Third-Quarter 2017 Results
- Revenue increased 5% to $797 million with 12% growth at American Home Shield
- Net income of $80 million, or $0.59 per share, versus $70 million, or $0.51 per share, a year ago
- Adjusted EBITDA (1) increased 4% to $200 million from $192 million a year ago
- Adjusted net income (2) of $99 million, or $0.73 per share, versus $81 million, or $0.59 per share, a year ago
- Continued strong cash flow conversion
Full-Year 2017 Outlook
- Revenue guidance maintained between $2,900 million and $2,920 million
- Reflecting impact of hurricanes and on-going transformational initiatives at Terminix, Adjusted EBITDA now expected between $670 million and $675 million
ServiceMaster
Global Holdings, Inc. (NYSE: SERV), a leading provider of
essential residential and commercial services, today announced unaudited
third-quarter 2017 results. The company reported a year-over-year
revenue increase of 5 percent driven primarily by organic growth at
American Home Shield (“AHS”), as well as the impact of acquiring
Landmark Home Warranty (“Landmark”) in November 2016 and 7 percent
growth at the Franchise Services Group.
Third-quarter 2017 net income was $80 million, or $0.59 per share,
versus $70 million, or $0.51 per share, in the same period in 2016.
Third-quarter 2017 Adjusted EBITDA was $200 million, a year-over-year
increase of $8 million, or 4 percent.
Third-quarter 2017 adjusted net income was $99 million, or $0.73 per
share, versus $81 million, or $0.59 per share, for the same period in
2016.
“During the quarter, we achieved continued strong growth at American
Home Shield and the Franchise Services Group, while making progress on
our transformational initiatives at Terminix,” said ServiceMaster chief
executive officer Nik Varty. “At Terminix, third-quarter revenue was
$395 million, comparable to prior year. However, excluding the temporary
impact of the hurricanes and the attrition of Alterra customers,
Terminix revenue increased 2 percent over prior year. We are continuing
to focus on improving customer retention by significantly upgrading the
customer experience. We are strengthening our leadership team and
driving accountability throughout the organization so that we can
consistently deliver on our commitments.”
“We are on track with our previously announced plans to spin off
American Home Shield in the third quarter of 2018,” Varty added. “The
spin-off will allow Terminix to fully focus on its transformational
activities, while allowing AHS to pursue its high-growth opportunities.”
|
Consolidated Performance
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
$ millions
|
|
|
2017
|
|
|
2016
|
|
|
B/(W)
|
|
|
2017
|
|
|
2016
|
|
|
B/(W)
|
Revenue
|
|
|
$
|
797
|
|
|
|
$
|
758
|
|
|
|
$
|
39
|
|
|
|
|
$
|
2,246
|
|
|
|
$
|
2,113
|
|
|
|
$
|
133
|
|
|
YoY growth
|
|
|
|
|
|
|
—
|
|
|
|
|
5.1
|
%
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
6.3
|
%
|
|
Gross Margin
|
|
|
|
377
|
|
|
|
|
358
|
|
|
|
|
19
|
|
|
|
|
|
1,066
|
|
|
|
|
1,009
|
|
|
|
|
56
|
|
|
% of revenue
|
|
|
|
47.4
|
%
|
|
|
|
47.2
|
%
|
|
|
0.1
|
|
pts
|
|
|
|
47.5
|
%
|
|
|
|
47.8
|
%
|
|
|
(0.3
|
)
|
pts
|
SG&A
|
|
|
|
(199
|
)
|
|
|
|
(185
|
)
|
|
|
|
(14
|
)
|
|
|
|
|
(592
|
)
|
|
|
|
(546
|
)
|
|
|
|
(46
|
)
|
|
% of revenue
|
|
|
|
25.0
|
%
|
|
|
|
24.5
|
%
|
|
|
(0.5
|
)
|
pts
|
|
|
|
26.3
|
%
|
|
|
|
25.8
|
%
|
|
|
(0.5
|
)
|
pts
|
Income from Continuing Operations before Income Taxes
|
|
|
|
114
|
|
|
|
|
116
|
|
|
|
|
(2
|
)
|
|
|
|
|
313
|
|
|
|
|
200
|
|
|
|
|
113
|
|
|
% of revenue
|
|
|
|
14.3
|
%
|
|
|
|
15.3
|
%
|
|
|
(1.0
|
)
|
pts
|
|
|
|
13.9
|
%
|
|
|
|
9.5
|
%
|
|
|
4.4
|
|
pts
|
Net Income
|
|
|
|
80
|
|
|
|
|
70
|
|
|
|
|
11
|
|
|
|
|
|
204
|
|
|
|
|
124
|
|
|
|
|
80
|
|
|
% of revenue
|
|
|
|
10.1
|
%
|
|
|
|
9.2
|
%
|
|
|
0.9
|
|
pts
|
|
|
|
9.1
|
%
|
|
|
|
5.9
|
%
|
|
|
3.2
|
|
pts
|
Adjusted Net Income
(2)
|
|
|
|
99
|
|
|
|
|
81
|
|
|
|
|
18
|
|
|
|
|
|
238
|
|
|
|
|
221
|
|
|
|
|
17
|
|
|
% of revenue
|
|
|
|
12.5
|
%
|
|
|
|
10.7
|
%
|
|
|
1.7
|
|
pts
|
|
|
|
10.6
|
%
|
|
|
|
10.5
|
%
|
|
|
0.1
|
|
pts
|
Adjusted EBITDA
(1)
|
|
|
|
200
|
|
|
|
|
192
|
|
|
|
|
8
|
|
|
|
|
|
543
|
|
|
|
|
523
|
|
|
|
|
21
|
|
|
% of revenue
|
|
|
|
25.1
|
%
|
|
|
|
25.4
|
%
|
|
|
(0.3
|
)
|
pts
|
|
|
|
24.2
|
%
|
|
|
|
24.7
|
%
|
|
|
(0.6
|
)
|
pts
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
|
81
|
|
|
|
|
(29
|
)
|
|
|
|
110
|
|
|
|
|
|
340
|
|
|
|
|
215
|
|
|
|
|
126
|
|
|
Free Cash Flow
(3)
|
|
|
|
67
|
|
|
|
|
(43
|
)
|
|
|
|
110
|
|
|
|
|
|
293
|
|
|
|
|
170
|
|
|
|
|
123
|
|
|
|
|
|
|
|
|
|
Segment Performance
|
|
|
|
|
Revenue and Adjusted EBITDA for each reportable segment and
Corporate were as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
|
Nine Months Ended September 30,
|
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
|
|
Revenue
|
|
|
Adjusted EBITDA
|
$ millions
|
|
|
2017
|
|
|
B/(W) vs. PY
|
|
|
2017
|
|
|
B/(W) vs. PY
|
|
|
2017
|
|
|
B/(W) vs. PY
|
|
|
2017
|
|
|
B/(W) vs. PY
|
Terminix
|
|
|
$
|
395
|
|
|
$
|
(1
|
)
|
|
|
$
|
82
|
|
|
|
$
|
(10
|
)
|
|
|
|
$
|
1,188
|
|
|
$
|
14
|
|
|
|
$
|
269
|
|
|
|
$
|
(30
|
)
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
(0.3
|
)%
|
|
|
|
20.9
|
%
|
|
|
(2.4
|
)
|
pts
|
|
|
|
|
|
|
1.2
|
%
|
|
|
|
22.6
|
%
|
|
|
(2.8
|
)
|
pts
|
American Home Shield
|
|
|
|
346
|
|
|
|
37
|
|
|
|
|
96
|
|
|
|
|
17
|
|
|
|
|
|
899
|
|
|
|
113
|
|
|
|
|
209
|
|
|
|
|
40
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
12.0
|
%
|
|
|
|
27.8
|
%
|
|
|
2.1
|
|
pts
|
|
|
|
|
|
|
14.4
|
%
|
|
|
|
23.3
|
%
|
|
|
1.7
|
|
pts
|
Franchise Services Group
|
|
|
|
55
|
|
|
|
4
|
|
|
|
|
22
|
|
|
|
|
1
|
|
|
|
|
|
157
|
|
|
|
7
|
|
|
|
|
65
|
|
|
|
|
7
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
7.5
|
%
|
|
|
|
38.9
|
%
|
|
|
(1.3
|
)
|
pts
|
|
|
|
|
|
|
4.3
|
%
|
|
|
|
41.2
|
%
|
|
|
2.9
|
|
pts
|
Corporate
(4)
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
|
1
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
|
|
|
4
|
|
|
Total
|
|
|
$
|
797
|
|
|
$
|
39
|
|
|
|
$
|
200
|
|
|
|
$
|
8
|
|
|
|
|
$
|
2,246
|
|
|
$
|
133
|
|
|
|
$
|
543
|
|
|
|
$
|
21
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
|
5.1
|
%
|
|
|
|
25.1
|
%
|
|
|
(0.3
|
)
|
pts
|
|
|
|
|
|
|
6.3
|
%
|
|
|
|
24.2
|
%
|
|
|
(0.6
|
)
|
pts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliations of net income to adjusted net income and Adjusted
EBITDA, as well as a reconciliation of net cash provided from operating
activities from continuing operations to free cash flow, are set forth
below in this press release.
Terminix
Terminix reported a slight year-over-year revenue decrease in the third
quarter of 2017 as increases in core termite control, termite renewals,
wildlife exclusion, insulation and mosquito sales were offset by a
decline in core pest control revenue which included the expected decline
in revenue associated with the prior acquisition of Alterra Pest
Control. Hurricanes Harvey and Irma also negatively impacted third
quarter revenue by $4 million as the result of 53 branches, primarily in
Texas and Florida, being temporarily closed for a period of time in
August and September. Adjusting for these temporary branch closures and
the impact of Alterra customer attrition, revenue would have grown 2
percent in the third quarter. Adjusted EBITDA decreased 11 percent, or
$10 million, versus prior year, primarily reflecting a $3 million impact
due to the revenue loss from hurricanes Harvey and Irma, a $3 million
increase in termite damage claims, a $2 million increase in insurance
costs, a $2 million increase in sales and marketing costs and a $1
million increase in production labor costs associated with the company’s
effort to improve safety, customer service and retention, offset, in
part, by a $1 million increase in revenue conversion.
American Home Shield
American Home Shield reported a 12 percent year-over-year revenue
increase in the third quarter of 2017 driven by an increase in new unit
sales, improved price realization and the impact of the Landmark
acquisition. AHS’s organic revenue growth was 8 percent in the third
quarter versus prior year. For the quarter, Adjusted EBITDA increased 21
percent, or $17 million, versus prior year, primarily reflecting a $14
million increase from the conversion of higher organic revenue, $4
million associated with the Landmark acquisition, a $3 million
contribution from lower claims costs and a $2 million decrease in other
costs, offset, in part, by a $4 million increase in sales and marketing
costs and a $2 million increase in call center costs. The increase in
sales and marketing costs were driven by the timing of marketing
spending and the increase in call center service costs was driven by an
investment to improve customer service levels.
Franchise Services Group
The Franchise Services Group reported a 7 percent year-over-year revenue
increase in the third quarter of 2017 driven by higher janitorial
national accounts revenue and product sales, offset, in part, by a
decrease in revenue from Merry Maids branches. The favorable impact from
disaster restoration fees associated with hurricanes Harvey and Irma in
the third quarter was in line with the favorable fee impact from the
Alberta, Canada fire cleanup and other significant weather events that
occurred during the same period in 2016. Adjusted EBITDA increased 4
percent, or $1 million, versus prior year, primarily reflecting higher
revenue conversion.
Cash Flow
For the nine months ended September 30, 2017, net cash provided from
operating activities from continuing operations increased to $340
million from $215 million for the nine months ended September 30, 2016.
Net cash provided from operating activities in 2016 included $90 million
in payments related to fumigation matters.
Net cash used for investing activities from continuing operations was
$48 million for the nine months ended September 30, 2017 compared to $90
million for the nine months ended September 30, 2016.
Net cash used for financing activities from continuing operations was
$136 million for the nine months ended September 30, 2017 compared to
$97 million for the nine months ended September 30, 2016. In the nine
months ended September 30, 2017, we used $85 million to purchase 2.2
million shares of company stock compared to $52 million to purchase 1.4
million shares of company stock in the 2016 period. Additionally, we
used $31 million for the nine months ended September 30, 2017 to
purchase a portion of our 7.25% notes maturing in 2038.
Free cash flow(3) was $293 million for the nine months ended
September 30, 2017 compared to $170 million for the nine months ended
September 30, 2016.
Full-Year 2017 Outlook
The company maintains its previous full-year 2017 revenue guidance in
the range of $2,900 million to $2,920 million, reflecting anticipated
growth, primarily at American Home Shield, and resulting in an
anticipated revenue increase of 6 percent compared to 2016. Full-year
2017 Adjusted EBITDA is now anticipated to range from $670 million to
$675 million, or from flat to an increase of 1 percent compared to 2016.
The revision reflects the impact of hurricanes and on-going business
transformation initiatives at Terminix. Our 2017 outlook excludes the
impact of potential acquisitions.
A reconciliation of the forward-looking 2017 Adjusted EBITDA outlook to
net income is not being provided as the company does not currently have
sufficient data to accurately estimate the variables and individual
adjustments for such reconciliation.
Other Matters
American Home Shield Spin-off
On July 26, 2017, the company announced that it intends to separate its
AHS business from the company’s Terminix and Franchise Services Group
businesses by means of a spin-off of the AHS business to company
shareholders, resulting in two publicly traded companies. The spin-off
would create two independent companies each with an enhanced strategic
focus, simplified operating structure, distinct investment identity and
strong financial profile. The transaction is expected to be completed in
the third quarter of 2018, subject to satisfaction of customary
conditions, including the effectiveness of a Registration Statement on
Form 10 to be filed with the SEC, receipt of a favorable ruling from the
IRS concerning certain tax matters and final approval by the company’s
board of directors, and it is intended to qualify as a tax-free
distribution to the company’s shareholders for U.S. federal income tax
purposes.
Fumigation-Related Matters
As previously disclosed, on January 20, 2017, the company entered into a
plea agreement in connection with the investigation initiated by the
United States Department of Justice (“DOJ”) related to the U.S. Virgin
Islands matter. Under the terms of the plea agreement we have agreed to
pay fines, community service and government costs totaling up to $10
million. On March 23, 2017, we pled guilty to four misdemeanor charges.
The sentencing hearing previously scheduled for September 21, 2017 has
been rescheduled for November 20, 2017, due to hurricane activity in the
Caribbean. The plea agreement is non-binding on the court. It is
possible that the court could use its discretion to impose fines or
other terms different than those in the plea agreement. If the plea
agreement is approved by the court, it will resolve the federal criminal
consequences associated with the DOJ investigation.
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. No
shares were repurchased during the third-quarter 2017. As of September
30, 2017, we have repurchased 3.9 million outstanding shares at an
aggregate cost of $145 million under this program.
Third-Quarter 2017 Earnings Conference Call
The company will discuss its third-quarter 2017 financial and operating
results during a conference call at 8 a.m. central time (9 a.m. eastern
time) today, October 31, 2017. To participate on the conference call,
interested parties should call 800.671.7958 (or international
participants, 303.223.4372). 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
November 30, 2017. To access the replay of this call, please call
800.633.8284 and enter reservation number 21860626 (international
participants: 402.977.9140, reservation number 21860626). 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 (cabinet and furniture 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 2017 revenue and Adjusted EBITDA outlook, as well
as statements with respect to the potential separation of AHS from
ServiceMaster and the distribution of AHS shares to ServiceMaster
shareholders, and approval of the U.S. Virgin Islands plea agreement.
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. Such risks, uncertainties
and changes in circumstances include, but are not limited to:
uncertainties as to the timing of the spin-off or whether it will be
completed at all, the results and impact of the announcement of the
proposed spin-off, the failure to satisfy any conditions to complete the
spin-off, the expected tax treatment of the spin-off, the increased
demands on management to prepare for and accomplish the spin-off, the
incurrence of significant transaction costs, the impact of the spin-off
on the businesses of ServiceMaster and AHS, and the failure to achieve
anticipated benefits of the spin-off. 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; 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, as
applicable, 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, as applicable, 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;
income from discontinued operations, net of income taxes; provision for
income taxes; loss on extinguishment of debt and interest expense. 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; income from discontinued operations, net of income taxes; loss on
extinguishment of debt 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 net cash provided from operating
activities from continuing operations less property additions, net of
government grant fundings for 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
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Revenue
|
|
|
$
|
797
|
|
|
$
|
758
|
|
|
$
|
2,246
|
|
|
$
|
2,113
|
Cost of services rendered and products sold
|
|
|
|
419
|
|
|
|
400
|
|
|
|
1,180
|
|
|
|
1,104
|
Selling and administrative expenses
|
|
|
|
199
|
|
|
|
185
|
|
|
|
592
|
|
|
|
546
|
Amortization expense
|
|
|
|
7
|
|
|
|
8
|
|
|
|
20
|
|
|
|
24
|
401(k) Plan corrective contribution
|
|
|
|
(4)
|
|
|
|
—
|
|
|
|
(3)
|
|
|
|
1
|
Fumigation related matters
|
|
|
|
—
|
|
|
|
1
|
|
|
|
2
|
|
|
|
92
|
Insurance reserve adjustment
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
23
|
Impairment of software and other related costs
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
|
1
|
Restructuring charges
|
|
|
|
21
|
|
|
|
8
|
|
|
|
24
|
|
|
|
13
|
Gain on sale of Merry Maids branches
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(2)
|
Interest expense
|
|
|
|
38
|
|
|
|
39
|
|
|
|
113
|
|
|
|
115
|
Interest and net investment income
|
|
|
|
(1)
|
|
|
|
(1)
|
|
|
|
(3)
|
|
|
|
(5)
|
Loss on extinguishment of debt
|
|
|
|
3
|
|
|
|
—
|
|
|
|
6
|
|
|
|
—
|
Income from Continuing Operations before Income Taxes
|
|
|
|
114
|
|
|
|
116
|
|
|
|
313
|
|
|
|
200
|
Provision for income taxes
|
|
|
|
34
|
|
|
|
46
|
|
|
|
109
|
|
|
|
76
|
Income from Continuing Operations
|
|
|
|
80
|
|
|
|
70
|
|
|
|
204
|
|
|
|
124
|
Income from discontinued operations, net of income taxes
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
|
—
|
Net Income
|
|
|
$
|
80
|
|
|
$
|
70
|
|
|
$
|
204
|
|
|
$
|
124
|
Total Comprehensive Income
|
|
|
$
|
83
|
|
|
$
|
71
|
|
|
$
|
208
|
|
|
$
|
126
|
Weighted-average common shares outstanding - Basic
|
|
|
|
134.3
|
|
|
|
135.1
|
|
|
|
134.2
|
|
|
|
135.4
|
Weighted-average common shares outstanding - Diluted
|
|
|
|
135.2
|
|
|
|
137.1
|
|
|
|
135.4
|
|
|
|
137.5
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
$
|
0.60
|
|
|
$
|
0.52
|
|
|
$
|
1.52
|
|
|
$
|
0.92
|
Net Income
|
|
|
|
0.60
|
|
|
|
0.52
|
|
|
|
1.52
|
|
|
|
0.91
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
|
$
|
0.59
|
|
|
$
|
0.51
|
|
|
$
|
1.50
|
|
|
$
|
0.90
|
Net Income
|
|
|
|
0.59
|
|
|
|
0.51
|
|
|
|
1.51
|
|
|
|
0.90
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
Consolidated Statements of Financial Position
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
|
As of
|
|
|
|
September 30,
|
|
|
December 31,
|
|
|
|
2017
|
|
|
2016
|
Assets:
|
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
$
|
456
|
|
|
$
|
291
|
Marketable securities
|
|
|
|
14
|
|
|
|
25
|
Receivables, less allowances of $23 and $22, respectively
|
|
|
|
619
|
|
|
|
536
|
Inventories
|
|
|
|
42
|
|
|
|
43
|
Prepaid expenses and other assets
|
|
|
|
88
|
|
|
|
70
|
Deferred customer acquisition costs
|
|
|
|
40
|
|
|
|
34
|
Total Current Assets
|
|
|
|
1,259
|
|
|
|
998
|
Other Assets:
|
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
|
221
|
|
|
|
210
|
Goodwill
|
|
|
|
2,255
|
|
|
|
2,247
|
Intangible assets, primarily trade names, service marks and
trademarks, net
|
|
|
|
1,698
|
|
|
|
1,708
|
Restricted cash
|
|
|
|
89
|
|
|
|
95
|
Notes receivable
|
|
|
|
40
|
|
|
|
37
|
Long-term marketable securities
|
|
|
|
19
|
|
|
|
19
|
Other assets
|
|
|
|
66
|
|
|
|
71
|
Total Assets
|
|
|
$
|
5,647
|
|
|
$
|
5,386
|
Liabilities and Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
|
$
|
123
|
|
|
$
|
112
|
Accrued liabilities:
|
|
|
|
|
|
|
|
|
Payroll and related expenses
|
|
|
|
56
|
|
|
|
54
|
Self-insured claims and related expenses
|
|
|
|
127
|
|
|
|
111
|
Accrued interest payable
|
|
|
|
18
|
|
|
|
16
|
Other
|
|
|
|
92
|
|
|
|
60
|
Deferred revenue
|
|
|
|
666
|
|
|
|
629
|
Current portion of long-term debt
|
|
|
|
146
|
|
|
|
59
|
Total Current Liabilities
|
|
|
|
1,227
|
|
|
|
1,042
|
Long-Term Debt
|
|
|
|
2,654
|
|
|
|
2,772
|
Other Long-Term Liabilities:
|
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
|
745
|
|
|
|
719
|
Other long-term obligations, primarily self-insured claims
|
|
|
|
168
|
|
|
|
167
|
Total Other Long-Term Liabilities
|
|
|
|
913
|
|
|
|
886
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
|
Shareholders' Equity:
|
|
|
|
|
|
|
|
|
Common stock $0.01 par value (authorized 2,000,000,000 shares with
146,540,700 shares issued and 135,020,815 outstanding at September
30, 2017 and 144,339,338 shares issued and 135,030,283 outstanding
at December 31, 2016)
|
|
|
|
2
|
|
|
|
2
|
Additional paid-in capital
|
|
|
|
2,317
|
|
|
|
2,274
|
Accumulated deficit
|
|
|
|
(1,201)
|
|
|
|
(1,405)
|
Accumulated other comprehensive income (loss)
|
|
|
|
1
|
|
|
|
(3)
|
Less common stock held in treasury, at cost (11,519,885 shares at
September 30, 2017 and 9,309,055 shares at December 31, 2016)
|
|
|
|
(267)
|
|
|
|
(182)
|
Total Shareholders' Equity
|
|
|
|
852
|
|
|
|
686
|
Total Liabilities and Shareholders' Equity
|
|
|
$
|
5,647
|
|
|
$
|
5,386
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
Consolidated Statements of Cash Flows
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
2017
|
|
|
2016
|
Cash and Cash Equivalents and Restricted Cash at Beginning of
Period
|
|
|
$
|
386
|
|
|
$
|
296
|
Cash Flows from Operating Activities from Continuing Operations:
|
|
|
|
|
|
|
|
|
Net Income
|
|
|
|
204
|
|
|
|
124
|
Adjustments to reconcile net income to net cash provided from
operating activities:
|
|
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
(1)
|
|
|
|
—
|
Depreciation expense
|
|
|
|
56
|
|
|
|
43
|
Amortization expense
|
|
|
|
20
|
|
|
|
24
|
Amortization of debt issuance costs
|
|
|
|
4
|
|
|
|
3
|
401(k) Plan corrective contribution
|
|
|
|
(3)
|
|
|
|
1
|
Fumigation related matters
|
|
|
|
2
|
|
|
|
92
|
Payments on fumigation related matters
|
|
|
|
(2)
|
|
|
|
(90)
|
Insurance reserve adjustment
|
|
|
|
—
|
|
|
|
23
|
Impairment of software and other related costs
|
|
|
|
2
|
|
|
|
1
|
Gain on sale of Merry Maids branches
|
|
|
|
—
|
|
|
|
(2)
|
Loss on extinguishment of debt
|
|
|
|
6
|
|
|
|
—
|
Deferred income tax provision
|
|
|
|
27
|
|
|
|
12
|
Stock-based compensation expense
|
|
|
|
10
|
|
|
|
10
|
Gain on sale of marketable securities
|
|
|
|
—
|
|
|
|
(3)
|
Restructuring charges
|
|
|
|
24
|
|
|
|
13
|
Cash payments related to restructuring charges
|
|
|
|
(8)
|
|
|
|
(7)
|
Other
|
|
|
|
14
|
|
|
|
5
|
Change in working capital, net of acquisitions:
|
|
|
|
|
|
|
|
|
Receivables
|
|
|
|
(81)
|
|
|
|
(81)
|
Inventories and other current assets
|
|
|
|
(8)
|
|
|
|
(9)
|
Accounts payable
|
|
|
|
13
|
|
|
|
18
|
Deferred revenue
|
|
|
|
35
|
|
|
|
40
|
Accrued liabilities
|
|
|
|
17
|
|
|
|
(5)
|
Accrued interest payable
|
|
|
|
3
|
|
|
|
(6)
|
Current income taxes
|
|
|
|
3
|
|
|
|
6
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
|
340
|
|
|
|
215
|
Cash Flows from Investing Activities from Continuing Operations:
|
|
|
|
|
|
|
|
|
Property additions
|
|
|
|
(50)
|
|
|
|
(45)
|
Government grant fundings for property additions
|
|
|
|
2
|
|
|
|
—
|
Sale of equipment and other assets
|
|
|
|
4
|
|
|
|
7
|
Business acquisitions, net of cash acquired
|
|
|
|
(12)
|
|
|
|
(86)
|
Purchases of available-for-sale securities
|
|
|
|
(9)
|
|
|
|
(6)
|
Sales and maturities of available-for-sale securities
|
|
|
|
23
|
|
|
|
48
|
Origination of notes receivable
|
|
|
|
(80)
|
|
|
|
(78)
|
Collections on notes receivable
|
|
|
|
76
|
|
|
|
73
|
Other investments
|
|
|
|
(1)
|
|
|
|
(3)
|
Net Cash Used for Investing Activities from Continuing Operations
|
|
|
|
(48)
|
|
|
|
(90)
|
Cash Flows from Financing Activities from Continuing Operations:
|
|
|
|
|
|
|
|
|
Payments of debt
|
|
|
|
(78)
|
|
|
|
(50)
|
Call premium paid on retirement of debt
|
|
|
|
(1)
|
|
|
|
—
|
Repurchase of common stock
|
|
|
|
(85)
|
|
|
|
(52)
|
Issuance of common stock
|
|
|
|
27
|
|
|
|
6
|
Net Cash Used for Financing Activities from Continuing Operations
|
|
|
|
(136)
|
|
|
|
(97)
|
Cash Flows from Discontinued Operations:
|
|
|
|
|
|
|
|
|
Cash provided from operating activities
|
|
|
|
1
|
|
|
|
—
|
Net Cash Provided from Discontinued Operations
|
|
|
|
1
|
|
|
|
—
|
Effect of Exchange Rate Changes on Cash
|
|
|
|
1
|
|
|
|
—
|
Cash Increase During the Period
|
|
|
|
159
|
|
|
|
28
|
Cash and Cash Equivalents and Restricted Cash at End of Period
|
|
|
$
|
545
|
|
|
$
|
325
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net income to adjusted
net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
(In millions)
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Net Income
|
|
|
$
|
80
|
|
|
|
$
|
70
|
|
|
|
$
|
204
|
|
|
|
$
|
124
|
|
Amortization expense
|
|
|
|
7
|
|
|
|
|
8
|
|
|
|
|
20
|
|
|
|
|
24
|
|
401(k) Plan corrective contribution
|
|
|
|
(4
|
)
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
|
|
|
1
|
|
Fumigation related matters
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
|
2
|
|
|
|
|
92
|
|
Insurance reserve adjustment
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
23
|
|
Restructuring charges
|
|
|
|
21
|
|
|
|
|
8
|
|
|
|
|
24
|
|
|
|
|
13
|
|
Gain on sale of Merry Maids branches
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
Impairment of software and other related costs
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
2
|
|
|
|
|
1
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
Loss on extinguishment of debt
|
|
|
|
3
|
|
|
|
|
—
|
|
|
|
|
6
|
|
|
|
|
—
|
|
Tax impact of adjustments
|
|
|
|
(9
|
)
|
|
|
|
(7
|
)
|
|
|
|
(18
|
)
|
|
|
|
(56
|
)
|
Adjusted Net Income
|
|
|
$
|
99
|
|
|
|
$
|
81
|
|
|
|
$
|
238
|
|
|
|
$
|
221
|
|
Weighted-average diluted common shares outstanding
|
|
|
|
135.2
|
|
|
|
|
137.1
|
|
|
|
|
135.4
|
|
|
|
|
137.5
|
|
Adjusted earnings per share
|
|
|
$
|
0.73
|
|
|
|
$
|
0.59
|
|
|
|
$
|
1.75
|
|
|
|
$
|
1.61
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net cash provided from
operating activities from continuing operations to free cash flow.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
(In millions)
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
$
|
81
|
|
|
|
$
|
(29
|
)
|
|
|
$
|
340
|
|
|
|
$
|
215
|
|
Property additions, net of Government grant fundings for property
additions
|
|
|
|
(14
|
)
|
|
|
|
(14
|
)
|
|
|
|
(48
|
)
|
|
|
|
(45
|
)
|
Free Cash Flow
|
|
|
$
|
67
|
|
|
|
$
|
(43
|
)
|
|
|
$
|
293
|
|
|
|
$
|
170
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net income to Adjusted
EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
September 30,
|
(In millions)
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
|
|
2016
|
Net income
|
|
|
$
|
80
|
|
|
|
$
|
70
|
|
|
$
|
204
|
|
|
|
$
|
124
|
|
Depreciation and amortization expense
|
|
|
|
26
|
|
|
|
|
24
|
|
|
|
77
|
|
|
|
|
68
|
|
401(k) Plan corrective contribution
|
|
|
|
(4
|
)
|
|
|
|
—
|
|
|
|
(3
|
)
|
|
|
|
1
|
|
Fumigation related matters
|
|
|
|
—
|
|
|
|
|
1
|
|
|
|
2
|
|
|
|
|
92
|
|
Insurance reserve adjustment
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
23
|
|
Non-cash stock-based compensation expense
|
|
|
|
1
|
|
|
|
|
3
|
|
|
|
10
|
|
|
|
|
10
|
|
Restructuring charges
|
|
|
|
21
|
|
|
|
|
8
|
|
|
|
24
|
|
|
|
|
13
|
|
Gain on sale of Merry Maids branches
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(2
|
)
|
Non-cash impairment of software and other related costs
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
2
|
|
|
|
|
1
|
|
Income from discontinued operations, net of income taxes
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
|
|
—
|
|
Provision for income taxes
|
|
|
|
34
|
|
|
|
|
46
|
|
|
|
109
|
|
|
|
|
76
|
|
Loss on extinguishment of debt
|
|
|
|
3
|
|
|
|
|
—
|
|
|
|
6
|
|
|
|
|
—
|
|
Interest expense
|
|
|
|
38
|
|
|
|
|
39
|
|
|
|
113
|
|
|
|
|
115
|
|
Other non-operating expenses
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
Adjusted EBITDA
|
|
|
$
|
200
|
|
|
|
$
|
192
|
|
|
$
|
543
|
|
|
|
$
|
523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminix
|
|
|
$
|
82
|
|
|
|
$
|
92
|
|
|
$
|
269
|
|
|
|
$
|
299
|
|
American Home Shield
|
|
|
|
96
|
|
|
|
|
79
|
|
|
|
209
|
|
|
|
|
170
|
|
Franchise Services Group
|
|
|
|
22
|
|
|
|
|
21
|
|
|
|
65
|
|
|
|
|
58
|
|
Corporate
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
|
|
|
(3
|
)
|
Adjusted EBITDA
|
|
|
$
|
200
|
|
|
|
$
|
192
|
|
|
$
|
543
|
|
|
|
$
|
523
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminix Segment
|
Revenue by service line is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
|
2017
|
|
|
2016
|
|
|
Growth
|
|
|
Acquired
|
|
|
Organic
|
Pest Control (1)
|
|
|
$
|
228
|
|
|
$
|
234
|
|
|
$
|
(6
|
)
|
|
|
(3
|
)%
|
|
|
$
|
1
|
|
|
1
|
%
|
|
|
$
|
(7
|
)
|
|
|
(3
|
)%
|
Termite and Other Services (2)
|
|
|
|
144
|
|
|
|
140
|
|
|
|
4
|
|
|
|
3
|
%
|
|
|
|
—
|
|
|
—
|
%
|
|
|
|
3
|
|
|
|
2
|
%
|
Other
|
|
|
|
23
|
|
|
|
22
|
|
|
|
1
|
|
|
|
3
|
%
|
|
|
|
—
|
|
|
—
|
%
|
|
|
|
1
|
|
|
|
3
|
%
|
Total revenue
|
|
|
$
|
395
|
|
|
$
|
396
|
|
|
$
|
(1
|
)
|
|
|
—
|
%
|
|
|
$
|
2
|
|
|
—
|
%
|
|
|
$
|
(3
|
)
|
|
|
(1
|
)%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
For the three months ended September 30, 2017, organic pest control
revenue decreased 3 percent compared to prior year, which was
significantly impacted by a $5 million organic revenue decline
associated with Alterra. Excluding Alterra, organic pest control
revenue decreased $3 million, or one percent.
|
(2)
|
|
Termite renewal revenue comprised 50 percent and 51 percent of total
revenue from Termite and Other Services for the third quarter of
2017 and 2016, respectively.
|
|
|
|
|
|
|
|
|
American Home Shield Segment
|
|
|
|
|
The table below presents selected operating metrics related to
renewable customer counts and customer retention.
|
|
|
|
|
|
|
|
|
|
|
|
|
As of September 30,
|
|
|
2017
(1)
|
|
2016
(1)
|
Growth in Home Warranties
|
|
10%
|
|
10%
|
Customer Retention Rate
|
|
75%
|
|
76%
|
(1)
|
|
As of September 30, 2017 and 2016, excluding the impact of
acquisitions, the growth in home warranties was 6 percent and 7
percent, respectively, and the customer retention rate for our
American Home Shield segment was 76 percent and 75 percent,
respectively.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Franchise Services Group Segment
|
|
|
|
|
|
|
|
|
|
|
|
Revenue by service line is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
% of
|
|
|
|
September 30,
|
|
|
Revenue
|
(In millions)
|
|
|
2017
|
|
|
2016
|
|
|
2017
|
Royalty Fees
|
|
|
$
|
32
|
|
|
$
|
32
|
|
|
58
|
%
|
Company-Owned Merry Maids Branches
|
|
|
|
—
|
|
|
|
1
|
|
|
—
|
|
Janitorial National Accounts
|
|
|
|
15
|
|
|
|
12
|
|
|
26
|
|
Sales of Products
|
|
|
|
5
|
|
|
|
4
|
|
|
9
|
|
Other
|
|
|
|
4
|
|
|
|
3
|
|
|
7
|
|
Total revenue
|
|
|
$
|
55
|
|
|
$
|
51
|
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ServiceMaster Global Holdings, Inc.
Investor Relations:
Brian Turcotte, 901-597-3282
Brian.Turcotte@servicemaster.com
or
Media:
Peter Tosches, 901-597-8449
Peter.Tosches@servicemaster.com