American Home Shield 2015 Annual Report Download - page 80

Table of Contents
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SERVICEMASTER GLOBAL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Basis of Presentation
ServiceMaster is a leading provider of essential residential and commercial services. The Company’s services include termite
and pest control, home warranties, disaster restoration, janitorial, residential cleaning, furniture repair and home inspection. The
Company provides these services through an extensive service network of company-owned, franchised and licensed locations
operating primarily under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster
Clean, Merry Maids, Furniture Medic and AmeriSpec. All consolidated Company subsidiaries are wholly-owned. Intercompany
transactions and balances have been eliminated.
Initial Public Offering
On June 25, 2014, the Company’s registration statement on Form S-1 was declared effective by the SEC for an initial public
offering of its common stock. The Company registered the offering and sale of 35,900,000 shares of its common stock and an
additional 5,385,000 shares of its common stock sold to the underwriters pursuant to an option to purchase additional shares. On
July 1, 2014, the Company completed the offering of 41,285,000 shares of its common stock at a price of $17.00 per share.
Secondary Public Offerings
On February 4, 2015, the Company’s registration statement on Form S-1 was declared effective by the SEC for a secondary
offering of its common stock. The Company registered on behalf of certain stockholders the offering and sale of 25,000,000 shares of
common stock and an additional 3,750,000 shares of common stock sold to the underwriters pursuant to an option to purchase
additional shares. On February 10, 2015, the selling stockholders completed the offering of 25,000,000 shares of common stock at a
price of $29.50 per share. On February 13, 2015, the selling stockholders completed the offering of an additional 3,750,000 shares of
common stock at a price of $29.50 per share pursuant to the underwriters’ option to purchase additional shares.
On May 27, 2015, the Company’s registration statement on Form S-1 was declared effective by the SEC for a secondary
offering of its common stock. The Company registered on behalf of certain stockholders the offering and sale of 20,000,000 shares of
common stock and an additional 3,000,000 shares of common stock sold to the underwriters pursuant to an option to purchase
additional shares. On June 2, 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, the Company’s shelf registration statement on Form S-3 was automatically declared effective by the
SEC for a secondary offering of its common stock. The Company 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.
The Company did not receive any of the proceeds from the aggregate 80,711,763 shares of common stock sold by the selling
stockholders in 2015.
Note 2. Significant Accounting Policies
Consolidation
The consolidated financial statements of the Company include all of its wholly-owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
Use of Estimates
The preparation of the consolidated financial statements requires management to make certain estimates and assumptions
required under GAAP which may differ from actual results. The more significant areas requiring the use of management estimates
relate to revenue recognition; the allowance for uncollectible receivables; accruals for self-insured retention limits related to medical,
workers’ compensation, auto and general liability insurance claims; accruals for home warranties and termite damage claims; the
possible outcome of outstanding litigation; accruals for income tax liabilities as well as deferred tax accounts; the deferral and
amortization of customer acquisition costs; share based compensation; useful lives for depreciation and amortization expense; the
valuation of marketable securities; and the valuation of tangible and intangible assets. In 2015, there were no changes in the significant
areas that require estimates or in the underlying methodologies used in determining the amounts of these associated estimates.
The allowance for receivables is developed based on several factors including overall customer credit quality, historical
write-off experience and specific account analyses that project the ultimate collectability of the outstanding balances. As such, these
factors may change over time causing the allowance level to vary.
The Company carries insurance policies on insurable risks at levels which it believes to be appropriate, including workers’
compensation, auto and general liability risks. The Company purchases insurance policies from third-party insurance carriers, which
typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall below the
retention limits. In determining the Company’s accrual for self-insured claims, the Company uses historical claims experience to
78 2015 Annual Report