American Home Shield 2015 Annual Report Download - page 23

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2015, the selling stockholders completed the offering of 20,000,000 shares of common stock at a price of $34.00 per share. On June
12, 2015, the selling stockholders completed the offering of an additional 3,000,000 shares of common stock at a price of $34.00 per
share pursuant to the underwriters’ option to purchase additional shares.
On November 5, 2015, our shelf registration statement on Form S-3 was automatically declared effective by the SEC for a
secondary offering of our common stock. We registered on behalf of certain stockholders the offering and sale of 28,961,763 shares of
common stock. On November 5, 2015, the selling stockholders completed the offering of 28,961,763 shares of common stock at a
price of $33.91 per share.
We did not receive any of the proceeds from the aggregate 80,711,763 shares of common stock sold by the selling
stockholders in 2015.
Ownership
On July 24, 2007, we were taken private pursuant to a merger transaction, and, following the completion of the merger and
other subsequent transactions and prior to our initial public offering, the significant majority of our outstanding common stock was
owned by investment funds managed by, or affiliated with, Clayton, Dubilier & Rice, LLC (“CD&R” or the “CD&R Funds”),
JPMorgan Chase Funding Inc. (“JPMorgan”), StepStone Group LP (“StepStone”), the investment funds managed by StepStone (the
“StepStone Funds”) and Ridgemont Partners Secondary Fund I, L.P. (“Ridgemont”) (collectively, the “Equity Sponsors”). Upon
completion of the secondary public offerings in February, May and November 2015, the CD&R Funds and StepStone Funds no longer
hold our common stock. See “—Initial Public Offering” and “—Secondary Public Offerings” for further details on our ownership
structure.
Refinancing of Indebtedness
On February 17, 2015, we redeemed $190 million in aggregate principal amount of our outstanding 8% senior notes due
2020 (the “8% 2020 Notes”) at a redemption price of 106.0% of the principal amount using available cash. In connection with the
partial redemption, we recorded a loss on extinguishment of debt of $13 million in the year ended December 31, 2015, which includes
a pre-payment premium of $11 million and the write-off of $2 million of debt issuance costs.
On April 1, 2015, we entered into a first amendment (the “First Term Loan Amendment”) which further amends the
agreement governing our $1,825 million term loan facility maturing July 1, 2021 (the “Term Loan Facility) and our $300 million
revolving credit facility maturing July 1, 2019 (the “Revolving Credit Facility”) (together with the Term Loan Facility, the “Credit
Facilities”). The First Term Loan Amendment provides for incremental term loans (the “April Incremental Term Loans”) under the
Term Loan Facility in an aggregate principal amount of $175 million. On April 1, 2015, we used the net proceeds from the April
Incremental Term Loans, together with cash on hand, to redeem the remaining outstanding $200 million in aggregate principal amount
of the 8% 2020 Notes at a redemption price of 106.0% of the principal amount. In connection with the redemption, we recorded a loss
on extinguishment of debt of $14 million in the year ended December 31, 2015, which includes a pre-payment premium of $12
million and the write-off of $2 million of debt issuance costs.
On August 17, 2015, we entered into a second amendment (the “Second Term Loan Amendment”) which amends the
agreement governing the Credit Facilities. The Second Term Loan Amendment provides for incremental term loans (the “August
Incremental Term Loans”) under the Term Loan Facility in an aggregate principal amount of $400 million. On August 17, 2015, we
used the net proceeds from the August Incremental Term Loans, together with cash on hand, to redeem the remaining outstanding
$488 million in aggregate principal amount of our outstanding 7% senior notes due 2020 (the “7% 2020 Notes”) (together with the 8%
2020 Note, the “2020 Notes”) at a redemption price of 105.25% of the principal amount. In connection with the redemption, we
recorded a loss on extinguishment of debt of $31 million in the year ended December 31, 2015, which includes a pre-payment
premium of $25 million and the write-off of $6 million of debt issuance costs.
Our Market Opportunity
Termite and Pest Control Industry
The outsourced market for residential and commercial termite and pest control services in the United States was
approximately $7 billion in 2014, according to Specialty Products Consultants, LLC. We estimate that there are approximately 20,000
U.S. termite and pest control companies, nearly all of which have fewer than 100 employees.
Termites are responsible for an estimated $5 billion in home damage in the United States annually, according to the National
Pest Management Association. The termite control industry provides treatment and inspection services to residential and commercial
property owners for the remediation and prevention of termite infestations. We believe homeowners value quality and reliability over
price in choosing professional termite control services, as the cost of most professional treatments is well below the potential cost of
inaction or ineffective treatment. As a result, we believe the demand for termite remediation services is relatively insulated from
changes in consumer spending. In addition to remediation services, the termite control industry offers periodic termite inspections and
preventative treatments to residential and commercial property owners in areas with high termite activity, typically through annual
contracts. These annual contracts may carry guarantees that protect the property owner against the cost of structural damage caused by
a termite infestation. Termites can cause significant damage to a structure before becoming visible to the untrained eye, highlighting
the value proposition of professional preventative termite services. As a result, the termite control industry experiences high renewal
rates on annual preventative inspection and treatment contracts, and revenues from such contracts are generally stable and recurring.
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