Ladies and gentlemen, good morning. Welcome to the Rollins fourth quarter conference call. (Operator Instructions) I would now like to turn the conference over to Susan Garland. Please go ahead, Madam.

Thank you. By now you should have all received a copy of the press release. However, if anyone is missing a copy and would like to receive one, please contact our office at 212-827-3777. We will send you the release and make sure you are on the company’s distribution list. There will be a replay of the call which will begin one hour after the call and run for one week. The replay can be accessed by dialing 1-800-405-2236, pass code 11106089. Additionally, the call is being webcast over www.viavid.com and a replay will be available for 90 days. On the line with us today are Gary Rollins, President and Chief Executive Officer; and Harry Cynkus, Chief Financial Officer and Treasurer. Management will make some opening remarks and then we’ll open up the lines for questions. Gary, would you like to begin?

Yes. Thank you, Susan. Good morning and thank you all for joining our fourth quarter and year-end 2007 conference call. Harry will read our forward-looking statement disclaimer and then we’ll begin.

Thank you, Gary. Our earnings release discusses our business outlook and contains certain forward-looking statements. These particular forward-looking statements and all other statements that may be made on this call excluding historical facts are subject to a number of risks and uncertainties and actual results may differ materially from any statement we make today. Please refer to today’s press release and our SEC filings, including the risk factor section on Form 10-K for the year ended December 31, 2006, for more information on the risk factors that could cause actual results to differ.

We were pleased with our fourth quarter results and record performance for the full year. As stated in our news release, this was the tenth consecutive year of improved financial results and we remain optimistic about our future. Revenues for the quarter increased 5.5% and 4.2% for the full year. This growth was a result of the momentum of our sales and marketing programs. Our commercial pest control segment had a particularly strong year with our commercial sales team delivering our best overall results and the best year-over-year improvement in the history of the company. For the fourth quarter, commercial pest control sales were up 25% and up almost 14% for the full year. National account sales were equally impressive with a 45% increase over last year and up 16% for the year. It should be noted that a good portion of the sales that were made in the fourth quarter are just now beginning to produce revenue in the first quarter of ’08. As an example, we have almost 3,500 new individual store locations for three national accounts that are now scheduled to start service in February. I would like to voice my appreciation and acknowledgement to the members of our commercial sales team for such a terrific year and we are looking forward to an even better ’08. Our specific industry concentration and excellent service performance are enabling us to increase new contract pricing. In 2007, we increased our average new commercial sales price by over 15%. Our average contract for our commercial customers has increased almost 23% over the past two years. The maturation of our commercial and national account sales force, bolstered by greater experience and savvy, have likewise generated improvement in our average sales per employee. As you can see, we are pretty pleased with…

Thank you, Gary. Today we reported that fourth quarter revenue grew 5.5% and thanks primarily to our commercial sales team, this represents our best quarter for growth this year. Revenues totaled $216 million compared to $204.7 million for the fourth quarter last year. Net income for the quarter was $11.9 million as compared to $10.5 million last year, a 13.2% improvement, while diluted earnings per share this quarter is $0.12, a 20% improvement over the $0.10 reported last year in the fourth quarter. For the full year, revenues rose 4.2% to $894.9 million, net income rose 12% to $64.7 million, and diluted earnings per share increased 14.3%. All EPS calculations are adjusted to reflect the three-for-two stock split that was effective in this quarter. I’m particularly pleased to expand our discussion on this quarter’s revenue growth and the positive growth in all of our business lines. It’s been difficult to miss all the talk of economic concerns in the headlines these days but we have not seen much of an impact on our business to date. As Gary has previously stated, rats, roaches, and termites don’t read the Wall Street Journal. But seriously, we are fortunate that pest control historically has been recession resistant. Let’s start with our commercial pest control, which has been a key strategic focus of ours. This year it represents 44% of our business, though representing almost 46% in the fourth quarter. Excluding commercial fumigations, our commercial revenue grew 10.3%. Let me repeat that -- our commercial revenue excluding fumigations, which is somewhat lumpy, grew 10.3%. That just sounds and feels so good. And including fumigation grew 9.8%. For some time, we have stated that we felt our commercial pest control offering has the opportunity to not only outpace the residential pest control’s growth rate but…

Thank you, Harry. We are now ready to open the call for any questions that you might have.

(Operator Instructions) Our first question comes from Clint Fendley from Davenport. Please go ahead.

Thank you. Good morning and congratulations on the quarter. Harry, a couple of questions here; first off, given the adjustment in the tax rate for the fourth quarter, how should we think about that rate looking forward into ’08 here?

I would expect for the first three quarters of next year to probably see a rate right around 39%, maybe a little less, and then as we -- the states are always the wildcard in that as we go through and true that up. This year we had some favorable results but I don’t think the -- I wouldn’t count on the 38.3 being sustainable but Gary is always --

I’m glad you asked that question, by the way. It’s one that I ask Harry about every month.

We continue to work on it but I’m hoping for tax relief in next year’s congress.

Okay, and on the pension change from the liability to the half-secure, was there any impact on the P&L from that?

No. All of that runs through other comprehensive income and retained earnings.

Okay, and Harry, on the termite claims, do you have the actual number for the quarter?

I don’t have that right handy. I’ll have to get back on that.

Okay, that’s fine. And I guess Gary, any thoughts on why we’ve seen the negative growth across the industry here? What could be driving that?

I think the biggest thing is the weather. I hate to give you a weather report but probably 40% or 50% of the country had really drought conditions or severe shortages of rainfall and I think that one of the key learnings here is we always knew that moisture was important, as was evening temperatures, and I think this year was very educational because we really saw exactly how important it was. I mean, we can almost track our conventional leads by the relative rainfall variance throughout the country.

Okay. Thank you. That’s helpful. Harry, I guess on the cash, we saw the balance come down just a little bit sequentially. Any thoughts on what drove that flux?

This quarter there was substantial share repurchase in the fourth quarter. I think it was 566,000 shares at an average price that was over $19, so a lot of that money was returned to shareholders through the share buy-back program.

Okay. And final question, any thoughts -- obviously a lot of momentum it looks like here on the commercial side as we head into Q1. Just any preliminary thoughts on the quarter.

Well, we’re optimistic. We certainly don’t do earnings projections, forecasts, but we are optimistic. We think for the reasons that I mentioned that we’ve got a lot of revenue that was generated in the fourth quarter, which is typically unusual historically, or a lot of the sales, rather, will convert to revenue in the first quarter of this year, so -- you know, we hope we’re not foolish. We’re certainly oblivious to the economic uproar but we think that we can control our destiny. We’re certainly in a lot better position than most companies that are really vulnerable to borrowing money and a lot of the factors that take place. Furthermore, we have never been a company that had a large weighting towards new construction or new homeowners and I guess that’s a good news, bad news. We probably over the year should have done a better job with that but the good news right now is that that’s not going to really impact us like it will contractors and a lot of other pest control companies that have really concentrated on new construction.

Do you think that that could potentially open up some opportunities for you on the M&A side with some of the regional players here that do have more exposure to the real estate market?

Well, I’m hopeful that the kind of a down year in the prospect of -- you know, for some competitors may be not an encouraging prospect for ’08 that there will be some motivation as far as selling businesses. You never know but I think that if people have succession plans, estate plans, and you know, kind of look at the prospect of maybe having two disappointing years in a row, that this may give them the motivation to decide that they need to sell their business.

Thank you.

Thank you. Our next question comes from James Clement with Sidoti & Company. Please go ahead. James Clement - Sidoti & Company: Gary, do you -- I don’t know if this number is something that you all disclose but I know you mentioned three large accounts, 3,500 new locations hitting the commercial business in February. Can you give us a rough sense of what the breakdown is in your commercial business between national accounts versus independent local businesses?

I’d have to give some thought to that.

The total commercial business is in the neighborhood of for the year is just under I think $400 million, and our national account business is $30 million to $35 million, so the national account business is less than 10% of our commercial business. James Clement - Sidoti & Company: But I would also, and this would be the follow-up question, is it seems like you all are extremely pleased with your national account sales team, so I was trying to get a rough sense of is that the area of the commercial business that you think the really super strong growth would be the most sustainable over time.

The biggest investment that we made was in what I would call local commercial or regional commercial. I mean, we may have added one or two sales men on our national account business. I think the biggest thing you are seeing in national account is the -- really the service improvements and frankly some of the deterioration in the service among some of the competition because pest problems for national accounts are really a big deal. They just cringe over having a headline or the newscast or something that talks about a pest problem in some of their locations. So I think it’s the maturation of our national account sales force, I think it’s the fact that some of our competitors have stumbled. Now, the good thing about this business that I commented on, it was all at higher prices than the competitors had it for, so that makes you feel good. I really have no interest to go in and cut the guys deal and get this based on price. James Clement - Sidoti & Company: And Gary, the way you guys can accomplish that, is that -- is your feeling on that is just a higher quality of service.

I think -- exactly. I think, as I mentioned, the consequences of bad service or a cheap deal is just getting so significant and I think when you call on these people, you can tell very quickly in the visit that they are very concerned about keeping their company out of the paper and they are really concerned in getting good quality. More so, I’ve been in the business 40 years. I’ve never really seen the level of concern about not having pests to the extent that they exist today. James Clement - Sidoti & Company: Okay. Changing gears just a little bit, earlier this year you started talking about it a little bit on the calls and talked about it again here, but Internet leads -- how untapped a resource is that for you? I mean, roughly what percent of your residential business, the new business is now being originated from the Internet? Would you have a rough guess on that?

I’m trying to -- I don’t have anything here in front of me. A little over half our business came through our national call center, but that includes calls and Internet. Internet continues to grow at double-digits -- I’m struggling for what the range is right now.

I would say in a 20% to 30% range. I mean, we can get back with you and get maybe more -- James Clement - Sidoti & Company: That’s okay but it sounds to me like that’s -- I mean, it’s --

-- is of course when you are just starting, the increases are pretty dramatic from a percent point of view, and the wonderful thing this year was that you heard about a perfect storm. I guess this was a perfect situation because the conventional advertising was just -- which typically is the -- is influenced, you know, by the weather, the pest -- our advertising and our pest pressure, if you would, but we just had the web thing coming on with some of the investments and the changes that we made with our website, the changes that we made at our call center. I think I’ve mentioned before one of the tricky things is if people source with the web but they don’t want to really conduct business on the web. Now you have to figure out how do you convert a web lead to a phone lead and efficiently? So we think we’ve -- I guess we don’t know what we don’t know, but we think we are smarter than we were two years ago. James Clement - Sidoti & Company: But it also sounds -- and correct me if I’m wrong -- I mean, it sounds like this is -- you sort of just kind of scratched the surface here and you expect your --

Well, we think so. We can just see a greater part of our advertising budget going in this regard. Of course, one of the reasons that we increased our staffing at OCSC was to make sure that we handle these leads on a timely basis. A pest control lead is not something that you can put on a shelf and work on when you get around to it. When people really get motivated because of a pest sighting, or just total frustration because they haven’t been able to fix it themselves, they want to do something and take care of it. So you really have to be responsive when you get these leads. James Clement - Sidoti & Company: Okay. Thanks very much for your time.

Our next question comes from Patrick Stowe with Priority Capital. Please go ahead.

Just a little clarification -- did you say that the claims expense was down $5 million for the year?

For the full year.

For the full year. And do you feel like that’s a pace that can continue? I guess you said the number of clients was down something like 25% at the end of the year, the number of open claims.

I certainly won’t sit here today and say we’re going to drop -- we could drop another $5 million in the next 12 months. I think the rate is sustainable, the number of claims in the backlog is down, the number of serious cases I think continues to be addressed. What we have seen historically in the termite claims, it seems to go in steps. That for a number of years there were 23 million for a couple of years and then you drop down to the $17 million range and we were in $17 million for about three years if you look at history dollars spent. This year, it took another decrease and some of it is the older customers that we had that were treated with different chemicals in the past become less of our total customer base.

Yeah, one of the things that, if I can expand on Harry’s comments, I don’t think we’ll be taking this big a bite out of the apple each year but I do think that what we are seeing is really what we’ve done in the past. We put our claims on an early reporting deal, like we do workman’s comp claims, where they have to be called into Atlanta as soon as they are received. There’s a penalty to the branch if that does not happen, so we don’t really have claims lingering out in these branches and I think that was one of the problems that we had in the past, was that they just were not receiving the kind of attention that they needed to receive. I mean, I think that my expectation is it will continue to decrease but I don’t think it will do so in $5 million clips.

Right, so I guess -- am I thinking about it correctly if last year it was about a $17.5 million charge, this year it was something like 12.5?

That’s correct.

Okay, and then at some point, I guess you would expect -- I mean, there will always be some base level of claims. You wouldn’t expect that to go to zero over the next 10 years?

No, it will never go to zero. I think if you look back at the history of the company, the lowest it was ever was $3 million, but the trends are positive and we have proactive processes in place and we think we’ll continue a favorable trend.

Okay, that’s helpful. I appreciate the color. And then I know over the last couple of years, you guys have invested in your IT systems, specifically in routing software. Can you give us an update on where you are there and if that’s helping to address the expense structure positively?

Well, routing and scheduling will ultimately let us be more productive and efficient. The routing and scheduling initiative has been underway probably longer than we care to talk about it but we are in the final stages here. We’ve introduced it, we brought in a number of key managers, branch managers, region managers, and demoed the system and the capabilities. I think at the last region manager meeting last week, we had four of the region managers who have that desire to be early adopters get up and build enthusiasm and share their experiences to what they see. So we can’t wait to get it out of the lab and get it live. It’s going through a couple more shakedowns. We have the number of severity one issues is down to a point -- I think we’re working on the final performance tweaking to make sure that when we interface with a customer, we don’t keep them on hold an extended period of time. So we have a couple more weeks here of testing. We’re running live data. As we mentioned, end of the second quarter, beginning of the third quarter we’ll be live in some branches and begin a full scale implementation before the year is out. It could take us two years to get through the 400 locations.

I think one of the things that is really noteworthy is this isn’t like changing an accounts receivable system or an inventory system or whatever. I mean, these are customers that are happy. I mean, they are staying with us longer, we successfully service them every month when we’re supposed to, so we really had to be very cautious with this conversion and with this testing and that’s why I guess -- I would suspect that our testing cycle will be twice as long of another system or another type application because we just want to be sure that we don’t end up suffering as a result of this conversion.

Yeah, no, I certainly understand the importance of it and speaking from a customer’s point of view, I appreciate the benefits of it. I just wanted to make sure I was thinking right about a timeline of returns on that investment and it sounds like we’ll be live at the middle of this year and then cycling into next year, it’s still a little bit out in front of us.

Right. We’re still -- we haven’t -- I mean, we’re disappointed that we don’t have it in the field. I mean, time is money. We’re disappointed that we continue to have to spend and we don’t have it working for us but we really haven’t lost our enthusiasm as to the positive impact it can have on our business and our bottom line.

And part of what we are doing, and we talked about using Map Point to do some route optimization in front of the rollout and we are seeing productivity improvements come from that. And part of this -- it’s really a precursor and it’s part of the change environment, getting people used to doing things different, cleaning up the data, getting used to the thought of optimization from -- so we’re starting -- we saw some productivity improvements in the fourth quarter here with some of the prep work that we’re going into it, so it is kind of exciting to see. We’re seeing -- and it’s not just in service productivity. We’ll see it in less miles driven, less windshield time, in allowances and accidents. This will affect so many different areas of the business. We’re still excited about it but we still have a lot of other opportunities in the business to improve it.

All right. I appreciate the color. And then one last one, if I can; did I hear you right that your average pricing on new commercial contracts was up 15% in the quarter?

Yes, that’s correct. Now that doesn’t reflect necessarily a price increase. It has more to do -- it’s new contracts and it more has to do I think with the complexity of the customers and the mix of the customer that we are selling more upstream, selling more services than we had in the past. And I think part of that is having a professional sales force being managed and directed, and I think part of it is an outgrowth of what we’ve done in part of our last couple of years, commercial steering project. One of the things we did is we developed a standard scope of services so that when our sales people did go into an environment they weren’t necessarily familiar with, okay, if I’m going to be in this type of company, here’s at a minimum the service I should provide and it helps them price it properly. And also I think it ultimately results in better retention in customer service because we are doing the service necessary to provide them with a good environment.

And just on the commercial side, you gave a plus 10.3% number. Is that organic growth for the fourth quarter?

Yes.

And is there any way to break that out between new customer wins versus I guess increased revenue with existing customers?

No, we really don’t slice and dice it that finely.

Okay, the last question I have is I guess you gave me a plus 25 --

I thought you already had a last question.

Sorry about that. I appreciate the time. You gave a plus 25% number for the commercial business.

I believe that was the increase in sales from the national -- was that the national sales?

I was just trying to reconcile that with the 10% organic. I didn’t know if there was a --

Sales and revenue are two different things. We track sales, that revenue is going to come in over the course of 12 months, and your revenue is your month to month or month to prior quarter change. So when we talk sales, it’s --

Okay, sales is more of kind of a backlog number, I guess?

Yeah, or you would sell a contract let’s say for $1,000 -- let’s say $12,000, but you would just get $1,000 a month for the next --

Twelve months.

The next 12 months.

Okay, I understand. So that --

So for the first quarter, if we sold it in the last quarter and we started in the first quarter, then you would just get three months of the sale.

Yeah, the 25% was comparing sales booked in this quarter versus the same quarter a year --

Okay, I understand. I appreciate the time and I wish you the best of luck. Thanks.

(Operator Instructions) We have no further questions at this time. I would like to turn the line back over to management for closing remarks.

Okay. Well, thank you. I would like to thank all of you for joining us in today’s call and your interest in Rollins and we look forward to you participating on our next call. Have a good day.

Ladies and gentlemen, this concludes the Rollins fourth quarter conference call. If you would like to listen to a replay of today’s conference, please dial 303-590-3000 or 1-800-405-2236, pass code 11106089. Again, 303-590-3000 or 800-405-2236, pass code 11106089. ACT would like to thank you for your participation. You may now disconnect.