidelines as determined by the Human Capital Management and Compensation Committee include:
| | | | | |
| Title | Stock Ownership Requirements |
Chairman of the Board and Rollins, Inc. President and Chief Executive Officer | Ownership equal to 5 times base salary |
Other Rollins Officers, andPresident of Orkin, LLC, and President of Rollins' Brands | Ownership equal to 3 times base salary |
Division andPresidents, Brand Presidents and Group Vice Presidents | Ownership equal to 2 times base salary |
Other covered executives
| Ownership equal to 1 times base salary
|
Participants under the Guidelines have a period of five years to adhere to the Guidelines. Participants have their individual ownership amount established based upon their annual base salary at the time they became subject to the Guidelines and the Company’s average closing common stock price for the prior 90-day period. Promotions into a different position category require recalculation of a Participant’s ownership amounts, as appropriate.
Shares counted toward this requirement are based on shares beneficially owned by such participant (as beneficial ownership is defined by Rule 16a-1(a)(2) under the Exchange Act).
Once achieved, ownership of the amount under the Guidelines should be maintained for as long as the participant is subject to the Guidelines.
In addition, the Human Capital Management and Compensation Committee has approved and adopted stock ownership guidelines applicable to our non-employee directors. Information with respect to our non-employee directors’ stock ownership guidelines is set forth in “Non-Employee Director Stock Ownership Guidelines” on page 18.We Strongly Discourage
17. Our Policies Regarding Hedging and Pledging of Common StockUnder our
Our insider trading policy we strongly discourage ourprohibits all employees, including our named executive officers, and the members of our Board of Directors,all directors, from selling short Company securities, and from purchasing or selling puts, calls, or other derivative securities at any time. Our policy also strongly discourages all employees, as well as directors and named executive officers, from pledging our securities, or otherwise encumbering, individually ownedsubjecting them to margin calls or grantedthe ability to be sold outside of the owner’s control. Our directors and named executive officers are subject to additional prohibitions on hedging. The policy also requires our employees, including the named executive officers, and directors, to take responsibility for compliance with the policy by certain of their family members and affiliates under their control.
Clawback Policy
We have an executive clawback policy, adopted in 2023, and effective as of October 2, 2023, to recover certain erroneously awarded compensation received by our Section 16 officers on or after the effective date, in the event the Company
securities.Clawback Policy
Ouris required to prepare an accounting restatement. This policy is intended to comply with the SEC and NYSE requirements. The policy requires mandatory recuperation of certain incentive-based compensation regardless of fault or involvement. Also, our executive bonus agreements contain a provision that provides that, among other things, if any bonus amount is paid as a result of misrepresented or inaccurate performance, the Company may require repayment of some or all of the excess bonus paid, subject to applicable laws. This recoupment policy reflects the Company’s high ethical standards and strict compliance with accounting and other regulations applicable to public companies. As all incentives and awards remain within the discretion of the Human Capital Management and Compensation Committee, the Committee also retains the ability to take any restatements or adjustments into account in subsequent years. In addition, the Sarbanes-Oxley Act requires in the case of accounting restatements that result from material non-compliance with SEC financial reporting requirements, that the Chief Executive Officer and Chief Financial Officer must disgorge bonuses and other incentive-based compensation and profits on stock sales received during the 12-months following publication of the restated financials, if the non-compliance results from misconduct.
Tax Deductibility of Compensation
As a result of the Tax Cuts and Jobs Act, starting with compensation payable in 2018, Section 162(m) of the Internal Revenue Code limits us from deducting compensation, including performance-based compensation, in excess of $1,000,000 paid to our executive officers. The Human Capital Management and Compensation Committee will continue to retain full discretion to award compensation packages that best attract, retain and reward successful executive officers. Therefore, the Human Capital Management and Compensation Committee anticipates that it will award compensation that is not fully deductible under Section 162(m).
HUMAN CAPITAL MANAGEMENT AND COMPENSATION COMMITTEE REPORT The Human Capital Management and Compensation Committee has reviewed and discussed the Compensation Discussion and Analysis contained in this Proxy Statement with management. Based on such review and discussions, the Human Capital Management and Compensation Committee recommended to our
boardBoard of
directorsDirectors that the Compensation Discussion and Analysis be included in this Proxy Statement.
Respectfully submitted by the Human Capital Management and Compensation Committee of the Board of Directors
Jerry W. Nix, Chairperson
This report of the Human Capital Management and Compensation Committee is required by the SEC and, in accordance with the SEC’s rules, will not be deemed to be part of or incorporated by reference by any general statement incorporating by reference this Proxy Statement into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or under the Exchange Act, except to the extent that we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting material” or “filed” under either the Securities Act or the Exchange Act.
EXECUTIVE OFFICER COMPENSATION & BENEFITS SUMMARY COMPENSATION TABLE The following table provides information regarding the compensation awarded to, earned by
andand/or paid to each of our named executive officers for the years indicated below:
| | | | | | | | | | | | | | | | |
| | | | | | | | | | | | Change in | | | | |
| | | | | | | | | | | | Pension Value | | | | |
| | | | | | | | | | | | and Non- | | | | |
| | | | | | | | | | | | Qualified | | | | |
| | | | | | | | | | Non-Equity | | Deferred | | | | |
| | | | | | | | Stock | | Incentive Plan | | Compensation | | All Other | | |
| | | | Salary | | Bonus | | Awards | | Compensation | | Earnings | | Compensation | | Total |
Name and Principal Position | | Year | | ($) | | ($)(1) | | ($)(2) | | ($)(3) | | ($) | | ($)(4) | | ($) |
Gary W. Rollins | | 2022 | | 1,449,000 | | - | | 3,564,000 | | 2,173,500 | | - | | 573,704 | | 7,760,204 |
Chairman and Chief Executive Officer | | 2021 | | 1,400,000 | | - | | 4,458,000 | | 2,100,000 | | - | | 435,601 | | 8,393,601 |
| | 2020 | | 1,152,308 | | - | | 2,846,575 | | 1,170,300 | | 10,385 | | 295,627 | | 5,475,195 |
Kenneth D. Krause | | 2022 | | 212,885 | | 930,000 | | 2,500,034 | | 337,500 | | - | | 480,875 | | 4,461,294 |
Executive Vice President, Chief Financial Officer and Treasurer | | 2021 | | - | | - | | - | | - | | - | | - | | - |
| | 2020 | | - | | - | | - | | - | | - | | - | | - |
Julie K. Bimmerman | | 2022 | | 255,000 | | - | | 594,000 | | 117,300 | | - | | 15,857 | | 982,157 |
Interim Chief Financial Officer and Treasurer | | 2021 | | 255,000 | | 7,231 | | 167,175 | | 87,538 | | - | | 12,216 | | 529,160 |
| | 2020 | | - | | - | | - | | - | | - | | - | | - |
Jerry E. Gahlhoff, Jr. | | 2022 | | 690,000 | | - | | 1,188,000 | | 759,000 | | - | | 42,836 | | 2,679,836 |
President and Chief Operating Officer | | 2021 | | 600,000 | | - | | 1,300,250 | | 708,000 | | - | | 32,155 | | 2,640,405 |
| | 2020 | | 412,654 | | - | | 393,011 | | 269,921 | | 16,539 | | 11,909 | | 1,104,034 |
John F. Wilson | | 2022 | | 983,250 | | - | | 1,485,000 | | 1,229,063 | | - | | 43,390 | | 3,740,703 |
Vice Chairman and Assistant to the Chairman | | 2021 | | 950,000 | | - | | 2,229,000 | | 1,187,500 | | - | | 39,344 | | 4,405,844 |
| | 2020 | | 853,846 | | - | | 1,469,200 | | 819,144 | | 20,168 | | 14,933 | | 3,177,291 |
Elizabeth B. Chandler | | 2022 | | 517,500 | | - | | 356,400 | | 388,125 | | - | | 36,913 | | 1,298,938 |
Vice President, General Counsel and Corporate | | 2021 | | 500,000 | | - | | 835,875 | | 355,000 | | - | | 32,132 | | 1,723,007 |
Secretary | | 2020 | | 421,000 | | - | | 550,950 | | 220,150 | | - | | 30,491 | | 1,222,591 |
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Name and Principal Position | Year | Salary
($) | Bonus ($)(1) | Equity Awards ($)(2) | Non-Equity Incentive Plan Compensation ($)(3) | All Other Compensation ($)(4) | Total
($) |
| RSA | PSU |
| Gary W. Rollins | 2023 | 1,449,000 | | — | | 1,628,100 | 802,915 | | 2,148,142 | | 545,489 | | 6,573,646 | |
| Executive Chairman | 2022 | 1,449,000 | | — | | 3,564,000 | — | | 2,173,500 | | 573,704 | | 7,760,204 | |
| 2021 | 1,400,000 | | — | | 4,458,000 | — | | 2,100,000 | | 435,601 | | 8,393,601 | |
| Jerry E. Gahlhoff, Jr. | 2023 | 1,000,000 | | — | | 2,623,955 | 1,294,070 | | 1,785,000 | | 40,864 | | 6,743,889 | |
| President and Chief Operating Officer | 2022 | 690,000 | | — | | 1,188,000 | — | | 759,000 | | 42,836 | | 2,679,836 | |
| 2021 | 600,000 | | — | | 1,300,250 | — | | 708,000 | | 32,155 | | 2,640,405 | |
| Kenneth D. Krause | 2023 | 702,000 | | — | | 1,052,838 | 519,206 | | 835,380 | | 228,470 | | 3,337,894 | |
| Executive Vice President, Chief Financial Officer | 2022 | 212,885 | | 930,000 | | 2,500,034 | — | | 337,500 | | 465,624 | | 4,446,043 | |
| and Treasurer | 2021 | — | | — | | — | — | | — | | — | | — | |
| John F. Wilson | 2023 | 400,000 | | — | | 298,485 | 147,173 | | 355,000 | | 38,163 | | 1,238,821 | |
| Vice Chairman and Assistant to the Chairman | 2022 | 983,250 | | — | | 1,485,000 | — | | 1,229,063 | | 43,390 | | 3,740,703 | |
| 2021 | 950,000 | | — | | 2,229,000 | — | | 1,187,500 | | 39,344 | | 4,405,844 | |
| Elizabeth B. Chandler | 2023 | 538,200 | | — | | 301,199 | 148,528 | | 480,344 | | 36,019 | | 1,504,290 | |
| Vice President, General Counsel and Corporate | 2022 | 517,500 | | — | | 356,400 | — | | 388,125 | | 36,913 | | 1,298,938 | |
| Secretary | 2021 | 500,000 | | — | | 835,875 | — | | 355,000 | | 32,132 | | 1,723,007 | |
(1) | (1) | The amounts reported in this column represents for Mr. Krause, a one -time cash sign-on bonus and a one-time make-whole cash bonus in the amounts of $500,000 and $430,000, respectively, paid pursuant to the terms of the Offer Letter dated July 25, 2022, between the Company and Mr. Krause, and (ii) for Ms. Bimmerman, for 2021, a discretionary cash bonus under the RSC Bonus Plan.The amounts reported in this column represent for Mr. Krause, a one-time cash sign-on bonus and a one-time make-whole cash bonus in the amounts of $500,000 and $430,000, respectively, paid pursuant to the terms of the Offer Letter dated July 25, 2022, between the Company and Mr. Krause.(2)The amounts reported in these columns represent the aggregate grant date fair value of restricted stock and performance share units awarded to each named executive officer under our 2018 Stock Incentive Plan during the fiscal years 2023, 2022 and 2021, as applicable, in accordance with FASB ASC Topic 718. Because these values are determined as of the date of grant and based on certain assumptions, including assumptions regarding the outcome of certain performance and market conditions, actual values received by the NEOs may be lower or higher from the numbers presented here. Please refer to Note 13 – Stockholder Equity to our consolidated financial statements contained in our 2023 Form 10-K for the period ending December 31, 2023, for a discussion of the assumptions used in these computations. When calculating the amounts shown in this table, we have disregarded all estimates of forfeitures. The fair value presented for the PSUs assumes that the 3-year CAGR and the Adjusted EBITDA Margin portions of the award will cliff vest at target levels, and fair value for these portions of the PSUs was calculated by multiplying this target number of shares by the closing price on the grant date. A Monte Carlo simulation was used to value the TSR Modifier portion of the award, since the modifier is subject to a market condition, and this requires certain assumptions to be made. Significant assumptions used in the Monte Carlo valuation included volatility rate of 32% and a risk-free interest rate of 4.38%. If the maximum level of performance is achieved, the grant date fair values of the PSUs would be $1,605,831 for Gary W. Rollins; $2,588,141 for Mr. Gahlhoff; $1,038,413 for Mr. Krause; $294,346 for Mr. Wilson; and $297,057 for Ms. Chandler. (3)The amounts reported in this column represent bonuses paid under the Company’s performance-based incentive cash compensation plan, which are accrued in the fiscal year earned and paid in the first quarter of the following fiscal year.
|
| (2) | These amounts reported in this column represent the aggregate grant date fair value of restricted Common Stock awarded to each named executive officer under our 2018 Stock Incentive Plan during the fiscal years 2022, 2021 and 2020, respectively, in accordance with FASB ASC Topic 718. Please refer to Note 14 – Stock-Based Compensation to our consolidated financial statements contained in our 2022 Form 10-K for the period ending December 31, 2022, for a discussion of the assumptions used in these computations. When calculating the amounts shown in this table, we have disregarded all estimates of forfeitures. Our 2022 Form 10-K has been included in our Annual Report and provided to our stockholders. |
| (3) | These amounts reported in this column represent bonuses paid under the Company’s performance-based incentive cash compensation plan, which are accrued in the fiscal year earned and paid in the first quarter of the following fiscal year. |
| (4) | The amounts reported in this column include perquisites and other benefits of the types indicated in the following table: |
(4)The amounts reported in this column include perquisites and other benefits of the types indicated in the following table:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| Perquisites | | | | |
| Name | Personal Use of Aircraft(a) ($) | Auto
Allowance
($) | Use of Executive Dining Room(b) ($) | Executive
Physical
($) | Relocation Expenses(c) ($) | Company
Contribution
to 401(k) Plan
($) | Tax Gross- Ups(d) ($) | Total
($) |
| Gary W. Rollins | 333,710 | 22,124 | 141,902 | 2,605 | — | | 13,725 | 31,423 | 545,489 |
| Jerry E. Gahlhoff, Jr. | — | | 27,139 | — | | — | | — | | 13,725 | — | | 40,864 |
| Kenneth D. Krause | — | | 36,674 | — | | — | | 125,353 | 13,725 | 52,718 | | 228,470 |
| John F. Wilson | — | | 21,877 | — | | 2,561 | — | | 13,725 | — | | 38,163 |
| Elizabeth B. Chandler | — | | 19,293 | — | | 3,001 | — | | 13,725 | — | | 36,019 |
(a)The amount reported in this column for Mr. Rollins represents (1) the incremental costs to the Company for Mr. Rollins’ personal use of the Company’s aircraft (calculated based on the actual variable costs to the Company of Mr. Rollins’ proportionate use of the Company aircraft) and (2) the variable costs paid by the Company for Mr. Rollins personal use of Mr. Rollins' aircraft (these variable costs include fuel, landing fees, pilot expenses, insurance, training and subscriptions).
(b)The amount reported in this column represents the incremental costs to the Company for Mr. Rollins’ use of the Company’s executive dining room.
(c)The amount reported in this column represents the aggregate incremental costs to the Company for Mr. Krause's relocation to Atlanta, Georgia where the Company's corporate headquarters are located.
(d)The amounts reported in this column represent, for Mr. Rollins, the tax gross-up related to Mr. Rollins’ personal use of the Company aircraft, and for Mr. Krause, the tax gross-up related to Mr. Krause's relocation to Atlanta, Georgia.
| | | | | | | | | | | | | | | | |
| | Perquisites | | | | | | |
| | Personal | | | | Use of | | | | | | | | | | |
| | Use of | | | | Executive | | | | | | Company | | Tax | | |
| | Company | | Auto | | Dining | | Executive | | Relocation | | Contribution | | Gross- | | Total |
Name | | Airplane(a) | | Allowance | | Room(b) | | Physical | | Expenses(c) | | to 401(k) Plan | | Ups(d) | | ($) |
Gary W. Rollins | | 392,704 | | 21,015 | | 124,839 | | - | | - | | 13,725 | | 21,421 | | 573,704 |
Kenneth D. Krause | | - | | 6,179 | | - | | - | | 323,537 | | - | | 151,159 | | 480,875 |
Julie K. Bimmerman | | - | | - | | - | | 2,132 | | - | | 13,725 | | - | | 15,857 |
Jerry E. Gahlhoff, Jr. | | - | | 27,592 | | - | | 1,519 | | - | | 13,725 | | - | | 42,836 |
John F. Wilson | | - | | 29,665 | | - | | - | | - | | 13,725 | | - | | 43,390 |
Elizabeth B. Chandler | | - | | 19,752 | | - | | 3,436 | | - | | 13,725 | | - | | 36,913 |
| (a) | The amount reported in this column for Mr. Rollins represents the incremental costs to the Company for Mr. Rollins’ personal use of the Company’s aircraft (calculated based on the actual variable costs to the Company of Mr. Rollins’ proportionate use of the Company aircraft). |
| (b) | The amount reported in this column represents the incremental costs to the Company for Mr. Rollins’ use of the Company’s executive dining room. |
| (c) | The amount reported in this column for Mr. Krause represents the aggregate incremental costs to the Company for Mr. Krause’s relocation to Atlanta, Georgia where the Company’s corporate headquarters are located. |
| (d) | The amounts reported in this column represent, for Mr. Rollins, the tax gross-up related to Mr. Rollins’ personal use of the Company airplane, and for Mr. Krause, the tax gross-up related to Mr. Krause’s relocation to Atlanta, Georgia. |
GRANTS OF PLAN-BASED AWARDS IN 2022
2023
The following table shows for the year ended December 31,
2022,2023, certain information regarding grants of plan-based awards to our named executive officers.
| | | | | | | | | | |
| | | | | | Estimated Possible Payouts Under | | All Other | | Grant Date |
| | | | | | Non-Equity Incentive Plan Awards | | Awards: Number | | Fair Value of |
| | | | | | | | of Shares of | | Stock and |
| | | | Committee Approval | | Target(3) | | Stock or Units(4) | | Options(5) |
Name | | Grant Date(1) | | Date(2) | | ($) | | (#) | | Awards |
Gary W. Rollins | | 1/26/2022 | | 1/24/2022 | | 2,173,500 | | 120,000 | | 3,564,000 |
| | | | | | | | | | |
Kenneth D. Krause | | 9/1/2022 | | 9/1/2022 | | 337,500 | | 73,186 | | 2,500,034 |
| | | | | | | | | | |
Julie K. Bimmerman | | 1/26/2022 | | 1/24/2022 | | 117,300 | | 20,000 | | 594,000 |
| | | | | | | | | | |
Jerry E. Gahlhoff, Jr. | | 1/26/2022 | | 1/24/2022 | | 759,000 | | 40,000 | | 1,188,000 |
| | | | | | | | | | |
John F. Wilson | | 1/26/2022 | | 1/24/2022 | | 1,229,063 | | 50,000 | | 1,485,000 |
| | | | | | | | | | |
Elizabeth B. Chandler | | 1/26/2022 | | 1/24/2022 | | 388,125 | | 12,000 | | 356,400 |
| (1) | The dates reported in this column represent the grant date for the equity-based awards reported in the “All Other Awards: Number of Shares of Stock or Units” column. |
| (2) | The dates reported in this column represent the date the Human Capital Management and Compensation Committee approved the equity-based awards reported in the “All Other Awards: Number of Shares of Stock or Units” column. |
| (3) | The amounts reported in this column represent payouts of non-equity incentive cash bonus awards granted under the 2022 Executive Bonus Plan for each named executive officer. For Mr. Krause, this amount represents a prorated amount of 50% of his annual base salary. There are no threshold or maximum levels for the awards. |
| (4) | The amounts reported in this column represent the number of restricted Common Stock granted under our 2018 Stock Incentive Plan awarded in fiscal year 2022 to our named executive officers. All grants of restricted Common Stock to the named executive officers in 2022, with the exception of Mr. Krause, vest one-fifth per year beginning on the second anniversary of the grant date. Mr. Krause’s restricted Common Stock vests over a three-year period beginning on January 1, 2023, with one-third of the award vesting on that date and the remaining two-thirds vesting in equal portions on each subsequent anniversary of that date. We have not issued any stock options in the past three fiscal years. |
| (5) | The amounts reported in this column represent the grant date fair value for grants of restricted Common Stock granted to our named executive officers in fiscal year 2022 under our 2018 Stock Incentive Plan as computed in accordance with ASC Topic 718. Please refer to Note 14 – Stock-Based Compensation to our Financial Statements contained in the Company’s 2022 Form 10-K for a discussion of assumptions used in this computation. The 2022 Form 10-K has been included in the Company’s Annual Report and provided to its stockholders. |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | Estimated Possible Payouts Under Non-Equity Incentive Plan Awards(3) | Estimated Future Payouts Under Equity Incentive Plan Awards(4) | All Other Awards: Number of Shares of Stock or Units(5) (#) | Grant Date Fair Value of Stock or Units Awards(6) ($) |
| Name | Award Type | Grant Date(1) | Committee Approval Date(2) | Threshold ($) | Target
($) | Maximum ($) | Threshold (#) | Target (#) | Maximum (#) |
| Gary W. Rollins | RSA | 2/16/2023 | 2/14/2023 | — | — | — | — | — | — | 45,000 | 1,628,100 |
| PSU | 2/16/2023 | 2/14/2023 | — | — | — | 9,000 | 22,500 | 45,000 | — | 802,915 |
| Cash Incentive | — | — | 1,358,438 | 1,811,250 | 2,264,063 | — | — | — | — | — |
| Jerry E. Gahlhoff, Jr. | RSA | 2/16/2023 | 2/14/2023 | — | — | — | — | — | — | 72,525 | 2,623,955 |
| PSU | 2/16/2023 | 2/14/2023 | — | — | — | 14,505 | 36,264 | 72,525 | — | 1,294,070 |
| Cash Incentive | — | — | 1,125,000 | 1,500,000 | 1,875,000 | — | — | — | — | — |
| Kenneth D. Krause | RSA | 2/16/2023 | 2/14/2023 | — | — | — | — | — | — | 29,100 | 1,052,838 |
| PSU | 2/16/2023 | 2/14/2023 | — | — | — | 5,820 | 14,550 | 29,100 | — | 519,206 |
| Cash Incentive | — | — | 526,500 | 702,000 | 877,500 | — | — | — | — | — |
| John F. Wilson | RSA | 2/16/2023 | 2/14/2023 | — | — | — | — | — | — | 8,250 | 298,485 |
| PSU | 2/16/2023 | 2/14/2023 | — | — | — | 1,650 | 4,125 | 8,250 | — | 147,173 |
| Cash Incentive | — | — | 225,000 | 300,000 | 375,000 | — | — | — | — | — |
| Elizabeth B. Chandler | RSA | 2/16/2023 | 2/14/2023 | — | — | — | — | — | — | 8,325 | 301,199 |
| PSU | 2/16/2023 | 2/14/2023 | — | — | — | 1,665 | 4,164 | 8,325 | — | 148,528 |
| Cash Incentive | — | — | 302,738 | 403,650 | 504,563 | — | — | — | — | — |
(1)The dates reported in this column represent the grant date for the equity-based awards.
(2)The dates reported in this column represent the date the Human Capital Management and Compensation Committee approved the equity-based awards.
(3)The amounts reported in these columns represent potential payouts of non-equity incentive cash bonus awards granted under the 2023 Executive Bonus Plan for each named executive officer, determined as of the date they were granted. These are the amounts that would have been earned if the performance goals had been met at threshold, target, and maximum levels, respectively. See “Compensation Discussion and Analysis -- Performance-Based Cash Incentive” above for more information about the structure of these bonus awards. Actual payouts were based upon actual 2023 performance levels and therefore differ from what is shown here. Actual payouts for 2023 are set forth in the "Summary Compensation Table" on page 43 under “Non-Equity Incentive Plan Compensation.”
(4)The amounts reported in these columns represent the number of shares that may become payable under the PSUs awarded in fiscal year 2023 to our named executive officers, assuming achievement of “threshold,” “target” and “maximum” levels of both performance goals and the Relative TSR Goal for the TSR Modifier. These goals are described in more detail under “Compensation Discussion and Analysis -- Equity-Based Awards” above. PSUs also provide entitlement to certain Dividend Equivalents as described above.
(5)The amounts reported in this column represent RSAs granted under our 2018 Stock Incentive Plan in fiscal year 2023 to our named executive officers.
(6)The amounts reported in this column represent the aggregate grant date fair value of restricted stock and performance share units at target level awarded to each named executive officer under our 2018 Stock Incentive Plan during fiscal year 2023, in accordance with FASB ASC Topic 718. The grant date fair value of the PSUs set forth in this column is based on the “probable outcome” (which as of grant date was target attainment) of the performance and market conditions of these awards and using the
same methodology described above in Footnote 2 to the "Summary Compensation Table" on page 43. These values may not match the actual amount realized by the NEOs, which could be higher or lower than what is presented here.
Description of Plan-Based Awards
Non-Equity Incentive Plan Awards. The cash incentive awards shown in the table “Grants of Plan-Based Awards in 2023” were granted under the 2023 Executive Bonus Plan. The material terms of the Plan and these awards are described above under “Compensation Discussion and Analysis” in the section entitled “Fiscal 2023 Named Executive Officer Compensation Details—Performance-Based Cash Incentive.” The 2023 Executive Bonus Plans are filed as exhibits to our 2022 Form 10-K for the period ending December 31, 2022.
Equity Incentive Plan Awards. The PSUs shown in the table “Grants of Plan-Based Awards in 2023” were granted under, and are subject to, the terms of our 2018 Stock Incentive Plan. The material terms of such awards are described under “Compensation Discussion and Analysis” in the section entitled “Fiscal 2023 Named Executive Officer Compensation Details—Equity-Based Awards.” The form agreements for the PSUs are filed as exhibits to our 2023 Form 10-K for the period ending December 31, 2023.
Time-Lapsed Restricted Stock. The RSAs shown in the table “Grants of Plan-Based Awards in 2023” are subject to the terms of our 2018 Stock Incentive Plan, and are described under “Compensation Discussion and Analysis” in the section entitled “Fiscal 2023 Named Executive Officer Compensation Details—Equity-Based Awards.” The form agreements for the RSAs are filed as exhibits to 2022 Form 10-K for the period ending December 31, 2022.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END The table below sets forth the total number of restricted shares of Common Stock
and performance share units outstanding at December 31,
20222023 and held by the Company’s named executive officers but which have not yet vested, together with the market value of these unvested shares based on the
$36.54$43.67 closing price of our Common Stock on December
31, 2022.29, 2023 (the last trading day of the year). The Company does not have any outstanding option awards held by the named executive officers.
| | | | |
| | Stock Awards |
| | Number of Shares or Units | | Market Value of Shares or |
| | of Stock That Have Not Yet | | Units of Stock That Have |
| | Vested | | Not Yet Vested |
Name | | (#) | | ($) |
Gary W. Rollins | | 28,350 | (1) | 1,035,909 |
| | 52,200 | (2) | 1,907,388 |
| | 61,650 | (3) | 2,252,691 |
| | 93,000 | (4) | 3,398,220 |
| | 120,000 | (5) | 4,384,800 |
| | 120,000 | (6) | 4,384,800 |
Kenneth D. Krause | | 73,186 | (7) | 2,674,216 |
Julie K. Bimmerman | | 2,925 | (3) | 106,880 |
| | 5,760 | (4) | 210,470 |
| | 4,500 | (5) | 164,430 |
| | 20,000 | (6) | 730,800 |
Jerry E. Gahlhoff, Jr. | | 4,050 | (1) | 147,987 |
| | 7,200 | (2) | 263,088 |
| | 8,550 | (3) | 312,417 |
| | 12,840 | (4) | 469,174 |
| | 35,000 | (5) | 1,278,900 |
| | 40,000 | (6) | 1,461,600 |
John F. Wilson | | 13,500 | (1) | 493,290 |
| | 27,000 | (2) | 986,580 |
| | 31,860 | (3) | 1,164,164 |
| | 48,000 | (4) | 1,753,920 |
| | 60,000 | (5) | 2,192,400 |
| | 50,000 | (6) | 1,827,000 |
Elizabeth B. Chandler | | 1,890 | (1) | 69,061 |
| | 5,400 | (2) | 197,316 |
| | 7,200 | (3) | 263,088 |
| | 18,000 | (4) | 657,720 |
| | 22,500 | (5) | 822,150 |
| | 12,000 | (6) | 438,480 |
| | | | | | | | | | | | | | | | | | | | |
| Restricted Stock Awards | Performance Share Unit Awards |
| Name | Number of Shares
of Stock That Have Not
Vested
(#) | | Market Value of Shares of Stock That Have
Not Vested
($) | Number of Unearned Units
That Have Not
Vested
(#) | | Market Value of Unearned Units That Have
Not Vested
($) |
| Gary W. Rollins | 26,100 | (1) | 1,139,787 | | 45,000(7) | | 1,965,150(9) |
| 41,100 | (2) | 1,794,837 | | | | |
| 69,750 | (3) | 3,045,983 | | | | |
| 96,000 | (4) | 4,192,320 | | | | |
| 96,000 | (5) | 4,192,320 | | | | |
| 45,000 | (6) | 1,965,150 | | | | |
| Jerry E. Gahlhoff, Jr. | 3,600 | (1) | 157,212 | | 72,525(7) | | 3,167,167(9) |
| 5,700 | (2) | 248,919 | | | | |
| 9,630 | (3) | 420,542 | | | | |
| 28,000 | (4) | 1,222,760 | | | | |
| 32,000 | (5) | 1,397,440 | | | | |
| 72,525 | (6) | 3,167,167 | | | | |
| Kenneth D. Krause | 48,791 | (8) | 2,130,703 | | 29,100(7) | | 1,270,797(9) |
| 29,100 | (6) | 1,270,797 | | | | |
| John F. Wilson | 13,500 | (1) | 589,545 | | 8,250(7) | | 360,278(9) |
| 21,240 | (2) | 927,551 | | | | |
| 36,000 | (3) | 1,572,120 | | | | |
| 48,000 | (4) | 2,096,160 | | | | |
| 40,000 | (5) | 1,746,800 | | | | |
| 8,250 | (6) | 360,278 | | | | |
| Elizabeth B. Chandler | 2,700 | (1) | 117,909 | | 8,325(7) | | 363,553(9) |
| 4,800 | (2) | 209,616 | | | | |
| 13,500 | (3) | 589,545 | | | | |
| 18,000 | (4) | 786,060 | | | | |
| 9,600 | (5) | 419,232 | | | | |
| 8,325 | | (6) | 363,553 | | | | |
(1) | (1) | These awards of time-lapse restricted stock were granted to the named executive officers on 1/24/2017 and became fully vested on 1/23/2023.These awards of time-lapse restricted stock were granted to the named executive officers on 1/23/2018 and became fully vested on 1/23/2024.(2)These awards of time-lapse restricted stock were granted to the named executive officers on 1/22/2019 and are scheduled to fully vest on 1/22/2025. (3)These awards of time-lapse restricted stock were granted to the named executive officers on 1/28/2020 and are scheduled to fully vest on 1/28/2026. (4)These awards of time-lapse restricted stock were granted to the named executive officers on 1/26/2021 and are scheduled to fully vest on 1/26/2027.
|
| (2) | These awards of time-lapse restricted stock were granted to the named executive officers on 1/23/2018 and are scheduled to fully vest on 1/23/2024. |
| (3) | These awards of time-lapse restricted stock were granted to the named executive officers on 1/22/2019 and are scheduled to fully vest on 1/22/2025. |
| (4) | These awards of time-lapse restricted stock were granted to the named executive officers on 1/28/2020 and are scheduled to fully vest on 1/28/2026. |
| (5) | These awards of time-lapse restricted stock were granted to the named executive officers on 1/26/2021 and are scheduled to fully vest on 1/26/2027. |
| (6) | These awards of time-lapse restricted stock were granted to the named executive officers on 1/26/2022 and are scheduled to fully vest on 1/26/2027. |
| (7) | This award of time-lapse restricted stock was granted to the Mr. Krause on 9/1/2022 and is scheduled to fully vest on 1/1/2025. |
47
(5)These awards of time-lapse restricted stock were granted to the named executive officers on 1/26/2022 and are scheduled to fully vest on 1/26/2027.(6)These awards of time-lapse restricted stock were granted to the named executive officers on 2/16/2023 and are scheduled to fully vest on 2/16/2027.
(7)These awards of performance share units were granted to the named executive officers on 2/16/2023 and are scheduled to cliff vest on 12/31/2025, subject to performance and market criteria.
(8)This award of time-lapse restricted stock was granted to Mr. Krause on 9/1/2022 and is scheduled to fully vest on 1/1/2025.
(9)This market value shows the maximum payout. Actual values received by the NEOs may be lower from the numbers presented here.
OPTION EXERCISES AND STOCK VESTED The following table sets forth the number of shares of Common Stock acquired by the named executive officers and the aggregate value realized upon the vesting of stock during the fiscal year ended December 31,
2022.2023. None of our named executive officers owned any stock options that were exercised in
2022. | | | | |
| | Stock Awards |
| | Number of Shares Acquired | | Value Realized on |
| | on Vesting | | Vesting(1) |
Name | | (#) | | ($) |
Gary W. Rollins | | 126,600 | | 3,931,065 |
Kenneth D. Krause | | - | | - |
Julie K. Bimmerman | | 3,990 | | 121,022 |
Jerry E. Gahlhoff, Jr. | | 17,310 | | 538,042 |
John F. Wilson | | 63,120 | | 1,960,548 |
Elizabeth B. Chandler | | 13,290 | | 411,261 |
| (1) | The amounts in this column represent the market value on the vesting date of the shares that vested, without regard to any related tax obligations. Market value was determined using the closing price per share of Common Stock on the vesting date. |
2023.48
| | | | | | | | |
| Stock Awards |
| Name | Number of Shares Acquired
on Vesting
(#) | Value Realized on Vesting(1) ($) |
| Gary W. Rollins | 146,250 | 5,280,350 | |
| Jerry E. Gahlhoff, Jr. | 28,710 | 1,036,896 | |
| Kenneth D. Krause | 24,395 | 891,637 | |
| John F. Wilson | 71,620 | 2,585,498 | |
| Elizabeth B. Chandler | 18,390 | 662,936 | |
(1)The amounts in this column represent the market value on the vesting date of the shares that vested, without regard to any related tax obligations. Market value was determined using the closing price per share of Common Stock on the vesting date.
NON-QUALIFIED DEFERRED COMPENSATION On June 13, 2005, the Company approved the Rollins, Inc. Deferred Compensation Plan (the “Deferred Compensation Plan”) that is designed to comply with the provisions of the American Jobs Creation Act of 2004 (including Section 409A of the Internal Revenue Code). The Deferred Compensation Plan provides that employees eligible to participate in the Deferred Compensation Plan include those who are both members of a group of management and/or highly compensated employees selected by the committee administering the Deferred Compensation Plan. All of the executive officers are eligible to participate in the Company’s Deferred Compensation Plan. The table below sets forth the contributions made to the Deferred Compensation Plan, the aggregate earnings in 20222023 and the balances as of December 31, 20222023 for each named executive officer under the Deferred Compensation Plan: | | | | | | | | | | |
| | Executive | | Registrant | | Aggregate | | Aggregate | | Aggregate |
| | contributions in last | | contributions in last | | earnings/(losses) | | withdrawals/ | | balance at last |
| | FY(1) | | FY | | in last FY(2) | | distributions | | FYE |
Name | | ($) | | ($) | | ($) | | | | ($) |
Gary W. Rollins | | - | | - | | (18,319) | | - | | 109,771 |
Kenneth D. Krause | | - | | - | | - | | - | | - |
Julie K. Bimmerman | | - | | - | | - | | - | | - |
Jerry E. Gahlhoff, Jr. | | - | | - | | (21,740) | | - | | 107,118 |
John F. Wilson | | 391,226 | | - | | 40,556 | | - | | 3,028,279 |
Elizabeth B. Chandler | | - | | - | | - | | - | | - |
| | | | | | | | | | | | | | | | | |
| Name | Executive contributions in last FY(1) ($) | Registrant
contributions in last
FY
($) | Aggregate earnings/(losses) in last FY(2) ($) | Aggregate
withdrawals/
distributions | Aggregate
balance at last
FYE
($) |
| Gary W. Rollins | - | | - | | (15,725) | | - | | 125,496 | |
| Jerry E. Gahlhoff, Jr. | - | | - | | (15,745) | | - | | 122,863 | |
| Kenneth D. Krause | - | | - | | - | | - | | - | |
| John F. Wilson | 350,631 | | - | | 202,657 | | - | | 3,668,192 | |
| Elizabeth B. Chandler | - | | - | | - | | - | | - | |
(1) | (1) | This column reports the actual amounts of base salary deferred by the named executive officers in 2022 under the Deferred Compensation Plan, and the bonus compensation amounts deferred by the named executive officers related to 2021 that were paid in 2022, which are included in the Summary Compensation Table on page 44. |
| (2) | This column reports earnings or losses on compensation that the named executive officers elected to defer under the Deferred Compensation Plan. These amounts do not represent above-market or preferential earnings and therefore are not included in the Summary Compensation Table on page 44. |
This column reports the actual amounts of base salary deferred by the named executive officers in 2023 under the Deferred Compensation Plan, which is included in the "Summary Compensation Table" on page 43.(2)This column reports earnings or losses on compensation that the named executive officers elected to defer under the Deferred Compensation Plan. These amounts do not represent above-market or preferential earnings and therefore are not included in the "Summary Compensation Table" on page 43. The Deferred Compensation Plan provides that participants may defer up to 50% of their base salary and up to 85% of their annual bonus with respect to any given plan year, subject to a $2,000 per plan year minimum. The Company may make discretionary contributions to participant accounts but has not done so since 2011.
Under the Deferred Compensation Plan, salary and bonus deferrals are fully vested. Any discretionary contributions are subject to vesting in accordance with the matching contribution-vesting schedule set forth in the Rollins 401(k) Savings Plan in which a participant participates.
Accounts
will beare credited with hypothetical earnings, and/or debited with hypothetical losses, based on the performance of certain “Measurement Funds.” Account values are calculated as if the funds from deferrals and Company credits had been converted into shares or other ownership units of selected Measurement Funds by purchasing (or selling, where relevant) such shares or units at the current purchase price of the relevant Measurement Fund at the time of the participant’s selection. Deferred Compensation Plan benefits are unsecured general obligations of the Company to the participants, and these obligations rank in parity with the Company’s other unsecured and unsubordinated indebtedness. The Company has established a “rabbi trust,” which it uses to voluntarily set aside amounts to indirectly fund any obligations under the Deferred Compensation Plan. To the extent that the Company’s obligations under the Deferred Compensation Plan exceed assets available under the trust, the Company would be required to seek additional funding sources to fund its liability under the Deferred Compensation Plan.
Generally, the Deferred Compensation Plan provides for distributions of any deferred amounts upon the earliest to occur of a participant’s death, disability, retirement or other termination of employment (a “Termination Event”). However, for any deferrals of salary and bonus (but not Company contributions), participants would be entitled to designate a distribution date which is prior to a Termination Event. Generally, the Deferred Compensation Plan allows a participant to elect to receive distributions under the Deferred Compensation Plan in installments or lump-sum payments.
The Company maintains the Rollins 401(k) Savings Plan, a defined contribution qualified retirement plan (the “401(k) Plan”). Participants in the 401(k) Plan may make before-tax and Roth after-tax contributions, subject to IRS limits, and the Company makes matching contributions. Participants may also make rollover contributions to the 401(k) Plan. Previously, participants were permitted to make non-Roth after-tax contributions. The full amount of a participant’s vested benefit is payable upon his termination of employment, retirement, total and permanent disability, death or age 59½. The forms of benefit payment under the 401(K) Plan are dependent upon the vested account balance. If the participant’s vested account balance is greater than $1,000 up to and including $5,000 upon termination of employment, a participant may roll their distribution into another qualified plan or an individual retirement plan of their choice, or it will be rolled into a Prudential individual retirement account. If the account balance is equal to or less than $1,000, the participant may roll their vested balance into another qualified plan or take a lump sum distribution. If the participant’s account balance is greater than $5,000 upon termination of employment, they can leave their funds in the Plan, take a full or partial lump sum distribution, take systematic distributions or roll their vested assets into another qualified plan or individual retirement account. A participant may withdraw before-tax and Roth contributions upon specified instances of financial hardship. A participant may withdraw all or any portion of their non-Roth after-tax account and rollover account at any time. Amounts contributed by the Company to the accounts of named executive officers as matching contributions under the 401(k) Plan are included in the “All“All Other Compensation”Compensation” column of the "Summary Compensation Table" on page 44.43.
POTENTIAL PAYMENTS UPON TERMINATION OR CHANGE IN CONTROL The following table and accompanying discussion describes the potential payments and benefits under the Company’s compensation and benefit plans and arrangements to which the named executive officers would be entitled upon termination of employment. There are no other agreements, arrangements or plans that entitle executive officers to severance, perquisites, or other enhanced benefits upon termination of their employment, except as described below. Any agreement to provide additional payments or benefits to a terminating executive officer would be in the discretion of the Human Capital Management and Compensation Committee. The executive officers are not entitled to additional benefits at death or disability per the terms of the defined benefit plan. The executive officers can choose to receive the amounts accumulated in the Deferred Compensation Plan either as a lump sum or in installments at retirement, death or disability. These amounts have been disclosed under the “Non-Qualified Deferred Compensation” section on page 49.50. Unvested Equity Awards. Under our Time-Lapse Restricted Stock Award Agreements and our Performance Share Unit Award Agreements (the “StockEquity Award AgreementAgreements”), if a named executive officer’s employment with the Company terminates at any time prior to the vesting of any restricted stock or performance share units issued under the StockEquity Award Agreement,Agreements, the named executive officer shall forfeit all unvested restricted stock unless such named executive officer’s employment terminatesor performance stock units, except where termination was due to his or hercertain circumstances specified in the agreements, such as permanent disability, death or a change in control. InTreatment of unvested awards varies with the reason for the termination, the type of award, and the year in which the award was granted, as described in more detail below:
•Death. Under our RSA agreements, in the event of death or a change in control of a named executive officer, suchall unvested restricted stock shall vest immediately. Under our PSU award agreements, if employment terminates due to death before the cliff vesting occurs, the award will vest at target levels for the CAGR and Adjusted EBITDA Margin components, as if target performance had been achieved, without regard to actual performance. Nothing will vest for the TSR Modifier, regardless of actual performance.
•Change in Control. In thean event of permanent disabilitya "change in control," as determined by our Board of a named executive officer, a portion of suchDirectors, unvested restricted stock shall vest immediately and shall be determined by prorating theimmediately. The PSU award agreements do not contain any change in control provisions.
•Disability. Our RSA agreements provide for accelerated vesting of a prorated amount of restricted stock by dividingupon permanent disability. The proration allows the NEO to receive a fraction of the award equal (in total, including any shares that have already vested under the award) to the number of months elapsed from the grant date to the date of permanent disability, by 72, multiplying the resultdivided by the aggregate amountnumber of restricted stockmonths in the vesting period for the award. Under our PSU agreements, if employment terminates due to disability before cliff vesting occurs, the award will vest at target levels for the CAGR and reducingAdjusted EBITDA Margin components, as if target performance had been achieved, without regard to actual performance. Nothing will vest for the result byTSR Modifier, regardless of actual performance.
•Retirement. None of our RSA and PSU agreements provide for vesting at retirement.
The Executive Bonus Plan agreements require the award recipient to remain employed through the end of the year, subject to certain exceptions only for certain transfers and promotions.No provision is made under these agreements for payouts to individuals whose employment has terminated for any previously vested shares pursuantreason prior to the Stock Award Agreement.end of the year, including due to death, disability, retirement, or change in control.
The table below shows the incremental restricted shares and performance share units that would become vested under the Stockrelevant Equity Award Agreement as of December 31, 2022,2023, at the closing market price of $36.54
$43.67 per share for our Common Stock, as of that date, in the case of retirement, death, disability or change in control.
| | | | | | | | | | | |
| | Equity Awards |
| Name | | Number of shares
underlying
unvested stock
(#) | Unrealized value of
unvested
stock
($) |
| Gary W. Rollins | Retirement | - | - | |
| Death | 388,950 | 16,985,447 | |
| Disability | 212,789 | 9,292,521 | |
| Change in Control | 388,950 | 16,985,447 | |
| Jerry E. Gahlhoff, Jr. | Retirement | - | - | |
| Death | 175,630 | 7,669,762 | |
| Disability | 79,669 | 3,479,156 | |
| Change in Control | 175,630 | 7,669,762 | |
| Kenneth D. Krause | Retirement | - | - | |
| Death | 87,591 | 3,825,099 | |
| Disability | 36,092 | 1,576,141 | |
| Change in Control | 87,591 | 3,825,099 | |
| John F. Wilson | Retirement | - | - | |
| Death | 169,740 | 7,412,546 | |
| Disability | 97,352 | 4,251,402 | |
| Change in Control | 169,740 | 7,412,546 | |
| Elizabeth B. Chandler | Retirement | - | - | |
| Death | 59,700 | 2,607,099 | |
| Disability | 32,347 | 1,412,624 | |
| Change in Control | 59,700 | 2,607,099 | |
| | | | | | |
| | | | Stock Awards |
| | | | Number of shares | | Unrealized value of |
| | | | underlying | | unvested |
| | | | unvested stock | | stock |
Name | | | | (#) | | ($) |
Gary W. Rollins | | Retirement | | - | | - |
| | Death | | 475,200 | | 17,363,808 |
| | Disability | | 216,517 | | 7,911,519 |
| | Change in Control | | 475,200 | | 17,363,808 |
Kenneth D. Krause | | Retirement | | - | | - |
| | Death | | 192,676 | | 2,674,216 |
| | Disability | | 54,582 | | 267,422 |
| | Change in Control | | 192,676 | | 2,674,216 |
Julie K. Bimmerman | | Retirement | | - | | - |
| | Death | | 33,185 | | 1,212,580 |
| | Disability | | 9,814 | | 358,587 |
| | Change in Control | | 33,185 | | 1,212,580 |
Jerry E. Gahlhoff, Jr. | | Retirement | | - | | - |
| | Death | | 107,640 | | 3,933,166 |
| | Disability | | 40,231 | | 1,470,024 |
| | Change in Control | | 107,640 | | 3,933,166 |
John F. Wilson | | Retirement | | - | | - |
| | Death | | 230,360 | | 8,417,354 |
| | Disability | | 107,901 | | 3,942,727 |
| | Change in Control | | 230,360 | | 8,417,354 |
Elizabeth B. Chandler | | Retirement | | - | | - |
| | Death | | 66,990 | | 2,447,815 |
| | Disability | | 29,126 | | 1,064,273 |
| | Change in Control | | 66,990 | | 2,447,815 |
Accrued Pay and Regular Retirement Benefits. The amounts shown in the table above do not include payments and benefits to the extent they are provided on a non-discriminatory basis to salaried employees generally upon termination of employment. These include:
| ● | •Accrued salary and vacation pay •Distributions of plan balances under the 401(k) plan, as described on page 51 •Non-Qualified Deferred Compensation Accrued salary and vacation pay
|
| ● | Distributions of plan balances under the 401(k) plan, as described on page 50 |
| ● | Non-Qualified Deferred Compensation |
Change in Control or Severance. The Company does not have any severance for its executive officers. However, upon the occurrence of a “Change in Control,” as determined by the Board of Directors, all unvested restricted stock shall immediately vest.
As required by the SEC rules, we are providing the ratio of our median employee’s annual total compensation (the median of the total compensation of all our employees, excluding our principal executive officer) to the total annual compensation of Mr. Gary W. Rollins,Jerry E. Gahlhoff, Jr., who served as our principal executive officer (“PEO”) during fiscal year 2022.2023.
The purpose of the required disclosure is to provide a measure of the equitability of pay within the organization. We believe our compensation philosophy and process yield an equitable result.
| | | | |
Median Employee annual total compensation for 2022 | | $ | 49,099 | (1) |
PEO annual total compensation for 2022 | | $ | 7,760,204 | |
Ratio of PEO to Median Employee compensation for 2022 | | | 158:1 | |
| | (1) | | | | | | |
| Median Employee annual total compensation for 2023 | This amount represents taxable wages$ | 57,200 | | |
| PEO annual total compensation for 2023 | $ | 6,743,889 | | |
Ratio of the median employee, not including equity awards, if any.PEO to Median Employee compensation for 2023 | 118:1 | |
In determining the median employee, a listing was prepared of all employees as of December 31, 2022. We changed the determination date to identify our median employee from October 31st to December 31st in order to reduce the administrative burden in calculating the pay ratio.
2023.
As of December 31,
2022,2023, we had approximately
17,51519,000 employees, including
ourapproximately 2,000 international
employees.employees and approximately 17,000 employees in the United States. For purposes of identifying the median employee, we (i) used the annual base salaries and bonuses of all employees employed by the Company or its consolidated subsidiaries as of December 31,
20222023 (including
for administrative convenience, allour employees in Canada (approximately 1,158 employees) but excluding our employees located in the United Kingdom (approximately 320), Singapore (approximately 80), and Australia (approximately 350) (approximately 750 excluded international
employees without regard to the number of employees or where they are located)employees)), other than Mr.
Rollins;Gahlhoff, resulting in approximately 18,000 employees included in the calculation; (ii) ranked the total base salary and bonus amounts of all employees
in (i), except Mr.
Rollins,Gahlhoff, from lowest to highest; and (iii) selected the median employee based on the total amount. For simplicity, the value of the Company’s 401(k) plan and medical benefits provided were excluded. For this purpose, annual base salary plus bonus was calculated using W-2 wages, excluding any equity awards, and in the case of international employees, the local equivalent.
The pay ratio disclosure presented above is a reasonable estimate. Because the SEC rules for identifying the median employee and calculating the pay ratio allow companies to use different methodologies, exemptions, estimates and assumptions, our pay ratio disclosure may not be comparable to the pay ratios reported by other companies.
In accordance with the SEC’s regulations, we are providing the following information about the relationship between executive compensation actually paid to our principal executive officer (“PEO”) and our other named executive officers (“NEOs”) and certain financial performance of the Company for the years ended December 31, 2023, 2022, 2021, and 2020. For further information concerning the Company’s compensation philosophy see section titled "Executive Compensation – Compensation Discussion and Analysis” on page 32.
31. Pay versus Performance Table
| | | | | | | | | | | | | | | | |
| | | | | | Average | | | | Value of Initial Fixed $100 | | | | |
| | | | | | Summary | | Average | | Investment Based On: | | | | |
| | Summary | | | | Compensation | | Compensation | | | | Peer Group | | | | |
| | Compensation | | Compensation | | Table Total for | | Actually Paid | | Total | | Total | | | | Total Pre-Tax |
| | Table Total for | | Actually Paid | | Non-PEO | | to Non-PEO | | Shareholder | | Shareholder | | Net Income | | Profit |
| | PEO(1) | | to PEO(2) | | NEOs(1) | | NEOs(2) | | Return(3) | | Return(4) | | (thousands)(5) | | (thousands)(6) |
Year | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
2022 | | 7,760,204 | | 9,213,035 | | 2,629,526 | | 2,960,216 | | 187.47 | | 212.33 | | 368.599 | | 498,917 |
2021 | | 8,393,601 | | 6,163,785 | | 2,220,844 | | 905,146 | | 173.43 | | 224.30 | | 356.565 | | 482,485 |
2020 | | 5,475,195 | | 14,029,693 | | 1,791,259 | | 3,926,358 | | 195.81 | | 170.39 | | 266.756 | | 362,716 |
The following table sets forth information concerning the compensation of our NEOs for each of the fiscal years ended December 31, 2023, 2022, 2021 and 2020, and our financial performance for each such fiscal year:
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | | | | Value of Initial Fixed $100 Investment Based on: | | | |
| Year | Summary Compensation Table Total for PEO
($)(1) | Compensation Actually Paid to PEO
($)(2) | Average Summary Compensation Table Total for Non-PEO NEOs ($)(1) | Average Compensation Actually Paid to Non-PEO NEOs ($)(2) | Total Shareholder Return
($)(3) | Peer Group Total Shareholder Return ($)(4) | Net Income
($)(5) | Pre-Tax Profit
($)(6) |
| 2023 | 6,743,889 | 9,226,265 | 3,163,663 | 4,851,471 | 207 | 194 | 434,957,000 | 586,257,000 |
| 2022 | 7,760,204 | 9,213,035 | 2,629,526 | 2,960,216 | 171 | 151 | 368,599,000 | 498,917,000 |
| 2021 | 8,393,601 | 6,163,785 | 2,220,844 | 905,146 | 158 | 159 | 356,565,000 | 482,485,000 |
| 2020 | 5,475,195 | 14,029,693 | 2,094,217 | 5,109,905 | 179 | 121 | 266,756,000 | 362,716,000 |
(1)
1.The dollar amounts reported in these columns are (i) the amountsamount of total compensation in the “Total” column of the "Summary Compensation Table" reported for Mr. Rollins(a) Jerry E. Gahlhoff for each correspondingthe year 2023 when he served as the Company’s Chief Executive Officer inand (b) Gary W. Rollins for the “Total” column ofyears 2022, 2021, and 2020 when he served as the Summary Compensation Table,”Company’s Chief Executive Officer, and (ii) the average of the amounts reported for the Company’s remaining NEOs as a group in the “Total” column of the "Summary Compensation Table" in each applicable year. The names of the remaining NEOs included for purposes of calculating the average amounts in each applicable year are as follows:
| | | | | | |
Year | All OtherNon-PEO NEOs
| |
2022
2023 | Gary W. Rollins, Kenneth D. Krause, John F. Wilson and Elizabeth B. Chandler | |
| 2022 | Jerry E. Gahlhoff, Jr., Kenneth D. Krause, Julie K. Bimmerman, John F. Wilson and Elizabeth B. Chandler | |
2021 | Jerry E. Gahlhoff, Jr., Eddie P. Edward Northen, Julie K. Bimmerman, John F. Wilson and Elizabeth B. Chandler | |
2020 | Jerry E. Gahlhoff, Jr., EddieRandall R. Rollins, P. Edward Northen, John F. Wilson and Elizabeth B. Chandler | |
2.The amounts reported in these columns represent the amount of “compensation actually paid” to Mr.(a) Jerry E. Gahlhoff for the year 2023 and (b) Gary W. Rollins for the years 2022, 2021, and 2020, and on average, to all other NEOs as a group, as computed in accordance with Item 402(v) of Regulation S-K. The dollar amounts do not reflect the actual amount of compensation earned by or paid to Mr.Jerry E. Gahlhoff or Gary W. Rollins or to the other NEOs as a group during the applicable year. In accordance with the requirements of Item 402(v) of Regulation S-K, the following adjustments were made to Mr. Rollins’Jerry E. Gahlhoff or Gary W. Rollins’s total compensation, and to the average total compensation for the other NEOs as a group, for each year to determine the compensation actually paid: | | | | | | | | | | | | |
| | 2022 | | 2021 | | 2020 |
| | | | Average | | | | Average | | | | Average |
| | PEO | | Other NEOs | | PEO | | Other NEOs | | PEO | | Other NEOs |
| | ($) | | ($) | | ($) | | ($) | | ($) | | ($) |
Summary Compensation Table Total | | 7,760,204 | | 2,629,526 | | 8,393,601 | | 2,220,844 | | 5,475,195 | | 1,791,259 |
Subtraction of Stock Awards | | (3,564,000) | | (1,224,687) | | (4,458,000) | | (1,129,360) | | (2,846,575) | | (786,940) |
Addition of Year-End Equity Value | | 4,384,800 | | 1,426,419 | | 4,105,200 | | 834,724 | | 4,541,888 | | 1,255,612 |
Change in Fair Value of Stock Awards granted in Prior Year | | 827,616 | | 147,338 | | (1,758,348) | | (283,712) | | 6,399,417 | | 1,560,923 |
Addition of Fair Value of Stock Awards that were granted and vested in the same FY(a) | | - | | - | | - | | - | | - | | - |
Change in Fair Value of Stock Awards granted during any prior FY that met the vesting conditions as of the end of the applicable FY | | (399,921) | | (62,357) | | (321,024) | | (64,051) | | 308,943 | | 74,124 |
Subtraction of Stock Awards that failed to meet the vesting conditions | | - | | - | | - | | (708,066) | | - | | - |
Subtraction of Aggregate Change in Actuarial Present Value of Accumulated Benefit Under Defined Benefit and Pension Plans | | - | | - | | - | | - | | (10,385) | | (9,177) |
Addition of dividends or other earnings paid during applicable FY prior to vesting date | | 204,336 | | 43,977 | | 202,356 | | 34,767 | | 161,210 | | 40,557 |
Compensation Actually Paid ($) | | 9,213,035 | | 2,960,216 | | 6,163,785 | | 905,146 | | 14,029,693 | | 3,926,358 |
(a) No stock awards that were granted to the PEO or any other NEO during the fiscal years ended on December 31, 2022, 2021 or 2020, vested in the same fiscal year.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| 2023 | 2022 | 2021 | 2020 |
| PEO
($) | Average non-PEO NEOs ($) | PEO ($) | Average non-PEO NEOs ($) | PEO ($) | Average non-PEO NEOs ($) | PEO ($) | Average non-PEO NEOs ($) |
| Summary Compensation Table Total | 6,743,889 | 3,163,663 | 7,760,204 | 2,629,526 | 8,393,601 | 2,220,844 | 5,475,195 | 2,094,217 |
Subtraction of Stock Awards
| (3,918,025) | (1,224,611) | (3,564,000) | (1,224,687) | (4,458,000) | (1,129,360) | (2,846,575) | (1,143,772) |
Addition of Year-End Equity Value
| 5,735,845 | 1,792,816 | 4,384,800 | 1,426,419 | 4,105,200 | 834,724 | 4,541,888 | 1,004,490 |
Change in Fair Value of Stock Awards granted in Prior Year
| 562,771 | 1,042,907 | 827,616 | 147,338 | (1,758,348) | (283,712) | 6,399,417 | 1,249,230 |
| Addition of Fair Value Stock Awards that were granted and vested in the same FY | — | — | — | — | — | — | — | 768,180 |
Change in Fair Value of Stock Awards granted during any prior FY that met the vesting conditions as of the end of the applicable FY
| (11,764) | (24,458) | (399,921) | (62,357) | (321,024) | (64,051) | 308,943 | 1,096,205 |
| Subtraction of Stock Awards that failed to meet the vesting conditions | — | — | — | — | — | (708,066) | — | — |
| Subtraction of Aggregate Change in Actuarial Present Value of Accumulated Benefit Under Defined Benefit and Pension | — | — | — | — | — | — | (10,385) | (7,801) |
| Application of dividends or other earnings paid during applicable FY prior to vesting date | 113,549 | 101,155 | 204,336 | 43,977 | 202,356 | 34,767 | 161,210 | 49,157 |
| Compensation Actually Paid | 9,226,265 | 4,851,471 | 9,213,035 | 2,960,216 | 6,163,785 | 905,146 | 14,029,693 | 5,109,905 |
(3) 3.The amounts reported in this column represents the Company’s total cumulative Total Shareholder Return (“TSR”) for the fiscal years ended December 31, 2023, 2022, 2021 and 2020. The Company’s total cumulative TSR is the total shareholder return calculated as the profit or loss from net share price change, over a given period, including reinvestment of dividends.
(4)
4.The amounts reported in this column represents the weighted Peer Group TSR (“Peer Group TSR”) for the fiscal years ended December 31, 2023, 2022, 2021 and 2020. The Peer Group TSR is weighted according to the respective companies’ stock market capitalization at the beginning of each period for which a return is indicated. The peer group used for this purpose is the S&P 500 Commercial Services & Supplies Index.(5)
5.The amounts reported in this column represent the amount of net incomeNet Income reflected in the Company’s audited financial statements for the fiscal years ended December 31, 2023, 2022, 2021 and 2020. (6)
6.Pre-Tax Profit, which is calculated as consolidated income before taxes, represents the most important financial measure used by the Company to link compensation actually paid to its named executive officers for the fiscal years ended December 31, 2023, 2022, 2021 and 20202020.
.Relationship between Compensation Actually Paid and Financial Performance Measures
The following graphs further illustrate the relationship between the compensation actually paid to the PEO and the average compensation actually paid to the other NEOs during the fiscal years ended December 31,
2023, 2022, 2021 and 2020, to each (1) Company and Peer Group total shareholder return, (2) net income, and (3) pre-tax profit.
Compensation Compensation actually paid for purposes of the tabular disclosure and the following graphs were calculated in accordance with SEC rules and do not fully represent the actual final amount of compensation earned by or actually paid to our NEOs during the applicable years.Compensation Actually Paid vs. Company and Peer Group Total Shareholder Return
Compensation Actually Paid vs. Net Income
Compensation Actually Paid vs. Pre-Tax Profit
FinancialPay Versus Performance Measures
Tabular List
The following table lists (in no specific order) the most important financial performance measures used by the Company to link compensation actually paid to our NEOs in 20222023 to the performance of the Company:Company.
| | |
| Revenue |
Pre-Tax Profit |
Stock Price |
| Adjusted EBITDA |
DELINQUENT SECTION 16(a) REPORTS Section 16(a) of the Exchange Act requires our officers and directors and persons who own more than ten percent of a registered class of our equity securities to file reports of ownership and changes in ownership with the SEC.
Officers,Our employees prepare these reports for our directors and
greater than ten percent stockholders are required by SEC regulation to furnish us with copiesexecutive officers who request them on the basis of
all Section 16(a) forms they file.information obtained from them and from our records. Based on our knowledge of stock transactions, our review of copies of reports filed under Section 16(a)information available to us during fiscal year 2023, and written representations furnishedmade to us by the reporting persons, we believe that all persons subject to the reporting requirements of Section 16(a) filed the required reports onwere made in a timely basis during the fiscal year ended December 31, 2022.
manner other than one Form 4 for each of Gary W. Rollins, John F. Wilson, Jerry E. Gahlhoff, Jr., Kenneth D. Krause, Elizabeth B. Chandler and Traci Hornfeck, which were filed one day late on February 21, 2023 due to an administrative error.
EQUITY COMPENSATION PLAN INFORMATION
The following table sets forth information concerning our equity compensation plans as of December 31, 2022:
| | | | | | |
| | | | | | Number of Securities |
| | | | | | Remaining Available for |
| | Number of Securities To | | Weighted Average | | Future Issuance Under |
| | Be Issued Upon Exercise | | Exercise Price of | | Equity Compensation |
| | of Outstanding Options, | | Outstanding Options, | | Plans (Excluding Securities |
| | Warrants and Rights | | Warrants and Rights | | Reflected in Column) |
Plan Category | | (A) | | (B) | | (C) |
Equity compensation plans approved by security holders | | 2,685,442 | | | | 5,916,617 |
Equity compensation plans not approved by security holders | | - | | - | | - |
Total | | 2,685,442 | | - | | 5,916,617 |
STOCK OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information relating to the beneficial ownership of our common stock as of March 1,
20232024 by:
| ● | Each of our named executive officers; |
| ● | Each of our directors and director nominees; |
| ● | All of our current executive officers, directors and director nominees as a group; and |
•Each of our named executive officers;
| ● | Each beneficial owner of more than 5% of our common stock. |
•Each of our directors and director nominees;
•All of our current executive officers, directors and director nominees as a group; and
•Each beneficial owner of more than 5% of our common stock.
The number of shares beneficially owned by each
stockholdershareholder is determined under rules issued by the SEC. Under these rules, beneficial ownership includes any shares as to which a person has sole or shared voting power or investment power. Unless otherwise indicated, we believe, based on the information furnished to us, that the persons named in the table below have sole voting and investment power with respect to all securities that they beneficially own, subject to community property laws where applicable.
The information contained in the following table is not necessarily indicative of beneficial ownership for any other purpose, and the inclusion of any shares in the table does not constitute an admission of beneficial ownership of those shares. Unless otherwise indicated, the business address of each beneficial owner listed in the table below is c/o of Rollins, Inc., 2170 Piedmont Road,
N.E.NE Atlanta, Georgia. The information provided in the table below is based on our records, information filed with the SEC, on which we are relying pursuant to applicable SEC regulations, and information provided to us.
| | | | | |
| | Amount Beneficially | | Percent of Outstanding | |
Name and Address of Beneficial Owner | | Owned(1) | | Shares | |
5% Stockholders: | | | | | |
The Control Group | | 249,028,485 | (2) | 50.54 | % |
Gary W. Rollins Voting Trust U/A dated September 14, 1994 | | 224,748,671 | (3) | 45.61 | % |
R. Randall Rollins Voting Trust U/A dated August 25, 1994 | | 224,748,671 | (4) | 45.61 | % |
LOR, Inc. | | 216,017,072 | (5) | 43.84 | % |
The Vanguard Group | | 28,341,622 | (6) | 5.75 | % |
Blackrock, Inc. | | 27,434,936 | (7) | 5.57 | % |
Named Executive Officers: | | | | | |
Gary W. Rollins | | 15,883,307 | (8) | 3.22 | % |
Kenneth D. Krause | | 94,764 | (9) | ** | |
Jerry E. Gahlhoff, Jr. | | 232,091 | (10) | ** | |
Julie K. Bimmerman | | 58,707 | (11) | ** | |
John F. Wilson | | 784,791 | (12) | ** | |
Elizabeth B. Chandler | | 101,855 | (13) | ** | |
Directors and Director Nominees: | | | | | |
Susan R. Bell | | 1,492 | | ** | |
Donald P. Carson | | 1,342 | | ** | |
Patrick J. Gunning | | 1,342 | | ** | |
P. Russell Hardin | | - | | ** | |
Gregory B. Morrison | | 1,342 | | ** | |
Jerry W. Nix | | 1,342 | | ** | |
Pamela R. Rollins | | 5,994,803 | (14) | 1.22 | % |
Louise S. Sams | | 1,342 | | ** | |
All Directors, Director Nominees and Named Executive Officers as a group (14 persons) | | 23,158,520 | (15) | 4.70 | % |
| (1) | Except as otherwise noted, the nature of the beneficial ownership for all shares is sole voting and investment power. |
| | | | | | | | | | | |
| Name and Address of Beneficial Owner | Amount Beneficially Owned(1) | | Percent of Outstanding
Shares |
| 5% Shareholders: | | | |
| The Significant Shareholder Group | 204,184,624 | (2) | 42.14 | % |
| Gary W. Rollins Voting Trust U/A dated September 14, 1994 | 180,238,857 | (3) | 37.20 | % |
| R. Randall Rollins Voting Trust U/A dated August 25, 1994 | 180,238,857 | (4) | 37.20 | % |
| LOR, Inc. | 171,507,258 | (5) | 35.40 | % |
| The Vanguard Group | 32,226,294 | (6) | 6.65 | % |
| Blackrock, Inc. | 28,515,437 | (7) | 5.89 | % |
| Named Executive Officers: | | | |
| Gary W. Rollins | 15,404,743 | (8) | 3.18 | % |
| Jerry E. Gahlhoff, Jr. | 302,130 | (9) | ** |
| Kenneth D. Krause | 104,078 | (10) | ** |
| John F. Wilson | 725,731 | (11) | ** |
| Elizabeth B. Chandler | 99,709 | (12) | ** |
| Directors and Director Nominees: | | | |
| Susan R. Bell | 3,859 | | ** |
| Donald P. Carson | 3,709 | | ** |
| Patrick J. Gunning | 3,709 | | ** |
| P. Russell Hardin | 7,927 | | ** |
| Dale E. Jones | - | | ** |
| Gregory B. Morrison | 3,709 | | ** |
| Jerry W. Nix | 3,709 | | ** |
| Pamela R. Rollins | 6,136,686 | (13) | 1.27 | % |
| Louise S. Sams | 3,709 | | ** |
| All Directors, Director Nominees and Named Executive Officers as a group (14 persons) | 22,709,355 | (14) | 4.69 | % |
(1)Except as otherwise noted, the nature of the beneficial ownership for all shares is sole voting and investment power.
(2)Based upon information contained in a report on Schedule 13D filed with the U.S. Securities and Exchange Commission (the “SEC”) on September 11, 2023 by the Significant Shareholder Group, which consists of Gary W. Rollins, Amy R. Kreisler, Pamela R. Rollins and Timothy C. Rollins, and certain companies under their control.
(3)Based upon information contained in a report on Schedule 13D filed with the SEC on September 11, 2023, an aggregate of 180,238,857 shares of Company Common Stock are beneficially owned by the Gary W. Rollins Voting Trust U/A dated September 14, 1994 (the “GWR Voting Trust”). The amount shown for the GWR Voting Trust includes the following shares of Company Common Stock (a) 164,581,449 shares held by LOR, Inc., a Georgia corporation (the GWR Voting Trust has a 50% voting interest in LOR, Inc.); (b) 8,731,599 shares held by Rollins Holding Company, Inc., a Georgia corporation (the GWR Voting Trust has a 50% voting interest in Rollins Holding Company, Inc.); (c) 2,235,811 shares held by RFA Management Company, LLC, a Georgia limited liability company, the manager of which is LOR, Inc.; (d) 744,963 shares held by RFT Investment Company, LLC (LOR, Inc. is the manager of RFT Investment Company, LLC); and (e) 3,945,035 shares held by RCTLOR, LLC, a Georgia limited liability company (LOR, Inc. is the managing member of RCTLOR, LLC). The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest.
(4)Based upon information contained in a report on Schedule 13D filed with the SEC on September 11, 2023, an aggregate of 180,238,857 shares of Company Common Stock are beneficially owned by the R. Randall Rollins Voting Trust U/A dated August 25, 1994 (the “RRR Voting Trust”). The amount shown for the RRR Voting Trust includes the following shares of Company Common Stock (a) 164,581,449 shares held by LOR, Inc., a Georgia corporation (the RRR Voting Trust has a 50% voting interest in LOR, Inc.); (b) 8,731,599 shares held by Rollins Holding Company, Inc., a Georgia corporation (the RRR Voting Trust has a 50% voting interest in Rollins Holding Company, Inc.); (c) 2,235,811 shares held by RFA Management Company, LLC, a Georgia limited liability company, the manager of which is LOR, Inc.; (d) 744,963 shares held by RFT Investment Company, LLC (LOR, Inc. is the manager of RFT Investment Company, LLC); and (e) 3,945,035 shares held by RCTLOR, LLC, a Georgia
limited liability company (LOR, Inc. is the managing member of RCTLOR, LLC). The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest.
(5)Based upon information contained in a report on Schedule 13D filed with the SEC on September 11, 2023, an aggregate of 171,507,258 shares of Company Common Stock are beneficially owned by LOR, Inc. The amount shown for LOR, Inc. includes the following shares of Company Common Stock (a) 2,235,811 shares held by RFA Management Company, LLC, a Georgia limited liability company, the manager of which is LOR, Inc.; (b) 744,963 shares held by RFT Investment Company, LLC (LOR, Inc. is the manager of RFT Investment Company, LLC); and (c) 3,945,035 shares held by RCTLOR, LLC, a Georgia limited liability company (LOR, Inc. is the managing member of RCTLOR, LLC). The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest.
(6)Based upon information contained in a report on Schedule 13G/A filed with the SEC on February 13, 2024, an aggregate of 32,226,294 shares of Company Common Stock are beneficially owned by The Vanguard Group’s clients, including investment companies registered under the Investment Company Act of 1940 and other managed accounts. The Vanguard Group has shared power to vote or direct to vote 370,969 shares, sole power to dispose of or to direct the disposition of 31,039,156 shares, and shared power to dispose or to direct the disposition of 1,187,138 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355.
(7)Based upon information contained in a report on Schedule 13G/A filed with the SEC on January 29, 2023 by Blackrock, Inc. (“Blackrock”), Blackrock beneficially owns an aggregate of 28,515,437 shares of Company Common Stock, as to which Blackrock has sole power to vote or direct to vote, 26,967,274 shares and sole power to dispose of or to direct the disposition of 28,515,437 shares. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G/A. The address for Blackrock is 50 Hudson Yards, New York, New York 10001.
(8)The amount shown for Mr. Rollins includes (a) 5,262,751 shares of Company Common Stock held directly by Mr. Rollins (297,800 shares of these are restricted stock awards for Company Common Stock); (b) 128,197 shares of Company Common Stock in the Company’s Dividend Reinvestment Plan; (c) 21,829 shares of Company Common Stock held in the Rollins 401(k) Savings Plan; (d) 8,306,635 shares held in a charitable trust of which he is a co-trustee and as to which he shares voting and investment power; (e) 959,538 shares held by seven trusts (the “Rollins Family Trusts”) for the benefit of the children and/or more remote descendants of his deceased brother, R. Randall Rollins; and (f) 701,034 shares held by the R. Randall Rollins 2012 Trust. (The trustee of each of the Rollins Family Trusts and the R. Randall Rollins 2012 Trust is a corporation over which Gary W. Rollins has the ability to assert control within sixty days.) Also, this amount includes 24,759 shares held by Mr. Rollins’ wife. The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest. Mr. Rollins is part of the Significant Shareholder Group, as disclosed on the Schedule 13D filed with the SEC on September 11, 2023.
(9)The amount shown for Mr. Gahlhoff includes 151,455 shares of restricted stock awards for Company Common Stock and 33 shares of Company Common Stock in the Company’s employee stock purchase plan and 1,421 shares of Company Common Stock held in the Rollins 401(k) Savings Plan.
(10)The amount shown for Mr. Krause includes 77,891 shares of restricted stock awards for Company Common Stock.
(11)The amount shown for Mr. Wilson includes 166,990 shares of restricted stock awards for Company Common Stock and 37,135 shares of Company Common Stock in the Company’s purchase plan.
(12)The amount shown for Ms. Chandler includes 56,925 shares of restricted stock awards for Company Common Stock.
(13)The amount shown for Ms. Rollins includes (a) 490,049 shares of Company Common Stock held directly by Ms. Rollins, (b) 94,053 shares held by the 2002 Pamela R. Rollins Trust, as to which Ms. Rollins currently has the power to designate the members of the Investment Committee of the trustee, and (c) 139,516 shares held by nine family trusts which are trusts benefiting the grandchildren and more remote descendants of her deceased father, R. Randall Rollins (Ms. Rollins is a trustee of each such trust). Also, this amount includes 5,413,068 shares of Company Common Stock held by a charitable trust of which Ms. Rollins is co-trustee. Ms. Rollins disclaims any financial or pecuniary interest in these holdings. Ms. Rollins is part of the Significant Shareholder Group, as disclosed on the Schedule 13D filed with the SEC on September 11, 2023.
(14)Shares held in trusts as to which more than one director are co-trustees or entities in which there is common stock ownership have been included only once.
**Represents beneficial ownership of less than 1% of the Company’s outstanding common stock.
| (2) | Based upon information contained in a report on Schedule 13D filed with the U.S. Securities and Exchange Commission (the “
SEC”) on December 13, 2022, the Control Group, which consists of Gary W. Rollins, Amy R. Kreisler, Pamela R. Rollins and Timothy C. Rollins, and certain companies under their control, possesses in excess of fifty percent of the Company’s voting power. |
| (3) | Based upon information contained in a report on Schedule 13D filed with the SEC on December 13, 2022, an aggregate of 224,748,671 shares of Company Common Stock are beneficially owned by the Gary W. Rollins Voting Trust U/A dated September 14, 1994 (the “GWR Voting Trust”). The amount shown for the GWR Voting Trust includes the following shares of Company Common Stock (a) 209,091,263 shares held by LOR, Inc., a Georgia corporation (the GWR Voting Trust has a 50% voting interest in LOR, Inc.); (b) 8,731,599 shares held by Rollins Holding Company, Inc., a Georgia corporation (the GWR Voting Trust has a 50% voting interest in Rollins Holding Company, Inc.); (c) 2,235,811 shares held by RFA Management Company, LLC, a Georgia limited liability company, the manager of which is LOR, Inc.; (d) 744,963 shares held by RFT Investment Company, LLC (LOR, Inc. is the manager of RFT Investment Company, LLC); and (e) 3,945,035 shares held by RCTLOR, LLC, a Georgia limited liability company (LOR, Inc. is the managing member of RCTLOR, LLC). The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest. |
| (4) | Based upon information contained in a report on Schedule 13D filed with the SEC on December 13, 2022, an aggregate of 224,748,671 shares of Company Common Stock are beneficially owned by the R. Randall Rollins Voting Trust U/A dated August 25, 1994 (the “RRR Voting Trust”). The amount shown for the RRR Voting Trust includes the following shares of Company Common Stock (a) 209,091,263 shares held by LOR, Inc., a Georgia corporation (the RRR Voting Trust has a 50% voting interest in LOR, Inc.); (b) 8,731,599 shares held by Rollins Holding Company, Inc., a Georgia corporation (the RRR Voting Trust has a 50% voting interest in Rollins Holding Company, Inc.); (c) 2,235,811 shares held by RFA Management Company, LLC, a Georgia limited liability company, the manager of which is LOR, Inc.; (d) 744,963 shares held by RFT Investment Company, LLC (LOR, Inc. is the manager of RFT Investment Company, LLC); and (e) 3,945,035 shares held by RCTLOR, LLC, a Georgia limited liability company (LOR, Inc. is the managing member of RCTLOR, LLC). The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest. |
| (5) | Based upon information contained in a report on Schedule 13D filed with the SEC on December 13, 2022, an aggregate of 216,017,072 shares of Company Common Stock are beneficially owned by LOR, Inc. The amount shown for LOR, Inc. includes the following shares of Company Common Stock (a) 2,235,811 shares held by RFA Management Company, LLC, a Georgia limited liability company, the manager of which is LOR, Inc.; (b) 744,963 shares held by RFT Investment Company, LLC (LOR, Inc. is the manager of RFT Investment Company, LLC); and (c) 3,945,035 shares held by RCTLOR, LLC, a Georgia limited liability company (LOR, Inc. is the managing member of RCTLOR, LLC). The reporting person disclaims beneficial ownership of these shares except to the extent of the reporting person’s pecuniary interest. |
| (6) | Based upon information contained in a report on Schedule 13G/A filed with the SEC on February 3, 2023, an aggregate of 28,341,622 shares of Company Common Stock are beneficially owned by The Vanguard Group’s clients, including investment companies registered under the Investment Company Act of 1940 and other managed accounts. The Vanguard Group has shared power to vote or direct to vote 341,661 shares, sole power to dispose of or to direct the disposition of 24,173,676 shares, and shared power to dispose or to direct the disposition of 969,079 shares. The address for The Vanguard Group is 100 Vanguard Blvd., Malvern, Pennsylvania 19355. |
| (7) | Based upon information contained in a report on Schedule 13G filed with the SEC on February 9, 2023 by Blackrock, Inc. (“Blackrock”), Blackrock beneficially owns an aggregate of 27,434,936 shares of Company Common Stock, as to which Blackrock has sole power to vote or direct to vote, 25,870,874 shares and sole power to dispose of or to direct the disposition of 27,434,936 shares. BlackRock also reported that it was filing as the parent holding company or control person of certain subsidiaries listed in an exhibit to the Schedule 13G. The address for Blackrock is 55 East 22nd Street, New York, New York 10055. |
| (8) | The amount shown for Mr. Rollins includes 8,629,469 shares of the Company Common Stock held in a charitable trust of which he is a co-trustee and as to which he shares voting and investment power. Also includes 24,759* shares of Company Common Stock held by his wife. Also includes the following shares of Company Common Stock: (a) 161,228 shares held by eleven trusts benefiting the grandchildren and more remote descendants of his late brother, Mr. R. Randall Rollins (Mr. Gary W. Rollins is a trustee of each such trust); (b) 959,538 shares held by seven trusts (the “Rollins Family Trusts”) for the benefit of the children and/or more remote descendants of his late brother, Mr. R. Randall Rollins; (c) 4,887,802 shares of Company Common Stock held directly by Mr. Gary W. Rollins; (d) 701,034 shares currently held by the R. Randall Rollins 2012 Trust (the trustee of each of the Rollins Family Trusts and the R. Randall Rollins 2012 Trust is a corporation over which Mr. Gary W. Rollins has the ability to assert control within sixty days); (e) 373,950 shares of restricted stock awards for Company Common Stock, (f) 123,684 shares of Company Common Stock in the Company’s employee stock purchase plan; and (g) 21,843 shares of Company Common Stock held in the Rollins 401(k) Savings Plan. Mr. Gary W. Rollins is part of a control group holding company securities, as disclosed on a Schedule 13D on file with the SEC. |
| (9) | The amount shown for Mr. Krause includes 77,891 shares of restricted stock awards for Company Common Stock. |
| (10) | The amount shown for Mr. Gahlhoff includes 151,455 shares of restricted stock awards for Company Common Stock and 33 shares of Company Common Stock in the Company’s employee stock purchase plan and 1,421 shares of Company Common Stock held in the Rollins 401(k) Savings Plan. |
| (11) | The amount shown for Ms. Bimmerman, includes 31,950 shares of restricted stock awards for Company Common Stock, 32 shares of Company Common Stock in the Company’s purchase plan and 21,723 shares of Company Common Stock held in the Rollins 401(k) Savings Plan. |
| (12) | The amount shown for Mr. Wilson includes 166,990 shares of restricted stock awards for Company Common Stock and 37,135 shares of Company Common Stock in the Company’s purchase plan. |
| (13) | The amount shown for Ms. Chandler includes 56,925 shares of restricted stock awards for Company Common Stock. |
| (14) | The amount shown for Ms. Rollins includes 5,413,068* shares of Company Common Stock held by a charitable trust of which Ms. Rollins is co-trustee. Also includes 487,682 shares of Company Common Stock held directly by Ms. Rollins. Also includes 94,053 shares held by the 2002 Pamela R. Rollins Trust, as to which Ms. Rollins currently has the power to designate the members of the Investment Committee of the trustee. |
| (15) | Shares held in trusts as to which more than one director are co-trustees or entities in which there is common stock ownership have been included only once. |
| *
| Mr. Gary W. Rollins and Ms. Pamela R. Rollins both disclaim any financial or pecuniary interest in these holdings.
|
| **
| Represents beneficial ownership of less than 1% of the Company’s outstanding common stock.
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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS
The
ControllingSignificant Shareholder Group controls
in excess of fiftyapproximately 42 percent of the Company’s voting power.
Please refer to the discussion on page 9 under the heading, “Controlled Company Exemption.” The
ControllingSignificant Shareholder Group also controls in excess of fifty percent of the voting power of RPC, Inc. and Marine Products, Inc. All of the Company’s directors, with the exception of Messrs. Carson, Gahlhoff,
Hardin, and Morrison and
Ms. Sams, are also directors of RPC, Inc. and Marine Products Corporation.
Related party transactions, as defined in Regulation S-K, Item 404(a), must be reviewed and approved in advance, by our Nominating and Corporate Governance Committee. As set forth in the charter of our Nominating and Corporate Governance Committee, the Nominating and Corporate Governance Committee has the authority and responsibility to ensure that it approve all related party transactions, including material amendments that are in compliance with applicable law, consistent with the Company’s corporate governance policies (including those relative to conflicts of interest and usurpation of corporate opportunities) and on terms that are deemed to be fair to the Company. The Nominating and Corporate Governance Committee also has the authority to hire legal, accounting, financial or other advisors, as it may deem necessary or desirable and/or to delegate responsibilities to executive officers of the Company in connection with discharging its duties. These same rights and responsibilities apply equally to the Subcommittee. A copy of the charter of the Nominating and Corporate Governance Committee is available at our website www.rollins.com under the heading “Governance - Governance Documents.”Transactions with RPC, Inc.
The Company provides certain administrative services to RPC, Inc. (“RPC”) (a company in which Mr. Gary Rollins previously served as Executive Chairman from 2001 to 2022,
Registration Rights Agreement and which Mr. Gary Rollins and Ms. Pam Rollins currently serve as a directors). The service agreements between RPC andSecondary Offering
On September 6, 2023, the Company provide for the provision of services on a cost reimbursement basis and are terminable on six months’ notice. The services covered by these agreements include administration of certain employee benefit programs and other administrative services. Charges to RPC (or to corporations which are subsidiaries of RPC) for such services and rent totaled approximately $0.1 million for the year ended December 31, 2022.Transactionsentered into an underwriting agreement (the “
Underwriting Agreement”) with LOR, Inc.Pilot Sharing Agreement
During (“
LOR”), and Goldman Sachs & Co. LLC and Morgan Stanley & Co. LLC, as representatives of the year ended 2021,several underwriters named in Schedule I thereto (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, 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 “OptionalShares”). 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. LOR is a member of the Significant Shareholder Group and a company controlled by Mr. Gary W. Rollins and certain members of his family. 8,724,100 of the shares of Common Stock offered in the Offering were repurchased by the Company alsofrom LOR for approximately $300 million at the same per share price paid by the Underwriters to LOR in the Offering, or $34.39 per share. The Offering was made pursuant to the Company’s existing registration statement on Form S-3, previously filed with the SEC and declared effective by the SEC on June 22, 2023, as supplemented by the prospectus supplement dated September 6, 2023, filed with the SEC pursuant to Rule 424(b)(5) under the Securities Act of 1933, as amended.
On June 5 2023, the Company entered into a Pilot Sharingregistration rights agreement (the "Registration Rights Agreement") with LOR, and LOR paid $1.5 million to the Company, and upon closing the Offering, LOR paid an additional $3.5 million to the Company pursuant to the Registration Rights Agreement. Pursuant to the Registration Rights Agreement, the Company will pay all costs, fees and expenses incident to the Company’s performance or compliance with the Registration Rights Agreement with LOR wherebyrespect to a total of five (5) requested offerings, including the Company’s employee pilots may be used by LOR from time to time to operate the LOR aircraftOffering, and thereafter, LOR will reimbursebe responsible for all such expenses in connection with any subsequent offering.
The Underwriting Agreement contains customary representations, warranties and covenants of the Company
for 50% of the costs of the pilots, including salary, benefits and
training. The Pilot Sharing Agreement was approved by the Company’s Nominating and Corporate Governance Committee. Charges to LOR under the Pilot Sharing Agreement total $0.6 million for the year ended December 31, 2022.Administrative Services Agreement
The Company also provides certain administrative services to LOR and also rents office, hangerprovides for customary indemnification by each of the Company, LOR and storage space to LOR. Charges to LOR (or corporations which are subsidiaries of LOR) for rentthe Underwriters against certain liabilities.
Aircraft and
administrative services totaled $0.8 million for the year ended December 31, 2022.Lear Lease Agreement
Administrative Arrangements
In 2014, P.I.A. LLC, a company then owned by the former andour late Chairman of the Board of Directors, R. Randall Rollins, purchased a Lear Model 35A jet and entered into a lease arrangement with the Company for Companycompany use of the aircraft for business purposes. P.I.A. LLC is now owned by a trust for the benefit of the late Mr. Rollins’ family. The lease is terminable by either party on 30 days’ notice. The Company pays $100.00$100 per month in rent for
the leased aircraft, and pays all variable costs and expenses associated with the leased aircraft, such as the costs for fuel, maintenance, storage and pilots. The Company has the priority right to use of the aircraft on business days, and Rollins family members and guests have the
right to use the aircraft for personal use through the terms of thean Aircraft Time Sharing Agreement with the Company. During the year ended December 31, 2023, the Company paid or incurred approximately $0.6 million in rent and operating costs under the Aircraft Time Sharing Agreement.
In August 2023, GWR 450, LLC (the “GWRLLC”), a company wholly-owned by Gary W. Rollins, purchased a Gulfstream 450 aircraft (the “G450”). In connection with the G450 purchase, the Company entered a lease arrangement with GWR LLC to lease the G450 for corporate purposes from time to time. The initial term of the lease is one year from the date of the agreement and the same renews for another year, unless terminated sooner.
During 2023, the Company amended its existing Pilot Sharing Agreement with LOR to include GWR LLC whereby the Company’s employee pilots may be used by LOR and GWR LLC from time to time to operate their respective aircrafts. LOR will reimburse the Company for 50% of the costs of the pilots, including salary, benefits and training. In addition, LOR and the Company are each responsible for their own fuel costs. Charges to LOR under the Pilot Sharing Agreement totaled $0.5 million for the year ended December 31, 2023.
During 2023, the existing administrative services agreement (the “Administrative Services Agreement”) between the Company and LOR was amended to include GWR LLC. According to the amended agreement, the Company shall provide certain administrative services to LOR and GWR LLC and rents office, hanger and storage space to LOR and GWR LLC. Charges to LOR and GWR LLC for rent and administrative services totaled $1.1 million for the year ended December 31, 2023.
The amounts paid by the Company for
Ms. Pam
R. Rollins
to use the aircraft for personal use
of the aircraft is disclosed in the
“Director“Director Compensation Table,” included in this Proxy Statement.
During the year ended December 31, 2022, the Company paid approximately $0.3 million in total rent and operating costs. These payments were made under the Aircraft Time Sharing Agreement which primarily includes Company use and personal use. This amount also includes payments for the benefit of LOR, its affiliates, and Rollins family members and guests under the Pilot Sharing Agreement referenced above. The foregoing related party transactions were previously approved by the Company’s Nominating and Governance Committee of the Board of Directors.
Related Party Franchise
AgreementsAgreement
On December 1, 2019, Orkin, a subsidiary of the Company, entered into a franchise agreement with Wilson Pest Management, Inc. The
franchiseefranchise is owned 100% by John
F. Wilson IV,
who is the son of John F. Wilson, Vice Chairman of the Company.
TheDuring the year ended December 31, 2023, the Company received a total of approximately
$0.8$0.2 million
which included payment forpursuant to this franchise agreement, the
franchise and an initial franchise fee of seventy-five thousand dollars in connection with the transaction. The franchise agreement provides for a monthly royalty fee of 9.0% of the franchisee’s reported
income. The Company approved the agreement in accordance with its Related Party Transactions policy. During the year ended December 31, 2022, the royalty fee paid to Orkin in accordance with the franchise agreement between Orkin and John Wilson IV was $0.2 million.
revenue.
Appropriate proposals of
stockholdersshareholders intended to be presented at the Company’s
20242025 Annual Meeting of the
StockholdersShareholders must be received by the Company by November
16, 202314, 2024, in order to be included, pursuant to Rule 14a-8 promulgated under the Exchange Act in the proxy statement and form of proxy relating to that meeting. With regard to such
stockholdershareholder proposals, if the date of the next annual meeting of
stockholdersshareholders is advanced or delayed more than 30 calendar days from the first anniversary of this year’s annual meeting, the Company will, in a timely manner, inform its
stockholdersshareholders of the change and of the date by which such proposals must be received.
StockholdersShareholders desiring to present business at the
20242025 Annual Meeting of
StockholdersShareholders outside of the
stockholdershareholder proposal rules of Rule 14a-8 of the Securities Exchange Act of 1934 and instead pursuant to the Twenty-Seventh Article of the Company’s Amended and Restated By-Laws must prepare a written notice regarding such proposal addressed to Secretary, Rollins, Inc., 2170 Piedmont Road,
N.E.,NE, Atlanta, Georgia 30324, which must be delivered to or mailed and received at the aforementioned address no later than January
26, 202423, 2025, and no earlier than December
17, 2023. Stockholders14, 2024. Shareholders should consult the Amended and Restated By-Laws for other specific requirements related to such notice and proposed business.
With respect to
stockholdershareholder nomination of directors, the Company’s Amended and Restated By-Laws provide that nominations for the election of directors may be made by any
stockholdershareholder entitled to vote for the election of directors. Nominations must comply with an advance notice procedure which generally requires with respect to nominations for directors for election at an annual meeting, that written notice be addressed to: Secretary, Rollins, Inc., 2170 Piedmont Road,
N.E.,NE, Atlanta, Georgia 30324, and be received not less than 90 nor more than 130 days prior to the anniversary of the prior year’s annual meeting and set forth, among other requirements specified in the Amended and Restated By-Laws, the name, age, business address and, if known, residence address of the nominee proposed in the notice, the principal occupation or employment of the nominee for the past five years, the nominee’s qualifications, the class or series and number of shares of capital stock of the Company which are owned beneficially or of record by the person and any other information relating to the person that would be required to be disclosed in a proxy statement or other filings. Other specific requirements related to such notice, including required disclosures concerning the
stockholdershareholder intending to present the nomination, are set forth in the Company’s Amended and Restated By-Laws. Notices of nominations must be received by the Secretary of the Company no later than January
26, 202423, 2025, and no earlier than December
17, 2023,14, 2024, with respect to directors to be elected at the
20242025 Annual Meeting of
Stockholders.Shareholders.
The Company will bear the solicitation cost of proxies. Upon request, the Company will reimburse brokers, dealers and banks, or their nominees, for reasonable expenses incurred in forwarding copies of the proxy materials to their beneficial
stockholdersshareholders of record. Proxies also may be solicited in person or by telephone, facsimile or other means by our directors, officers and regular employees. These individuals will receive no additional compensation for these services. The Company has retained Alliance Advisors to provide proxy solicitation services for a fee of
$7,000$10,000 plus reasonable
out of pocketout-of-pocket expenses.
Our Annual Report for the year ended December 31,
2022,2023, is being provided to you with this Proxy Statement. The Annual Report includes our
20222023 Form 10-K (without exhibits). The Annual Report is not considered proxy-soliciting material.
On written request of any record or beneficial stockholder,shareholder, we will provide, free of charge, a copy of our 20222023 Annual Report, which includes the consolidated financial statements. Requests should be made in writing and addressed to: Kenneth Krause, Executive Vice President, Chief Financial Officer and Treasurer, Rollins, Inc., 2170 Piedmont Road, NE, Atlanta, Georgia 30324. We will charge reasonable out-of-pocket expenses for the reproduction of exhibits to our 20222023 Form 10-K should a stockholdershareholder request copies of such exhibits.
Our Board of Directors knows of no business other than the matters set forth herein, which will be presented at the meeting. Since matters not known at this time may come before the meeting, the enclosed proxy gives discretionary authority with respect to such matters as may properly come before the meeting and it is the intention of the persons named in the proxy to vote in accordance with their judgment on such matters.
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| | By Order of the Board of Directors |
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| Elizabeth B. Chandler |
| Secretary | Secretary
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Atlanta, Georgia
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Atlanta, Georgia
March 14, 2024 | |
March 15, 2023
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CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement may containcontains forward-looking statements. AllForward-looking statements include statements regarding our expectations, beliefs, intentions or strategies regarding the future, including with respect to business, financial, operational, compensation and environmental, social/and or governance matters; statements of the assumptions underlying any of the foregoing statements; and all other thanstatements that are not statements of historical facts, containedincluding but not limited to those set forth above under "Updated Strategic Objectives" in this Proxy Statement, including statements regarding future operations are forward-looking statements.the Letter from our Executive Chair of the Board. In some cases, forward- looking statements may be identified by words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “expect,” “objective,” “plan,” “potential,” “seek,” “grow,” “target,” “if,��” or the negative of these terms and similar expressions intended to identify forward-looking statements. Forward-looking statements are made subject to the safe harbor provisions of the federal securities laws pursuant to Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We have based these forward-looking statements primarily on our current opinions, expectations, beliefs, plans, objectives, assumptions and projections about future events and trends that we believe may affect us. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, the future events and trends discussed in this Proxy Statement may not occur and actual results may differ materially and adversely from those anticipated or implied in the forward-looking statements. You should read this Proxy Statement with the understanding that our actual future results, levels of activity, performance and events and circumstances may be materially different from what we expect. In addition, these forward-looking statements are subject to a number of risks, uncertainties and assumptions relating to our business, including the effect of broader economic and market conditions on our customers, our ability to execute our business and growth strategies and to achieve sustainability goals, the impact of the global supply environment and other macroeconomic conditions, and all those described in the section titled “Risk Factors” set forth in Part I, Item 1A, and in the rest of our 20222023 Form 10-K and in our other SEC filings. Forward-looking statements speak only as of the date of this Proxy Statement, and you should not put undue reliance on any forward-looking statements. We assume no obligation to publicly update or revise any forward-looking statements because of new information, future events, changes in assumptions or otherwise, except to the extent required by applicable laws. If we update one or more forward-looking statements, no inference should be drawn that we will make additional updates with respect to those or other forward-looking statements. While we believe that such information provides a reasonable basis for these statements, such information may be limited or incomplete. Our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all relevant information. These statements are inherently uncertain, and investors are cautioned not to unduly rely on these statements.
| PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. t t Rollins, Inc. Notice of 2023 Annual Meeting of Shareholders 2170 Piedmont Road, N.E., Atlanta, Georgia 30324 Proxy Solicited by Board of Directors for Annual Meeting – April 25, 2023 The undersigned stockholder(s) hereby appoints Gary W. Rollins and John F. Wilson, and either of them, as proxies to appoint their substitute, and hereby authorize(s) them to represent and to vote, as undersigned on the reverse side of this proxy, all of the shares of the common stock of Rollins, Inc. that the stockholder(s) are entitled to vote at the Annual Meeting of Stockholders to be held at 12:30 P.M., Eastern Time, on April 25, 2023, at 2170 Piedmont Road, N.E., Atlanta, Georgia 30324, and at any adjournments or postponements thereof. THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED “FOR” EACH OF THE NOMINEES NAMED IN PROPOSAL 1, “FOR” PROPOSAL 2 AND “THREE YEARS” ON PROPOSAL 3. THE PROXIES ARE AUTHORIZED TO VOTE IN THEIR JUDGMENT FOR THE ELECTION OF ANY PERSON TO THE BOARD OF DIRECTORS IF ANY NOMINEE NAMED HEREIN BECOMES UNABLE TO SERVE OR FOR GOOD CAUSE WILL NOT SERVE, AND UPON SUCH OTHER BUSINESS NOT KNOWN AS MAY PROPERLY COME BEFORE THE ANNUAL MEETING OR ANY ADJOURNMENTS THEREOF. (PLEASE VOTE, DATE AND SIGN THIS PROXY ON THE OTHER SIDE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE.) Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting of Stockholders to be held April 25, 2023. The Notice and Proxy Statement and Annual Report are available at: http://www.viewproxy.com/ROL/2023.
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| DO NOT PRINT IN THIS AREA (Stockholder Name & Address Data) PLEASE DETACH ALONG PERFORATED LINE AND MAIL IN THE ENVELOPE PROVIDED. t t 1. To elect one Class II and four Class I director nominees to serve as directors of the Company until our 2024 and 2026 annual meeting of stockholders, respectively, or until their successors are duly elected and qualified; Class I Directors to be elected for a three-year term expiring in 2026 01 - Jerry E. Gahlhoff 02 - Patrick J. Gunning 03 - Gregory B. Morrison 04 - Jerry W. Nix Class II Directors to be elected for a one-year term expiring in 2024 05 - P. Russell Hardin 2. To hold an advisory (non-binding) vote to approve the compensation of the Company’s named executive officers; 3. To hold an advisory (non-binding) vote on the frequency of future stockholder advisory votes to approve the compensation paid to the Company’s named executive officers CONTROL NUMBER PROXY VOTING INSTRUCTIONS Please have your 11-digit control number ready when voting by Internet or Telephone INTERNET Vote Your Proxy on the Internet: Go to www.AALvote.com/ROL Have your proxy card available when you access the above website. Follow the prompts to vote your shares. Vote by 11:59 p.m. ET on April 24, 2023. TELEPHONE Vote Your Proxy by Phone: Call 1 (866) 804-9616 Use any touch-tone telephone to vote your proxy. Have your proxy card available when you call. Follow the voting instructions to vote your shares. Vote by 11:59 p.m. ET on April 24, 2023. PLEASE MARK YOUR VOTE IN BLUE OR BLACK INK AS SHOWN HERE x FOR AGAINST ABSTAIN o o o Proposals - The Board of Directors recommends a vote FOR all the nominees listed, FOR Proposal 2 and THREE YEARS on Proposal 3. 1 YEAR 2 YEARS 3 YEARS o o o SCAN TO VIEW MATERIALS & VOTEw CONTROL NUMBER Please sign exactly as name(s) appears herein. Joint owners should each sign. When signing as attorneys, executor, administrator, corporate officer, trustee, guardian or custodian, please give full title. ______________________________________________________________ Signature of Stockholder: Date ______________________________________________________________ Signature of Stockholder: Date NOTE: To consider and act upon such other business as may properly come before the Annual Meeting or any adjournment of the meeting. MAIL Vote Your Proxy by Mail: Mark, sign, and date your proxy card, then detach it, and return it in the post-age-paid envelope provided. IN PERSON Vote Your Proxy: You may vote your shares in person at the 2023 Annual Meeting on April 25, 2023, at 12:30 p.m. (local time) at the Rollins, Inc. Corporate Offices at 2170 Piedmont Road, N.E., Atlanta, GA 30324. WITHHOLD o o o o o FOR o o o o o
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