- Terminix revenue increased 9 percent year-over-year,
including 2.6 percent organically
- Terminix retention, cancel rates, and net promoter score
improved across all revenue channels(#)
- Terminix completes analysis of potential termite damage
claims exposure
- Terminix announces $10 million investment to accelerate
termite damage claims mitigation program
- Full-year 2020 continuing operations guidance (excluding
ServiceMaster Brands):
- Revenue is expected between $1,980 and $2,000 million,
growth of 9 to 10 percent
- Terminix organic revenue growth is expected between 3 and 4
percent
- Adjusted EBITDA is expected between $320 and $335
million
ServiceMaster Global Holdings, Inc. (NYSE: SERV), a leading
provider of essential services to residential and commercial
customers in the termite, pest control, cleaning and restoration
markets, today announced unaudited full-year and fourth-quarter
2019 results.
For the full year 2019, the Company reported a year-over-year
revenue increase of nine percent to $2,077 million with net income
of $128 million, or $0.94 per share. Adjusted EBITDA(1) for the
year was $417 million. Adjusted net income(2) improved 41 percent
in 2019 to $184 million, or $1.35 per share, versus $130 million,
or $0.95 per share in the 2018.
For the quarter ended December 31, 2019, the Company reported a
year-over-year revenue increase of 11 percent to $507 million with
a net loss of $26 million, or $0.19 per share. Net income was
negatively impacted by an increase in our reserves of $40 million,
net of tax, for termite damage claims expense for Litigated(3) and
Non-Litigated(4) Claims in the quarter. Adjusted EBITDA for the
quarter of $80 million was approximately flat with prior year.
Adjusted net income improved 12 percent to $30 million, or $0.22
per share.
“Both the Terminix and ServiceMaster Brands segments delivered
strong progress against our 2019 strategic initiatives,” said
ServiceMaster Chairman and interim CEO Naren Gursahaney. “As we
announced in January, we are conducting a strategic review of our
ServiceMaster Brands business, including a possible sale of the
business. This decision reflects our emphasis on driving long-term
shareholder value.”
“At Terminix, solid full-year gains in net promoter scores and
retention led to 2.6 percent organic revenue growth, meeting
increased guidance estimates. We are continuing our progress
transforming the Terminix business, and improved prioritization and
alignment across the business on our key strategic priorities will
drive continued retention improvements and margin expansion in
2020. We remain laser-focused on the termite business, including
the execution of our termite damage claims mitigation program that
will better protect our customers and manage our risks. I am
encouraged by our progress and remain convinced we are on the right
path towards delivering sustainable, profitable growth at or above
industry levels.”
As further described in the “Termite Damage Claims” section
below, the Company has completed a detailed statistical analysis of
historical termite damage claims activity and potential future
exposure. Between 2020 and 2024 the Company expects total termite
damage claims expense of approximately $230 million, compared to
actual expense of $230 million incurred between 2015 and 2019.
Beginning in 2025 the Company expects termite damage claim expense
to return to historical levels of four to five percent of termite
and home service revenue.
Consolidated Performance
Three Months Ended December
31,
Year Ended December
31,
$ millions
2019
2018
B/(W)
2019
2018
B/(W)
Revenue
$
507
$
457
$
50
$
2,077
$
1,900
$
177
YoY growth
11.0
%
9.3
%
Gross Margin
198
192
6
899
860
39
% of revenue
39.0
%
42.0
%
(3.0
)pts
43.3
%
45.2
%
(2.0
)pts
SG&A
(142
)
(138
)
(5
)
(578
)
(555
)
(23
)
% of revenue
28.0
%
30.1
%
2.1
pts
27.9
%
29.2
%
1.4
pts
(Loss) Income from Continuing
Operations before Income Taxes
(38
)
(233
)
195
156
(126
)
282
% of revenue
(7.5
)%
(51.0
)%
43.5
pts
7.5
%
(6.6
)%
14.1
pts
Net (Loss) Income
(26
)
(248
)
222
128
(41
)
169
% of revenue
(5.1
)%
(54.3
)%
49.2
pts
6.2
%
(2.2
)%
8.3
pts
Adjusted Net Income(2)
30
26
3
184
130
54
% of revenue
5.9
%
5.8
%
0.1
pts
8.9
%
6.8
%
2.0
pts
Adjusted EBITDA(1)
80
80
(1
)
417
398
19
% of revenue
15.7
%
17.6
%
(1.8
)pts
20.1
%
20.9
%
(0.8
)pts
Net Cash Provided from Operating
Activities from Continuing Operations
32
24
8
245
229
16
Free Cash Flow(5)
25
17
8
216
187
29
Segment Performance
Revenue and Adjusted EBITDA for each
reportable segment and Corporate and Other Operations were as
follows:
Three Months Ended December
31, 2019
Year Ended December 31,
2019
Revenue
Adjusted EBITDA
Revenue
Adjusted EBITDA
$ millions
2019
B/(W) vs. PY
2019
B/(W) vs. PY
2019
B/(W) vs. PY
2019
B/(W) vs. PY
Terminix
$
423
$
27
$
58
$
2
$
1,798
$
143
$
319
$
(14
)
YoY growth / % of revenue
6.8
%
13.7
%
(0.4
)pts
8.6
%
17.7
%
(2.4
)pts
ServiceMaster Brands
66
5
22
—
257
13
92
3
YoY growth / % of revenue
8.4
%
33.6
%
(2.3
)pts
5.1
%
35.7
%
(0.7
)pts
Corporate and Other
Operations(6)
18
18
—
(3.1
)
22
21
7
(2)
Costs historically allocated to
American Home Shield
—
—
—
—
—
—
—
33
Total
$
507
$
50
$
80
$
(1
)
$
2,077
$
177
$
417
$
19
YoY growth / % of revenue
11.0
%
15.7
%
(1.8
)pts
9.3
%
20.1
%
(0.8
)pts
Reconciliations of net (loss) 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 eight percent year-over-year total revenue
growth and one percent organic revenue growth in the fourth quarter
of 2019, excluding the impact of our divested fumigation channel.
Organic revenue growth of four percent in residential pest control
was driven by strong pricing realization and volume growth in
mosquito services. Organic revenue growth of two percent in
commercial pest control was driven by year-over-year gains in
retention, partially offset by lower one-time sales. Organic
revenue decline of two percent in termite and home services was
driven by the year-over-year impact of a one-time acceleration of
revenue in the fourth quarter of 2018 to conform our accounting
method for a small sub-set of our customers to those adopted under
ASC 606. Acquisition revenue growth of seven percent, primarily in
the commercial pest service line, was principally driven by the
October 2019 McCloud Services and Gregory Pest Solutions
acquisitions.
Terminix Adjusted EBITDA was $58 million for the fourth quarter,
a year-over-year increase of $2 million. Higher organic revenue
contributed $1 million while higher revenue from inorganic growth
contributed $5 million. Terminix had year-over-year cost increases
of $4 million for termite damage claims, $4 million in technician
labor driven by accelerated hiring in advance of the 2020 peak
season, $4 million of additional sales and marketing to drive
growth, $3 million of other investments in growth, and $2 million
from outsourcing fumigation services. These costs were offset by
savings of $5 million in sourcing productivity, and a $9 million
reduction in incentive compensation driven by our 2019 financial
performance.
ServiceMaster Brands
ServiceMaster Brands reported an eight percent year-over-year
revenue increase in the fourth quarter of 2019. Adjusted EBITDA of
$22 million in the fourth quarter was roughly flat to prior
year.
Corporate and Other Operations
Corporate and Other Operations includes our pest control
operations in Europe, and our financing subsidiary. Corporate and
Other Operations reported $18 million in revenue in the fourth
quarter, consisting primarily of contributions from the recent
acquisitions of Nomor Holdings AB and Terminix UK. Negligible
Adjusted EBITDA in the quarter included contributions from Nomor
operations in Sweden and Norway, offset by expenses incurred at
Terminix UK as part of our ongoing efforts to separate the business
from its former owner’s systems and processes.
Other Matters
Termite Damage Claims
The Company announced today the acceleration of its
comprehensive termite damage claims mitigation program designed to
increase protection for customers in high risk areas and limit our
future exposure to termite damage claims. The $10 million
investment will include enhanced reinspection, leverage advanced
tools and procedures, increase the size of our quality assurance
teams and target a full supplemental treatment program, focusing on
the approximately 15,000 customers in the Mobile Bay Area(7) during
2020. The Company has completed approximately 2,500 supplemental
treatments and is currently staffing and training additional
treatment technicians to support the acceleration of supplemental
treatments throughout the remainder of the year.
During the fourth quarter, the Company retained a third-party
actuarial and economic advisor to examine the previous 10 years of
damage claims history in order to assist the Company in estimating
potential future exposure. The third-party used specific attributes
of our termite customer base and historical claims data, in order
to build a model to estimate total potential exposure. During the
five-year period from 2015-2019, the Company incurred approximately
$230 million in total termite damage claims expense. The results of
this study established an expectation of $230 million in total
termite damage claims expense for the years 2020 to 2024, before
returning to historical levels of approximately four to five
percent of termite and home services revenue.
We have historically determined that we had adequate information
to assess probability of loss and a reasonable estimate of the
range of loss for Litigated Claims only after the completion of
discovery for each individual case, which is often more than a year
after the case is filed. In 2019, we experienced an increase in the
numbers of Litigated Claims and in early 2020, we completed a
detailed statistical analysis of our recent termite damage claims
history and case results. As a result, we have concluded that,
given a statistically meaningful population of outstanding
Litigated Claims and sufficient history of resolving claims with
similar attributes, we are able to calculate an initial “best”
estimate of the outcome for most of our Litigated Claims based on
variables known at the time each case is filed. For the pending
Litigated Claims for which we were previously not able to estimate
a range of loss under our prior estimation technique, we have
recorded a change in estimate of our reserve in the amount of $45
million in the year ended December 31, 2019.
We have also utilized this statistical analysis to evaluate
warranty reserves for Non-Litigated Claims. The resulting
estimation technique projects the cost to settle Non-Litigated
Claims considering both the expected geographic distribution of
current and future claims and their relative cost to settle. Based
on this review we have recorded a change in estimate related to our
reserve for Non-Litigated Claims in the amount of $8 million in the
year ended December 31, 2019.
Free Cash Flow
Free cash flow was $216 million for the full-year 2019, compared
to $187 million for the full-year 2018. The $29 million improvement
was driven primarily by lower property additions compared to prior
year and a decrease in cash interest as a result of debt reductions
in first three quarters of the year and debt rate improvement in
the fourth quarter of 2019. For 2019, free cash flow to Adjusted
EBITDA conversion was 52 percent.
ServiceMaster Brands Strategic Alternatives Review
On January 21, 2020, we announced that we are exploring
strategic alternatives relating to ServiceMaster Brands, including
the potential sale of the business. Beginning with our quarterly
report on Form 10-Q for the period ending March 31, 2020, the
ServiceMaster Brands segment will be classified as held for sale
and reported in discontinued operations.
Full-Year 2020 Outlook
The Company expects full-year 2020 continuing operations revenue
to range from $1,980 million to $2,000 million, or an increase of
between nine and 10 percent compared to 2019. Organic revenue
growth at Terminix is expected to range from three to four percent.
Revenue from Terminix acquisitions closed prior to February 27,
2020 is expected to contribute approximately $60 million. European
pest operations are expected to contribute approximately $75
million in revenue.
Full-year 2020 Adjusted EBITDA is expected between $320 million
and $335 million. Organic incremental margins are expected to be
approximately 25 percent, offset by $10 million in incremental
termite damage claims expense, $10 million for the acceleration of
the termite damage claims mitigation program, and $5 million in the
first quarter in additional expenses from the outsourcing of our
divested fumigation services business. Adjusted EBITDA
contributions, primarily from commercial acquisitions, are expected
in the mid-to-high teens margin range, while our European pest
operations are expected to contribute low-to-mid teens margins, as
the Company optimizes and separates Terminix UK from its former
owner’s systems and processes. EBITDA margins will be pressured in
the first quarter of 2020, due to the impact of fumigation
outsourcing, and timing of cost optimization in our European
businesses.
The Company expects termite damage claims related costs of $70
million, including costs for the termite damage claims mitigation
program as well as increased Litigated and Non-Litigated Claims
expense primarily relating to Formosan termite activity in the
Mobile Bay Area of the country.
The timing and frequency of new litigated case filings is
difficult to predict. The guidance represents the Company’s best
estimate of litigated case filings, but actual pace and volume
could differ.
Guidance excludes any potential financial impact from the
outcome of the review of strategic alternatives for ServiceMaster
Brands.
A reconciliation of the forward-looking 2020 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.
Full-year and Fourth-Quarter 2019 Earnings Conference
Call
The Company will hold a conference call to discuss its full-year
and fourth-quarter 2019 financial and operating results at 8 a.m.
central time (9 a.m. Eastern time) on Thursday, February 27,
2020.
Participants may join this conference call by dialing
877.308.9611 (or international participants, +1.303.223.0120).
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 presentation,
visit the Company’s investor relations home page.
The call will be available for replay until March 28, 2020. To
access the replay of this call, please call 800.633.8284 and enter
reservation number 21950664 (international participants:
+1.402.977.9140, reservation number 21950664). Or you can review
the webcast on the Company’s investor relations home page.
About ServiceMaster
ServiceMaster Global Holdings, Inc. is a leading provider of
termite and pest control, cleaning and restoration services in both
the residential and commercial markets, 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), Copesan (commercial national accounts pest
management), Furniture Medic (cabinet and furniture repair), Merry
Maids (residential cleaning), Nomor (European pest control),
ServiceMaster Clean (commercial cleaning), ServiceMaster Restore
(restoration and reconstruction), Terminix (termite and pest
control), and Terminix Commercial (commercial 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 2020 revenue, organic revenue
growth, Adjusted EBITDA, incremental margin outlook and
projections, and expected termite damage claims costs.
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: the possibility that the review of strategic
alternatives for our ServiceMaster Brands businesses will not
result in a transaction or that the anticipated benefits will not
be realized, and the diversion of management time and other
business disruption during the period of the review; the impact of
reserves attributable to pending Litigated and Non-Litigated
Claims; lawsuits, enforcement actions and other claims by third
parties or governmental authorities; compliance with, or violation
of environmental health and safety laws and regulations; 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
like 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.
_______________________________________________
(#) Retention, cancel rate and net promoter scores in the
termite revenue channel exclude the impact of customer attrition in
the Mobile Bay Area.
(1) Adjusted EBITDA is defined as net (loss) income before:
depreciation and amortization expense; acquisition-related costs;
termite damage claims reserve adjustment; fumigation related
matters; non-cash stock-based compensation expense; restructuring
and other charges; (gain) loss on investment in frontdoor, inc.;
(loss) gain from discontinued operations, net of income taxes;
(benefit) 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 (loss) income before:
amortization expense; fumigation related matters; restructuring and
other charges; acquisition-related costs; termite damage claims
reserve adjustment; (gain) loss on investment in frontdoor, inc.;
(loss) gain from discontinued operations, net of income taxes; loss
on extinguishment of debt; 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) Litigated Claims are defined as circumstances when we do not
reach an agreement with a customer to remediate termite damage and
that customer initiates litigation or arbitration proceedings.
(4) Non-Litigated Claims are defined as circumstances when a
customer notifies us that they have experienced termite damage and
we reach an agreement to remediate that damage.
(5) 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.
(6) Corporate and Other Operations includes our pest control
operations in Europe, our financing subsidiary and the unallocated
expenses of our headquarters functions.
(7) Mobile Bay Area refers to our Terminix branches in Mobile,
Alabama and Gulf Shores, Alabama, which comprise all of our
customers in the area.
SERVICEMASTER GLOBAL HOLDINGS,
INC. Consolidated Statements of Operations and Comprehensive
Income (In millions, except per share data)
Three Months Ended
Year Ended
December 31,
December 31,
2019
2018
2019
2018
Revenue
$
507
$
457
$
2,077
$
1,900
Cost of services rendered and products
sold
309
265
1,178
1,041
Selling and administrative expenses
142
138
578
555
Amortization expense
10
4
29
18
Acquisition-related costs
4
3
17
5
Termite damage claims reserve
adjustment
53
—
53
—
Fumigation related matters
—
3
—
3
Restructuring and other charges
2
4
17
17
Loss (gain) on investment in frontdoor,
inc.
—
249
(40
)
249
Interest expense
23
25
87
133
Interest and net investment income
(1
)
(2
)
(6
)
(5
)
Loss on extinguishment of debt
1
—
8
10
(Loss) Income from Continuing
Operations before Income Taxes
(38
)
(233
)
156
(126
)
(Benefit) provision for income taxes
(12
)
4
27
37
(Loss) Income from Continuing
Operations
(25
)
(237
)
129
(163
)
(Loss) gain from discontinued operations,
net of income taxes
—
(11
)
(1
)
122
Net (Loss) Income
$
(26
)
$
(248
)
$
128
$
(41
)
Total Comprehensive (Loss)
Income
$
(9
)
$
(266
)
$
132
$
(44
)
Weighted-average common shares outstanding
- Basic
135.6
135.7
135.8
135.5
Weighted-average common shares outstanding
- Diluted
135.6
135.7
136.2
135.5
Basic (Loss) Earnings Per Share:
(Loss) Income from Continuing
Operations
$
(0.19
)
$
(1.75
)
$
0.95
$
(1.20
)
(Loss) gain from discontinued operations,
net of income taxes
(0.00
)
(0.08
)
(0.01
)
0.90
Net (Loss) Income
(0.19
)
(1.83
)
0.94
(0.30
)
Diluted (Loss) Earnings Per Share:
(Loss) Income from Continuing
Operations
$
(0.19
)
$
(1.75
)
$
0.95
$
(1.20
)
(Loss) gain from discontinued operations,
net of income taxes
(0.00
)
(0.08
)
(0.01
)
0.90
Net (Loss) Income
(0.19
)
(1.83
)
0.94
(0.30
)
SERVICEMASTER GLOBAL HOLDINGS,
INC. Consolidated Statements of Financial Position (In
millions, except share data)
As of
As of
December 31,
December 31,
2019
2018
Assets:
Current Assets:
Cash and cash equivalents
$
280
$
224
Investment in frontdoor, inc.
—
445
Receivables, less allowances of $24 and
$21, respectively
218
186
Inventories
48
45
Prepaid expenses and other assets
83
61
Total Current Assets
629
962
Other Assets:
Property and equipment, net
212
201
Operating lease right-of-use assets
97
—
Goodwill
2,279
1,956
Intangible assets, primarily trade names,
service marks and trademarks, net
1,791
1,588
Restricted cash
89
89
Notes receivable
45
43
Long-term marketable securities
13
21
Deferred customer acquisition costs
95
77
Other assets
73
87
Total Assets
$
5,322
$
5,023
Liabilities and Stockholders'
Equity:
Current Liabilities:
Accounts payable
$
104
$
89
Accrued liabilities:
Payroll and related expenses
59
60
Self-insured claims and related
expenses
72
58
Accrued interest payable
16
14
Other
105
61
Deferred revenue
111
95
Current portion of lease liability
20
—
Current portion of long-term debt
70
49
Total Current Liabilities
557
425
Long-Term Debt
1,668
1,727
Other Long-Term Liabilities:
Deferred taxes
501
484
Other long-term obligations, primarily
self-insured claims
164
182
Long-term lease liability
111
—
Total Other Long-Term Liabilities
776
666
Commitments and Contingencies
Stockholders’ Equity:
Common stock $0.01 par value (authorized
2,000,000,000 shares with 147,872,959 shares issued and 135,408,054
shares outstanding at December 31, 2019, and 147,209,928 shares
issued and 135,687,558 outstanding at December 31, 2018)
2
2
Additional paid-in capital
2,334
2,309
Retained earnings (accumulated
deficit)
291
156
Accumulated other comprehensive income
9
5
Less common stock held in treasury, at
cost (12,464,905 shares at December 31, 2019, and 11,522,370 shares
at December 31, 2018)
(313
)
(267
)
Total Stockholders' Equity
2,322
2,204
Total Liabilities and Stockholders'
Equity
$
5,322
$
5,023
SERVICEMASTER GLOBAL HOLDINGS,
INC. Consolidated Statements of Cash Flows (In millions)
Year Ended December
31,
2019
2018
Cash and Cash Equivalents and
Restricted Cash at Beginning of Period
$
313
$
563
Cash Flows from Operating Activities
from Continuing Operations:
Net Income (Loss)
128
(41
)
Adjustments to reconcile net loss to net
cash provided from operating activities:
Loss (gain) from discontinued operations,
net of income taxes
1
(122
)
Depreciation expense
75
73
Amortization expense
29
18
Amortization of debt issuance costs
3
4
Amortization of lease right-of-use
assets
19
—
Fumigation related matters
—
3
Payments on fumigation related matters
(2
)
(2
)
Termite damage claims reserve
adjustment
53
—
(Gain) loss on investment in frontdoor,
inc.
(40
)
249
Loss on extinguishment of debt
8
10
Deferred income tax provision
9
8
Stock-based compensation expense
15
14
Gain on sales of marketable securities
(1
)
(1
)
Restructuring and other charges
17
17
Payments related to restructuring and
other charges
(20
)
(15
)
Acquisition-related costs
17
5
Payments for acquisition-related costs
(15
)
(3
)
Other
(23
)
(2
)
Change in working capital, net of
acquisitions:
Receivables
(7
)
(6
)
Inventories and other current assets
(14
)
(6
)
Accounts payable
—
(2
)
Deferred revenue
—
(2
)
Accrued liabilities
(3
)
12
Accrued interest payable
2
(1
)
Current income taxes
(7
)
17
Net Cash Provided from Operating
Activities from Continuing Operations
245
229
Cash Flows from Investing Activities
from Continuing Operations:
Property additions
(28
)
(49
)
Government grant fundings for property
additions
—
7
Sale of equipment and other assets
1
2
Business acquisitions, net of cash
acquired
(513
)
(191
)
Sales and maturities of available-for-sale
securities
9
—
Origination of notes receivables
(102
)
(120
)
Collections on notes receivables
118
100
Other investments
—
1
Net Cash Used for Investing Activities
from Continuing Operations
(516
)
(250
)
Cash Flows from Financing Activities
from Continuing Operations:
Borrowings of debt
1,470
1,000
Payments of debt
(1,095
)
(1,114
)
Discount paid on issuance of debt
(1
)
—
Debt issuance costs paid
(10
)
—
Contribution to frontdoor, inc.
—
(242
)
Repurchase of common stock
(47
)
—
Issuance of common stock
10
7
Net Cash Used for Financing Activities
from Continuing Operations
327
(350
)
SERVICEMASTER GLOBAL HOLDINGS,
INC. Consolidated Statements of Cash Flows (Continued) (In
millions)
Year Ended December
31,
2019
2018
Cash Flows from Discontinued
Operations:
Cash provided from operating
activities
(2
)
146
Cash used for investing activities
—
(1
)
Cash used for financing activities
—
(24
)
Net Cash Used for Discontinued
Operations
(2
)
121
Effect of Exchange Rate Changes on
Cash
1
(1
)
Cash Increase (Decrease) During the
Period
55
(250
)
Cash and Cash Equivalents and
Restricted Cash at End of Period
$
368
$
313
The following table presents
reconciliations of net (loss) income to Adjusted net income.
Three Months Ended
Year Ended
December 31,
December 31,
(In millions, except per share
data)
2019
2018
2019
2018
Net (Loss) income
$
(26
)
$
(248
)
$
128
$
(41
)
Amortization expense
10
4
29
18
Acquisition-related costs
4
3
17
5
Termite damage claims reserve
adjustment
53
—
53
—
Fumigation related matters
—
3
—
3
Restructuring and other charges
2
4
17
17
Loss (gain) on investment in frontdoor,
inc.
—
249
(40
)
249
Loss (gain) from discontinued operations,
net of income taxes
—
11
1
(122
)
Loss on extinguishment of debt
1
—
8
10
Tax impact of adjustments
(17
)
(3
)
(29
)
(14
)
Impact of tax law change on deferred
taxes
—
3
—
3
Adjusted Net Income
$
30
$
26
$
184
$
130
Weighted average diluted common shares
outstanding
135.9
136.2
136.2
136.1
Adjusted earnings per share
$
0.22
$
0.19
$
1.35
$
0.95
The following table presents
reconciliations of net cash provided from operating activities from
continuing operations to free cash flow.
Three Months Ended
Year Ended
December 31,
December 31,
(In millions)
2019
2018
2019
2018
Net Cash Provided from Operating
Activities from Continuing Operations
$
32
$
24
$
245
$
229
Property additions and Government grant
fundings for property additions
(7
)
(7
)
(28
)
(41
)
Free Cash Flow
$
25
$
17
$
216
$
187
The following table presents
reconciliations of net (loss) income to Adjusted EBITDA.
Three Months Ended
Year Ended
December 31,
December 31,
(In millions)
2019
2018
2019
2018
Net (Loss) income
$
(26
)
$
(248
)
$
128
$
(41
)
Depreciation and amortization expense
30
24
104
91
Acquisition-related costs
4
3
17
5
Termite damage claims reserve
adjustment
53
—
53
—
Fumigation related matters
—
3
—
3
Non-cash stock-based compensation
expense
3
5
15
14
Restructuring and other charges
2
4
17
17
Loss (gain) on investment in frontdoor,
inc.
—
249
(40
)
249
Loss (gain) from discontinued operations,
net of income taxes
—
11
1
(122
)
(Benefit) provision for income taxes
(12
)
4
27
37
Loss on extinguishment of debt
1
—
8
10
Interest expense
23
25
87
133
Adjusted EBITDA
$
80
$
80
$
417
$
398
Terminix
$
58
$
56
$
319
$
333
ServiceMaster Brands
22
22
92
89
Corporate and Other Operations
—
3
7
9
Costs historically allocated to American
Home Shield
—
—
—
(33
)
Adjusted EBITDA
$
80
$
80
$
417
$
398
Terminix Segment
Revenue by service line is as follows:
Three Months Ended
December 31,
(In millions)
2019
2018
Growth
Acquired
Organic
Residential Pest Control
$
169
$
161
$
8
5
%
$
3
2
%
$
6
4
%
Commercial Pest Control
106
84
22
26
%
20
24
%
2
2
%
Termite and Home Services
117
117
(1
)
(1
)%
2
2
%
(3
)
(2
)%
Other
24
23
—
2
%
2
10
%
(2
)
(9
)%
416
386
$
30
8
%
$
27
7
%
$
3
1
%
Fumigation
8
11
(3
)
(28
)%
—
—
%
(3
)
(28
)%
Total Revenue
$
423
$
396
$
27
7
%
$
27
7
%
$
—
—
%
Year Ended
December 31,
(In millions)
2019
2018
Growth
Acquired
Organic
Residential Pest Control
$
704
$
645
$
59
9
%
$
34
5
%
$
26
4
%
Commercial Pest Control
399
327
72
22
%
67
21
%
4
1
%
Termite and Home Services
567
549
18
3
%
8
1
%
10
2
%
Other
88
84
4
5
%
2
3
%
2
2
%
$
1,758
$
1,605
$
153
10
%
$
112
7
%
$
41
3
%
Fumigation
40
50
(10
)
(20
)%
—
—
%
(10
)
(20
)%
Total Revenue
$
1,798
$
1,655
$
143
9
%
$
112
7
%
$
32
2
%
ServiceMaster Brands Segment
Revenue by service line is as follows:
% of Revenue
% of Revenue
Three Months Ended
Three Months Ended
Year Ended
Year Ended
December 31,
December 31,
December 31,
December 31,
(In millions)
2019
2018
2019
2018
2019
2018
2019
2018
Royalty Fees
$
32
$
33
49
%
54
%
$
133
$
132
52
%
54
%
Commercial Cleaning and other National
Accounts
19
17
28
%
27
%
73
65
28
%
26
%
Sales of Products
4
4
7
%
7
%
14
16
6
%
6
%
Other
11
7
16
%
11
%
36
32
14
%
13
%
Total revenue
$
66
$
61
100
%
100
%
$
257
$
244
100
%
100
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200227005275/en/
Investor Relations: Jesse Jenkins 901.597.8259
Jesse.Jenkins@servicemaster.com
Media: James Robinson 901.597.7521
James.Robinson@servicemaster.com
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