Pest control giant Rollins and a former senior executive have settled a civil complaint with the Securities and Exchange Commission alleging improper accounting practices in two quarterly earnings reports.
Atlanta-based Rollins and former chief financial officer Paul Edward Northen settled the claims without admitting or denying the allegations. Rollins agreed to pay a civil penalty of $8 million, while Northen settled for $100,000, the SEC said this week in a news release.
Rollins operates pest control brands including Orkin and Northwest Exterminating.
The SEC alleges Northen used improper accounting practices to report higher earnings per share, misstating Rollins’ quarterly reports in order to be in line with predictions by stock analysts. The SEC complaint said Northen was aware the company’s preliminary results in the first quarter of 2016 and the second quarter of 2017 were “close to, but short of,” the consensus estimates of stock analysts.
Meeting analysts’ quarterly expectations was important to Rollins management, the SEC said, and allowed them to tout the company’s record for consecutive quarters of “improved revenues and earnings.”
Northen allegedly directed reductions in the company’s various accounting reserves to artificially increase Rollins’ profits to meet Wall Street expectations.
Attempts to reach Northen were not successful.
Rollins said in a news release that “individuals who were leading the accounting department at the time are no longer employed by the company.”
Rollins General Counsel Elizabeth Chandler said in the release Rollins has “taken this matter very seriously, conducting an internal review and taking proactive steps to address the findings.” She said the company also “strengthened our internal controls over financial reporting ... including those related to management’s judgments and estimates impacting reported financial results.”
Rollins said it will not have to restate earnings for the period as a result of the investigation.
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