ServiceMaster Global Holdings, Inc. (NYSE: SERV), a leading provider of essential residential and commercial services, today announced preliminary unaudited third-quarter 2015 results. The company reported a year-over-year revenue increase of 6 percent driven by strong organic growth at American Home Shield (“AHS”), increased sales of new services at Terminix and price increases.
Third-quarter 2015 net income was $49 million or $0.36 per share, including a loss on extinguishment of debt of $31 million related to the company’s redemption of its 7% Senior Notes due 2020, versus a loss of $4 million or ($0.03) per share in the same period in 2014.
Third-quarter 2015 adjusted net income was $74 million, or $0.54 per share, versus $61 million, or $0.46 per share, for the same period in 2014.
Third-quarter 2015 Adjusted EBITDA was $174 million, a year-over-year increase of $17 million or 11 percent driven largely by increases at AHS and Terminix of $13 million and $5 million, respectively.
Rob Gillette, ServiceMaster’s chief executive officer, noted “Since going public in July 2014, we have reported six consecutive quarters of year-over-year revenue and Adjusted EBITDA growth. As we implement our mobile strategy across all our business units, we expect the convenience of services we bring to our customers to result in continued growth and profitability.”
Preliminary Consolidated Performance | |||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||
| $ millions | 2015 | 2014 | B/(W) | 2015 | 2014 | B/(W) | |||||||||||||||||||||||||||||||
| Revenue | $ | 706 | $ | 664 | $ | 42 | $ | 1,993 | $ | 1,880 | $ | 113 | |||||||||||||||||||||||||
| YoY growth | 6.3 | % | 6.0 | % | |||||||||||||||||||||||||||||||||
| Gross Margin | 338 | 320 | 18 | 957 | 897 | 60 | |||||||||||||||||||||||||||||||
| % of revenue | 47.9 | % | 48.2 | % | (0.3 | ) | pts | 48.0 | % | 47.7 | % | 0.3 | pts | ||||||||||||||||||||||||
| SG&A | (178 | ) | (176 | ) | (2 | ) | (512 | ) | (505 | ) | (7 | ) | |||||||||||||||||||||||||
| % of revenue | 25.2 | % | 26.5 | % | 1.3 | pts | 25.7 | % | 26.9 | % | 1.2 | pts | |||||||||||||||||||||||||
Income (Loss) from Continuing Operations before Income Taxes | 83 | (5 | ) | 88 | 237 | 48 | 189 | ||||||||||||||||||||||||||||||
| % of revenue | 11.8 | % | (0.8 | ) | % | 12.6 | pts | 11.9 | % | 2.6 | % | 9.3 | pts | ||||||||||||||||||||||||
| Income (Loss) from Continuing Operations | 50 | (3 | ) | 53 | 145 | 22 | 123 | ||||||||||||||||||||||||||||||
| % of revenue | 7.1 | % | (0.5 | ) | % | 7.6 | pts | 7.3 | % | 1.2 | % | 6.1 | pts | ||||||||||||||||||||||||
| Net Income (Loss) | 49 | (4 | ) | 53 | 144 | (76 | ) | 220 | |||||||||||||||||||||||||||||
| % of revenue | 6.9 | % | (0.6 | ) | % | 7.5 | pts | 7.2 | % | (4.0 | ) | % | 11.2 | pts | |||||||||||||||||||||||
| Adjusted Net Income(1) | 74 | 61 | 13 | 201 | 135 | 66 | |||||||||||||||||||||||||||||||
| % of revenue | 10.5 | % | 9.2 | % | 1.3 | pts | 10.1 | % | 7.2 | % | 2.9 | pts | |||||||||||||||||||||||||
| Adjusted EBITDA(2) | 174 | 157 | 17 | 498 | 443 | 55 | |||||||||||||||||||||||||||||||
| % of revenue | 24.6 | % | 23.6 | % | 1.0 | pts | 25.0 | % | 23.6 | % | 1.4 | pts | |||||||||||||||||||||||||
| Pre-Tax Unlevered Free Cash Flow(3) | 125 | 120 | 5 | 463 | 387 | 76 | |||||||||||||||||||||||||||||||
Preliminary Segment Performance | |||||||||||||||||||||||||||||||||||||||||||
Revenue and Adjusted EBITDA for each reportable segment and Corporate were as follows: | |||||||||||||||||||||||||||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||||||||||||||||||||||||||||
| Revenue | Adjusted EBITDA | Revenue | Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||||
| $ millions | 2015 | B/(W) vs. PY | 2015 | B/(W) vs. PY | 2015 | B/(W) vs. PY | 2015 | B/(W) vs. PY | |||||||||||||||||||||||||||||||||||
| Terminix | $ | 372 | $ | 19 | $ | 82 | $ | 5 | $ | 1,103 | $ | 54 | $ | 272 | $ | 24 | |||||||||||||||||||||||||||
| YoY growth / % of revenue | 5.4 | % | 22.0 | % | 0.2 | pts | 5.1 | % | 24.7 | % | 1.1 | pts | |||||||||||||||||||||||||||||||
| American Home Shield | 275 | 30 | 74 | 13 | 711 | 74 | 174 | 30 | |||||||||||||||||||||||||||||||||||
| YoY growth / % of revenue | 12.2 | % | 26.9 | % | 2.0 | pts | 11.6 | % | 24.5 | % | 1.9 | pts | |||||||||||||||||||||||||||||||
| Franchise Services Group | 58 | (6 | ) | 20 | 1 | 178 | (11 | ) | 58 | — | |||||||||||||||||||||||||||||||||
| YoY growth / % of revenue | (9.4 | ) | % | 34.5 | % | 4.8 | pts | (5.8 | ) | % | 32.6 | % | 1.9 | pts | |||||||||||||||||||||||||||||
| Corporate(4) | 1 | (1 | ) | (1 | ) | — | 2 | (3 | ) | (6 | ) | 1 | |||||||||||||||||||||||||||||||
| Total | $ | 706 | $ | 42 | $ | 174 | $ | 17 | $ | 1,993 | $ | 113 | $ | 498 | $ | 55 | |||||||||||||||||||||||||||
| YoY growth / % of revenue | 6.3 | % | 24.6 | % | 1.0 | pts | 6.0 | % | 25.0 | % | 1.4 | pts | |||||||||||||||||||||||||||||||
A reconciliation of income from continuing operations to both adjusted net income and Adjusted EBITDA, as well as a reconciliation of net cash provided from operating activities from continuing operations to pre-tax unlevered free cash flow, are set forth below in this press release.
Terminix
Terminix reported a 5 percent year-over-year revenue increase in the third-quarter of 2015 driven primarily by increased sales of new services and improved pricing, partially offset by lower demand for traditional termite services. Adjusted EBITDA increased 6 percent or $5 million versus prior year, driven primarily by the flow-through effect of higher revenue, partially offset by higher selling costs during the quarter.
American Home Shield
American Home Shield reported a 12 percent year-over-year revenue increase in the third-quarter of 2015 driven by organic growth and price increases. Adjusted EBITDA increased 21 percent or $13 million versus prior year, primarily reflecting the flow-through effect of higher revenue, partially offset by an increase in claim costs.
Franchise Services Group
The Franchise Services Group reported a 9 percent year-over-year revenue decrease in the third-quarter of 2015 reflecting primarily the conversion of company-owned Merry Maids branches to franchises. Adjusted EBITDA increased 5 percent or $1 million versus prior year, primarily reflecting cost reduction initiatives, largely offset by the flow-through effect of lower revenue.
Cash Flow
For the nine months ended September 30, 2015, net cash provided from operating activities from continuing operations increased to $229 million from $132 million for the nine months ended September 30, 2014.
Net cash used for investing activities from continuing operations was $34 million for the nine months ended September 30, 2015 compared to $51 million for the nine months ended September 30, 2014.
Net cash used for financing activities from continuing operations was $314 million for the nine months ended September 30, 2015 compared to $274 million for the nine months ended September 30, 2014.
Pre-tax unlevered free cash flow(3) was $463 million for the nine months ended September 30, 2015, compared to $387 million for the nine months ended September 30, 2014.
Other Matters
On August 17, 2015, the company redeemed the remaining outstanding $488 million of its 7% Senior Notes due 2020. As part of the transaction, the company paid $30 million in fees and pre-payment premium. To redeem the $488 million 7% Senior Notes, the company used $118 million in cash and incurred incremental borrowings of $400 million under its term loan.
Full-Year 2015 Outlook
The company anticipates that revenue will be between $2,580 million and $2,590 million, a 5 percent increase compared to 2014. Adjusted EBITDA is anticipated to be $620 million for the full-year 2015, an increase of 11 percent compared to 2014.
Third-Quarter 2015 Earnings Conference Call
The company will discuss its third-quarter 2015 operating results during a conference call at 8 a.m. central time today, November 3, 2015. To participate on the conference call, interested parties should call 888.225.2695 (or international participants, 303.223.4364). Additionally, the conference call will be available via webcast. A slide presentation highlighting the company’s results and key performance indicators 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 3, 2015. To access the replay of this call, please call 800.633.8284 and enter reservation number 21780085 (international participants: 402.977.9140, reservation number 21780085). You may also review the webcast on the company’s investor relations home page.
About ServiceMaster
ServiceMaster Global Holdings, Inc. is a leading provider of essential residential and commercial services, operating through an extensive service network of more than 8,000 company-owned locations and franchise and license agreements. The company’s portfolio of well-recognized brands includes American Home Shield (home warranties), AmeriSpec (home inspections), Furniture Medic (furniture 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. Some of the forward-looking statements can be identified by the use of forward-looking terms such as “believes,” “expects,” “may,” “will,” “shall,” “should,” “would,” “could,” “seeks,” “aims,” “projects,” “is optimistic,” “intends,” “plans,” “estimates,” “anticipates” or other comparable terms. Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control, including, without limitation, the risks and uncertainties discussed in the “Risk Factors” and “Information Regarding Forward-Looking Statements” sections in the company’s reports filed with the U.S. Securities and Exchange Commission. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this press release.
Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation, the effects of our substantial indebtedness; changes in interest rates, because a significant portion of our indebtedness bears interest at variable rates; 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. 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 used by 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 and pre-tax unlevered 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 or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of the company’s cash flow or liquidity. We believe these non-GAAP financial measures are useful for investors, analysts and other interested parties as it facilitates company-to-company operating and financial condition performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, consulting agreements and equity-based, long-term incentive plans.
_________________________________________________
(1) Adjusted net income is defined by the company as income (loss) from continuing operations before: amortization expense; impairment of software and other related costs; consulting agreement termination fees; restructuring charges; gain on sale of Merry Maids branches; management and consulting fees; loss on extinguishment of debt; and the tax impact of all of the aforementioned adjustments. The company’s definition of adjusted net income may not be comparable to similarly titled measures of other companies.
(2) Adjusted EBITDA is defined as income (loss) from continuing operations before: depreciation and amortization expense; non-cash impairment of software and other related costs; non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids branches; management and consulting fees; consulting agreement termination fees; provision (benefit) for income taxes; loss on extinguishment of debt; interest expense; and other non-operating expenses. The company’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
(3) Pre-tax unlevered free cash flow is defined by the company as (i) Net Cash Provided from Operating Activities from Continuing Operations before: cash paid for interest expense; call premium paid for retirement of debt; cash paid for income taxes, net of refunds; cash paid for restructuring charges; cash paid for management and consulting fees; cash paid for consulting agreement termination fees; cash paid for impairment of software and other related costs; excess tax benefits from stock-based compensation; gain on sales of marketable securities; and other non-operating items; (ii) less property additions.
(4) Corporate includes The ServiceMaster Acceptance Company Limited Partnership (SMAC) and the unallocated expenses of our headquarters function.
| SERVICEMASTER GLOBAL HOLDINGS, INC. | |||||||||||||||||||||
| Consolidated Statements of Operations and Comprehensive Income (Loss) | |||||||||||||||||||||
(In millions, except per share data) | |||||||||||||||||||||
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||||||
| Revenue | $ | 706 | $ | 664 | $ | 1,993 | $ | 1,880 | |||||||||||||
| Cost of services rendered and products sold | 368 | 344 | 1,036 | 983 | |||||||||||||||||
| Selling and administrative expenses | 178 | 176 | 512 | 505 | |||||||||||||||||
| Amortization expense | 7 | 13 | 31 | 39 | |||||||||||||||||
| Impairment of software and other related costs | — | — | — | 47 | |||||||||||||||||
| Consulting agreement termination fees | — | 21 | — | 21 | |||||||||||||||||
| Restructuring charges | 2 | 1 | 4 | 7 | |||||||||||||||||
| Gain on sale of Merry Maids branches | (3 | ) | — | (5 | ) | — | |||||||||||||||
| Interest expense | 41 | 49 | 128 | 171 | |||||||||||||||||
| Interest and net investment income | — | — | (8 | ) | (7 | ) | |||||||||||||||
| Loss on extinguishment of debt | 31 | 65 | 58 | 65 | |||||||||||||||||
| Income (Loss) from Continuing Operations before Income Taxes | 83 | (5 | ) | 237 | 48 | ||||||||||||||||
| Provision (benefit) for income taxes | 32 | (3 | ) | 91 | 26 | ||||||||||||||||
| Income (Loss) from Continuing Operations | 50 | (3 | ) | 145 | 22 | ||||||||||||||||
| Loss from discontinued operations, net of income taxes | (1 | ) | (1 | ) | (2 | ) | (98 | ) | |||||||||||||
| Net Income (Loss) | $ | 49 | $ | (4 | ) | $ | 144 | $ | (76 | ) | |||||||||||
| Total Comprehensive Income (Loss) | $ | 42 | $ | (8 | ) | $ | 130 | $ | (82 | ) | |||||||||||
| Weighted-average common shares outstanding - Basic | 135.2 | 133.2 | 134.9 | 105.8 | |||||||||||||||||
| Weighted-average common shares outstanding - Diluted | 136.8 | 133.2 | 136.5 | 106.7 | |||||||||||||||||
| Basic Earnings (Loss) Per Share: | |||||||||||||||||||||
| Income (Loss) from Continuing Operations | $ | 0.37 | $ | (0.02 | ) | $ | 1.08 | $ | 0.20 | ||||||||||||
| Loss from discontinued operations, net of income taxes | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.93 | ) | |||||||||||||
| Net Income (Loss) | 0.37 | (0.03 | ) | 1.07 | (0.72 | ) | |||||||||||||||
| Diluted Earnings (Loss) Per Share: | |||||||||||||||||||||
| Income (Loss) from Continuing Operations | $ | 0.37 | $ | (0.02 | ) | $ | 1.07 | $ | 0.20 | ||||||||||||
| Loss from discontinued operations, net of income taxes | (0.01 | ) | (0.01 | ) | (0.01 | ) | (0.92 | ) | |||||||||||||
| Net Income (Loss) | 0.36 | (0.03 | ) | 1.05 | (0.72 | ) | |||||||||||||||
| SERVICEMASTER GLOBAL HOLDINGS, INC. | |||||||||||
| Consolidated Statements of Financial Position | |||||||||||
(In millions, except share data) | |||||||||||
| As of | As of | ||||||||||
| September 30, | December 31, | ||||||||||
| 2015 | 2014 | ||||||||||
| Assets: | |||||||||||
| Current Assets: | |||||||||||
| Cash and cash equivalents | $ | 260 | $ | 389 | |||||||
| Marketable securities | 23 | 19 | |||||||||
| Receivables, less allowances of $24 and $25, respectively | 520 | 441 | |||||||||
| Inventories | 36 | 42 | |||||||||
| Prepaid expenses and other assets | 43 | 44 | |||||||||
| Deferred customer acquisition costs | 34 | 35 | |||||||||
| Deferred taxes | 51 | 76 | |||||||||
| Total Current Assets | 967 | 1,044 | |||||||||
| Property and Equipment: | |||||||||||
| At cost | 397 | 369 | |||||||||
| Less: accumulated depreciation | (247 | ) | (233 | ) | |||||||
| Net Property and Equipment | 150 | 136 | |||||||||
| Other Assets: | |||||||||||
| Goodwill | 2,086 | 2,069 | |||||||||
| Intangible assets, primarily trade names, service marks and trademarks, net | 1,673 | 1,696 | |||||||||
| Notes receivable | 32 | 26 | |||||||||
| Long-term marketable securities | 58 | 88 | |||||||||
| Other assets | 57 | 41 | |||||||||
| Debt issuance costs | 24 | 34 | |||||||||
| Total Assets | $ | 5,046 | $ | 5,134 | |||||||
| Liabilities and Shareholders' Equity: | |||||||||||
| Current Liabilities: | |||||||||||
| Accounts payable | $ | 110 | $ | 84 | |||||||
| Accrued liabilities: | |||||||||||
| Payroll and related expenses | 69 | 82 | |||||||||
| Self-insured claims and related expenses | 103 | 92 | |||||||||
| Accrued interest payable | 3 | 34 | |||||||||
| Other | 50 | 51 | |||||||||
| Deferred revenue | 549 | 514 | |||||||||
| Liabilities of discontinued operations | 1 | 9 | |||||||||
| Current portion of long-term debt | 49 | 39 | |||||||||
| Total Current Liabilities | 934 | 905 | |||||||||
| Long-Term Debt | 2,702 | 3,017 | |||||||||
| Other Long-Term Liabilities: | |||||||||||
| Deferred taxes | 718 | 715 | |||||||||
| Other long-term obligations, primarily self-insured claims | 170 | 138 | |||||||||
| Total Other Long-Term Liabilities | 888 | 854 | |||||||||
| Commitments and Contingencies (See Note 4) | |||||||||||
| Shareholders’ Equity: | |||||||||||
Common stock $0.01 par value (authorized 2,000,000,000 shares with 143,040,318 shares issued and 135,396,779 outstanding at September 30, 2015 and 141,731,682 shares issued and 134,092,335 outstanding at December 31, 2014) | 2 | 2 | |||||||||
| Additional paid-in capital | 2,240 | 2,207 | |||||||||
| Retained deficit | (1,576 | ) | (1,720 | ) | |||||||
| Accumulated other comprehensive loss | (22 | ) | (8 | ) | |||||||
Less common stock held in treasury, at cost 7,643,539 shares at September 30, 2015 and 7,639,347 shares at December 31, 2014) | (122 | ) | (122 | ) | |||||||
| Total Shareholders' Equity | 522 | 359 | |||||||||
| Total Liabilities and Shareholders' Equity | $ | 5,046 | $ | 5,134 | |||||||
| SERVICEMASTER GLOBAL HOLDINGS, INC. | |||||||||||
| Consolidated Statements of Cash Flows | |||||||||||
(In millions) | |||||||||||
| Nine Months Ended | |||||||||||
| September 30, | |||||||||||
| 2015 | 2014 | ||||||||||
| Cash and Cash Equivalents at Beginning of Period | $ | 389 | $ | 484 | |||||||
| Cash Flows from Operating Activities from Continuing Operations: | |||||||||||
| Net Income (Loss) | 144 | (76 | ) | ||||||||
| Adjustments to reconcile net income (loss) to net cash provided from operating activities: | |||||||||||
| Loss from discontinued operations, net of income taxes | 2 | 98 | |||||||||
| Depreciation expense | 35 | 36 | |||||||||
| Amortization expense | 31 | 39 | |||||||||
| Amortization of debt issuance costs | 4 | 6 | |||||||||
| Impairment of software and other related costs | — | 47 | |||||||||
| Gain on sale of Merry Maids branches | (5 | ) | — | ||||||||
| Loss on extinguishment of debt | 58 | 65 | |||||||||
| Call premium paid on retirement of debt | (49 | ) | (35 | ) | |||||||
| Deferred income tax provision | 41 | 19 | |||||||||
| Stock-based compensation expense | 8 | 5 | |||||||||
| Excess tax benefits from stock-based compensation | (12 | ) | — | ||||||||
| Gain on sales of marketable securities | (6 | ) | (4 | ) | |||||||
| Other | 6 | 3 | |||||||||
| Change in working capital, net of acquisitions: | |||||||||||
| Receivables | (77 | ) | (62 | ) | |||||||
| Inventories and other current assets | 3 | (7 | ) | ||||||||
| Accounts payable | 29 | 11 | |||||||||
| Deferred revenue | 35 | 36 | |||||||||
| Accrued liabilities | 5 | (4 | ) | ||||||||
| Accrued interest payable | (31 | ) | (40 | ) | |||||||
| Accrued restructuring charges | (2 | ) | — | ||||||||
| Current income taxes | 12 | (5 | ) | ||||||||
| Net Cash Provided from Operating Activities from Continuing Operations | 229 | 132 | |||||||||
| Cash Flows from Investing Activities from Continuing Operations: | |||||||||||
| Property additions | (30 | ) | (29 | ) | |||||||
| Sale of equipment and other assets | 9 | 2 | |||||||||
| Other business acquisitions, net of cash acquired | (31 | ) | (52 | ) | |||||||
| Purchases of available-for-sale securities | (5 | ) | (10 | ) | |||||||
| Sales and maturities of available-for-sale securities | 30 | 46 | |||||||||
| Origination of notes receivables | (77 | ) | (64 | ) | |||||||
| Collections on notes receivables | 69 | 58 | |||||||||
| Net Cash Used for Investing Activities from Continuing Operations | (34 | ) | (51 | ) | |||||||
| Cash Flows from Financing Activities from Continuing Operations: | |||||||||||
| Borrowings of debt | 578 | 1,825 | |||||||||
| Payments of debt | (911 | ) | (2,687 | ) | |||||||
| Discount paid on issuance of debt | (2 | ) | (18 | ) | |||||||
| Debt issuance costs paid | (5 | ) | (24 | ) | |||||||
| Contribution to TruGreen Holding Corporation | — | (35 | ) | ||||||||
| Repurchase of common stock and RSU vesting | — | (5 | ) | ||||||||
| Issuance of common stock | 14 | 671 | |||||||||
| Excess tax benefits from stock-based compensation | 12 | — | |||||||||
| Net Cash Used for Financing Activities from Continuing Operations | (314 | ) | (274 | ) | |||||||
| Cash Flows from Discontinued Operations: | |||||||||||
| Cash used for operating activities | (9 | ) | (11 | ) | |||||||
| Cash used for investing activities | — | (2 | ) | ||||||||
| Cash used for financing activities | — | (3 | ) | ||||||||
| Net Cash Used for Discontinued Operations | (9 | ) | (15 | ) | |||||||
| Effect of Exchange Rate Changes on Cash | (1 | ) | — | ||||||||
| Cash Decrease During the Period | (129 | ) | (208 | ) | |||||||
| Cash and Cash Equivalents at End of Period | $ | 260 | $ | 275 | |||||||
The following table presents reconciliations of Income from Continuing Operations to Adjusted Net Income for the periods presented.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||
| (In millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| Income (Loss) from Continuing Operations | $ | 50 | $ | (3 | ) | $ | 145 | $ | 22 | ||||||||||||
| Amortization expense | 7 | 13 | 31 | 39 | |||||||||||||||||
| Impairment of software and other related costs | — | — | — | 47 | |||||||||||||||||
| Consulting agreement termination fees | — | 21 | — | 21 | |||||||||||||||||
| Restructuring charges | 2 | 1 | 4 | 7 | |||||||||||||||||
| Gain on sale of Merry Maids branches | (3 | ) | — | (5 | ) | — | |||||||||||||||
| Management and consulting fees | — | — | — | 4 | |||||||||||||||||
| Loss on extinguishment of debt | 31 | 65 | 58 | 65 | |||||||||||||||||
| Tax impact of adjustments | (14 | ) | (36 | ) | (33 | ) | (69 | ) | |||||||||||||
| Adjusted Net Income | $ | 74 | $ | 61 | $ | 201 | $ | 135 | |||||||||||||
The following table presents reconciliations of Net Cash Provided from Operating Activities from Continuing Operations to Pre-Tax Unlevered Free Cash Flow for the periods presented.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||
| (In millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| Net Cash Provided from Operating Activities from Continuing Operations | $ | 19 | $ | (17 | ) | $ | 229 | $ | 132 | ||||||||||||
| Cash paid for interest expense | 56 | 82 | 149 | 199 | |||||||||||||||||
| Call premium paid on retirement of debt | 26 | 35 | 49 | 35 | |||||||||||||||||
| Cash paid for income taxes, net of refunds | 31 | 2 | 38 | 11 | |||||||||||||||||
| Cash paid for restructuring charges | 1 | 2 | 6 | 7 | |||||||||||||||||
| Cash paid for management and consulting fees | — | — | — | 4 | |||||||||||||||||
| Cash paid for consulting agreement termination fees | — | 21 | — | 21 | |||||||||||||||||
| Cash paid for impairment of software and other related costs | — | — | — | 3 | |||||||||||||||||
| Excess tax benefits from stock-based compensation | 2 | — | 12 | — | |||||||||||||||||
| Other | — | (1 | ) | 3 | 1 | ||||||||||||||||
| Gain on sales of marketable securities | — | (1 | ) | 6 | 4 | ||||||||||||||||
| Property additions | (10 | ) | (3 | ) | (30 | ) | (29 | ) | |||||||||||||
| Pre-Tax Unlevered Free Cash Flow | $ | 125 | $ | 120 | $ | 463 | $ | 387 | |||||||||||||
The following table presents reconciliations of Adjusted EBITDA to Income from Continuing Operations for the periods presented.
| Three Months Ended | Nine Months Ended | ||||||||||||||||||||
| September 30, | September 30, | ||||||||||||||||||||
| (In millions) | 2015 | 2014 | 2015 | 2014 | |||||||||||||||||
| Terminix | $ | 82 | $ | 77 | $ | 272 | $ | 248 | |||||||||||||
| American Home Shield | 74 | 61 | 174 | 144 | |||||||||||||||||
| Franchise Services Group | 20 | 19 | 58 | 58 | |||||||||||||||||
| Corporate | (1 | ) | (1 | ) | (6 | ) | (7 | ) | |||||||||||||
| Adjusted EBITDA | $ | 174 | $ | 157 | $ | 498 | $ | 443 | |||||||||||||
| Depreciation and amortization expense | (18 | ) | (25 | ) | (66 | ) | (76 | ) | |||||||||||||
| Non-cash impairment of software and other related costs | — | — | — | (47 | ) | ||||||||||||||||
| Non-cash stock-based compensation expense | (3 | ) | (2 | ) | (8 | ) | (5 | ) | |||||||||||||
| Restructuring charges | (2 | ) | (1 | ) | (4 | ) | (7 | ) | |||||||||||||
| Gain on sale of Merry Maids branches | 3 | — | 5 | — | |||||||||||||||||
| Management and consulting fees | — | — | — | (4 | ) | ||||||||||||||||
| Consulting agreement termination fees | — | (21 | ) | — | (21 | ) | |||||||||||||||
| Provision for income taxes | (32 | ) | 3 | (91 | ) | (26 | ) | ||||||||||||||
| Loss on extinguishment of debt | (31 | ) | (65 | ) | (58 | ) | (65 | ) | |||||||||||||
| Interest expense | (41 | ) | (49 | ) | (128 | ) | (171 | ) | |||||||||||||
| Other non-operating expenses | — | 1 | (3 | ) | — | ||||||||||||||||
| Income (Loss) from Continuing Operations | $ | 50 | $ | (3 | ) | $ | 145 | $ | 22 | ||||||||||||
The table below presents selected operating metrics related to renewable customer counts and customer retention for our Terminix and American Home Shield segments.
| As of September 30, | ||||||||||||
| 2015 | 2014((1)) | |||||||||||
| Terminix | ||||||||||||
| (Reduction) Growth in Pest Control Customers | (2 | ) | % | — | % | |||||||
| Pest Control Customer Retention Rate | 79 | % | 80 | % | ||||||||
| Reduction in Termite and Other Services Customers | (2 | ) | % | (3 | ) | % | ||||||
| Termite and Other Services Customer Retention Rate | 85 | % | 85 | % | ||||||||
| American Home Shield | ||||||||||||
| Growth in Home Warranties | 7 | % | 13 | % | ||||||||
| Customer Retention Rate | 75 | % | 75 | % | ||||||||
(1) As of September 30, 2014, excluding the Home Security of America (“HSA”) accounts acquired on February 28, 2014, the growth in home warranties was 4 percent, and, excluding all HSA accounts, the customer retention rate for our American Home Shield segment was 76 percent.
Terminix Segment | |||||||||||||
Revenue by service line is as follows: | |||||||||||||
| Three Months Ended | % of | ||||||||||||
| September 30, | Revenue | ||||||||||||
| (In millions) | 2015 | 2014 | 2015 | ||||||||||
| Pest Control | $ | 217 | $ | 202 | 58 | % | |||||||
| Termite and Other Services | 135 | 133 | 36 | ||||||||||
| Other | 21 | 18 | 6 | ||||||||||
| Total revenue | $ | 372 | $ | 353 | 100 | % | |||||||
Termite renewal revenue comprised 51 percent of total revenue from Termite and Other Services for the three months ended September 30, 2015 and 2014.
Franchise Services Group Segment | |||||||||||||
Revenue by service line is as follows: | |||||||||||||
| Three Months Ended | % of | ||||||||||||
| September 30, | Revenue | ||||||||||||
| (In millions) | 2015 | 2014 | 2015 | ||||||||||
| Royalty Fees | $ | 30 | $ | 30 | 51 | % | |||||||
| Company-Owned Merry Maids Branches | 10 | 16 | 18 | ||||||||||
| Janitorial National Accounts | 10 | 10 | 17 | ||||||||||
| Sales of Products | 5 | 5 | 8 | ||||||||||
| Other | 4 | 3 | 6 | ||||||||||
| Total revenue | $ | 58 | $ | 64 | 100 | % | |||||||
View source version on businesswire.com: http://www.businesswire.com/news/home/20151103005633/en/
Contacts:
Investor Relations:
James
Shields, 901-597-6839
James.Shields@servicemaster.com
or
Media:
Peter
Tosches, 901-597-8449
Peter.Tosches@servicemaster.com
