MEMPHIS, Tenn. - August 04, 2014 - (BUSINESS WIRE) - ServiceMaster Global Holdings, Inc. (NYSE: SERV), a leading provider of essential residential and commercial services, today announced preliminary unaudited second-quarter 2014 results. The company reported second-quarter 2014 revenue of $683 million, an increase of 8 percent compared to the same period in 2013.
The company reported second-quarter 2014 income from continuing operations of $42 million, versus income from continuing operations of $15 million in the same period in 2013.
The company reported second-quarter 2014 net income of $40 million, or $0.44 per diluted share, versus a loss of $510 million for the second quarter of 2013, which included pre-tax non-cash impairment charges of $673 million to reduce the carrying value of TruGreen’s goodwill and trade name. The company reported second-quarter 2014 adjusted net income1of $52 million, or $0.56 per diluted share, versus $24 million, or $0.26 per share, in the same period in 2013. Earnings per share and other share data contained in this release do not reflect the 41.3 million shares issued by the company on July 1, 2014, in conjunction with its initial public offering.
The company reported second-quarter 2014 Adjusted EBITDA2 of $171 million, an increase of 32 percent or $41 million compared to the same period in 2013. The increase was primarily driven by the impact of higher revenue, operating cost savings and the transition of certain costs in the second quarter of 2014 to TruGreen Holding Corporation, which the company spun-off on January 14, 2014. A reconciliation of income from continuing operations to both adjusted net income and Adjusted EBITDA are set forth below in this press release.
"Terminix, American Home Shield and the Franchise Services Group all reported revenue and Adjusted EBITDA growth in the second quarter of 2014 versus prior year," said Rob Gillette, ServiceMaster’s chief executive officer. "We’re on the right path, with great businesses, strong brands and passionate associates who provide essential services to our valued customers."
"Based on our strong year-to-date performance, we plan to increase our business reinvestment in the second half of the year to drive future growth," said Gillette. "Our current projection range for full-year 2014 performance is $2,446 million to $2,466 million for revenue and $535 million to $540 million for Adjusted EBITDA."
Terminix, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported a 3 percent revenue increase in the second quarter of 2014 compared to the second quarter of 2013. The revenue increase was primarily driven by improved price realization in both termite and pest control and new product introductions.
Adjusted EBITDA increased 12 percent or $10 million versus the second quarter of 2013 driven primarily by higher revenue conversion and overhead cost reductions.
American Home Shield, which provides home warranties for household systems and appliances, reported a 17 percent revenue increase in the second quarter of 2014 compared to the second quarter of 2013, driven by the acquisition of Home Security of America, Inc. ("HSA"), higher customer counts, favorable product mix and timing within the year of contract revenue.
Adjusted EBITDA increased 52 percent or $21 million versus prior year, primarily reflecting the flow-through effect of the higher revenue, a decrease in contract claims and increased operating efficiencies.
The Franchise Services Group, which provides residential and commercial disaster restoration, janitorial, residential cleaning services, furniture repair and home inspections, reported a 10 percent revenue increase in the second quarter of 2014 compared to the second quarter of 2013. The revenue increase was driven primarily by higher royalty fees and an increase in janitorial national accounts.
Adjusted EBITDA increased 7 percent or $1 million versus the second quarter of 2013, primarily reflecting the flow-through effect of increased revenue, partially offset by the mix impact of higher growth in janitorial national accounts.
Other Operations and Headquarters
Adjusted EBITDA improved $9 million versus prior year, primarily reflecting the transition of certain costs to TruGreen and other cost reductions.
For the six months ended June 30, 2014, net cash provided from operating activities from continuing operations increased $26 million to $149 million compared to $123 million for the six months ended June 30, 2013.
Net cash used for investing activities from continuing operations was $36 million for the six months ended June 30, 2014, compared to $45 million for the six months ended June 30, 2013.
Pre-tax unlevered free cash flow3 was $258 million for the six months ended June 30, 2014, compared to $236 million for the six months ended June 30, 2013.
Net cash used for financing activities from continuing operations was $54 million for the six months ended June 30, 2014, compared to $51 million for the six months ended June 30, 2013. During the second quarter of 2014, we made scheduled principal payments on debt of $22 million.
On July 1, 2014, in connection with the closing of the Company’s initial public offering, The ServiceMaster Company, LLC terminated its existing credit agreement governing its old term loan facilities and its existing revolving credit facility, which were scheduled to mature January 2017, and entered into a new credit agreement with respect to a $1,825 million new term loan facility maturing 2021 and a $300 million new revolving credit facility maturing 2019. Borrowings under the new term loan facility, together with $244 million of available cash and $118 million of net proceeds of the initial public offering, were used to repay in full the $2,187 million outstanding under the old term loan facilities. In addition, $41 million of available cash was used to pay debt issuance costs of $23 million and to pay original issue discount of $18 million in connection with the new term loan facility.
On July 16, 2014, The ServiceMaster Company, LLC used a portion of the remaining proceeds from the initial public offering to redeem $210 million of its outstanding 8% Notes and $263 million of its 7% Notes due 2020. In connection with the redemption of the 8% Notes and the 7% Notes, The ServiceMaster Company, LLC was required to pay a pre-payment premium of $17 million and $18 million, respectively, and accrued interest of $7 million and $8 million, respectively.
In connection with the partial redemption of the 8% Notes and 7% Notes and the repayment of the old term loan facilities, we expect to record a loss on extinguishment of debt of approximately $65 million in the third quarter of 2014, which includes the pre-payment premiums on the 8% Notes and 7% Notes of $17 million and $18 million, respectively, and the write-off of approximately $30 million of debt issuance costs.
The company will discuss its second-quarter 2014 operating results during a conference call at 8 a.m. central time tomorrow, August 5, 2014. To participate on the conference call, interested parties should call 800.354.6885 (or international participants, 303.223.2680). 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 at www.servicemaster.com.
The call will be available for replay until September 4, 2014. To access the replay of this call, please call 800.633.8284 and enter reservation number 21728675 (international participants: 402.977.9140, reservation number 21728675). Or you can review the webcast on the company’s investor relations home page.
ServiceMaster Global Holdings, Inc. is a leading provider of essential residential and commercial services, operating through an extensive service network of more than 7,000 company-owned, franchised and licensed locations. The company’s portfolio of well-recognized brands includes Terminix (termite and pest control), American Home Shield (home warranties), ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspections). The company serves approximately 5 million residential and commercial customers through an employee base of approximately 13,000 company associates and a franchise network that independently employs an estimated 33,000 additional people. 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/TheServiceMasterCo.
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 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; and the success of, 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.
This press release contains certain non-GAAP financial measures, which are not measures of financial condition or profitability. 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.
1Adjusted net income (loss) is defined by the company as income (loss) from continuing operations before: amortization expense; non-cash impairment of property and equipment; management and consulting fees; restructuring charges; 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.
2Adjusted 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 impairment of property and equipment; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; interest expense and provision (benefit) for income taxes. The company’s definition of Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
3Pre-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; premium received on issuance of debt; cash paid for income taxes, net of refunds; cash paid for restructuring charges; and cash paid for management and consulting fees, (ii) less property additions.
4The Other Operations and Headquarters segment includes The ServiceMaster Acceptance Company Limited Partnership (SMAC) and the remainder of the company’s headquarters functions not allocated to the business segments.
SOURCE ServiceMaster Global Holdings, Inc.
Brian Turcotte
ServiceMaster Global Holdings, Inc.
Investor Relations
901-597-3282
Brian.Turcotte@servicemaster.com
Peter Tosches
ServiceMaster Global Holdings, Inc.
Media Relations
901-597-8449
Peter.Tosches@servicemaster.com
ServiceMaster Global Holdings, Inc. is a provider of essential residential and commercial services.