Overview

For the first quarter ended March 31, 2009, the Company's revenues increased to $243.0 million, an increase of $32.9 million or 15.7%. HomeTeam Pest Defense ("HomeTeam") contributed revenue of $31.1 million for the quarter. Excluding the impact of HomeTeam, revenue increased 0.9% in the quarter.

                                 Reconciliation

             Rollins, Inc. Revenues Excluding HomeTeam Pest Defense



                                                                      %Better/
                                                                     (worse) as
                                            Three Months Ended       compared to
                                                March 31,          same quarter in
(in thousands)                               2009        2008        prior year
Net Revenues                              $  242,972   $ 210,078              15.7 %
Less:
Revenues from HomeTeam Pest Defense           31,062           0                 0
Revenue Excluding HomeTeam Pest Defense   $  211,910   $ 210,078               0.9 %

Favorable contributions from other acquisitions, i.e. Crane Pest Control ("Crane"), were offset by decreases in revenues due to the decline in the Canadian dollar. Foreign operations accounted for approximately 6% and 8% of total revenues during the first quarter of 2009 and 2008 respectively.

Cost of Services provided for the first quarter ended March 31, 2009 increased $15.4 million or 14.0%, compared to the quarter ended March 31, 2008. Gross margin for the quarter increased to 48.4% for the first quarter versus 47.7% in the prior year. Of the dollar increase $17.0 million was due to the acquisition of HomeTeam and Crane. Margins excluding the impact of HomeTeam improved 170 basis points, due to a nearly $2 million reduction in fleet cost due to lower cost of fuel as well as greater service technician productivity.

Depreciation and amortization expenses for the first quarter ended March 31, 2009 increased to $9.4 million, an increase of 42.2% or $2.8 million versus the prior year first quarter. Amortization of intangibles from acquisitions made last year after the first quarter accounted for $2.1 million of the increase and depreciation from those acquisitions account for $0.3 million of the increase in depreciation.

Sales, General and Administrative Expenses for the first quarter ended March 31, 2009 increased $10.5 million or 14.7%, to 33.7% of revenues, decreasing from 34.0% for the first quarter ended March 31, 2008. Of the dollar increase $9.1million was due to the addition of HomeTeam and Crane. Sales, general and administrative expenses excluding the impact of HomeTeam as a percent of revenues increased 80 basis points due to increases in cost of risk, litigation and casualty, stock based compensation, and sales salaries partially offset by decreases in fleet cost and $1.0 million in non-recurring expenses related to the HomeTeam acquisition last year.

Net Income for the first quarter ended March 31, 2009 was $15.8 million as compared to $13.8 Million for the prior year quarter, a 14.2% improvement, while diluted earnings per share for the quarter ended March 31, 2009 was $0.16 per diluted share, a 14.3% improvement over the $0.14 per diluted share reported the prior year quarter.

Rollins continues to be financially solid generating $20.6 million in cash from operations year to date. The Company paid back, as of March 31, 2009, $28.0 million of the $90.0 million borrowed in April 2008 to finance the HomeTeam Pest Defense acquisition, while also buying back $10.2 million of stock on the open market under the Company's share buyback program.

Dividends and Stock Repurchases

The Board of Directors, at its quarterly meeting on January 27, 2009, approved a 12% increase in the Company's quarterly dividend. In addition, the Company declared its regular quarterly cash dividend of $0.07 per share, which marked the seventh consecutive year the Board has increased its dividend a minimum of 12% or greater.

During the first quarter ended March 31, 2009, the Company repurchased 603,400 shares of its $1 par value common stock at a weighted average price of $15.19 per share. In total, approximately 4.0 million additional shares may be purchased under programs approved by the Board of Directors.

Outlook

Rollins expected 2009 to be a challenging year and it has been, however it achieved solid results during the first quarter. The Company is fortunate to have a large base of recurring revenue, great pest control brands and a proven team of highly qualified professional and dedicated employees.

Sales in all three service lines; Residential, Commercial, and Termite were all up for the quarter. The Company's modest revenue increase indicates that while the Company is recession resistant, Rollins is not economically immune. The layoff of approximately 5 million people across the United States has had an expected impact on its residential pest business. A large portion of this customer retention decrease is financial related. The Company is working with customers that have been economically harmed with other service frequency options to help enable them to maintain their Orkin protection.

Results of Operations



                                                                 %Better/
                                                                (worse) as
                                      Three Months Ended     compared to same
                                          March 31,             quarter in
(in thousands)                         2009        2008         prior year
Revenues                            $  242,972   $ 210,078               15.7 %
Cost of services provided              125,371     109,953              (14.0 )
Depreciation and amortization            9,429       6,631              (42.2 )
Sales, general and administrative       81,988      71,488              (14.7 )
Gain on sale of assets                      (5 )       (21 )            (76.2 )
Interest (income)/expense                  428        (719 )           (159.5 )
Income before income taxes              25,761      22,746               13.3
Provision for income taxes               9,953       8,907              (11.7 )
Net Income                          $   15,808   $  13,839               14.2 %

Revenues for the first quarter ended March 31, 2009 increased to $243.0 million, an increase of $32.9 million or 15.7%. HomeTeam Pest Defense ("HomeTeam") contributed revenue of $31.1 million for the quarter. Excluding the impact of HomeTeam, revenue increased 0.9% in the quarter. Favorable contributions from other acquisitions, i.e. Crane Pest Control ("Crane"), were offset by decreases in revenues due to the decline in the Canadian dollar. Foreign operations accounted for approximately 6% and 8% of total revenues during the first quarter of 2009 and 2008 respectively.

The revenues of the Company are affected by the seasonal nature of the Company's pest and termite control services. The increase in pest pressure and activity, as well as the metamorphosis of termites in the spring and summer (the occurrence of which is determined by the timing of the change in seasons), has historically resulted in an increase in the Company's revenue as evidenced by the following chart.