- Terminix Revenue of $436 million – up 10.3 percent total year-over-year and 2.6 percent organically
- Franchise Service Group Revenue of $60 million – up 8.6 percent total year-over-year and 2.1 percent organically
- Full Year Revenue Guidance increased to range from $1,885 million to $1,900 million due to improved performance of Terminix acquisitions
- Full Year Adjusted EBITDA Guidance remains in the range of $425 million to $435 million
- On October 1, 2018, ServiceMaster completed the spin-off of American Home Shield, operating under its new parent company, frontdoor, inc.
- In connection with the spin, ServiceMaster reduced debt by $982 million
MEMPHIS, Tenn.--(BUSINESS WIRE)--ServiceMaster
Global Holdings, Inc. (NYSE: SERV), a leading provider of
termite and pest control, cleaning and restoration services in both the
residential and commercial markets, today announced unaudited
third-quarter 2018 results.
The results for the American Home Shield segment are included in
continuing operations in ServiceMaster’s results reported in this press
release. Beginning with the Company’s Annual Report on Form 10-K for the
year ending December 31, 2018, the American Home Shield segment,
including periods prior to the fourth-quarter of 2018, will be reported
in discontinued operations. For further information on the third-quarter
performance of American Home Shield, please visit investors.frontdoorhome.com/.
For the third quarter, the company, as a whole, reported a
year-over-year revenue increase of 10 percent to $873 million.
Third-quarter 2018 net income was $71 million, or $0.52 per share,
versus $80 million, or $0.60 per share, in the same period in 2017.
Third-quarter 2018 Adjusted EBITDA(1) was $191 million, a
year-over-year decrease of $9 million and adjusted net income(2)
was $91 million, or $0.67 per share versus $99 million, or $0.73 per
share, for the same period in 2017.
Excluding the American Home Shield segment, revenue in the third quarter
increased 10 percent to $496 million and Adjusted EBITDA(1)
increased $1 million to $105 million year-over-year.
“We are pleased to see our transformation efforts begin to show up in
Terminix growth, with 7.8 percent organic growth in residential pest and
2.6 percent overall organic Terminix revenue growth,” said ServiceMaster
Chief Executive Officer Nik Varty. “The residential pest transformation
began last October with a focus on enhancing the customer experience and
driving operational improvements in start rates, completion rates and
customer engagement. We still have significantly more to do in terms of
improving the 50,000 customer experiences we deliver every day, which
will ultimately drive improvements in our customer retention rates. As
promised, we continue to invest with discipline in technology, talent,
training, marketing and the ability of our field operations to better
serve our customers. We have also now expanded the focus of our
transformation efforts on our termite and commercial pest service lines.
We have successfully integrated our Terminix Commercial national
accounts with Copesan, and we continue to leverage their service and
delivery capabilities as we expand our presence in this important market
segment to enable future growth. Our restoration and cleaning businesses
continue to drive growth, with strong gains in commercial disaster and
fire restoration programs at ServiceMaster Restore and 15 percent growth
in janitorial national accounts at ServiceMaster Clean. We continue to
explore opportunities to expand our brands in markets that are showing
high growth profiles such as healthcare cleaning and national accounts.”
“I would also like to recognize the hard work of many in the successful
and timely completion of the spin-off of the American Home Shield
business.”
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|
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|
|
|
|
|
|
|
|
Consolidated Performance
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
|
|
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|
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Three Months Ended September 30,
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Nine Months Ended September 30,
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$ millions
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2018
|
|
2017
|
|
B/(W)
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|
2018
|
|
2017
|
|
B/(W)
|
|
Revenue
|
|
$
|
873
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|
|
|
$
|
797
|
|
|
|
$
|
77
|
|
|
|
$
|
2,422
|
|
|
|
$
|
2,246
|
|
|
|
$
|
176
|
|
|
|
YoY growth
|
|
|
|
|
|
|
|
|
|
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9.6
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%
|
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|
|
|
|
|
|
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7.8
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%
|
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Gross Margin
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|
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393
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|
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377
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|
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15
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1,113
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|
|
|
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1,066
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|
|
|
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47
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% of revenue
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|
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45.0
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%
|
|
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47.4
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%
|
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|
(2.4
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)
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pts
|
|
|
45.9
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%
|
|
|
47.5
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|
%
|
|
|
(1.5
|
)
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pts
|
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SG&A
|
|
|
(229
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)
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|
|
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(199
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)
|
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|
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(30
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)
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|
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(651
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)
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|
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(592
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)
|
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|
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(60
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)
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|
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% of revenue
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|
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26.2
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%
|
|
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25.0
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%
|
|
|
(1.2
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)
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pts
|
|
|
26.9
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%
|
|
|
26.3
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|
%
|
|
|
(0.5
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)
|
pts
|
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Income from Continuing Operations before Income Taxes
|
|
|
100
|
|
|
|
|
114
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|
|
|
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(14
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)
|
|
|
|
285
|
|
|
|
|
313
|
|
|
|
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(28
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)
|
|
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% of revenue
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|
|
11.4
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%
|
|
|
14.3
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|
%
|
|
|
(2.9
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)
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pts
|
|
|
11.7
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%
|
|
|
13.9
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%
|
|
|
(2.2
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)
|
pts
|
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Net Income
|
|
|
71
|
|
|
|
|
80
|
|
|
|
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(10
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)
|
|
|
|
207
|
|
|
|
|
204
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|
|
|
|
3
|
|
|
|
% of revenue
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|
|
8.1
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%
|
|
|
10.1
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|
%
|
|
|
(2.0
|
)
|
pts
|
|
|
8.5
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|
%
|
|
|
9.1
|
|
%
|
|
|
(0.5
|
)
|
pts
|
|
Adjusted Net Income
(1)
|
|
|
91
|
|
|
|
|
99
|
|
|
|
|
(8
|
)
|
|
|
|
258
|
|
|
|
|
238
|
|
|
|
|
21
|
|
|
|
% of revenue
|
|
|
10.5
|
|
%
|
|
|
12.5
|
|
%
|
|
|
(2.0
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)
|
pts
|
|
|
10.7
|
|
%
|
|
|
10.6
|
|
%
|
|
|
0.1
|
|
pts
|
|
Adjusted EBITDA
(2)
|
|
|
191
|
|
|
|
|
200
|
|
|
|
|
(9
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)
|
|
|
|
540
|
|
|
|
|
543
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|
|
|
|
(4
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)
|
|
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% of revenue
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|
|
21.9
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%
|
|
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25.1
|
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%
|
|
|
(3.2
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)
|
pts
|
|
|
22.3
|
|
%
|
|
|
24.2
|
|
%
|
|
|
(1.9
|
)
|
pts
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
86
|
|
|
|
|
81
|
|
|
|
|
5
|
|
|
|
|
365
|
|
|
|
|
340
|
|
|
|
|
25
|
|
|
|
Free Cash Flow
(3)
|
|
|
75
|
|
|
|
|
67
|
|
|
|
|
8
|
|
|
|
|
313
|
|
|
|
|
293
|
|
|
|
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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|
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Segment Performance
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Revenue and Adjusted EBITDA for each reportable segment and
Corporate were as follows:
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|
|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended September 30,
|
|
Nine Months Ended September 30,
|
|
|
|
Revenue
|
|
Adjusted EBITDA
|
|
Revenue
|
|
Adjusted EBITDA
|
|
$ millions
|
|
2018
|
|
B/(W) vs. PY
|
|
2018
|
|
B/(W) vs. PY
|
|
2018
|
|
B/(W) vs. PY
|
|
2018
|
|
B/(W) vs. PY
|
|
Terminix
|
|
$
|
436
|
|
$
|
41
|
|
|
$
|
80
|
|
|
$
|
(2
|
)
|
|
|
$
|
1,259
|
|
$
|
70
|
|
|
$
|
276
|
|
|
$
|
7
|
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
10.3
|
%
|
|
|
18.4
|
%
|
|
|
(2.4
|
)
|
pts
|
|
|
|
|
|
5.9
|
%
|
|
|
21.9
|
%
|
|
|
(0.7
|
)
|
pts
|
|
Franchise Services Group
|
|
|
60
|
|
|
5
|
|
|
|
21
|
|
|
|
(1
|
)
|
|
|
|
183
|
|
|
26
|
|
|
|
67
|
|
|
|
2
|
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
8.6
|
%
|
|
|
34.7
|
%
|
|
|
(4.3
|
)
|
pts
|
|
|
|
|
|
16.6
|
%
|
|
|
36.6
|
%
|
|
|
(4.6
|
)
|
pts
|
|
Corporate
(4)
|
|
|
—
|
|
|
—
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
1
|
|
|
—
|
|
|
|
6
|
|
|
|
5
|
|
|
|
Total
|
|
$
|
496
|
|
$
|
46
|
|
|
$
|
105
|
|
|
$
|
1
|
|
|
|
$
|
1,443
|
|
$
|
96
|
|
|
$
|
348
|
|
|
$
|
14
|
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
10.1
|
%
|
|
|
21.2
|
%
|
|
|
(1.9
|
)
|
pts
|
|
|
|
|
|
7.2
|
%
|
|
|
24.1
|
%
|
|
|
(0.7
|
)
|
pts
|
|
American Home Shield
|
|
|
377
|
|
|
31
|
|
|
|
86
|
|
|
|
(10
|
)
|
|
|
|
979
|
|
|
80
|
|
|
|
191
|
|
|
|
(18
|
)
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
8.9
|
%
|
|
|
22.7
|
%
|
|
|
(5.0
|
)
|
pts
|
|
|
|
|
|
8.9
|
%
|
|
|
19.5
|
%
|
|
|
(3.7
|
)
|
pts
|
|
Total
|
|
$
|
873
|
|
$
|
77
|
|
|
$
|
191
|
|
|
$
|
(9
|
)
|
|
|
$
|
2,422
|
|
$
|
176
|
|
|
$
|
540
|
|
|
$
|
(4
|
)
|
|
|
YoY growth / % of revenue
|
|
|
|
|
|
9.6
|
%
|
|
|
21.9
|
%
|
|
|
(3.2
|
)
|
pts
|
|
|
|
|
|
7.8
|
%
|
|
|
22.3
|
%
|
|
|
(1.9
|
)
|
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 10.3 percent year-over-year revenue increase in the
third quarter of 2018, reflecting an increase in residential pest
control services and the acquisition of Copesan on March 30, 2018.
Terminix achieved organic revenue growth of 2.6 percent in the third
quarter, including 7.8 percent organic growth in residential pest
control. When normalized for the prior year hurricane and the one-time
bait monitoring station conversion impact, organic revenue would have
been 2.3 percent. Strong organic residential pest revenue growth was
driven by operational improvements in completion rate, start rate, and
new unit sales as a result of continued progress in the Terminix
transformation. Organic revenue growth remains on track to range between
1 and 2 percent for the full year.
Although Terminix posted over 10 percent revenue growth, adjusted EBITDA
decreased by $2 million, or 3 percent, largely the result of our
continuing efforts to drive consistently strong long-term growth. We
increased selling and marketing expenses, which drove higher new sales
in the quarter. Additionally, we continue to invest heavily in upgrading
our service model that will ultimately drive higher customer retention
and consistently strong growth. The Company continues to see
opportunities to invest in the business to drive future growth, and
adjusted EBITDA margins remain on pace to be relatively flat for the
full year, excluding acquisition impact and the spin related
dis-synergies.
Franchise Services Group
The Franchise Services Group reported an 8.6 percent year-over-year
revenue increase in the third quarter of 2018 driven by 15 percent
growth in janitorial national accounts sales, as well as the recognition
of $4 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 increased revenue by $4 million but had no
impact on Adjusted EBITDA.
Adjusted EBITDA decreased 3 percent, or $1 million, versus prior year,
reflecting the pass through of a decrease in high margin royalty fees
due to the positive impact of hurricane events in 2017 offset, in part,
by an increase in lower margin janitorial national accounts. When
normalized for hurricane impact in the third-quarter of 2017 and the
national advertising fund accounting rule change, revenue growth would
have been 4 percent and Adjusted EBITDA would have been up 2 percent
year-over-year in the third quarter.
Corporate
Corporate reported a $4 million increase in Adjusted EBITDA when
compared to the third quarter of the prior year. This increase is
primarily related to favorable claims trends in our automobile, general
liability, and workers’ compensation program. The favorable claim trends
are attributable to operational improvements in claims management.
American Home Shield Spin-Off
On October 1, 2018, the Company completed the previously announced
spin-off of its American Home Shield segment resulting in the spin-off
of approximately $1 billion in debt and $251 million in cash and
marketable securities and various other assets and liabilities of the
businesses. The separation was effectuated through a prorate dividend
(the “Distribution”) to the company’s stockholders of approximately 80.2
percent of the outstanding shares of common stock of frontdoor, inc.
(“Frontdoor”), which was formed as a wholly owned subsidiary of the
company to hold its American Home Shield segment. As a result of the
Distribution, Frontdoor is an independent public company that trades on
the Nasdaq Global Select Market under the symbol “FTDR”.
The Distribution was made to the Company’s stockholders of record as of
the close of business on September 14, 2018, and such stockholders
received one share of Frontdoor common stock for every two shares of
ServiceMaster common stock held as of the close of business on the
record date. The Company distributed 67,781,527 shares of common stock
of Frontdoor in the Distribution and retained 16,734,092 shares, or
approximately 19.8 percent of the common stock of Frontdoor immediately
following the Distribution. The Company currently intends to responsibly
dispose of all of the Frontdoor common stock by June 14, 2019 to further
reduce debt.
The American Home Shield segment is reported in this press release in
continuing operations. Beginning with the Company’s fourth-quarter and
full-year press release for the year ending December 31, 2018, the
American Home Shield segment will be reported in discontinued operations.
In connection with the Distribution, on September 28, 2018, the Company
and Frontdoor entered into a separation and distribution agreement as
well as various other agreements that govern the relationships between
the parties following the Distribution, including a transition services
agreement, a tax matters agreement and an employee matters agreement.
These agreements provide for the allocation between ServiceMaster and
Frontdoor of assets, liabilities and obligations attributable to periods
prior to, at and after the Distribution and govern certain relationships
between the Company and Frontdoor after the Distribution.
Cash Flow
For the nine months ended September 30, 2018, net cash provided from
operating activities from continuing operations increased to $365
million from $340 million for the nine months ended September 30, 2017,
a seven percent year-over-year increase. The increase was driven by
lower cash taxes resulting from the Tax Cut and Jobs Act, partially
offset by one-time spending related to the AHS spin.
Net cash used for investing activities from continuing operations was
$198 million for the nine months ended September 30, 2018, compared to
$48 million for the nine months ended September 30, 2017. Net cash used
for investing activities in the nine months ended September 30, 2018,
included $160 million of payments for Copesan and other acquisitions,
net of cash acquired.
Net cash used for financing activities from continuing operations was
$119 million for the nine months ended September 30, 2018, compared to
$136 million for the nine months ended September 30, 2017. In the nine
months ended September 30, 2018, we used $79 million to repay our
matured 2018 Notes, as well as $982 million to repay a portion of our
outstanding term loan debt as a part of the American Home Shield spin.
In the nine months ended September 30, 2017, we used $85 million to
purchase 2.2 million shares of company stock.
Free cash flow(3) was $313 million for the nine months ended
September 30, 2018 compared to $293 million for the nine months ended
September 30, 2017. Free cash flow(3) to Adjusted EBITDA(1) conversion
was 58 percent for the nine months ended on September 30, 2018.
Full-Year 2018 Outlook
The company now expects full-year 2018 revenue to range from $1,885
million to $1,900 million, or an increase of seven to nine percent
compared to 2017. The increase in revenue since the previously provided
outlook primarily reflects improved performance of Terminix
acquisitions. Organic revenue growth at Terminix remains on track to
range between 1 and 2 percent for the full year.
Full-year 2018 Adjusted EBITDA is anticipated to remain in the range of
$425 million to $435 million, or an increase of two percent to four
percent compared to 2017. Full-year 2018 Adjusted EBITDA guidance
includes spin related dis-synergies. Adjusted EBITDA margins at Terminix
remain on pace to be relatively flat for the full year, excluding
acquisition impact and spin related dis-synergies.
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.
Third-Quarter 2018 Earnings Conference Call
The company will discuss its third-quarter 2018 financial and operating
results during a conference call at 8 a.m. central time (9 a.m. eastern
time) today, November 6, 2018. To participate on the conference call,
interested parties should call 800.954.0686 (or international
participants, +1.212.231.2907). 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
December 6, 2018. To access the replay of this call, please call
800.633.8284 and enter reservation number 21898236 (international
participants: 402.977.9140, reservation number 21898236). 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 AmeriSpec (home inspections), Furniture Medic (cabinet
and furniture repair), Merry Maids (residential cleaning), ServiceMaster
Clean (janitorial), ServiceMaster Restore (disaster restoration),
Terminix (termite and pest control), Terminix Commercial (commercial
termite and pest control) and Copesan (commercial national accounts pest
management). 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. 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: 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. 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. 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 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; 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.
(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; American
Home Shield spin-off charges; impairment of software and other related
costs; (gain) 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.
(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 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
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Revenue
|
|
$
|
873
|
|
|
$
|
797
|
|
|
$
|
2,422
|
|
|
$
|
2,246
|
|
|
Cost of services rendered and products sold
|
|
|
481
|
|
|
|
419
|
|
|
|
1,309
|
|
|
|
1,180
|
|
|
Selling and administrative expenses
|
|
|
229
|
|
|
|
199
|
|
|
|
651
|
|
|
|
592
|
|
|
Amortization expense
|
|
|
8
|
|
|
|
7
|
|
|
|
20
|
|
|
|
20
|
|
|
401(k) Plan corrective contribution
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(3
|
)
|
|
Fumigation related matters
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
2
|
|
|
Impairment of software and other related costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
Restructuring charges
|
|
|
1
|
|
|
|
14
|
|
|
|
13
|
|
|
|
17
|
|
|
American Home Shield spin-off charges
|
|
|
8
|
|
|
|
7
|
|
|
|
23
|
|
|
|
7
|
|
|
Interest expense
|
|
|
40
|
|
|
|
38
|
|
|
|
115
|
|
|
|
113
|
|
|
Interest and net investment income
|
|
|
(3
|
)
|
|
|
(1
|
)
|
|
|
(5
|
)
|
|
|
(3
|
)
|
|
Loss on extinguishment of debt
|
|
|
10
|
|
|
|
3
|
|
|
|
10
|
|
|
|
6
|
|
|
Income from Continuing Operations before Income Taxes
|
|
|
100
|
|
|
|
114
|
|
|
|
285
|
|
|
|
313
|
|
|
Provision for income taxes
|
|
|
29
|
|
|
|
34
|
|
|
|
77
|
|
|
|
109
|
|
|
Income from Continuing Operations
|
|
|
71
|
|
|
|
80
|
|
|
|
207
|
|
|
|
204
|
|
|
Gain from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
1
|
|
|
Net Income
|
|
$
|
71
|
|
|
$
|
80
|
|
|
$
|
207
|
|
|
$
|
204
|
|
|
Total Comprehensive Income
|
|
$
|
73
|
|
|
$
|
83
|
|
|
$
|
224
|
|
|
$
|
208
|
|
|
Weighted-average common shares outstanding - Basic
|
|
|
135.6
|
|
|
|
134.3
|
|
|
|
135.4
|
|
|
|
134.2
|
|
|
Weighted-average common shares outstanding - Diluted
|
|
|
136.0
|
|
|
|
135.2
|
|
|
|
135.8
|
|
|
|
135.4
|
|
|
Basic Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
0.52
|
|
|
$
|
0.60
|
|
|
$
|
1.53
|
|
|
$
|
1.52
|
|
|
Gain from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net Income
|
|
|
0.52
|
|
|
|
0.60
|
|
|
|
1.53
|
|
|
|
1.52
|
|
|
Diluted Earnings Per Share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income from Continuing Operations
|
|
$
|
0.52
|
|
|
$
|
0.59
|
|
|
$
|
1.53
|
|
|
$
|
1.50
|
|
|
Gain from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
Net Income
|
|
|
0.52
|
|
|
|
0.59
|
|
|
|
1.52
|
|
|
|
1.51
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
|
Consolidated Statements of Financial Position
|
|
(In millions, except share data)
|
|
|
|
|
|
|
|
|
|
|
|
As of
|
|
As of
|
|
|
|
September 30,
|
|
December 31,
|
|
|
|
2018
|
|
2017
|
|
Assets:
|
|
|
|
|
|
|
|
Current Assets:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
$
|
521
|
|
|
$
|
475
|
|
|
Marketable securities
|
|
|
9
|
|
|
|
25
|
|
|
Receivables, less allowances of $23 and $23, respectively
|
|
|
196
|
|
|
|
570
|
|
|
Inventories
|
|
|
44
|
|
|
|
41
|
|
|
Prepaid expenses and other assets
|
|
|
107
|
|
|
|
94
|
|
|
Deferred customer acquisition costs
|
|
|
—
|
|
|
|
36
|
|
|
Total Current Assets
|
|
|
878
|
|
|
|
1,242
|
|
|
Other Assets:
|
|
|
|
|
|
|
|
Property and equipment, net
|
|
|
248
|
|
|
|
237
|
|
|
Goodwill
|
|
|
2,405
|
|
|
|
2,256
|
|
|
Intangible assets, primarily trade names, service marks and
trademarks, net
|
|
|
1,738
|
|
|
|
1,692
|
|
|
Restricted cash
|
|
|
89
|
|
|
|
89
|
|
|
Notes receivable
|
|
|
44
|
|
|
|
41
|
|
|
Long-term marketable securities
|
|
|
21
|
|
|
|
22
|
|
|
Deferred customer acquisition costs
|
|
|
101
|
|
|
|
—
|
|
|
Other assets
|
|
|
89
|
|
|
|
68
|
|
|
Total Assets
|
|
$
|
5,612
|
|
|
$
|
5,646
|
|
|
Liabilities and Stockholders' Equity:
|
|
|
|
|
|
|
|
Current Liabilities:
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
147
|
|
|
$
|
115
|
|
|
Accrued liabilities:
|
|
|
|
|
|
|
|
Payroll and related expenses
|
|
|
63
|
|
|
|
63
|
|
|
Self-insured claims and related expenses
|
|
|
133
|
|
|
|
117
|
|
|
Accrued interest payable
|
|
|
22
|
|
|
|
15
|
|
|
Other
|
|
|
73
|
|
|
|
56
|
|
|
Deferred revenue
|
|
|
273
|
|
|
|
663
|
|
|
Current portion of long-term debt
|
|
|
54
|
|
|
|
144
|
|
|
Total Current Liabilities
|
|
|
764
|
|
|
|
1,174
|
|
|
Long-Term Debt
|
|
|
2,702
|
|
|
|
2,643
|
|
|
Other Long-Term Liabilities:
|
|
|
|
|
|
|
|
Deferred taxes
|
|
|
535
|
|
|
|
493
|
|
|
Other long-term obligations, primarily self-insured claims
|
|
|
187
|
|
|
|
169
|
|
|
Total Other Long-Term Liabilities
|
|
|
722
|
|
|
|
662
|
|
|
Commitments and Contingencies
|
|
|
|
|
|
|
|
Stockholders' Equity:
|
|
|
|
|
|
|
|
Common stock $0.01 par value (authorized 2,000,000,000 shares with
147,085,424 shares issued and 135,563,054 outstanding at September
30, 2018 and 146,662,232 shares issued and 135,141,048 outstanding
at December 31, 2017)
|
|
|
2
|
|
|
|
2
|
|
|
Additional paid-in capital
|
|
|
2,339
|
|
|
|
2,321
|
|
|
Accumulated deficit
|
|
|
(674
|
)
|
|
|
(895
|
)
|
|
Accumulated other comprehensive income
|
|
|
23
|
|
|
|
5
|
|
|
Less common stock held in treasury, at cost (11,522,370 shares at
September 30, 2018 and 11,521,184 shares at December 31, 2017)
|
|
|
(267
|
)
|
|
|
(267
|
)
|
|
Total Stockholders' Equity
|
|
|
1,423
|
|
|
|
1,167
|
|
|
Total Liabilities and Stockholders' Equity
|
|
$
|
5,612
|
|
|
$
|
5,646
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
SERVICEMASTER GLOBAL HOLDINGS, INC.
|
|
Consolidated Statements of Cash Flows
|
|
(In millions)
|
|
|
|
|
|
|
|
|
|
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
|
|
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
|
|
|
207
|
|
|
|
204
|
|
|
Adjustments to reconcile net income to net cash provided from
operating activities:
|
|
|
|
|
|
|
|
Gain from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
(1
|
)
|
|
Depreciation expense
|
|
|
62
|
|
|
|
56
|
|
|
Amortization expense
|
|
|
20
|
|
|
|
20
|
|
|
Amortization of debt issuance costs
|
|
|
4
|
|
|
|
4
|
|
|
401(k) Plan corrective contribution
|
|
|
—
|
|
|
|
(3
|
)
|
|
Fumigation related matters
|
|
|
1
|
|
|
|
2
|
|
|
Payments on fumigation related matters
|
|
|
(1
|
)
|
|
|
(2
|
)
|
|
Impairment of software and other related costs
|
|
|
—
|
|
|
|
2
|
|
|
Loss on extinguishment of debt
|
|
|
10
|
|
|
|
6
|
|
|
Deferred income tax (benefit) provision
|
|
|
21
|
|
|
|
27
|
|
|
Stock-based compensation expense
|
|
|
11
|
|
|
|
10
|
|
|
Gain on sale of marketable securities
|
|
|
(1
|
)
|
|
|
—
|
|
|
Restructuring charges
|
|
|
13
|
|
|
|
17
|
|
|
Payments for restructuring charges
|
|
|
(11
|
)
|
|
|
(5
|
)
|
|
American Home Shield spin-off charges
|
|
|
23
|
|
|
|
7
|
|
|
Payments for American Home Shield spin-off charges
|
|
|
(15
|
)
|
|
|
(3
|
)
|
|
Other
|
|
|
(8
|
)
|
|
|
14
|
|
|
Change in working capital, net of acquisitions:
|
|
|
|
|
|
|
|
Receivables
|
|
|
(1
|
)
|
|
|
(81
|
)
|
|
Inventories and other current assets
|
|
|
(38
|
)
|
|
|
(8
|
)
|
|
Accounts payable
|
|
|
26
|
|
|
|
13
|
|
|
Deferred revenue
|
|
|
(6
|
)
|
|
|
35
|
|
|
Accrued liabilities
|
|
|
25
|
|
|
|
17
|
|
|
Accrued interest payable
|
|
|
6
|
|
|
|
3
|
|
|
Current income taxes
|
|
|
16
|
|
|
|
3
|
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
|
365
|
|
|
|
340
|
|
|
Cash Flows from Investing Activities from Continuing Operations:
|
|
|
|
|
|
|
|
Property additions
|
|
|
(60
|
)
|
|
|
(50
|
)
|
|
Government grant fundings for property additions
|
|
|
7
|
|
|
|
2
|
|
|
Sale of equipment and other assets
|
|
|
1
|
|
|
|
4
|
|
|
Business acquisitions, net of cash acquired
|
|
|
(160
|
)
|
|
|
(12
|
)
|
|
Purchases of available-for-sale securities
|
|
|
(16
|
)
|
|
|
(9
|
)
|
|
Sales and maturities of available-for-sale securities
|
|
|
33
|
|
|
|
23
|
|
|
Origination of notes receivable
|
|
|
(79
|
)
|
|
|
(80
|
)
|
|
Collections on notes receivable
|
|
|
74
|
|
|
|
76
|
|
|
Other investments
|
|
|
—
|
|
|
|
(1
|
)
|
|
Net Cash Used for Investing Activities from Continuing Operations
|
|
|
(198
|
)
|
|
|
(48
|
)
|
|
Cash Flows from Financing Activities from Continuing Operations:
|
|
|
|
|
|
|
|
Borrowings of debt
|
|
|
1,000
|
|
|
|
—
|
|
|
Payments of debt
|
|
|
(1,109
|
)
|
|
|
(78
|
)
|
|
Discount paid on issuance of debt
|
|
|
(2
|
)
|
|
|
—
|
|
|
Debt issuance costs paid
|
|
|
(16
|
)
|
|
|
—
|
|
|
Call premium paid on retirement of debt
|
|
|
—
|
|
|
|
(1
|
)
|
|
Repurchase of common stock
|
|
|
—
|
|
|
|
(85
|
)
|
|
Issuance of common stock
|
|
|
6
|
|
|
|
27
|
|
|
Net Cash Used for Financing Activities from Continuing Operations
|
|
|
(119
|
)
|
|
|
(136
|
)
|
|
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 (Decrease) Increase During the Period
|
|
|
47
|
|
|
|
159
|
|
|
Cash and Cash Equivalents and Restricted Cash at End of Period
|
|
$
|
610
|
|
|
$
|
545
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net income to adjusted
net income.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
(In millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net Income
|
|
$
|
71
|
|
|
$
|
80
|
|
|
$
|
207
|
|
|
$
|
204
|
|
|
Amortization expense
|
|
|
8
|
|
|
|
7
|
|
|
|
20
|
|
|
|
20
|
|
|
401(k) Plan corrective contribution
|
|
|
—
|
|
|
|
(4
|
)
|
|
|
—
|
|
|
|
(3
|
)
|
|
Fumigation related matters
|
|
|
1
|
|
|
|
—
|
|
|
|
1
|
|
|
|
2
|
|
|
Restructuring charges
|
|
|
1
|
|
|
|
14
|
|
|
|
13
|
|
|
|
17
|
|
|
American Home Shield spin-off charges
|
|
|
8
|
|
|
|
7
|
|
|
|
23
|
|
|
|
7
|
|
|
Impairment of software and other related costs
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2
|
|
|
Gain from discontinued operations, net of income taxes
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(1
|
)
|
|
Loss on extinguishment of debt
|
|
|
10
|
|
|
|
3
|
|
|
|
10
|
|
|
|
6
|
|
|
Tax impact of adjustments
|
|
|
(7
|
)
|
|
|
(9
|
)
|
|
|
(16
|
)
|
|
|
(18
|
)
|
|
Adjusted Net Income
|
|
$
|
91
|
|
|
$
|
99
|
|
|
$
|
258
|
|
|
$
|
238
|
|
|
Weighted-average diluted common shares outstanding
|
|
|
136.0
|
|
|
|
135.2
|
|
|
|
135.8
|
|
|
|
135.4
|
|
|
Adjusted earnings per share
|
|
$
|
0.67
|
|
|
$
|
0.73
|
|
|
$
|
1.90
|
|
|
$
|
1.75
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net Cash Provided from Operating Activities from Continuing
Operations
|
|
$
|
86
|
|
|
$
|
81
|
|
|
$
|
365
|
|
|
$
|
340
|
|
|
Property additions and Government grant fundings for property
additions
|
|
|
(11
|
)
|
|
|
(14
|
)
|
|
|
(52
|
)
|
|
|
(48
|
)
|
|
Free Cash Flow
|
|
$
|
75
|
|
|
$
|
67
|
|
|
$
|
313
|
|
|
$
|
293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The following table presents reconciliations of net income to Adjusted
EBITDA.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
|
|
|
September 30,
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Net income
|
|
$
|
71
|
|
$
|
80
|
|
|
$
|
207
|
|
$
|
204
|
|
|
Depreciation and amortization expense
|
|
|
29
|
|
|
26
|
|
|
|
82
|
|
|
77
|
|
|
401(k) Plan corrective contribution
|
|
|
—
|
|
|
(4
|
)
|
|
|
—
|
|
|
(3
|
)
|
|
Fumigation related matters
|
|
|
1
|
|
|
—
|
|
|
|
1
|
|
|
2
|
|
|
Non-cash stock-based compensation expense
|
|
|
3
|
|
|
1
|
|
|
|
11
|
|
|
10
|
|
|
Restructuring charges
|
|
|
1
|
|
|
14
|
|
|
|
13
|
|
|
17
|
|
|
American Home Shield spin-off charges
|
|
|
8
|
|
|
7
|
|
|
|
23
|
|
|
7
|
|
|
Non-cash impairment of software and other related costs
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
2
|
|
|
Gain from discontinued operations, net of income taxes
|
|
|
—
|
|
|
—
|
|
|
|
—
|
|
|
(1
|
)
|
|
Provision for income taxes
|
|
|
29
|
|
|
34
|
|
|
|
77
|
|
|
109
|
|
|
Loss on extinguishment of debt
|
|
|
10
|
|
|
3
|
|
|
|
10
|
|
|
6
|
|
|
Interest expense
|
|
|
40
|
|
|
38
|
|
|
|
115
|
|
|
113
|
|
|
Adjusted EBITDA
|
|
$
|
191
|
|
$
|
200
|
|
|
$
|
540
|
|
$
|
543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminix
|
|
$
|
80
|
|
$
|
82
|
|
|
$
|
276
|
|
$
|
269
|
|
|
American Home Shield
|
|
|
86
|
|
|
96
|
|
|
|
191
|
|
|
209
|
|
|
Franchise Services Group
|
|
|
21
|
|
|
22
|
|
|
|
67
|
|
|
65
|
|
|
Corporate
|
|
|
4
|
|
|
—
|
|
|
|
6
|
|
|
—
|
|
|
Adjusted EBITDA
|
|
$
|
191
|
|
$
|
200
|
|
|
$
|
540
|
|
$
|
543
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Terminix Segment
Revenue by service line is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
September 30,
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(In millions)
|
|
2018
|
|
2017
|
|
Growth
|
|
Acquired
|
|
Organic
|
|
Residential Pest Control
|
|
$
|
180
|
|
$
|
162
|
|
$
|
18
|
|
|
11
|
|
%
|
|
$
|
6
|
|
3
|
%
|
|
$
|
13
|
|
|
8
|
|
%
|
|
Commercial Pest Control
|
|
|
90
|
|
|
66
|
|
|
24
|
|
|
37
|
|
%
|
|
|
24
|
|
37
|
%
|
|
|
—
|
|
|
—
|
|
%
|
|
Termite and Other Services
|
|
|
143
|
|
|
144
|
|
|
(1
|
)
|
|
(1
|
)
|
%
|
|
|
1
|
|
1
|
%
|
|
|
(2
|
)
|
|
(1
|
)
|
%
|
|
Other
|
|
|
22
|
|
|
23
|
|
|
(1
|
)
|
|
(3
|
)
|
%
|
|
|
—
|
|
—
|
%
|
|
|
(1
|
)
|
|
(3
|
)
|
%
|
|
Total revenue
|
|
$
|
436
|
|
$
|
395
|
|
$
|
41
|
|
|
10
|
|
%
|
|
$
|
31
|
|
8
|
%
|
|
$
|
10
|
|
|
3
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Residential pest control revenue for the three months ended September
30, 2018 increased 11 percent compared to prior year, primarily
resulting from an increase in volume driven by operational improvements
as well as the impact of acquisitions completed during the year.
Commercial pest control revenue for the three months ended September 30,
2018 increased 37 percent compared to prior year, primarily driven by
the impact of the Copesan acquisition.
Termite revenue, including wildlife exclusion, crawl space encapsulation
and attic insulation, which are managed as a component of our termite
line of business, decreased one percent compared to prior year,
reflecting a decline in core termite renewals driven by the decreasing
benefit from an initiative to upgrade bait monitoring stations for a
small subset of our customers in 2017, offset by increases in core
termite, wildlife exclusion and attic insulation. In the three months
ended September 30, 2018, termite renewal revenue comprised 47 percent
of total termite revenue, while the remainder consisted of termite new
unit revenue. Termite activity is unpredictable in its nature. Factors
that can impact termite activity include conducive weather conditions
and consumer awareness of termite swarms.
Franchise Services Group Segment
Revenue by service line is as follows:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended
|
|
% of
|
|
% of
|
|
|
|
September 30,
|
|
Revenue
|
|
Revenue
|
|
(In millions)
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
|
Royalty Fees
|
|
$
|
31
|
|
$
|
32
|
|
52
|
%
|
|
58
|
%
|
|
Janitorial National Accounts
|
|
|
17
|
|
|
15
|
|
28
|
|
|
26
|
|
|
Sales of Products
|
|
|
4
|
|
|
5
|
|
7
|
|
|
9
|
|
|
Other
|
|
|
8
|
|
|
4
|
|
14
|
|
|
7
|
|
|
Total revenue
|
|
$
|
60
|
|
$
|
55
|
|
100
|
%
|
|
100
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ServiceMaster Global Holdings, Inc.
Investor Relations:
Jesse Jenkins, 901-597-8259
Jesse.Jenkins@servicemaster.com
or
Media:
James Robinson, 901-597-7521
James.Robinson@servicemaster.com