First-Quarter 2018 Results
- Revenue increased five percent to $675 million
- Net income of $40 million, or $0.30 per share, in the first quarter, versus $39 million, or $0.29 per share, a year ago
- Adjusted net income (1) of $59 million, or $0.44 per share, in the first quarter, versus $46 million, or $0.34 per share, a year ago
- Adjusted EBITDA (2) increased five percent to $141 million for first quarter, versus $134 million a year ago
- Continued strong cash flow conversion for the first quarter with net cash provided from operating activities from continuing operations of $142 million and free cash flow (3) of $119 million, up 10 percent versus a year ago
- Completed Copesan Services, Inc. acquisition on March 30, 2018
Full-Year 2018 Outlook
- Due primarily to the projected impact of the Copesan acquisition, increasing revenue guidance by $70 million to between $3,085 million and $3,115 million, or growth over prior year between six percent and seven percent, and increasing Adjusted EBITDA guidance by $5 million to between $695 million and $710 million, or growth between two percent and five percent over prior year.
ServiceMaster
Global Holdings, Inc. (NYSE: SERV), a leading provider of
essential residential and commercial services, today announced unaudited
first-quarter 2018 results.
For the first quarter, the company reported a year-over-year revenue
increase of five percent. The increase in revenue was driven primarily
by nine percent organic growth at American Home Shield (“AHS”) and 14
percent organic growth at Franchise Services Group (“FSG”).
First-quarter 2018 net income was $40 million, or $0.30 per share,
versus $39 million, or $0.29 per share, in the same period in 2017.
First-quarter 2018 Adjusted EBITDA was $141 million, a year-over-year
increase of $7 million, or five percent, primarily driven by a $5
million increase at Terminix despite the impact of unfavorable weather
conditions on revenue and Adjusted EBITDA in 2018. First-quarter 2018
adjusted net income was $59 million, or $0.44 per share versus $46
million, or $0.34 per share, for the same period in 2017. Adjusted net
income was $14 million or 30% higher in the first quarter of 2018 due to
a lower effective income tax rate from the enactment of tax reform, and
higher year-over-year Adjusted EBITDA.
“In the first quarter, we made solid progress executing on our
strategies to drive long-term growth and deliver value for
shareholders,” said Chief Executive Officer Nik Varty. “Strong revenue
increases at American Home Shield and the Franchise Services Group
reflect our continued focus on generating growth through improving and
investing in customer service. In addition, we continued to make
progress on the Terminix transformation across our branches, enabling
route technicians to deliver exceptional customer experience as
evidenced by continued improvement in net promoter scores. These efforts
were supported by a significant improvement in aligning our field
incentive pay programs with critical performance metrics,” said Varty.
“During the quarter, we also closed the Copesan transaction as planned,
providing Terminix with improved capabilities in commercial pest
management through the addition of Copesan’s significant expertise,
system capabilities and processes for delivering pest management
solutions to sophisticated, national commercial customers,” Varty added.
“Finally, our previously announced spin-off of AHS is moving forward and
remains on track for the third quarter of 2018.”
|
|
|
|
|
|
|
|
|
|
|
|
|
Consolidated Performance
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
$ millions
|
|
2018
|
|
2017
|
|
B/(W)
|
Revenue
|
|
$
|
675
|
|
|
|
$
|
643
|
|
|
|
$
|
32
|
|
|
YoY growth
|
|
|
|
|
|
|
—
|
|
|
|
|
5.0
|
|
%
|
Gross Margin
|
|
|
313
|
|
|
|
|
297
|
|
|
|
|
17
|
|
|
% of revenue
|
|
|
46.4
|
|
%
|
|
|
46.2
|
|
%
|
|
|
0.3
|
|
pts
|
SG&A
|
|
|
(197
|
)
|
|
|
|
(186
|
)
|
|
|
|
(11
|
)
|
|
% of revenue
|
|
|
29.2
|
|
%
|
|
|
28.9
|
|
%
|
|
|
(0.2
|
)
|
pts
|
Income from Continuing Operations before Income Taxes
|
|
|
54
|
|
|
|
|
62
|
|
|
|
|
(7
|
)
|
|
% of revenue
|
|
|
8.1
|
|
%
|
|
|
9.6
|
|
%
|
|
|
(1.5
|
)
|
pts
|
Net Income
|
|
|
40
|
|
|
|
|
39
|
|
|
|
|
1
|
|
|
% of revenue
|
|
|
5.9
|
|
%
|
|
|
6.1
|
|
%
|
|
|
(0.1
|
)
|
pts
|
Adjusted Net Income
(2)
|
|
|
59
|
|
|
|
|
46
|
|
|
|
|
14
|
|
|
% of revenue
|
|
|
8.8
|
|
%
|
|
|
7.2
|
|
%
|
|
|
1.7
|
|
pts
|
Adjusted EBITDA
(1)
|
|
|
141
|
|
|
|
|
134
|
|
|
|
|
7
|
|
|
% of revenue
|
|
|
20.9
|
|
%
|
|
|
20.8
|
|
%
|
|
|
0.1
|
|
pts
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
142
|
|
|
|
|
126
|
|
|
|
|
15
|
|
|
Free Cash Flow
(3)
|
|
|
119
|
|
|
|
|
109
|
|
|
|
|
10
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
Segment Performance
|
Revenue and Adjusted EBITDA for each reportable segment and
Corporate were as follows:
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|
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|
|
|
|
|
|
|
|
|
|
|
Three Months Ended March 31,
|
|
|
Revenue
|
|
Adjusted EBITDA
|
$ millions
|
|
2018
|
|
B/(W) vs. PY
|
|
2018
|
|
B/(W) vs. PY
|
Terminix
|
|
$
|
368
|
|
$
|
2
|
|
|
$
|
86
|
|
|
$
|
5
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
0.6
|
%
|
|
|
23.4
|
%
|
|
|
1.1
|
|
pts
|
American Home Shield
|
|
|
247
|
|
|
20
|
|
|
|
32
|
|
|
|
2
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
8.6
|
%
|
|
|
13.1
|
%
|
|
|
(0.3
|
)
|
pts
|
Franchise Services Group
|
|
|
60
|
|
|
10
|
|
|
|
23
|
|
|
|
1
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
20.6
|
%
|
|
|
37.8
|
%
|
|
|
(5.5
|
)
|
pts
|
Corporate
(4)
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Total
|
|
$
|
675
|
|
$
|
32
|
|
|
$
|
141
|
|
|
$
|
7
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
5.0
|
%
|
|
|
20.9
|
%
|
|
|
0.1
|
|
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 one percent year-over-year revenue increase in the
first quarter of 2018, reflecting an increase in termite renewals and
wildlife exclusion, offset, in part, by a decline in termite completion
and other services revenue, driven primarily by unfavorable weather
conditions in the first quarter of 2018. Adjusted EBITDA increased six
percent, or $5 million, versus prior year, largely reflecting a $3
million reduction in bad debt expense driven by enhanced credit policies
and collection rates, a $2 million decrease in chemicals and materials
costs due to sourcing savings, a $1 million increase in revenue
conversion and a $1 million decrease in production labor costs, offset
by a $3 million increase in sales and marketing costs due to targeted
marketing investments to drive sales growth and a change in the timing
of our recognition of sales costs, driven by the adoption of the new
revenue recognition accounting standards. We estimate that the revenue
increase would have been approximately $3 million, or 1%, higher if not
for the unfavorable weather conditions in 2018.
American Home Shield
American Home Shield reported a nine percent year-over-year revenue
increase in the first quarter of 2018 driven by new unit sales growth
and improved price realization. Adjusted EBITDA increased six percent
versus prior year, primarily reflecting a $13 million increase from the
conversion of higher organic revenue, offset, in part, by a $6 million
increase in claims costs due primarily to higher incidence rates for
heating systems driven by significantly colder winter temperatures in
2018, a $3 million increase in sales and marketing costs and a $2
million increase in customer care center costs. The increase in sales
and marketing costs was driven by targeted spending to drive sales
growth, primarily in the direct to consumer channel, and the increase in
customer care center costs was to deliver a new level of customer
experience.
Franchise Services Group
The Franchise Services Group reported a 21 percent year-over-year
revenue increase in the first quarter of 2018 driven by higher royalty
fee revenue related to disaster restoration services and janitorial
national accounts revenue, as well as the recognition of $3 million of
national advertising fund franchisee contributions pursuant to our
adoption of a new accounting rule regarding revenue recognition that
took effect on January 1, 2018. Prior to 2018, contributions to the
national advertising fund made by our franchisees were treated as an
offset to advertising expense. The adoption of this accounting standards
change, therefore, increased revenue by $3 million but had no impact on
Adjusted EBITDA. Adjusted EBITDA increased five percent, or $1 million,
versus prior year, primarily reflecting $2 million from increased
revenues, offset, in part, by a $1 million increase in general and
administrative costs.
Cash Flow
For the three months ended March 31, 2018, net cash provided from
operating activities from continuing operations increased to $142
million from $126 million for the three months ended March 31, 2017.
Net cash used for investing activities from continuing operations was
$112 million for the three months ended March 31, 2018, compared to $31
million for the three months ended March 31, 2017. Net cash used for
investing activities in the three months ended March 31, 2018, included
$92 million of payments for the Copesan acquisition, net of cash
acquired.
Net cash used for financing activities from continuing operations was
$93 million for the three months ended March 31, 2018, compared to $60
million for the three months ended March 31, 2017. During the three
months ended March 31, 2018, we used $79 million to repay our 2018 Notes
which matured during the quarter. In the three months ended March 31,
2017, we used $51 million to purchase 1.3 million shares of company
stock.
Free cash flow(3) was $119 million for three months ended
March 31, 2018, compared to $109 million for the three months ended
March 31, 2017. No federal income tax payments were made in the first
quarter of 2018, so there was no impact from tax reform on net cash
provided from operating activities or Free Cash Flow.
Full-Year 2018 Outlook
The 2018 outlook assumes AHS remains with the company for the full year
and excludes the impact of any increases to operating costs related to
the planned separation of AHS in the third quarter of 2018 and any
future potential acquisitions.
The company now expects full-year 2018 revenue to range from $3,085
million to $3,115 million, or an increase of six to seven percent
compared to 2017. The increase in the revenue outlook primarily reflects
the projected impact of the Copesan acquisition at Terminix and also
includes the adoption of a new accounting rule regarding revenue
recognition as of January 1, 2018, at FSG. Full-year 2018 Adjusted
EBITDA is anticipated to now range from $695 million to $710 million, or
an increase of between two percent and five percent compared to 2017,
primarily due to the projected impact of the Copesan acquisition.
The company expects organic revenue growth at Terminix to range from one
percent to two percent for full-year 2018 compared to prior year. The
company expects high single-digit organic revenue growth at AHS and
mid-single-digit organic revenue growth at the FSG for full-year 2018
compared to prior year. Organic revenue growth excludes revenue from
acquired customers for 12 months following the acquisition date.
A reconciliation of the forward-looking 2018 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 its 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 is designed to
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,
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.
Copesan Services, Inc. Transaction
On March 30, 2018, the company announced the closing of its transaction
with Copesan Services, Inc., one of the largest national providers of
commercial pest management in the country. This combination will
significantly improve Terminix’s capabilities in commercial pest control
as Copesan, under its brand, provides us with significant expertise,
reputation and processes for delivering pest management solutions to
sophisticated commercial customers. This reinforces the strong
commitment ServiceMaster has made to focus on and grow the Terminix
commercial pest control business.
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 first-quarter 2018. As of March 31,
2018, we have repurchased 3.9 million outstanding shares at an aggregate
cost of $145 million under this program.
First-Quarter 2018 Earnings Conference Call
The company will discuss its first-quarter 2018 financial and operating
results during a conference call at 8 a.m. central time (9 a.m. eastern
time) today, May 1, 2018. To participate on the conference call,
interested parties should call 800.616.4707 (or international
participants, 303.223.4371). 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 May
31, 2018. To access the replay of this call, please call 800.633.8284
and enter reservation number 21887975 (international participants:
402.977.9140, reservation number 21887975). 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 service plans), 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 2018 revenue and Adjusted EBITDA outlook and
organic revenue growth projections, as well as statements with respect
to the potential separation of AHS from ServiceMaster and the
distribution of AHS shares to ServiceMaster shareholders.
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 performance and
liquidity 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 net income is defined as net income before: amortization
expense; 401(k) Plan corrective contribution; fumigation related
matters; insurance reserve adjustment; restructuring charges; American
Home Shield spin-off charges; gain on sale of Merry Maids branches;
impairment of software and other related costs; (income) loss from
discontinued operations, net of income taxes; loss on extinguishment of
debt; and the tax impact of the aforementioned adjustments and the
impact of tax law change on deferred taxes. 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.
(2) 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; American Home Shield
spin-off charges; gain on sale of Merry Maids branches; non-cash
impairment of software and other related costs; (gain) loss 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.
(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 corporate
functions.
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
Consolidated Statements of Operations and Comprehensive Income
|
(In millions, except per share data)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
|
2017
|
Revenue
|
|
$
|
675
|
|
$
|
643
|
Cost of services rendered and products sold
|
|
|
361
|
|
|
346
|
Selling and administrative expenses
|
|
|
197
|
|
|
186
|
Amortization expense
|
|
|
5
|
|
|
7
|
Fumigation related matters
|
|
|
—
|
|
|
1
|
Impairment of software and other related costs
|
|
|
—
|
|
|
2
|
Restructuring charges
|
|
|
12
|
|
|
2
|
American Home Shield spin-off charges
|
|
|
7
|
|
|
—
|
Interest expense
|
|
|
37
|
|
|
37
|
Income from Continuing Operations before Income Taxes
|
|
|
54
|
|
|
62
|
Provision for income taxes
|
|
|
14
|
|
|
24
|
Income from Continuing Operations
|
|
|
40
|
|
|
38
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
1
|
Net Income
|
|
$
|
40
|
|
$
|
39
|
Total Comprehensive Income
|
|
$
|
50
|
|
$
|
40
|
Weighted-average common shares outstanding - Basic
|
|
|
135.2
|
|
|
134.5
|
Weighted-average common shares outstanding - Diluted
|
|
|
135.6
|
|
|
136.0
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
0.30
|
|
$
|
0.28
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
—
|
Net Income
|
|
|
0.30
|
|
|
0.29
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
0.30
|
|
$
|
0.28
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
—
|
Net Income
|
|
|
0.30
|
|
|
0.29
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
Consolidated Statements of Financial Position
|
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
March 31,
|
|
December 31,
|
|
|
2018
|
|
2017
|
Assets:
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
411
|
|
|
$
|
475
|
|
Marketable securities
|
|
|
25
|
|
|
|
25
|
|
Receivables, less allowances of $22 and $23, respectively
|
|
|
169
|
|
|
|
570
|
|
Inventories
|
|
|
44
|
|
|
|
41
|
|
Prepaid expenses and other assets
|
|
|
90
|
|
|
|
94
|
|
Deferred customer acquisition costs
|
|
|
—
|
|
|
|
36
|
|
Total Current Assets
|
|
|
739
|
|
|
|
1,242
|
|
Other Assets:
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
239
|
|
|
|
237
|
|
Goodwill
|
|
|
2,353
|
|
|
|
2,256
|
|
Intangible assets, primarily trade names, service marks and
trademarks, net
|
|
|
1,742
|
|
|
|
1,692
|
|
Restricted cash
|
|
|
89
|
|
|
|
89
|
|
Notes receivable
|
|
|
41
|
|
|
|
41
|
|
Long-term marketable securities
|
|
|
21
|
|
|
|
22
|
|
Deferred customer acquisition costs
|
|
|
78
|
|
|
|
—
|
|
Other assets
|
|
|
80
|
|
|
|
68
|
|
Total Assets
|
|
$
|
5,383
|
|
|
$
|
5,646
|
|
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
126
|
|
|
$
|
115
|
|
Accrued liabilities:
|
|
|
|
|
|
|
Payroll and related expenses
|
|
|
53
|
|
|
|
63
|
|
Self-insured claims and related expenses
|
|
|
100
|
|
|
|
117
|
|
Accrued interest payable
|
|
|
18
|
|
|
|
15
|
|
Other
|
|
|
81
|
|
|
|
56
|
|
Deferred revenue
|
|
|
318
|
|
|
|
663
|
|
Current portion of long-term debt
|
|
|
64
|
|
|
|
144
|
|
Total Current Liabilities
|
|
|
761
|
|
|
|
1,174
|
|
Long-Term Debt
|
|
|
2,676
|
|
|
|
2,643
|
|
Other Long-Term Liabilities:
|
|
|
|
|
|
|
Deferred taxes
|
|
|
521
|
|
|
|
493
|
|
Other long-term obligations, primarily self-insured claims
|
|
|
185
|
|
|
|
169
|
|
Total Other Long-Term Liabilities
|
|
|
706
|
|
|
|
662
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
Common stock $0.01 par value (authorized 2,000,000,000 shares with
146,906,996 shares issued and 135,384,626 outstanding at March 31,
2018 and 146,662,232 shares issued and 135,141,048 outstanding at
December 31, 2017)
|
|
|
2
|
|
|
|
2
|
|
Additional paid-in capital
|
|
|
2,328
|
|
|
|
2,321
|
|
Accumulated deficit
|
|
|
(841
|
)
|
|
|
(895
|
)
|
Accumulated other comprehensive income
|
|
|
17
|
|
|
|
5
|
|
Less common stock held in treasury, at cost (11,522,370 shares at
March 31, 2018 and 11,521,184 shares at December 31, 2017)
|
|
|
(267
|
)
|
|
|
(267
|
)
|
Total Stockholders' Equity
|
|
|
1,239
|
|
|
|
1,167
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
5,383
|
|
|
$
|
5,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
Consolidated Statements of Cash Flows
|
(In millions)
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
|
|
2018
|
|
2017
|
Cash and Cash Equivalents and Restricted Cash at Beginning of
Period
|
|
$
|
563
|
|
|
$
|
386
|
|
Cash Flows from Operating Activities from Continuing Operations:
|
|
|
|
|
|
|
Net Income
|
|
|
40
|
|
|
|
39
|
|
Adjustments to reconcile net income to net cash provided from
operating activities:
|
|
|
|
|
|
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
(1
|
)
|
Depreciation expense
|
|
|
20
|
|
|
|
18
|
|
Amortization expense
|
|
|
5
|
|
|
|
7
|
|
Amortization of debt issuance costs
|
|
|
1
|
|
|
|
1
|
|
Fumigation related matters
|
|
|
—
|
|
|
|
1
|
|
Payments on fumigation related matters
|
|
|
—
|
|
|
|
(1
|
)
|
Impairment of software and other related costs
|
|
|
—
|
|
|
|
2
|
|
Deferred income tax provision
|
|
|
2
|
|
|
|
—
|
|
Stock-based compensation expense
|
|
|
4
|
|
|
|
5
|
|
Restructuring charges
|
|
|
12
|
|
|
|
2
|
|
Payments for restructuring charges
|
|
|
(4
|
)
|
|
|
(2
|
)
|
American Home Shield spin-off charges
|
|
|
7
|
|
|
|
—
|
|
Payments for American Home Shield spin-off charges
|
|
|
(3
|
)
|
|
|
—
|
|
Other
|
|
|
9
|
|
|
|
3
|
|
Change in working capital, net of acquisitions:
|
|
|
|
|
|
|
Receivables
|
|
|
21
|
|
|
|
36
|
|
Inventories and other current assets
|
|
|
(9
|
)
|
|
|
(4
|
)
|
Accounts payable
|
|
|
8
|
|
|
|
(4
|
)
|
Deferred revenue
|
|
|
40
|
|
|
|
15
|
|
Accrued liabilities
|
|
|
(27
|
)
|
|
|
(16
|
)
|
Accrued interest payable
|
|
|
3
|
|
|
|
3
|
|
Current income taxes
|
|
|
12
|
|
|
|
23
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
142
|
|
|
|
126
|
|
Cash Flows from Investing Activities from Continuing Operations:
|
|
|
|
|
|
|
Property additions
|
|
|
(23
|
)
|
|
|
(18
|
)
|
Government grant fundings for property additions
|
|
|
1
|
|
|
|
—
|
|
Business acquisitions, net of cash acquired
|
|
|
(92
|
)
|
|
|
(11
|
)
|
Purchases of available-for-sale securities
|
|
|
(9
|
)
|
|
|
(3
|
)
|
Sales and maturities of available-for-sale securities
|
|
|
10
|
|
|
|
—
|
|
Origination of notes receivable
|
|
|
(23
|
)
|
|
|
(25
|
)
|
Collections on notes receivable
|
|
|
24
|
|
|
|
26
|
|
Net Cash Used for Investing Activities from Continuing Operations
|
|
|
(112
|
)
|
|
|
(31
|
)
|
Cash Flows from Financing Activities from Continuing Operations:
|
|
|
|
|
|
|
Payments of debt
|
|
|
(95
|
)
|
|
|
(14
|
)
|
Repurchase of common stock and RSU vesting
|
|
|
—
|
|
|
|
(51
|
)
|
Issuance of common stock
|
|
|
2
|
|
|
|
5
|
|
Net Cash Used for Financing Activities from Continuing Operations
|
|
|
(93
|
)
|
|
|
(60
|
)
|
Cash Flows from Discontinued Operations:
|
|
|
|
|
|
|
Cash provided from operating activities
|
|
|
—
|
|
|
|
1
|
|
Net Cash Provided from Discontinued Operations
|
|
|
—
|
|
|
|
1
|
|
Cash (Decrease) Increase During the Period
|
|
|
(64
|
)
|
|
|
37
|
|
Cash and Cash Equivalents and Restricted Cash at End of Period
|
|
$
|
500
|
|
|
$
|
423
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net income to
adjusted net income.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
(In millions)
|
|
2018
|
|
2017
|
Net Income
|
|
$
|
40
|
|
|
$
|
39
|
|
Amortization expense
|
|
|
5
|
|
|
|
7
|
|
Fumigation related matters
|
|
|
—
|
|
|
|
1
|
|
Restructuring charges
|
|
|
12
|
|
|
|
2
|
|
American Home Shield spin-off charges
|
|
|
7
|
|
|
|
—
|
|
Impairment of software and other related costs
|
|
|
—
|
|
|
|
2
|
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
(1
|
)
|
Tax impact of adjustments
|
|
|
(6
|
)
|
|
|
(5
|
)
|
Adjusted Net Income
|
|
$
|
59
|
|
|
$
|
46
|
|
Weighted-average diluted common shares outstanding
|
|
|
135.6
|
|
|
|
136.0
|
|
Adjusted earnings per share
|
|
$
|
0.44
|
|
|
$
|
0.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net cash provided
from operating activities from continuing operations to free cash
flow.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
(In millions)
|
|
2018
|
|
2017
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
$
|
142
|
|
$
|
126
|
Property additions and Government grant fundings for property
additions
|
|
|
(23)
|
|
|
(18)
|
Free Cash Flow
|
|
$
|
119
|
|
$
|
109
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net income to
Adjusted EBITDA.
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
March 31,
|
(In millions)
|
|
2018
|
|
2017
|
Net income
|
|
$
|
40
|
|
$
|
39
|
Depreciation and amortization expense
|
|
|
25
|
|
|
25
|
Fumigation related matters
|
|
|
—
|
|
|
1
|
Non-cash stock-based compensation expense
|
|
|
4
|
|
|
5
|
Restructuring charges
|
|
|
12
|
|
|
2
|
American Home Shield spin-off charges
|
|
|
7
|
|
|
—
|
Non-cash impairment of software and other related costs
|
|
|
—
|
|
|
2
|
Income from discontinued operations, net of income taxes
|
|
|
—
|
|
|
(1)
|
Provision for income taxes
|
|
|
14
|
|
|
24
|
Interest expense
|
|
|
37
|
|
|
37
|
Adjusted EBITDA
|
|
$
|
141
|
|
$
|
134
|
|
|
|
|
|
|
|
Terminix
|
|
$
|
86
|
|
$
|
81
|
American Home Shield
|
|
|
32
|
|
|
31
|
Franchise Services Group
|
|
|
23
|
|
|
21
|
Corporate
|
|
|
—
|
|
|
—
|
Adjusted EBITDA
|
|
$
|
141
|
|
$
|
134
|
|
|
|
|
|
|
|
|
Terminix Segment
|
Revenue by service line is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
March 31,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2018
|
|
2017
|
|
Growth
|
|
Acquired
|
|
Organic
|
Pest Control
|
|
$
|
202
|
|
$
|
202
|
|
$
|
1
|
|
—
|
%
|
|
$
|
1
|
|
—
|
%
|
|
$
|
—
|
|
—
|
%
|
Termite and Other Services
|
|
|
151
|
|
|
149
|
|
|
1
|
|
1
|
%
|
|
|
—
|
|
—
|
%
|
|
|
1
|
|
1
|
%
|
Other
|
|
|
15
|
|
|
14
|
|
|
—
|
|
2
|
%
|
|
|
—
|
|
—
|
%
|
|
|
—
|
|
2
|
%
|
Total revenue
|
|
$
|
368
|
|
$
|
365
|
|
$
|
2
|
|
1
|
%
|
|
$
|
1
|
|
—
|
%
|
|
$
|
2
|
|
—
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pest control revenue remained consistent in the three months ended March
31, 2018.
Termite revenue, including the wildlife exclusion, crawl space
encapsulation and attic insulation products, which are managed as a
component of our termite line of business, increased one percent. In the
three months ended March 31, 2018, termite renewal revenue comprised 55
percent of total termite revenue, while the remainder consisted of
termite new unit revenue. Organic termite revenue increased one percent,
reflecting an increase in termite renewals revenue and wildlife
exclusion sales, offset, in part, by a decline in core termite revenue.
|
|
|
|
|
|
|
American Home Shield Segment
|
The table below presents selected operating metrics related to
renewable home service plans and customer retention.
|
|
|
|
|
|
|
|
|
|
As of March 31,
|
|
|
2018
|
|
2017
(1)
|
Growth in Home Service Plans
|
|
6
|
%
|
|
15
|
%
|
Customer Retention Rate
|
|
75
|
%
|
|
76
|
%
|
|
|
|
|
|
|
|
(1) As of March 31, 2017, excluding the impact of acquisitions, the
growth in home service plans was seven percent and 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
|
|
|
March 31,
|
|
Revenue
|
(In millions)
|
|
2018
|
|
2017
|
|
2018
|
Royalty Fees
|
|
$
|
33
|
|
$
|
31
|
|
55
|
%
|
Janitorial National Accounts
|
|
|
15
|
|
|
11
|
|
25
|
|
Sales of Products
|
|
|
3
|
|
|
3
|
|
6
|
|
Other
|
|
|
9
|
|
|
4
|
|
14
|
|
Total revenue
|
|
$
|
60
|
|
$
|
50
|
|
100
|
%
|
ServiceMaster Global Holdings, Inc.
Investor Relations:
Brian Turcotte, 901-597-3282
Brian.Turcotte@servicemaster.com
or
Media:
Michael Wassmer, 901-597-1706
Michael.Wassmer@servicemaster.com