Second-Quarter 2016
- Revenue increased 4% to $747 million with 8% and 5% growth at AHS and Terminix, respectively
- Net income of $16 million, or $0.11 per share, versus $67 million, or $0.49 per share, a year ago
- Gross margin of 49.3% expanded 0.3% compared to prior year
- Adjusted EBITDA (1) increased 6% to $203 million from $191 million a year ago
- Adjusted net income (2) of $93 million, or $0.67 per share, versus $82 million, or $0.60 per share, a year ago
- 2016 Outlook: Revenue range of $2,730 million to $2,760 million, or 5% to 6% over prior year, and Adjusted EBITDA range of $675 million to $690 million, or 9% to 11% over prior year
ServiceMaster
Global Holdings, Inc. (NYSE: SERV), a leading provider of
essential residential and commercial services, today announced unaudited
second-quarter 2016 results. The company reported a year-over-year
revenue increase of 4 percent driven primarily by organic growth at
American Home Shield (“AHS”) and the impact of acquiring Alterra Pest
Control, LLC (“Alterra”) in November 2015.
Second-quarter 2016 net income was $16 million, or $0.11 per share,
versus $67 million, or $0.49 per share, in the same period in 2015.
Second-quarter 2016 net income includes a charge of $88 million due to a
tentative settlement of a fumigation related matter and an insurance
reserve adjustment of $23 million, and second-quarter 2015 net income
includes a $14 million loss on extinguishment of debt.
Second-quarter 2016 adjusted net income was $93 million, or $0.67 per
share, versus $82 million, or $0.60 per share, for the same period in
2015.
Second-quarter 2016 Adjusted EBITDA was $203 million, a year-over-year
increase of $12 million, or 6 percent, primarily driven by an $11
million increase in Adjusted EBITDA at Terminix. For the company as a
whole, the Adjusted EBITDA increase this quarter reflects an increase of
$21 million from the conversion of higher revenue, partially offset by
an increase of approximately $6 million in technology costs, primarily
investments related to the ServSmart
SM
initiative, and a $3 million reduction in investment income.
Rob Gillette, ServiceMaster’s chief executive officer, noted: “Our
businesses remain strong. Our margins continue to improve as we continue
to streamline operations, convert our Merry Maids branches to franchises
and realize the benefits of operating leverage. This positions us well
for future growth as we continue to invest in marketing, our ServSmart
platform and build on our brand awareness.”
|
Consolidated Performance
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
$ millions
|
|
|
|
2016
|
|
|
2015
|
|
|
B/(W)
|
|
|
2016
|
|
|
2015
|
|
|
B/(W)
|
|
Revenue
|
|
|
|
$
|
747
|
|
|
|
$
|
716
|
|
|
|
$
|
31
|
|
|
|
$
|
1,355
|
|
|
|
$
|
1,288
|
|
|
|
$
|
67
|
|
|
YoY growth
|
|
|
|
|
|
|
|
|
|
|
4.3
|
%
|
|
|
|
|
|
|
|
|
|
5.2
|
%
|
|
Gross Margin
|
|
|
|
|
368
|
|
|
|
|
351
|
|
|
|
|
17
|
|
|
|
|
651
|
|
|
|
|
620
|
|
|
|
|
31
|
|
|
% of revenue
|
|
|
|
|
49.3
|
%
|
|
|
|
49.0
|
%
|
|
|
0.3 pts
|
|
|
|
48.0
|
%
|
|
|
|
48.1
|
%
|
|
|
(0.1) pts
|
|
SG&A
|
|
|
|
|
(187
|
)
|
|
|
|
(182
|
)
|
|
|
|
(5
|
)
|
|
|
|
(360
|
)
|
|
|
|
(334
|
)
|
|
|
|
(26
|
)
|
|
% of revenue
|
|
|
|
|
25.0
|
%
|
|
|
|
25.4
|
%
|
|
|
0.4 pts
|
|
|
|
26.6
|
%
|
|
|
|
25.9
|
%
|
|
|
(0.7) pts
|
|
Income from Continuing Operations before Income Taxes
|
|
|
|
|
23
|
|
|
|
|
109
|
|
|
|
|
(86
|
)
|
|
|
|
85
|
|
|
|
|
154
|
|
|
|
|
(69
|
)
|
|
% of revenue
|
|
|
|
|
3.1
|
%
|
|
|
|
15.2
|
%
|
|
|
(12.1) pts
|
|
|
|
6.3
|
%
|
|
|
|
12.0
|
%
|
|
|
(5.7) pts
|
|
Net Income
|
|
|
|
|
16
|
|
|
|
|
67
|
|
|
|
|
(51
|
)
|
|
|
|
54
|
|
|
|
|
94
|
|
|
|
|
(40
|
)
|
|
% of revenue
|
|
|
|
|
2.1
|
%
|
|
|
|
9.4
|
%
|
|
|
(7.3) pts
|
|
|
|
4.0
|
%
|
|
|
|
7.3
|
%
|
|
|
(3.3) pts
|
|
Adjusted Net Income
(2)
|
|
|
|
|
93
|
|
|
|
|
82
|
|
|
|
|
11
|
|
|
|
|
140
|
|
|
|
|
127
|
|
|
|
|
13
|
|
|
% of revenue
|
|
|
|
|
12.4
|
%
|
|
|
|
11.5
|
%
|
|
|
0.9 pts
|
|
|
|
10.3
|
%
|
|
|
|
9.9
|
%
|
|
|
0.4 pts
|
|
Adjusted EBITDA
(1)
|
|
|
|
|
203
|
|
|
|
|
191
|
|
|
|
|
12
|
|
|
|
|
330
|
|
|
|
|
324
|
|
|
|
|
6
|
|
|
% of revenue
|
|
|
|
|
27.2
|
%
|
|
|
|
26.7
|
%
|
|
|
0.5 pts
|
|
|
|
24.4
|
%
|
|
|
|
25.2
|
%
|
|
|
(0.8) pts
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
|
|
138
|
|
|
|
|
152
|
|
|
|
|
(14
|
)
|
|
|
|
244
|
|
|
|
|
220
|
|
|
|
|
24
|
|
|
Free Cash Flow
(3)
|
|
|
|
|
123
|
|
|
|
|
152
|
|
|
|
|
(29
|
)
|
|
|
|
212
|
|
|
|
|
224
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Segment Performance
|
|
Revenue and Adjusted EBITDA for each reportable segment and
Corporate were as follows:
|
|
|
|
|
|
|
|
Three Months Ended June 30,
|
|
|
Six Months Ended June 30,
|
|
|
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
$ millions
|
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
|
2016
|
|
|
B/(W) vs. PY
|
|
Terminix
|
|
|
|
$
|
414
|
|
|
$
|
19
|
|
|
|
$
|
112
|
|
|
|
$
|
11
|
|
|
|
$
|
778
|
|
|
$
|
47
|
|
|
|
$
|
207
|
|
|
|
$
|
17
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
4.8
|
%
|
|
|
|
27.1
|
%
|
|
|
1.5 pts
|
|
|
|
|
|
|
6.4
|
%
|
|
|
|
26.6
|
%
|
|
|
0.6 pts
|
|
American Home Shield
|
|
|
|
|
282
|
|
|
|
21
|
|
|
|
|
72
|
|
|
|
|
1
|
|
|
|
|
477
|
|
|
|
41
|
|
|
|
|
90
|
|
|
|
|
(10
|
)
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
8.0
|
%
|
|
|
|
25.5
|
%
|
|
|
(1.7) pts
|
|
|
|
|
|
|
9.4
|
%
|
|
|
|
18.9
|
%
|
|
|
(4.0) pts
|
|
Franchise Services Group
|
|
|
|
|
50
|
|
|
|
(10
|
)
|
|
|
|
19
|
|
|
|
|
(1
|
)
|
|
|
|
99
|
|
|
|
(21
|
)
|
|
|
|
37
|
|
|
|
|
(2
|
)
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
(16.7
|
)%
|
|
|
|
38.0
|
%
|
|
|
4.7 pts
|
|
|
|
|
|
|
(17.5
|
)%
|
|
|
|
37.4
|
%
|
|
|
4.9 pts
|
|
Corporate
(4)
|
|
|
|
|
1
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
1
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
|
|
2
|
|
|
Total
|
|
|
|
$
|
747
|
|
|
$
|
31
|
|
|
|
$
|
203
|
|
|
|
$
|
12
|
|
|
|
$
|
1,355
|
|
|
$
|
67
|
|
|
|
$
|
330
|
|
|
|
$
|
6
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
|
4.3
|
%
|
|
|
|
27.2
|
%
|
|
|
0.5 pts
|
|
|
|
|
|
|
5.2
|
%
|
|
|
|
24.4
|
%
|
|
|
(0.8) pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
A reconciliation of both Adjusted net income and Adjusted EBITDA to net
income, as well as a reconciliation of free cash flow to net cash
provided from operating activities from continuing operations, are set
forth below in this press release.
Terminix
Terminix reported a 5 percent year-over-year revenue increase in the
second-quarter of 2016, driven primarily by the impact of the Alterra
acquisition in November 2015 and organic growth in pest control revenue.
Adjusted EBITDA increased 11 percent, or $11 million, versus prior year,
primarily driven by $10 million from the conversion of higher revenue
and $5 million of other cost reductions, offset, in part, by a $4
million increase in technology costs.
American Home Shield
American Home Shield reported an 8 percent year-over-year revenue
increase in the second-quarter of 2016 driven by the growth in the
number of home warranties and price increases. Adjusted EBITDA increased
1 percent, or $1 million, versus prior year, primarily reflecting a $13
million increase from the conversion of higher revenue, offset, in part,
by a $4 million increase in contractor claim costs, a $3 million
increase in sales/marketing costs, a $2 million increase in technology
costs and a $3 million reduction in investment income.
Franchise Services Group
The Franchise Services Group reported a 17 percent year-over-year
revenue decrease in the second-quarter of 2016 primarily reflecting the
conversion of certain company-owned Merry Maids branches to franchises.
Adjusted EBITDA decreased 5 percent, or $1 million, versus prior year,
primarily reflecting the flow-through effect of lower revenue and the
branch conversions, offset, in part, by cost reduction initiatives.
Cash Flow
For the six months ended June 30, 2016, net cash provided from operating
activities from continuing operations increased to $244 million from
$220 million for the six months ended June 30, 2015.
Net cash used for investing activities from continuing operations was
$154 million for the six months ended June 30, 2016 compared to $20
million for the six months ended June 30, 2015. During the six months
ended June 30, 2016, we posted cash of $95 million, in lieu of letters
of credit, as collateral under our automobile, general liability and
workers’ compensation insurance program.
Net cash used for financing activities from continuing operations was
$45 million for the six months ended June 30, 2016 compared to $223
million for the six months ended June 30, 2015. During the six months
ended June 30, 2015, we borrowed an incremental $178 million and
redeemed $390 million in aggregate principal amount of the former 8%
2020 Notes.
Free cash flow(3) was $212 million for the six months ended
June 30, 2016 compared to $224 million for the six months ended June 30,
2015.
Other Matters
U.S. Virgin Islands
On July 21, 2016, the company entered into a superseding plea agreement
in connection with the investigation initiated by the United States
Department of Justice related to the U.S. Virgin Islands matter. Under
the terms of the superseding plea agreement we have agreed to pay fines,
community service and government costs up to $10 million (same aggregate
amount as previously disclosed) as recommended by the parties, but have
agreed to monetary ranges for the fines and community service, giving
the court discretion at sentencing. The superseding plea agreement is
subject to the approval of the court at a hearing scheduled for August
25, 2016 and, if approved will resolve the federal criminal consequences
associated with the DOJ investigation.
The company is also reporting that it has reached a tentative settlement
agreement to settle all civil claims of the affected family related to
the U.S. Virgin Islands matter. We expect that, under the terms of the
proposed settlement agreement, in addition to the amounts that the
company’s insurance carriers have agreed to pay to the family pursuant
to our general liability insurance policies, we will pay $87 million.
The company had previously paid $3 million related to these claims.
Insurance Reserve Adjustment
The company made a $23 million adjustment to accrued self-insured claims
related to automobile, general liability and workers’ compensation
risks. The adjustment is based on the company’s detailed annual
assessment of this actuarially determined accrual, which the company
completes in the second quarter of each year. This adjustment relates to
coverage periods of 2015 and prior.
Share Repurchase Program
On February 23, 2016, the company’s board of directors authorized a
three-year share repurchase program, under which the company may
purchase up to $300 million of outstanding shares of common stock.
During the second-quarter, the company purchased 461,174 shares of
common stock at an average price paid per share of $36.04.
New Board Members
On July 15, 2016, the company announced two new members elected to its
board of directors, naming Jerri DeVard, most recently chief marketing
officer of ADT Corporation, and John Corness, formerly a human resources
executive with Polaris Industries and GE.
Full-Year 2016 Outlook
Revenue is expected to range from $2,730 million to $2,760 million, or
an increase of 5 percent to 6 percent compared to 2015. Adjusted EBITDA
is expected to range from $675 million to $690 million, or an increase
of 9 percent to 11 percent compared to 2015. Reconciliation for the
forward-looking 2016 Adjusted EBITDA outlook is not being provided as
the company does not currently have sufficient data to accurately
estimate the variables and individual adjustments for such
reconciliation.
Second-Quarter 2016 Earnings Conference Call
The company will discuss its second-quarter 2016 operating results
during a conference call at 8 a.m. central time (9 a.m. eastern time)
today, July 28, 2016. To participate on the conference call, interested
parties should call 888.225.2695 (or international participants,
303.223.4364). Additionally, the conference call will be available via
webcast. A slide presentation highlighting the company’s results will
also be available. To participate via webcast and view the slide
presentation, visit the company’s investor
relations home page. The call will be available for replay until
August 27, 2016. To access the replay of this call, please call
800.633.8284 and enter reservation number 21815362 (international
participants: 402.977.9140, reservation number 21815362). You may also
review the webcast on the company’s investor
relations home page.
About ServiceMaster
ServiceMaster Global Holdings, Inc. is a leading provider of essential
residential and commercial services, operating through an extensive
service network of more than 8,000 company-owned locations and franchise
and license agreements. The company’s portfolio of well-recognized
brands includes American Home Shield (home warranties), AmeriSpec (home
inspections), Furniture Medic (furniture and cabinet repair), Merry
Maids (residential cleaning), ServiceMaster Clean (janitorial),
ServiceMaster Restore (disaster restoration) and Terminix (termite and
pest control). The company is headquartered in Memphis, Tenn. Go to www.servicemaster.com
for more information about ServiceMaster or follow the company at twitter.com/ServiceMaster
or Facebook.com/ServiceMaster.
Information Regarding Forward-Looking Statements
This press release contains forward-looking statements and cautionary
statements, including 2016 revenue and Adjusted EBITDA outlook and the
statements relating to the U.S. Virgin Islands matter. Some of the
forward-looking statements can be identified by the use of
forward-looking terms such as “believes,” “expects,” “may,” “will,”
“shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is
optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other
comparable terms. Forward-looking statements are subject to known and
unknown risks and uncertainties, many of which may be beyond our
control, including, without limitation, the risks and uncertainties
discussed in the “Risk Factors” and “Information Regarding
Forward-Looking Statements” sections in the company’s reports filed with
the U.S. Securities and Exchange Commission. We caution you that
forward-looking statements are not guarantees of future performance or
outcomes and that actual performance and outcomes, including, without
limitation, our actual results of operations, financial condition and
liquidity, and the development of the market segments in which we
operate, may differ materially from those made in or suggested by the
forward-looking statements contained in this press release.
Additional factors that could cause actual results and outcomes to
differ from those reflected in forward-looking statements include,
without limitation, lawsuits, enforcement actions and other claims by
third parties or governmental authorities; compliance with, or violation
of environmental health and safety laws and regulations; 401(k) Plan
corrective contribution; the effects of our substantial indebtedness;
changes in interest rates, because a significant portion of our
indebtedness bears interest at variable rates; weakening general
economic conditions; weather conditions and seasonality; the success of
our business strategies, and costs associated with restructuring
initiatives. The company assumes no obligation to update the information
contained herein, which speaks only as of the date hereof.
Non-GAAP Financial Measures
This press release contains certain non-GAAP financial measures.
Non-GAAP measures should not be considered as an alternative to GAAP
financial measures. Non-GAAP measures may not be calculated or
comparable to similarly titled measures of other companies. See non-GAAP
reconciliations below in this press release for a reconciliation of
these measures to the most directly comparable GAAP financial measures.
Adjusted EBITDA, adjusted net income, adjusted earnings per share and
free cash flow are not measurements of the company’s financial
performance under GAAP and should not be considered as an alternative to
net income, net cash provided by operating activities from continuing
operations or any other performance or liquidity measures derived in
accordance with GAAP. Management uses these non-GAAP financial measures
to facilitate operating performance and liquidity comparisons from
period to period. We believe these non-GAAP financial measures are
useful for investors, analysts and other interested parties as they
facilitate company-to-company operating and liquidity performance
comparisons by excluding potential differences caused by variations in
capital structures, taxation, the age and book depreciation of
facilities and equipment, restructuring initiatives and equity-based,
long-term incentive plans.
_________________________________________________
(1) Adjusted EBITDA is defined as net income before: depreciation and
amortization expense; 401(k) Plan corrective contribution; fumigation
related matters; insurance reserve adjustment; non-cash stock-based
compensation expense; restructuring charges; gain on sale of Merry Maids
branches; non-cash impairment of software and other related costs; loss
from discontinued operations, net of income taxes; provision for income
taxes; loss on extinguishment of debt; interest expense; and other
non-operating expenses. The company’s definition of Adjusted EBITDA may
not be comparable to similarly titled measures of other companies.
(2) Adjusted net income is defined as net income before: amortization
expense; 401(k) Plan corrective contribution; fumigation related
matters; insurance reserve adjustment; restructuring charges; gain on
sale of Merry Maids branches; impairment of software and other related
costs; loss from discontinued operations, net of income taxes; loss on
extinguishment of debt; other expense; and the tax impact of the
aforementioned adjustments. The company’s definition of adjusted net
income may not be comparable to similarly titled measures of other
companies. Adjusted earnings per share is calculated as adjusted net
income divided by the weighted-average diluted common shares outstanding.
(3) Free cash flow is defined as (i) net cash provided from operating
activities from continuing operations before: call premium paid on
retirement of debt; (ii) less property additions.
(4) Corporate includes The ServiceMaster Acceptance Company Limited
Partnership (SMAC) and the unallocated expenses of our headquarters
function.
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
|
Consolidated Statements of Operations and Comprehensive Income
|
|
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Revenue
|
|
|
|
$
|
747
|
|
|
|
$
|
716
|
|
|
|
$
|
1,355
|
|
|
|
$
|
1,288
|
|
|
Cost of services rendered and products sold
|
|
|
|
|
379
|
|
|
|
|
365
|
|
|
|
|
704
|
|
|
|
|
668
|
|
|
Selling and administrative expenses
|
|
|
|
|
187
|
|
|
|
|
182
|
|
|
|
|
360
|
|
|
|
|
334
|
|
|
Amortization expense
|
|
|
|
|
8
|
|
|
|
|
12
|
|
|
|
|
16
|
|
|
|
|
25
|
|
|
401(k) Plan corrective contribution
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Fumigation related matters
|
|
|
|
|
88
|
|
|
|
|
—
|
|
|
|
|
91
|
|
|
|
|
—
|
|
|
Insurance reserve adjustment
|
|
|
|
|
23
|
|
|
|
|
—
|
|
|
|
|
23
|
|
|
|
|
—
|
|
|
Impairment of software and other related costs
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Restructuring charges
|
|
|
|
|
4
|
|
|
|
|
—
|
|
|
|
|
5
|
|
|
|
|
2
|
|
|
Gain on sale of Merry Maids branches
|
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
|
|
(3
|
)
|
|
Interest expense
|
|
|
|
|
38
|
|
|
|
|
42
|
|
|
|
|
76
|
|
|
|
|
88
|
|
|
Interest and net investment income
|
|
|
|
|
(4
|
)
|
|
|
|
(7
|
)
|
|
|
|
(4
|
)
|
|
|
|
(7
|
)
|
|
Loss on extinguishment of debt
|
|
|
|
|
—
|
|
|
|
|
14
|
|
|
|
|
—
|
|
|
|
|
27
|
|
|
Income from Continuing Operations before Income Taxes
|
|
|
|
|
23
|
|
|
|
|
109
|
|
|
|
|
85
|
|
|
|
|
154
|
|
|
Provision for income taxes
|
|
|
|
|
7
|
|
|
|
|
42
|
|
|
|
|
30
|
|
|
|
|
59
|
|
|
Income from Continuing Operations
|
|
|
|
|
16
|
|
|
|
|
67
|
|
|
|
|
54
|
|
|
|
|
95
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
Net Income
|
|
|
|
$
|
16
|
|
|
|
$
|
67
|
|
|
|
$
|
54
|
|
|
|
$
|
94
|
|
|
Total Comprehensive Income
|
|
|
|
$
|
15
|
|
|
|
$
|
65
|
|
|
|
$
|
55
|
|
|
|
$
|
88
|
|
|
Weighted-average common shares outstanding - Basic
|
|
|
|
|
135.5
|
|
|
|
|
134.9
|
|
|
|
|
135.6
|
|
|
|
|
134.7
|
|
|
Weighted-average common shares outstanding - Diluted
|
|
|
|
|
137.7
|
|
|
|
|
136.5
|
|
|
|
|
137.7
|
|
|
|
|
136.3
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
|
$
|
0.11
|
|
|
|
$
|
0.50
|
|
|
|
$
|
0.40
|
|
|
|
$
|
0.71
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.01
|
)
|
|
Net Income
|
|
|
|
|
0.12
|
|
|
|
|
0.49
|
|
|
|
|
0.40
|
|
|
|
|
0.70
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
|
$
|
0.11
|
|
|
|
$
|
0.49
|
|
|
|
$
|
0.40
|
|
|
|
$
|
0.70
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(0.01
|
)
|
|
Net Income
|
|
|
|
|
0.11
|
|
|
|
|
0.49
|
|
|
|
|
0.39
|
|
|
|
|
0.69
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
|
Consolidated Statements of Financial Position
|
|
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
|
|
June 30,
|
|
|
December 31,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Assets:
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
$
|
342
|
|
|
|
$
|
296
|
|
|
Marketable securities
|
|
|
|
|
21
|
|
|
|
|
24
|
|
|
Receivables, less allowances of $24 and $23, respectively
|
|
|
|
|
508
|
|
|
|
|
487
|
|
|
Inventories
|
|
|
|
|
40
|
|
|
|
|
40
|
|
|
Prepaid expenses and other assets
|
|
|
|
|
240
|
|
|
|
|
54
|
|
|
Deferred customer acquisition costs
|
|
|
|
|
33
|
|
|
|
|
32
|
|
|
Total Current Assets
|
|
|
|
|
1,184
|
|
|
|
|
933
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
|
186
|
|
|
|
|
160
|
|
|
Goodwill
|
|
|
|
|
2,185
|
|
|
|
|
2,129
|
|
|
Intangible assets, primarily trade names, service marks and
trademarks, net
|
|
|
|
|
1,714
|
|
|
|
|
1,704
|
|
|
Restricted cash
|
|
|
|
|
95
|
|
|
|
|
—
|
|
|
Notes receivable
|
|
|
|
|
36
|
|
|
|
|
32
|
|
|
Long-term marketable securities
|
|
|
|
|
13
|
|
|
|
|
57
|
|
|
Other assets
|
|
|
|
|
49
|
|
|
|
|
83
|
|
|
Total Assets
|
|
|
|
$
|
5,462
|
|
|
|
$
|
5,098
|
|
|
Liabilities and Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
|
$
|
133
|
|
|
|
$
|
110
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Payroll and related expenses
|
|
|
|
|
61
|
|
|
|
|
64
|
|
|
Self-insured claims and related expenses
|
|
|
|
|
365
|
|
|
|
|
106
|
|
|
Accrued interest payable
|
|
|
|
|
10
|
|
|
|
|
10
|
|
|
Other
|
|
|
|
|
58
|
|
|
|
|
59
|
|
|
Deferred revenue
|
|
|
|
|
576
|
|
|
|
|
552
|
|
|
Current portion of long-term debt
|
|
|
|
|
60
|
|
|
|
|
54
|
|
|
Total Current Liabilities
|
|
|
|
|
1,262
|
|
|
|
|
955
|
|
|
Long-Term Debt
|
|
|
|
|
2,714
|
|
|
|
|
2,698
|
|
|
Other Long-Term Liabilities:
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
|
|
693
|
|
|
|
|
687
|
|
|
Other long-term obligations, primarily self-insured claims
|
|
|
|
|
197
|
|
|
|
|
213
|
|
|
Total Other Long-Term Liabilities
|
|
|
|
|
890
|
|
|
|
|
901
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Common stock $0.01 par value (authorized 2,000,000,000 shares with
143,563,741 shares issued and 135,442,846 outstanding at June 30,
2016 and 143,170,897 shares issued and 135,511,176 outstanding at
December 31, 2015)
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
Additional paid-in capital
|
|
|
|
|
2,257
|
|
|
|
|
2,245
|
|
|
Accumulated deficit
|
|
|
|
|
(1,506
|
)
|
|
|
|
(1,560
|
)
|
|
Accumulated other comprehensive loss
|
|
|
|
|
(20
|
)
|
|
|
|
(21
|
)
|
|
Less common stock held in treasury, at cost 8,120,895 shares at June
30, 2016 and 7,659,721 shares at December 31, 2015)
|
|
|
|
|
(138
|
)
|
|
|
|
(122
|
)
|
|
Total Shareholders' Equity
|
|
|
|
|
595
|
|
|
|
|
545
|
|
|
Total Liabilities and Shareholders' Equity
|
|
|
|
$
|
5,462
|
|
|
|
$
|
5,098
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
|
Consolidated Statements of Cash Flows
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
2016
|
|
|
2015
|
|
Cash and Cash Equivalents at Beginning of Period
|
|
|
|
$
|
296
|
|
|
|
$
|
389
|
|
|
Cash Flows from Operating Activities from Continuing Operations:
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
|
54
|
|
|
|
|
94
|
|
|
Adjustments to reconcile net income to net cash provided from
operating activities:
|
|
|
|
|
|
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
Depreciation expense
|
|
|
|
|
27
|
|
|
|
|
23
|
|
|
Amortization expense
|
|
|
|
|
16
|
|
|
|
|
25
|
|
|
Amortization of debt issuance costs
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
401(k) Plan corrective contribution
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Fumigation related matters
|
|
|
|
|
91
|
|
|
|
|
—
|
|
|
Payments on fumigation related matters
|
|
|
|
|
(2
|
)
|
|
|
|
—
|
|
|
Insurance reserve adjustment
|
|
|
|
|
23
|
|
|
|
|
—
|
|
|
Impairment of software and other related costs
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Gain on sale of Merry Maids branches
|
|
|
|
|
(2
|
)
|
|
|
|
(3
|
)
|
|
Loss on extinguishment of debt
|
|
|
|
|
—
|
|
|
|
|
27
|
|
|
Call premium paid on retirement of debt
|
|
|
|
|
—
|
|
|
|
|
(23
|
)
|
|
Deferred income tax provision
|
|
|
|
|
5
|
|
|
|
|
23
|
|
|
Stock-based compensation expense
|
|
|
|
|
7
|
|
|
|
|
5
|
|
|
Gain on sale of marketable securities
|
|
|
|
|
(3
|
)
|
|
|
|
(6
|
)
|
|
Other
|
|
|
|
|
3
|
|
|
|
|
4
|
|
|
Change in working capital, net of acquisitions:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
|
|
(18
|
)
|
|
|
|
(31
|
)
|
|
Inventories and other current assets
|
|
|
|
|
(20
|
)
|
|
|
|
(3
|
)
|
|
Accounts payable
|
|
|
|
|
34
|
|
|
|
|
35
|
|
|
Deferred revenue
|
|
|
|
|
24
|
|
|
|
|
28
|
|
|
Accrued liabilities
|
|
|
|
|
10
|
|
|
|
|
5
|
|
|
Accrued interest payable
|
|
|
|
|
—
|
|
|
|
|
(12
|
)
|
|
Accrued restructuring charges
|
|
|
|
|
3
|
|
|
|
|
(3
|
)
|
|
Current income taxes
|
|
|
|
|
(13
|
)
|
|
|
|
29
|
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
|
|
244
|
|
|
|
|
220
|
|
|
Cash Flows from Investing Activities from Continuing Operations:
|
|
|
|
|
|
|
|
|
Property additions
|
|
|
|
|
(31
|
)
|
|
|
|
(20
|
)
|
|
Sale of equipment and other assets
|
|
|
|
|
7
|
|
|
|
|
4
|
|
|
Other business acquisitions, net of cash acquired
|
|
|
|
|
(73
|
)
|
|
|
|
(19
|
)
|
|
Change in restricted cash
|
|
|
|
|
(95
|
)
|
|
|
|
—
|
|
|
Purchases of available-for-sale securities
|
|
|
|
|
(2
|
)
|
|
|
|
(5
|
)
|
|
Sales and maturities of available-for-sale securities
|
|
|
|
|
48
|
|
|
|
|
27
|
|
|
Origination of notes receivable
|
|
|
|
|
(53
|
)
|
|
|
|
(54
|
)
|
|
Collections on notes receivable
|
|
|
|
|
48
|
|
|
|
|
46
|
|
|
Other investments
|
|
|
|
|
(3
|
)
|
|
|
|
—
|
|
|
Net Cash Used for Investing Activities from Continuing Operations
|
|
|
|
|
(154
|
)
|
|
|
|
(20
|
)
|
|
Cash Flows from Financing Activities from Continuing Operations:
|
|
|
|
|
|
|
|
|
Borrowings of debt
|
|
|
|
|
—
|
|
|
|
|
178
|
|
|
Payments of debt
|
|
|
|
|
(33
|
)
|
|
|
|
(411
|
)
|
|
Debt issuance costs paid
|
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
Repurchase of common stock
|
|
|
|
|
(17
|
)
|
|
|
|
—
|
|
|
Issuance of common stock
|
|
|
|
|
5
|
|
|
|
|
13
|
|
|
Net Cash Used for Financing Activities from Continuing Operations
|
|
|
|
|
(45
|
)
|
|
|
|
(223
|
)
|
|
Cash Flows from Discontinued Operations:
|
|
|
|
|
|
|
|
|
Cash used for operating activities
|
|
|
|
|
—
|
|
|
|
|
(6
|
)
|
|
Net Cash Used for Discontinued Operations
|
|
|
|
|
—
|
|
|
|
|
(6
|
)
|
|
Effect of Exchange Rate Changes on Cash
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Cash Increase (Decrease) During the Period
|
|
|
|
|
46
|
|
|
|
|
(28
|
)
|
|
Cash and Cash Equivalents at End of Period
|
|
|
|
$
|
342
|
|
|
|
$
|
361
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of Adjusted Net Income to
Net Income for the periods presented.
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net Income
|
|
|
|
$
|
16
|
|
|
|
$
|
67
|
|
|
|
$
|
54
|
|
|
|
$
|
94
|
|
|
Amortization expense
|
|
|
|
|
8
|
|
|
|
|
12
|
|
|
|
|
16
|
|
|
|
|
25
|
|
|
401(k) Plan corrective contribution
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Fumigation related matters
|
|
|
|
|
88
|
|
|
|
|
—
|
|
|
|
|
91
|
|
|
|
|
—
|
|
|
Insurance reserve adjustment
|
|
|
|
|
23
|
|
|
|
|
—
|
|
|
|
|
23
|
|
|
|
|
—
|
|
|
Restructuring charges
|
|
|
|
|
4
|
|
|
|
|
—
|
|
|
|
|
5
|
|
|
|
|
2
|
|
|
Gain on sale of Merry Maids branches
|
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
|
|
|
(2
|
)
|
|
|
|
(3
|
)
|
|
Impairment of software and other related costs
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
—
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
1
|
|
|
Loss on extinguishment of debt
|
|
|
|
|
—
|
|
|
|
|
14
|
|
|
|
|
—
|
|
|
|
|
27
|
|
|
Tax impact of adjustments
|
|
|
|
|
(47
|
)
|
|
|
|
(9
|
)
|
|
|
|
(50
|
)
|
|
|
|
(19
|
)
|
|
Adjusted Net Income
|
|
|
|
$
|
93
|
|
|
|
$
|
82
|
|
|
|
$
|
140
|
|
|
|
$
|
127
|
|
|
Weighted-average diluted common shares outstanding
|
|
|
|
|
137.7
|
|
|
|
|
136.5
|
|
|
|
|
137.7
|
|
|
|
|
136.3
|
|
|
Adjusted earnings per share
|
|
|
|
$
|
0.67
|
|
|
|
$
|
0.60
|
|
|
|
$
|
1.01
|
|
|
|
$
|
0.93
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of Free Cash Flow to Net
Cash Provided from Operating Activities from Continuing Operations.
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
|
$
|
138
|
|
|
|
$
|
152
|
|
|
|
$
|
244
|
|
|
|
$
|
220
|
|
|
Call premium paid on retirement of debt
|
|
|
|
|
—
|
|
|
|
|
12
|
|
|
|
|
—
|
|
|
|
|
23
|
|
|
Property additions
|
|
|
|
|
(14
|
)
|
|
|
|
(12
|
)
|
|
|
|
(31
|
)
|
|
|
|
(20
|
)
|
|
Free Cash Flow
|
|
|
|
$
|
123
|
|
|
|
|
152
|
|
|
|
|
212
|
|
|
|
|
224
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of Adjusted EBITDA to Net
Income for the periods presented.
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Six Months Ended
|
|
|
|
|
|
June 30,
|
|
|
June 30,
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
|
2015
|
|
Terminix
|
|
|
|
$
|
112
|
|
|
|
$
|
101
|
|
|
|
$
|
207
|
|
|
|
$
|
190
|
|
|
American Home Shield
|
|
|
|
|
72
|
|
|
|
|
71
|
|
|
|
|
90
|
|
|
|
|
100
|
|
|
Franchise Services Group
|
|
|
|
|
19
|
|
|
|
|
20
|
|
|
|
|
37
|
|
|
|
|
39
|
|
|
Corporate
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
(3
|
)
|
|
|
|
(5
|
)
|
|
Adjusted EBITDA
|
|
|
|
$
|
203
|
|
|
|
$
|
191
|
|
|
|
$
|
330
|
|
|
|
$
|
324
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and amortization expense
|
|
|
|
|
(22
|
)
|
|
|
|
(24
|
)
|
|
|
|
(43
|
)
|
|
|
|
(48
|
)
|
|
401(k) Plan corrective contribution
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
Fumigation related matters
|
|
|
|
|
(88
|
)
|
|
|
|
—
|
|
|
|
|
(91
|
)
|
|
|
|
—
|
|
|
Insurance reserve adjustment
|
|
|
|
|
(23
|
)
|
|
|
|
—
|
|
|
|
|
(23
|
)
|
|
|
|
—
|
|
|
Non-cash stock-based compensation expense
|
|
|
|
|
(4
|
)
|
|
|
|
(2
|
)
|
|
|
|
(7
|
)
|
|
|
|
(5
|
)
|
|
Restructuring charges
|
|
|
|
|
(4
|
)
|
|
|
|
—
|
|
|
|
|
(5
|
)
|
|
|
|
(2
|
)
|
|
Gain on sale of Merry Maids branches
|
|
|
|
|
—
|
|
|
|
|
2
|
|
|
|
|
2
|
|
|
|
|
3
|
|
|
Non-cash impairment of software and other related costs
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
Loss from discontinued operations, net of income taxes
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
Provision for income taxes
|
|
|
|
|
(7
|
)
|
|
|
|
(42
|
)
|
|
|
|
(30
|
)
|
|
|
|
(59
|
)
|
|
Loss on extinguishment of debt
|
|
|
|
|
—
|
|
|
|
|
(14
|
)
|
|
|
|
—
|
|
|
|
|
(27
|
)
|
|
Interest expense
|
|
|
|
|
(38
|
)
|
|
|
|
(42
|
)
|
|
|
|
(76
|
)
|
|
|
|
(88
|
)
|
|
Other non-operating expenses
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
Net income
|
|
|
|
$
|
16
|
|
|
|
$
|
67
|
|
|
|
$
|
54
|
|
|
|
$
|
94
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminix Segment
Revenue by service line is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
June 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
Growth
|
|
|
Acquired
|
|
|
Organic
|
|
Pest Control
|
|
|
|
$
|
226
|
|
|
$
|
205
|
|
|
$
|
21
|
|
|
|
10
|
%
|
|
|
$
|
16
|
|
|
8
|
%
|
|
|
$
|
5
|
|
|
|
2
|
%
|
|
Termite and Other Services(1)
|
|
|
|
|
168
|
|
|
|
168
|
|
|
|
—
|
|
|
|
—
|
%
|
|
|
|
1
|
|
|
1
|
%
|
|
|
|
(1
|
)
|
|
|
(1
|
)%
|
|
Other
|
|
|
|
|
20
|
|
|
|
22
|
|
|
|
(2
|
)
|
|
|
(9
|
)%
|
|
|
|
—
|
|
|
—
|
%
|
|
|
|
(2
|
)
|
|
|
(9
|
)%
|
|
Total revenue
|
|
|
|
$
|
414
|
|
|
$
|
395
|
|
|
$
|
19
|
|
|
|
5
|
%
|
|
|
$
|
17
|
|
|
4
|
%
|
|
|
$
|
2
|
|
|
|
1
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Termite renewal revenue comprised 48 percent and 47 percent of total
revenue from Termite and Other Services for the second-quarter of 2016
and 2015, respectively.
American Home Shield Segment
The table below presents selected operating metrics related to renewable
customer counts and customer retention.
|
|
|
|
|
|
|
As of June 30,
|
|
|
|
|
|
2016(1)
|
|
|
2015
|
|
Growth in Home Warranties
|
|
|
|
10
|
%
|
|
|
7
|
%
|
|
Customer Retention Rate
|
|
|
|
76
|
%
|
|
|
75
|
%
|
|
|
|
|
|
|
|
|
|
(1) As of June 30, 2016, excluding the OneGuard Home Warranties
(“OneGuard”) accounts acquired on June 27, 2016, the growth in home
warranties was 7 percent, and, excluding all OneGuard accounts, the
customer retention rate for our American Home Shield segment was 75
percent.
Franchise Services Group Segment
Revenue by service line is as follows:
|
|
|
|
|
|
|
Three Months Ended
|
|
|
% of
|
|
|
|
|
|
June 30,
|
|
|
Revenue
|
|
(In millions)
|
|
|
|
2016
|
|
|
2015
|
|
|
2016
|
|
Royalty Fees
|
|
|
|
$
|
30
|
|
|
$
|
31
|
|
|
60
|
%
|
|
Company-Owned Merry Maids Branches
|
|
|
|
|
2
|
|
|
|
12
|
|
|
4
|
|
|
Janitorial National Accounts
|
|
|
|
|
11
|
|
|
|
10
|
|
|
22
|
|
|
Sales of Products
|
|
|
|
|
4
|
|
|
|
4
|
|
|
7
|
|
|
Other
|
|
|
|
|
3
|
|
|
|
3
|
|
|
7
|
|
|
Total revenue
|
|
|
|
$
|
50
|
|
|
$
|
60
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
ServiceMaster Global Holdings, Inc.
Investor Relations:
James Shields, 901-597-6839
James.Shields@servicemaster.com
or
Media:
Peter Tosches, 901-597-8449
Peter.Tosches@servicemaster.com