American Home Shield 2012 Annual Report Download
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Table of contents
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Page 1
... or organization) 36-3858106 (I.R.S. Employer Identification No.) 860 Ridge Lake Boulevard, Memphis, Tennessee 38120 (Address of principal executive offices, including zip code) (901) 597-1400 (Registrant's telephone number, including area code) Securities registered pursuant to Section 12... -
Page 2
... reporting company o Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes o No  The registrant is a privately held corporation and its equity shares are not publicly traded. At March 4, 2013, 1,000 shares of the registrant's common stock... -
Page 3
... Information Directors, Executive Officers and Corporate Governance Executive Compensation Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Certain Relationships and Related Transactions, and Director Independence Principal Accounting Fees and Services... -
Page 4
...'s reportable segments in the years indicated: Segment 2012 2011 2010 Terminix TruGreen American Home Shield ServiceMaster Clean Other Operations and Headquarters Terminix Segment 40% 31% 22% 4% 3% 37% 34% 22% 4% 3% 37% 35% 21% 4% 3% The Terminix segment provides termite and pest control... -
Page 5
... central air conditioning systems, water heaters and other covered household systems and appliances and services those contracts through independent repair contractors. In 2012, 70 percent of the home warranties written by American Home Shield were derived from existing contract renewals, while 17... -
Page 6
...franchised locations. AmeriSpec also had licensing arrangements whereby licensees provided home inspection services in Canada. Other OperatiIns and Headquarters Segment The Other Operations and Headquarters segment includes the Merry Maids business unit, The ServiceMaster Acceptance Company Limited... -
Page 7
... the event a customer fails to make payments under a retail installment sales contract for 120 days after the due date, Terminix and TruGreen purchase the installment contract from SMAC. Headquarters functions. The Business Support Center, headquartered in Memphis, Tennessee, includes company-wide... -
Page 8
... enter into one-year service programs, which are renewable annually. Our customer retention rates were 79.3 percent for Terminix Pest Control, R5.6 percent for Terminix Termite, 6R.6 percent for TruGreen and 73.7 percent for American Home Shield, as calculated on a rolling, twelve-month basis as of... -
Page 9
... to remote locations from a central management system, to improve customer call-handling, as well as sales and service handheld technology to enhance the customer experience; American Home Shield is developing a new operating system designed, in part, to enhance customer experience and improve... -
Page 10
... at Terminix with handheld technology to make the sales process more efficient and effective and plan to equip our TruGreen sales associates with similar handheld technology; For our franchise businesses, we seek to add new franchises to increase our penetration of what are very fragmented service... -
Page 11
...termite and pest control, lawn care, home warranties and preventative maintenance contracts, janitorial, cleaning and disaster restoration, house cleaning, wood furniture repair and home inspection. ServiceMaster competes with many other companies in the sale of its services, franchises and products... -
Page 12
...17 percent of the operating revenue of American Home Shield in 2012 was tied directly to existing home resales. Competition for home warranties and preventative maintenance contracts that cover household systems and appliances comes mainly from regional providers. Several competitors are expected to... -
Page 13
... residential real estate market place, such as real estate brokerages, financial institutions and insurance agencies and, for American Home Shield, an internal sales organization that supports these distribution channels. SERVICE MARKS, TRADEMARKS AND TRADE NAMES ServiceMaster holds various service... -
Page 14
... laws relating to consumer protection, wage and hour, deceptive trade practices, permitting and licensing, real estate settlements, workers' safety, tax, healthcare reforms, franchise-related issues, collective bargaining and other labor matters, environmental and employee benefits. The Terminix and... -
Page 15
... captive insurance company, which is domiciled in Vermont. EMPLOYEES The average number of persons employed by ServiceMaster during 2012 was approximately 20,000. Due to the seasonal nature of some of the Company's businesses, employee headcount can fluctuate during the course of a year, reaching... -
Page 16
... time it takes our customers to pay us, or that could lead to a decrease in pricing for our services and products, any of which could adversely affect our accounts receivable, among other things, and, in turn, increase our working capital needs. Volatile swings in the commercial real estate segment... -
Page 17
... cannot travel to service locations due to hazardous road conditions. In addition, extreme temperatures can lead to an increase in service requests related to household systems and appliances in our American Home Shield business, resulting in higher claim frequency and costs and lower profitability... -
Page 18
..., raw materials, wages, employee benefits, health care, vehicles, insurance and other operating costs. To the extent such costs increase, we may be prevented, in whole or in part, from passing these cost increases through to our existing and prospective customers, and the rates we pay to our... -
Page 19
... companies. Regional and local competitors operating in a limited geographic area may have lower labor, benefits and overhead costs. The principal methods of competition in our businesses include name recognition, quality and speed of service, pricing, customer satisfaction and reputation... -
Page 20
... execution of this strategy, including the rollout or adjustment of our new services or products or TruGreen's sales and marketing plans could cause us to re-evaluate or change our business strategies and could have a material adverse impact on our reputation, business, financial position... -
Page 21
... to provide additional health insurance benefits to our associates would likely increase our expenses, and any such increases could be significant enough to materially impact our business, financial position, results of operations and cash flows. Additional or new regulations, or changes in current... -
Page 22
... damage to our reputation and interruptions in our operations, including our customers' ability to pay for our services and products by credit card or their willingness to purchase our services and products and could result in a violation of applicable laws, regulations, orders, industry standards... -
Page 23
... laws, regulations or other applicable standards. For example, delays, higher than expected costs or unsuccessful development and implementation of new operating systems at American Home Shield and Merry Maids, which are currently under development, and at TruGreen, which is in the process of being... -
Page 24
...impact on the services provided by our human resources center of excellence. Failures of our information technology systems could also lead to violations of privacy laws, regulations, trade guidelines or practices related to our customers and associates. If our disaster recovery plans do not work as... -
Page 25
... could experience difficulty in delivering our services in a high-quality or timely manner and could be forced to increase wages in order to attract and retain associates, which would result in higher operating costs and reduced profitability. New election rules by the National Labor Relations Board... -
Page 26
... in accounting, securities and other rules applicable to our business, including proposed revisions to the rules related to accounting for leases and reserves for, and disclosures relating to, legal contingencies, could affect our reported results of operations and financial position, potentially... -
Page 27
...with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns; • • • • our ability to refinance indebtedness may be limited or the associated costs may increase; our flexibility to adjust to changing market conditions... -
Page 28
... be beyond our control, and as described under "-Risks Related to Our Business and Our Industry" above. The payment of ordinary and extraordinary dividends by our subsidiaries that are regulated as insurance, home warranty, or similar companies is subject to applicable state law limitations. If we... -
Page 29
... and other debt service obligations. These steps may include open market repurchases, debt repricings, maturity extensions, and other retirements, purchases or refinancings of outstanding debt in whole or in part, in addition to making any required scheduled installment payments. The timing of any... -
Page 30
... other indebtedness may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt... -
Page 31
... Terminix and TruGreen, along with the corporate headquarters, are located in leased premises at R60 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for American Home Shield are located in leased premises at RR9 Ridge Lake Boulevard, Memphis, Tennessee. The headquarters for ServiceMaster... -
Page 32
Table of Contents offices, training facilities and warehouse described above, are suitable and adequate to support the current needs of its business. Operating Company Owned Facilities Leased Facilities Terminix TruGreen American Home Shield ServiceMaster Clean Merry Maids ITEM 3. LEGTL ... -
Page 33
... OF EQUITY SECURITIES The Company's sole class of issued equity is common stock. As of March 4, 2013, all of the Company's common stock was owned by CDRSVM Holding, Inc. On July 24, 2007, the Company completed the Merger pursuant to which the Company's publicly traded securities were cancelled in... -
Page 34
... extinguishment of debt related to the completion of open market purchases of $R9.0 million in face value of the Company's 2015 Notes. (3) In 2009, the Company recorded a reduction in income tax expense of $15.2 million related to changes in state tax rates used to measure deferred taxes. In 200R... -
Page 35
... million and increase in income from continuing operations before income taxes for 2011 compared to 2010 of $R3.4 million primarily reflect the net effect of year over year changes in the following items: 2012 (In thousands) Compared to 2011 2011 Compared to 2010 Non-cash goodwill and trade name... -
Page 36
...the Company has executed to date for 2013, the Company projects that fuel prices will not significantly increase our fuel costs for 2013 compared to 2012. After adjusting for the impact of year over year changes in the number of covered employees, health care and related costs increased $6.6 million... -
Page 37
... sales and marketing expense and a $1.9 million reduction in key executive transition charges, offset, in part, by increased investments in ongoing productivity and standardization initiatives and an increase in technology costs related to a new operating system at TruGreen, which is in the process... -
Page 38
... in market conditions which indicated an improved outlook for the U.S. financial markets since the 2011 analysis. Trade Name Impairment Based on the revenue results at TruGreen in the first six months of 2012 and a then lower revenue outlook for the remainder of 2012 and future years, the Company... -
Page 39
... quarter of 2012. The long-term revenue growth rates used for periods after the defined projection period in the impairment tests at September 30, 2012, June 30, 2012 and October 1, 2011 were the same and in line with historical U.S. gross domestic product growth rates. The discount rates used in... -
Page 40
... 31, 2012, these charges included severance costs. (3) (4) Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in the Company's headquarters functions that provide company-wide administrative services for our operations that we refer to as "centers of... -
Page 41
... the impairment of a loan related to a prior business disposition. (2) (3) (4) IncIme Taxes The effective tax rate on (loss) income from continuing operations was a benefit of 13.R percent for the year ended December 31, 2012, a provision of 39.3 percent for the year ended December 31, 2011 and... -
Page 42
...- Growth in Pest Control Customers Pest Control Customer Retention Rate (Reduction) Growth in Termite Customers Termite Customer Retention Rate TruGreen- Reduction in Full Program Accounts Customer Retention Rate Tmerican Home Shield- Growth in Home Warranties Customer Retention Rate Segment Review... -
Page 43
... it excludes non-cash stock-based compensation expense, non-cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger, restructuring charges and management and consulting fees. The Company presents Operating Performance because it believes... -
Page 44
...: 2012 Year Ended December 31, 2011 2010 (In thousands) Operating Revenue: Terminix TruGreen American Home Shield ServiceMaster Clean Other Operations and Headquarters Total Operating Revenue Operating Performance: Terminix TruGreen American Home Shield ServiceMaster Clean Other Operations and... -
Page 45
Performance: Operating Performance of discontinued operations(7) $ -$ -$ -$ 43 -$ (1,13R)$ (1,13R) -
Page 46
...Terminix TruGreen Other Operations Tmerican and Home ServiceMaster Headquarters Shield Clean Total Year Ended December 31, 2011 Operating... attributable to purchase accounting(4) (44) (37) - Restructuring charges(5) 3,560 1,115 - Management and consulting fees(6) - - - Operating Performance $299... -
Page 47
Table of Contents (in thousands) Terminix TruGreen Other Operations Tmerican and Home ServiceMaster Headquarters Shield Clean Total Year Ended December 31, 2010 Operating income (loss)(1) $ 199,750 $ 112,312 $ 6R,3R0 $ Depreciation and amortization expense 67,761 66,069 42,259 EBITDA 267,511 ... -
Page 48
...long-term marketable securities associated with regulatory requirements in connection with American Home Shield and for other purposes totaled $243.7 million as of December 31, 2012. American Home Shield interest and net investment income was $6.2 million, $9.R million and $6.2 million for the years... -
Page 49
...in average customer counts, a $12.2 million increase in other pest revenue, primarily bed bug services, and improved price realization. Absolute pest control customer counts as of December 31, 2012 compared to 2011 increased 0.R percent, driven by new unit sales and acquisitions, offset, in part, by... -
Page 50
...in other sales channels which it believes will yield more attractive returns in the long-term, such as digital marketing. TruGreen also introduced its new Healthy Lawn Plan in early 2012, which provides a customized, full-year treatment plan that better matches the growing conditions in each part of... -
Page 51
... and acquisitions, offset, in part, by a 190 bps increase in the residential full program customer retention rate. The decrease in new unit sales was significantly impacted by changes in our product offerings and the rebalancing of our sales channel mix. For the year ended December 31, 2012 compared... -
Page 52
..., in home warranty claims costs and sales and marketing expense, offset, in part, by higher provisions for certain legal matters and increased investments to drive improvements in service delivery. American Home Shield is investing in a new operating system that is designed to improve customer... -
Page 53
...market and elimination of the government housing incentive program, which was extended through the first quarter of 2011. This decline was offset, in part, by growth in consumer sales. American Home Shield's Operating Performance increased $15.4 million for the year ended December 31, 2011 compared... -
Page 54
... acquisitions, offset, in part, by a decrease in new unit sales. Royalty fees, which were 20.5 percent of Merry Maids' operating revenue in 2012, increased 7.7 percent compared to 2011, driven by organic franchise growth, franchise license sales and the sale of the company-owned branches to existing... -
Page 55
...branches to existing and new franchisees in the fourth quarter of 2011, offset, in part, by a 630 bps increase in the customer retention rate. Royalty fees, which were 19.3 percent of Merry Maids' operating revenue in 2011, increased 6.3 percent compared to 2010, primarily driven by market expansion... -
Page 56
...payments related to restructuring charges and a $31.9 million increase in cash required for working capital. For the year ended December 31, 2011, working capital requirements were adversely impacted by a reduction in reserve levels under certain self-insurance programs and unrecognized tax benefits... -
Page 57
... needs, including vehicle fleet purchases in 2010 and 2011, and information technology projects, including a new operating system and telecommunications infrastructure at TruGreen and a new operating system at American Home Shield. The Company anticipates that capital expenditures for the full year... -
Page 58
... December 31, 2012, compared with $471.4 million as of December 31, 2011. As of December 31, 2012 and 2011, $243.7 million and $226.2 million, respectively, of the cash and short- and longterm marketable securities balances were associated with regulatory requirements at American Home Shield and for... -
Page 59
... 31, 2012, the Company had acquired $41.9 million of vehicles under the Fleet Agreement leasing program. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR... -
Page 60
..., any subsidiaries subject to regulation as an insurance, home warranty or similar company, or certain other subsidiaries (the "Non-Guarantors"). Term Facilities In August 2012, the Company entered into an amendment (the "2012 Term Loan Facility Amendment") to its Term Loan Facility to amend the... -
Page 61
... by the Company's subsidiaries that are regulated as insurance, home warranty or similar companies is subject to applicable state law limitations. Insurance subsidiaries and home warranty and similar subsidiaries (through which ServiceMaster conducts its American Home Shield business) are subject... -
Page 62
... our home warranty and insurance subsidiaries and is subject to these regulatory limitations on the payment of funds to us. We expect that such limitations are expected to be in effect in 2013. The remainder of the $243.7 million, or $55.0 million, is related to amounts that the Company's management... -
Page 63
... twelve-month term, and then are month-to-month, cancelable at the Company's option. The amounts in non-cancelable operating leases exclude all prospective cancelable payments under these agreements. There are residual value guarantees by the Company (which approximate R4 percent of the estimated... -
Page 64
... accounts receivable growth at American Home Shield and product sales and termite completions at Terminix. Prepaid expenses and other assets decreased from prior year levels, reflecting a reduction in prepaid marketing expense at Terminix. Current deferred tax assets increased from prior year... -
Page 65
... expense. Accrued self-insurance claims and related expenses increased from prior year levels, reflecting an increase in accruals for home warranty claims in the American Home Shield business. Accrued interest payable decreased from prior year levels, reflecting interest payments made in conjunction... -
Page 66
...for home warranty claims in the American Home Shield business are made based on the Company's claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per... -
Page 67
... franchise or license fees are pre-established fixed amounts and are recognized as revenue when collectability is reasonably assured and all material services or conditions relating to the sale have been substantially performed. Customer acquisition costs, which are incremental and direct costs... -
Page 68
... estimated growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based comparable and transaction approaches utilize comparable company public trading values, comparable... -
Page 69
... segment for the years ended December 31, 2012 and 2011, as well as the remaining value of the trade names not subject to amortization by business segment as of December 31, 2012 and 2011 are as follows: Other Tmerican Home ServiceMaster Operations & Headquarters(1) Shield Clean (In thousands... -
Page 70
... to accept market risk. The long-term revenue growth rates used in the analyses for the October 1, 2011 and 2010 impairment tests were the same and in line with historical U.S. gross domestic product growth rates. Had the Company used a discount rate in assessing the impairment of its trade names as... -
Page 71
... Company does not hold or issue derivative financial instruments for trading or speculative purposes. The Company has entered into specific financial arrangements in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts... -
Page 72
... for American Home Shield's, TruGreen's and Merry Maids' new operating systems; estimates for phasing out certain IT services from IBM and projections for expenditures to IBM in 2013; plans for equiping TruGreen's sales associates with handheld technology to make the sales process more efficient... -
Page 73
...and interest rate swaps; changes in our services or products; • • • existing and future governmental regulation and the enforcement thereof, including, without limitation, regulation relating to the environment, including the Federal Trade Commission rules on green marketing; restricting or... -
Page 74
...fees on businesses, including ServiceMaster, to generate more tax revenues, which could negatively impact spending by commercial customers and municipalities on our services; • regulations imposed by several states related to our home warranty and insurance subsidiaries, including those limiting... -
Page 75
... consumer spending, labor wages, fuel prices, fertilizer and other material costs, home resales, unemployment rates, insurance costs and medical costs could have a material adverse impact on future results of operations. The Company does not hold or issue derivative financial instruments for trading... -
Page 76
...6R% 2.R4% 1.70% Before the application of the applicable borrowing margin. Interest rate swap agreements in effect as of December 31, 2012 are as follows: Weighted Tverage Fixed Rate(1) Notional Trade Date Effective Date Expiration Date Tmount Floating Rate June 10, 2010 June 10, 2010 June... -
Page 77
...about the Company's debt as of December 31, 2012 (after considering the effect of the interest rate swap agreements), including the principal cash payments and related weighted-average interest rates by expected maturity dates based on applicable rates at December 31, 2012. Expected Year of Maturity... -
Page 78
...to its customers. The Company uses approximately 20 million gallons of fuel on an annual basis. A ten percent change in fuel prices would result in a change of approximately $7.0 million in the Company's annual fuel cost before considering the impact of fuel swap contracts. The Company's exposure to... -
Page 79
...REGISTERED PUBLIC TCCOUNTING FIRM To the Board of Directors of The ServiceMaster Company Memphis, Tennessee We have audited the accompanying consolidated statements of financial position of The ServiceMaster Company and subsidiaries (the "Company") as of December 31, 2012 and 2011, and the related... -
Page 80
... (In thousands) 2012 Year Ended December 31, 2011 2010 Operating Revenue Operating Costs and Expenses: Cost of services rendered and products sold Selling and administrative expenses Amortization expense Goodwill and trade name impairment Restructuring charges Total operating costs and expenses... -
Page 81
...-insured claims and related expenses Accrued interest payable Other Deferred revenue Liabilities of discontinued operations Current portion of long-term debt Total Current Liabilities Long-Term Debt Other Long-Term Liabilities: Deferred taxes Liabilities of discontinued operations Other long-term... -
Page 82
...$ Net loss Other comprehensive income, net of tax: Net unrealized gain on securities Net unrealized gain on derivative instruments Foreign currency translation Total comprehensive (loss) income Stock-based employee compensation -contribution from Holdings Balance December 31, 2010 $ Net income Other... -
Page 83
Other comprehensive income, net of tax: Net unrealized gain on securities Net unrealized gain on derivative instruments Foreign currency translation Total comprehensive (loss) income Stock-based employee compensation -contribution from Holdings Other Balance December 31, 2012 $ 965 965 12,239 12... -
Page 84
... tax (benefit) provision Stock-based compensation expense Goodwill and trade name impairment Restructuring charges Cash payments related to restructuring charges Change in working capital, net of acquisitions: Current income taxes Receivables Inventories and other current assets Accounts payable... -
Page 85
R0 -
Page 86
...for home warranty claims in the American Home Shield business are made based on the Company's claims experience and actuarial projections. Termite damage claim accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per... -
Page 87
...revenue consists primarily of payments received for annual contracts relating to home warranties, termite baiting, termite inspection, pest control and lawn care services. Deferred CustImer AcquisitiIn CIsts: Customer acquisition costs, which are incremental and direct costs of obtaining a customer... -
Page 88
... sells a series of lawn applications to customers which are rendered primarily in March through October (the production season). This business incurs incremental selling expenses at the beginning of the year that directly relate to successful sales for which the revenues are recognized in later... -
Page 89
...Step 1 of the goodwill impairment test for all reporting units. For the 2011 annual goodwill impairment review performed as of October 1, 2011, the Company performed qualitative assessments on the Terminix, American Home Shield and ServiceMaster Clean reporting units. Based on these assessments, the... -
Page 90
... estimated growth rates. The discount rates used in the DCF analyses are intended to reflect the risks inherent in the future cash flows of the respective reporting units. In addition, the market-based comparable and transaction approaches utilize comparable company public trading values, comparable... -
Page 91
... segment for the years ended December 31, 2012 and 2011, as well as the remaining value of the trade names not subject to amortization by business segment as of December 31, 2012 and 2011 are as follows: Other Tmerican Home ServiceMaster Operations & Headquarters(1) Shield Clean (In thousands... -
Page 92
... discount rates is primarily attributable to changes in market conditions which indicated a lower risk tolerance in 2011 as compared to 2010. This lower risk tolerance is exhibited through the marketplace's desire for higher returns in order to accept market risk. The long-term revenue growth rates... -
Page 93
... potential interest and penalties related to its uncertain tax positions in income tax expense. StIck-Based CImpensatiIn: The Company accounts for stock-based compensation under accounting standards for share based payments, which require that stock options, restricted stock units and share grants... -
Page 94
... On the Closing Date, ServiceMaster was acquired pursuant to the Merger, and, immediately following the completion of the Merger, all of the outstanding common stock of Holdings, the ultimate parent company of ServiceMaster, was owned by investment funds sponsored by, or affiliated with, the Equity... -
Page 95
..., American Home Shield, ServiceMaster Clean and Other Operations and Headquarters. In accordance with accounting standards for segments, the Company's reportable segments are strategic business units that offer different services. The Terminix segment provides termite and pest control services to... -
Page 96
... Year Ended December 31, 2011 2010 Operating Revenue: Terminix TruGreen American Home Shield ServiceMaster Clean Other Operations and Headquarters Total Operating Revenue Operating Income (Loss):(1)(2)(3) Terminix TruGreen American Home Shield ServiceMaster Clean Other Operations and Headquarters... -
Page 97
... Financial Statements (Continued) Note 3. Business Segment Reporting (Continued) (In thousands) 2012 Year Ended December 31, 2011 2010 Capital Expenditures: Terminix TruGreen American Home Shield ServiceMaster Clean Other Operations and Headquarters Total Capital Expenditures (1) $ $ 13... -
Page 98
... Reporting (Continued) Operations and Headquarters and other restructuring costs. Presented below is a summary of restructuring charges (credits) by segment: (In thousands) Year Ended December 31, 2012 2011 2010 Restructuring charges (credits): Terminix TruGreen American Home Shield ServiceMaster... -
Page 99
... amortization of tax deductible goodwill and foreign exchange rate changes. For 2011, the amount shown in the Other Operations & Headquarters column also reflects $0.R million related to the sale of certain Merry Maids company-owned branches to existing and new franchisees. Accumulated impairment... -
Page 100
...be completed by the second quarter of 2014. Nine state tax authorities are in the process of auditing state income tax returns of various subsidiaries. The Company's policy is to recognize potential interest and penalties related to its tax positions within the tax provision. During the years ended... -
Page 101
... at the U.S. federal statutory tax rate to the Company's effective income tax rate for continuing operations is as follows: Year Ended December 31, 2012 2011 2010 Tax at U.S. federal statutory rate State and local income taxes, net of U.S. federal benefit Tax credits Nondeductible goodwill Other... -
Page 102
... reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes. The deferred tax asset primarily reflects the impact of future tax deductions related to the Company's accruals and certain net operating loss... -
Page 103
... as of December 31, 2012 and 2011, respectively. The Company does not anticipate the need to repatriate funds to the United States to satisfy domestic liquidity needs arising in the ordinary course of business, including liquidity needs associated with our domestic debt service requirements. 9R -
Page 104
...as of the acquisition dates. Current Year During the year ended December 31, 2012, the Company completed several pest control and termite and lawn care acquisitions, along with several Merry Maids franchise acquisitions and the purchase of a distributor license agreement at ServiceMaster Clean. The... -
Page 105
... on sale ($0.5 million gain, net of tax). During the year ended December 31, 2010 the Company recorded a pre-tax non-cash impairment charge of $46.9 million ($2R.7 million, net of tax) associated with the goodwill and trade name at its TruGreen LandCare business in loss from discontinued operations... -
Page 106
... 31, 2012, these charges included severance costs. (3) (4) Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in the Company's headquarters functions that provide company-wide administrative services for our operations that we refer to as "centers of... -
Page 107
... leases provide that the Company pay taxes, insurance and maintenance applicable to the leased premises. As leases for existing locations expire, the Company expects to renew the leases or substitute another location and lease. Rental expense for the years ended December 31, 2012, 2011 and 2010 was... -
Page 108
... self-insured claims Cash payments Balance as of December 31, 2012 $ 121,692 26,052 (39,662) $ 10R,0R2 35,413 (39,670) $ 103,R25 Accruals for home warranty claims in the American Home Shield business are made based on the Company's claims experience and actuarial projections. Termite damage claim... -
Page 109
... to StepStone. As of December 22, 2011, Holdings purchased from BAS 7.5 million shares of capital stock of Holdings, and, effective January 1, 2012, the annual consulting fee payable to BAS was reduced to $0.25 million. The Company pays annual consulting fees of $0.5 million, $0.25 million and $0.25... -
Page 110
... Statements (Continued) Note 10. Related Party Transactions (Continued) In 200R and 2009, Holdings completed open market purchases totaling $65.0 million in face value of the 2015 Notes for a cost of $21.4 million. On December 21, 2011, the Company purchased from Holdings and retired $65.0 million... -
Page 111
... other obligations of subsidiaries, (iii) real estate or (iv) any other assets, if the granting of a security interest therein would require that any notes issued under ServiceMaster's indenture dated as of August 15, 1997 be secured. The Term Loan Facility is secured on a pari passu basis with the... -
Page 112
...of these agreements, the Company pays a fixed rate of interest on the stated notional amount and the Company receives a floating rate of interest (based on one month LIBOR) on the stated notional amount. Therefore, during the term of the swap agreements, the effective interest rate on the portion of... -
Page 113
... Consolidated Financial Statements (Continued) Note 12. Long-Term Debt (Continued) Interest rate swap agreements in effect as of December 31, 2012 are as follows: Weighted Tverage Fixed Rate(1) Trade Date Effective Date Expiration Date Notional Tmount Floating Rate June 10, 2010 June 10, 2010... -
Page 114
...2012, the Company entered into a registration rights agreement, pursuant to which the Company agreed to file with the SEC a registration statement with respect to the exchange of the 2020 Notes for similar notes that are publicly registered and to cause the registration statement to become effective... -
Page 115
...market funds and certificates of deposits, with maturities of three months or less when purchased, are included in Cash and cash equivalents on the Consolidated Statements of Financial Position. As of December 31, 2012 and 2011, the Company's investments consist primarily of domestic publicly traded... -
Page 116
... short- and long-term marketable securities balance are associated with regulatory requirements at American Home Shield and for other purposes. Such amounts, although not necessarily subject to third-party restrictions, are identified as being potentially unavailable to be paid to the Company by its... -
Page 117
...term debt on the Consolidated Statements of Financial Position. The interest rates applicable to the Company's obligation are based on a fluctuating rate of interest based on the Purchasers' pooled commercial paper rate (0.21 percent as of December 31, 2012). In addition, the Company pays usage fees... -
Page 118
... The Company has no other classes of capital stock, authorized or issued. Note 18. Stock-Based Compensation The board of directors and stockholders of Holdings have adopted the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan (the "MSIP"). The MSIP provides for the sale... -
Page 119
... 2010. In addition, Holdings granted ServiceMaster's executives, officers and employees options to purchase 506,116, 2,2R0,391 and 2R4,400 shares of Holdings common stock in 2012, 2011 and 2010, respectively, at a weighted average exercise price of $14.67 per share for options issued in 2012, $11.00... -
Page 120
... Company's CEO for which the Company has applied a forfeiture rate of zero. A summary of option activity under the MSIP as of December 31, 2012, and changes during the year then ended is presented below: Weighted Tvg. Stock Options Exercise Price Weighted Tvg. Remaining Contractual Term (in years... -
Page 121
... compensation costs related to non-vested stock options and RSUs granted by Holdings under the MSIP. These remaining costs are expected to be recognized over a weighted-average period of 2.5 years. In 2012, Holdings modified options held by certain executive officers of ServiceMaster. These... -
Page 122
... the contract fuel price to the expected forward fuel price as of each settlement date and applying the difference between the contract and expected prices to the notional gallons in the fuel swap contracts. The Company regularly reviews the forward price curves obtained from third party market data... -
Page 123
... 24,74R $ 24,74R As of December 31, 2011, liabilities related to interest rate swap contracts were reflected in other long-term obligations on the Consolidated Statement of Financial Position. The estimated fair value of the Company's assets that were recorded at fair value on a nonrecurring basis... -
Page 124
... in the fair value of the fuel swap contracts. The Company uses derivative financial instruments to manage risks associated with changes in fuel prices and interest rates. The Company does not hold or issue derivative financial instruments for trading or speculative purposes. In designating its... -
Page 125
... 31, 2012 Fuel swap contracts $ 2,577 $ 1,944 Cost of services rendered and products sold (21,R9R) Interest expense Interest rate swap contracts $ 17,114 $ Effective Portion of (Loss) Gain Recognized in Effective Portion of Gain (Loss) Reclassified from Tccumulated Other Location of... -
Page 126
... of which were posted under the Company's Revolving Credit Facility. As of December 31, 2012, the Company had interest rate swap contracts to pay fixed rates for interest on long-term debt with an aggregate notional amount of $9R0 million, maturing through 2013. The effective portion of the gain or... -
Page 127
... December 31, 2012 (In thousands) The ServiceMaster Company Guarantors NonGuarantors Eliminations Consolidated Operating Revenue $ Operating Costs and Expenses: Cost of services rendered and products sold Selling and administrative expenses Amortization expense Goodwill and trade name impairment... -
Page 128
of subsidiaries (net of tax) Net Loss Total (552,9R9) 4,034 - $ (713,543)$ (547,114)$ (1,R41)$ 54R,955 - 54R,955 $ (713,543) Comprehensive Loss $ (700,765)$ (546,632)$ (2,179)$ 54R,R11 $ (700,765) 122 -
Page 129
... 31, 2011 (In thousands) The ServiceMaster Company Guarantors NonGuarantors Eliminations Consolidated Operating Revenue $ Operating Costs and Expenses: Cost of services rendered and products sold Selling and administrative expenses Amortization expense Trade name impairment Restructuring charges... -
Page 130
(Loss) Total $ 40,R21 $ 157,193 $ (101,994)$ (55,199)$ 40,R21 Comprehensive Income (Loss) $ 51,9R0 $ 156,150 $(103,323)$ (52,R27)$ 51,9R0 123 -
Page 131
... and Comprehensive (Loss) Income For the Year Ended December 31, 2010 (In thousands) The ServiceMaster Company Guarantors NonGuarantors Eliminations Consolidated Operating Revenue $ Operating Costs and Expenses: Cost of services rendered and products sold Selling and administrative expenses... -
Page 132
124 -
Page 133
... Position Ts of December 31, 2012 (In thousands) The ServiceMaster Company Guarantors Tssets NonGuarantors Eliminations Consolidated Current Tssets: Cash and cash equivalents $ Marketable securities Receivables Inventories Prepaid expenses and other assets Deferred customer acquisition costs... -
Page 134
... Other longterm obligations, primarily self-insured claims Total Other Long-Term Liabilities Shareholder's - - 445,4R9 (445,4R9) - 20,RRR 20,RRR 554,650 1,243 717,037 92,724 R03,R59 497,R33 - (492,65R) 114,R55 1,... -
Page 135
...: (164,6R9) 213,211 2,796,7R9 93,54R Goodwill Intangible assets, 365,191 3,161,9R0 primarily trade names, service marks and trademarks, net Notes receivable Long-term marketable securities Investments in and advances to subsidiaries Other assets - 1,997,157 10,R34 2,R90,634 51,R71 1,R04... -
Page 136
... taxes Intercompany payable 613,929 30,7R4 (1R7,931) (2,005,104 ) 3,R24,032 - 12,309 R0R,R30 27R,652 (50,7R9) 1,036,693 - - 310,011 2,070 (322,320) - - 2,070 Liabilities of discontinued operations - Other longterm obligations, primarily self-insured claims Total Other Long-Term... -
Page 137
...For the Year Ended December 31, 2012 (In thousands) The ServiceMaster Company Guarantors ...234,609 Investing Tctivities from Continuing Operations: Property additions Sale of equipment and other assets Other business acquisitions, net of cash acquired Notes receivable, financial - (43... -
Page 138
...) (392,R99) 37,756 Cash Flows from Discontinued Operations: Cash used for operating activities - (66R) (134) Cash used for investing activities: Proceeds from sale of business - (3,611) - Net Cash Used for Discontinued Operations - (4,279) (134) Cash Increase During the Period R4,146 91 9,57R Cash... -
Page 139
...Cash Flows For the Year Ended December 31, 2011 (In thousands) The ServiceMaster Company Guarantors NonGuarantors Eliminations ... Operations: Property additions Sale of equipment and other assets Acquisition of The ServiceMaster Company Other business acquisitions, net of cash acquired Purchase of... -
Page 140
...) Cash provided from (used for) investing activities: Proceeds from sale of business - 26,134 - - 26,134 Other investing activities - - (1,617) - (1,617) Net Cash Provided from (Used for) Discontinued Operations - 26,474 (7,R45) - 1R,629 Cash Increase (Decrease) During the Period 100,214 (3,149) (20... -
Page 141
...Cash Flows For the Year Ended December 31, 2010 (In thousands) The ServiceMaster Company Guarantors NonGuarantors Eliminations ... Operations: Property additions Sale of equipment and other assets Acquisition of The ServiceMaster Company Other business acquisitions, net of cash acquired Purchase of... -
Page 142
... Flows from Financing Tctivities from Continuing Operations: Borrowings of debt 5,000 - (15,325) 10,000 - - 472,537 - 15,000 Payments of debt (32,250) - (13,75R) (59,340) (30) (61,333) - (30) Shareholders' dividends Debt issuance (413,197) costs paid - - Net intercompany advances (2R1... -
Page 143
... opinion. A company's internal control over financial reporting is a process designed by, or under the supervision of, the company's principal executive and principal financial officers, or persons performing similar functions, and effected by the company's board of directors, management, and other... -
Page 144
... discussed in the "Interim Reporting" section in the Significant Accounting Policies, for interim accounting purposes, TruGreen and other business segments of the Company incur pre-season advertising costs. In addition, TruGreen incurs costs related to annual repairs and maintenance procedures that... -
Page 145
... and with the participation of ServiceMaster's CEO, Harry J. Mullany III, and ServiceMaster's Senior Vice President and Interim CFO, David W. Martin, the effectiveness of the Company's internal control over financial reporting as of December 31, 2012. In making this assessment, it used the... -
Page 146
... & Touche LLP, the Company's independent registered public accounting firm, has issued an attestation report on the effectiveness of our internal control over financial reporting as of December 31, 2012. This attestation report is included in Item R of this Annual Report on Form 10-K. Changes in... -
Page 147
...as a management consultant and experience as a director of other consumer-oriented service businesses with nationwide locations that are similar to our business structure give him beneficial insight into our capital and liquidity needs, in addition to our challenges, opportunities and operations and... -
Page 148
... as President and Chief Operating Officer of American Home Shield since August 2012. From April 2011 to February 2012, Mr. Barry served as President, Automation and Controls Solutions and from March 2010 to April 2011, served as President, Global Security Products, UTC Fire & Safety, both business... -
Page 149
...-Human Resources of ServiceMaster since June 200R. From January 2004 until May 200R, Mr. Norden worked at Retail Ventures, Inc., a footwear and fashion retailer, where he served as Executive Vice President and Chief Administrative Officer; Executive Vice President, Human Resources, Real Estate... -
Page 150
... 2012, the Board approved the payment of a discretionary bonus of $100,000 to Mr. Fallon. As part of our strategy to align interests between our executive officers and stockholders, and in recognition of his hire into the senior management team, Mr. Barry purchased shares of Holdings' common stock... -
Page 151
...of the competitive review, as presented to the Board by our Senior Vice President, Human Resources, (3) the Board's assessment of the CEO's individual performance, and (4) prevailing economic conditions. The CEO recommends to our Board compensation for the Company's other executive officers based on... -
Page 152
...considered. As part of our review of competitive pay practices, we engaged Towers Watson in 2012 to conduct a total market review to determine whether executive officer total compensation opportunities were competitive. The Board approved a new group of 21 peer companies (the "Peer Group") that are... -
Page 153
... Vice President, Controller and Chief Accounting Officer. During his tenure as interim CFO, Mr. Martin will also receive $10,000 per month in incremental base salary prorated for any partial month of service. During 2012, this incremental base salary totaled $11,000. Mr. Cregg was no longer employed... -
Page 154
...of his salary as Senior Vice President, Controller and Chief Accounting Officer and at 65 percent of his salary as Interim CFO, prorated for the time served in each capacity. To encourage our executive officers to focus on short-term Company (and, where applicable, business unit) goals and financial... -
Page 155
... are based 100 percent on overall Company performance. For executive officers in charge of a business unit, payments are based on both Company and business unit performance. The corporate consolidated AOP Threshold and business unit AOP Thresholds applicable to the NEOs are set forth in the table... -
Page 156
... ABP achievement would be based on the original revenue targets shown above. The lower revenue targets for the NEOs were as follows: ServiceMaster-$3,366,166, American Home Shield-$757,636, ServiceMaster Clean-$152,351, Merry Maids -$73,066, Terminix-$1,230,214. The "% of Target Performance for... -
Page 157
opportunity for each participating NEO (see table below) was based on our review of Peer Group and survey data and the importance of the NEO's position relative to the overall financial success of the Company. The following table sets forth information regarding the 2012 performance under the ABP, ... -
Page 158
... associates with a corporate consolidated component to the ABP excluding the CEO. The Board determined that as CEO, Mr. Mullany had ultimate responsibility for TruGreen's performance, and therefore the Board elected to pay him a bonus for 2012 equal to 50 percent of his target. (2) During the year... -
Page 159
... have other available opportunities) and may be needed to compensate the executives for the lost value of existing compensation arrangements at the executives' prior employers. In 2012, the Company paid a $325,000 cash sign-on bonus to Mr. Barry as part of his new hire offer. The sign-on bonus for... -
Page 160
.... Unlike equity awards at publicly traded companies, these investment opportunities are not available to the general public and present an employment reward opportunity as well as subjecting the executive officer to liquidity risks and transfer restrictions. Generally, our policy has been to provide... -
Page 161
..., consistent with the MSIP and the stock subscription agreement entered into at the time of purchase. Please see the Grants of Plan-Based Awards Table (2012) for information regarding the vesting terms of the equity awards. Retirement Benefits Associates, including the NEOs, are generally eligible... -
Page 162
... and welfare benefit programs on the same basis as the rest of the Company's employees, including medical and dental care coverage, life insurance coverage and short- and long-term disability. The Company limits the use of perquisites as a method of compensation and provides executive officers with... -
Page 163
... elsewhere, are covered under ServiceMaster's standard severance policy or practice as in effect at the time employment is terminated. The terms of these post-termination arrangements are described in detail below under the Potential Payments Upon Termination or Change in Control section in this... -
Page 164
... Incentive Plan Compensation ($) 0 427,33R 0 Name and Principal Position Year Harry J. Mullany Chief Executive Officer David W. Martin SVP, Interim Chief Financial Officer & Chief Accounting Officer Roger T. Cregg Former Chief Financial Officer 2012 2011 2012 2011 2012 2011 2012 2012 2011 2012... -
Page 165
Table of Contents Tll Other Compensation (2012) Company Paid Perquisites Company Life and Tax Insurance Contributions Separation Other Payment(s) Payment Premiums to PSRP Personal ($)(2) Total 1) ($) Named Executive Officer Benefits ($) Harry J. Mullany 2R0,7R7(3) 223 R,750 0 0 2R9,760 David W. ... -
Page 166
...to serve as CEO of ServiceMaster, effective March 31, 2011. Mr. Mullany's employment with ServiceMaster commenced on February 22, 2011 pursuant to an employment agreement with Holdings, dated February 16, 2011. Mr. Mullany's employment agreement is a for a term of three years, commencing on February... -
Page 167
... subsequent investments, he received nonqualified stock options to purchase five shares at an exercise price equal to the fair market value of a share of common stock at the time of the option grant ("Matching Options"). The Matching Options vest at a rate of one-fourth per year on each of the first... -
Page 168
... part of his new hire grant and received matching options in connection with his purchase of shares of Holdings' common stock. All stock options and RSUs currently held by the NEOs are shown in the Outstanding Equity Awards at Fiscal Year-End (2012) table below. The MSIP and an employee stock option... -
Page 169
... 100,000 300,000 $ 11.00 12/16/2021 (1) Represents options to purchase shares of Holdings' common stock granted under the MSIP. Options become exercisable on the basis of passage of time and continued employment over a four-year period, with one-fourth becoming exercisable on each anniversary... -
Page 170
... identical to the company's 401(k) plan. ServiceMaster, in its sole discretion, may make matching contributions, based on the amounts that are deferred by associates pursuant to the DCP. ServiceMaster did not make matching contributions for 2012. Distributions are paid at the time elected by the... -
Page 171
... both of those fiscal years immediately preceding the date of termination, such average to be calculated using his target annual bonus for such year or years, as applicable. Payments of Mr. Mullany's severance benefits are subject to Mr. Mullany's signing a general release of claims. Mr. Mullany is... -
Page 172
...agreements or change in control agreements to newly hired executive officers; however, the Board periodically reassesses the need to offer these types of arrangements as part of maintaining competitive executive compensation packages. As officers who report directly to our CEO, Messrs. Martin, Barry... -
Page 173
... to purchase shares of Holdings' common stock will be accelerated if Holdings experiences a change in control (as defined in the MSIP), unless Holdings' Board of Directors reasonably determines in good faith that options with substantially equivalent or better terms are substituted for the existing... -
Page 174
..., Qualifying Termination or Change in Control (2012) Payment of Tcceleration of Tcceleration of Total Health & Vesting of Vesting of Base Salary and Current Welfare Payments RSUs Target Bonus Year Bonus Stock Options 3) ($)(3) ($)(2) ($)(1) 0 0 Named Executive Officer Event Harry J. Mullany Death... -
Page 175
...the Board by our Senior Vice President of Human Resources) and prevailing economic conditions. Our directors are principals of CD&R. See Item 13 of this Annual Report on Form 10-K below for a discussion of agreements between ServiceMaster, Holdings and the Equity Sponsors and their affiliates. ITEM... -
Page 176
... shares of common stock. Addresses for certain Equity Sponsors are set forth in the footnotes to the table. Name of Beneficial Owner Number of Shares Owned Percent of Class (%) Clayton, Dubilier & Rice Fund VII, L.P. and related funds(1) StepStone Group LLC managed funds(2) JPMorgan Chase... -
Page 177
... interest therein, if any Does not include common stock held by investment funds associated with or designated by Clayton, Dubilier & Rice, LLC. Messrs. Giuriceo and Wasserman are directors of The ServiceMaster Company and Holdings and executives of Clayton, Dubilier & Rice, LLC. They disclaim... -
Page 178
... Holdings, our indirect parent company, to be issued upon the exercise of outstanding options and RSUs granted under the MSIP. Number of Securities to be Issued Upon Exercise of Outstanding Options, Warrants and Rights(1) Weighted Tverage Exercise Price of Outstanding Options Plan Category Number... -
Page 179
...in the case of the Lead Investor at any time and in the case of the other certain Equity Sponsors at least 1R months following the initial public offering of Holdings common stock, to cause Holdings, at its own expense, to use its best efforts to register such securities held by the investment funds... -
Page 180
... to StepStone. As of December 22, 2011, Holdings purchased from BAS 7.5 million shares of capital stock of Holdings, and, effective January 1, 2012, the annual consulting fee payable to BAS was reduced to $0.25 million. The Company pays annual consulting fees of $0.5 million, $0.25 million and $0.25... -
Page 181
... review of ServiceMaster's financial statements; "tax fees" are fees for tax compliance, tax advice and tax planning; and "all other fees" are fees for any products and services provided by Deloitte & Touche LLP not included in the first three categories. 2012 2011 (1) Audit Fees (2) Audit-Related... -
Page 182
... as part of this Annual Report on Form 10-K and should be read in conjunction with the financial statements contained in Item R of this Annual Report on Form 10-K: Report of Independent Registered Public Accounting Firm on Financial Statement Schedules 170 171 Schedule I-The ServiceMaster Company... -
Page 183
...by the undersigned, thereunto duly authorized. THE SERVICEMASTER COMPANY Date: March 4, 2013 By /s/ HARRY J. MULLANY III Harry J. Mullany III Chief Executive Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on... -
Page 184
... of Contents REPORT OF INDEPENDENT REGISTERED PUBLIC TCCOUNTING FIRM To the Board of Directors The ServiceMaster Company Memphis, Tennessee We have audited the consolidated statements of financial position of The ServiceMaster Company and subsidiaries (the "Company") as of December 31, 2012 and... -
Page 185
...31, 2012, 2011 TND 2010 (In thousands) Year ended December 31, 2011 2010 2012 Operating Revenue Operating Costs and Expenses...debt Loss from Continuing Operations before Income Taxes Benefit for income taxes Loss from Continuing Operations Equity in earnings of subsidiaries (net of tax) Net (Loss) ... -
Page 186
... and related expenses Accrued interest payable $ 156 $ 192 1,659 67,000 2,919 10R,42R 1R0,19R 3,7R2,391 Other Current portion of long-term debt Total Current Liabilities Long-Term Debt Other Long-Term Liabilities: Intercompany payable Other long-term obligations, primarily self-insured claims... -
Page 187
..., 2011 2012 2010 Cash and Cash Equivalents at Beginning of Period Net Cash Provided from Operating Tctivities from Continuing Operations Cash Flows from Investing Tctivities from Continuing Operations: Acquisition of The ServiceMaster Company Notes receivable, financial investments and securities... -
Page 188
...The ServiceMaster Company included in this Annual Report on Form 10-K. For the years ended December 31, 2012, 2011 and 2010, Parent received cash dividends from its wholly owned subsidiaries of $515.7 million, $573.4 million and $413.2 million in 2012, 2011 and 2010, respectively. 3. Long-term debt... -
Page 189
... related to purchase accounting, which increases the effective interest rate from the coupon rates shown above. The key provisions of Parent's long-term debt agreements are disclosed in Note 12 to the consolidated financial statements of The ServiceMaster Company included in this Annual Report... -
Page 190
... reflect write-offs of uncollectible accounts. Deductions for the income tax valuation allowance in 2012 are primarily attributable to the reduction of net operating loss carryforwards related to the dissolution of certain subsidiaries. Deductions for the income tax valuation allowance in 2011 are... -
Page 191
... 4.1 to the registrant's Current Report on Form R-K filed February 14, 2012 (File No. 001-14762 (the "2012 R-K")). 4.9 First Supplemental Indenture, dated as of February 13, 2012, among the Company, the Subsidiary Guarantors named therein, and Wilmington Trust, National Association, as Trustee, is... -
Page 192
... Agreement, dated August 21, 2012, by and among the Company, the Subsidiary Guarantors named therein and J.P. Morgan Securities LLC, as representative of the initial purchasers, is incorporated by reference to Exhibit 4.2 to the registrant's Current Report on Form R-K filed August 21, 2012 (File No... -
Page 193
...by reference to Exhibit 10.3 to the 2007 R-K. 10.R Security Agreement, dated as of July 24, 2007, made by the Company and ServiceMaster Consumer Services Limited Partnership, in favor of the Term Loan Collateral Agent and Term Loan Administrative Agent is incorporated by reference to Exhibit 10.4 to... -
Page 194
... relating to the Company's 2003 Annual Meeting of Shareholders held May 21, 2003 (File No. 001-14762). 10.25* ServiceMaster Deferred Compensation Plan, as amended and restated effective January 1, 2005, is incorporated by reference to Exhibit 10.1 to the registrant's Current Report on Form R-K filed... -
Page 195
...'s Quarterly Report on Form 10-Q for the quarter ended March 31, 2011 (File No. 001-14762). 10.29* Employment Offer Letter executed on August 15, 2011, between the Company and Roger A. Cregg related to his appointment as the Company's Senior Vice President and Chief Financial Officer is incorporated... -
Page 196
...10.42* Form of Employee Stock Subscription Agreement under the MSIP related to stock option exercises is incorporated by reference to Exhibit 10 to the registrant's Quarterly Report on Form 10-Q for the quarter ended March 31, 2010 (File No. 001-14762). 10.43* Form of Employee Restricted Stock Unit... -
Page 197
Table of Contents Exhibit Number Description 101.DEF# XBRL Taxonomy Extension Definition Linkbase 101.LAB# XBRL Taxonomy Extension Label Linkbase 101.PRE# XBRL Extension Presentation Linkbase * # Denotes management contract or compensatory plan or arrangement. Filed herewith. 1R3 -
Page 198
-
Page 199
... offer of the position of Interim Chief Financial Officer for The ServiceMaster Company. In this interim role you will report to Hank Mullany, the Presiient ani Chief Executive Officer of ServiceMaster. Your effective start iate is November 28, 2012. When a new Chief Financial Officer is hirei you... -
Page 200
...of employment for the position of President & Chief Operating Officer of American Home Shield. In this position, you will report to Hank Mullany, Chief Executive Officer. Your effective start date will be August 20, 2012. Base Salary Your base compensation in this position will be at an annual rate... -
Page 201
... to choose coverage that best meet your needs. Regular, full-time associates are eligible to participate in medical, dental, vision, disability and life insurance, the legal services plan, and reimbursement accounts. Coverage for most plans is effective the first of the month following or coincident... -
Page 202
...The Terminix International Company Limited Partnership and TruGreen, Inc., parents, affiliates, related companies, predecessors, successors, assigns, and their respective officers, directors, employees, insurers, stockholders, and agents (collectively referred to as "Company" or "ServiceMaster"). In... -
Page 203
... held in accordance with the terms of the DCP and applicable rules and regulations. e. f. ABP. You will not be eligible for a payout from ServiceMaster's Annual Bonus Plan ("ABP") for the current year of 2012 as you will not be employed by the Company on the relevant date under the ABP. You will... -
Page 204
... discharge the Company and its respective parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, successors and assigns and their respective past and present directors, managers, officers, stockholders, partners, agents, employees, insurers, attorneys, servants... -
Page 205
...Company or any of its businesses produce, sell or market its good and/or services (including, without limitation, residential and commercial termite and pest control, janitorial and disaster recovery services, lawncare services, maid services, home inspection services, furniture restoration services... -
Page 206
... business days after deposit in the U.S. Mail, certified with return receipt requested. All notices will be addressed as follows: If to you: If to ServiceMaster: Thomas G. Brackett XXXXXXXXXXX XXXXXXXXXXX The ServiceMaster Company 860 Ridge Lake Boulevard Memphis, TN 38120 Attn: VP and Associate... -
Page 207
... Company, 860 Ridge Lake Blvd., Memphis, TN 38120 Attn: Jed Norden, Senior Vice President, 0uman Resources, within seven (7) days after execution of the Agreement; and The promises contained in this Agreement are consideration for your signing this Agreement and represent monetary payments... -
Page 208
...or any of its affiliates tnat is comparable to nis current position (as determined in tne good faitn judgment of tne Board of Directors of tne Company (tne "Board")), tnen tne Company snall, subject to tne below terms, restrictions and conditions, pay tne following to Executive as severance pay (tne... -
Page 209
... duly given wnen delivered, addressed, if to Executive, at nis address in tne records of tne Company, and to tne Company to: ServiceMaster Global Holdings, Inc., c/o Tne ServiceMaster Company, 860 Ridge Lake Blvd., Mempnis, TN 38120, attention Senior Vice President, Human Resources, or to sucn otner... -
Page 210
...'s position(s), autnorities or responsibilities as President of tne TruGreen business, or (ii) any failure to re-appoint Executive to serve as President of a business unit of tne Company; or a reduction in Executive's Base Salary or target annual bonus percentage, eacn as in effect on tne date... -
Page 211
... tnat Good Reason exists, Executive must notify ServiceMaster in writing, witnin ninety (90) days following Executive's knowledge of tne first event wnicn Executive determines constitutes Good Reason, or sucn event snall not constitute Good Reason under tne terms of Executive's employment. If... -
Page 212
... or similar cash distribution on Common Stock. If the Company makes any dividend or other distribution on the Common Stock in the form of Common Stock or other securities, the Company will credit the Employee's account with that number of additional shares of Common Stock or other securities that... -
Page 213
... Settlement Date, clause (i) shall apply). Section 5. (a) Employee's Representations and Warranties Access to Information, Etc. The Employee represents and warrants as follows: (i) the Employee understands the terms and conditions that apply to the Restricted Stock Units and the risks associated... -
Page 214
... of the payments, deemed payments or other benefits the Employee would otherwise receive under this Agreement (together with any reductions under any other plan, program, policy or arrangement) on an after-tax basis by more than 5%, the Company will use its commercially reasonable best efforts... -
Page 215
... other: (i) if to the Company, to it at: ServiceMaster Global Holdings, Inc. c/o The ServiceMaster Company 6 860 Ridge Lake Boulevard Memphis, Tennessee 38120 Attention: General Counsel Fax: (901) 597-8025 (ii) if to the Employee, to the Employee at his or her most recent address as shown on the... -
Page 216
... follows] 8 IN WITNESS WHEREOF, the Company and the Employee have executed this Agreement as of the date first above written. SERVICEMASTER GLOBAL HOLDINGS, INC. By: Name: Title: THE EMPLOYEE: Total Number of Shares of Common Stock as to which Restricted Stock Units have been Granted Pursuant... -
Page 217
... 12 RATIOS OF EARNINGS TO FIXED CHARGES Our consolidated ratios of earnings to fixed charges for the years ended December 31, 2012, 2011, 2010, 2009 and 2008 are as follows: 2012 Years Ended December 31, 2011 2010 2009 (in thousands) 2008 Ratio of Earnings to Fixed Charges (a) (a) 1.41 1.10... -
Page 218
QuickLinks Exhibit 12 RATIOS OF EARNINGS TO FIXED CHARGES -
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... COMPANY As of December 31, 2012, ServiceMaster had the following subsidiaries: State or Country of Incorporation or Organization Subsidiary 667217 Ontario Limited American Home Shield Corporation American Home Shield of Arizona, Inc. American Home Shield of California, Inc. American Home Shield... -
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... Service Company, LLC SVM Vanguard Service Company, LLC Terminix International, Inc. Terminix International, S.A. The ServiceMaster Acceptance Company Limited Partnership The ServiceMaster Foundation The Terminix International Company Limited Partnership TruGreen Companies L.L.C. TruGreen Home... -
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QuickLinks Exhibit 21 SUBSIDIARIES OF THE SERVICEMASTER COMPANY -
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... financial information; and (b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2013 /s/ HARRY J. MULLANY III Harry J. Mullany III Chief Executive Officer -
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QuickLinks Exhibit 31.1 CERTIFICATIONS -
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... or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: March 4, 2013 /s/ DAVID W. MARTIN David W. Martin Senior Vice President, Interim Chief Financial Officer and Chief Accounting Officer -
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QuickLinks Exhibit 31.2 CERTIFICATIONS -
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... States Code I, Harry J. Mullany III, the Chief Executive Officer of The ServiceMaster Company, certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the... -
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QuickLinks Exhibit 32.1 Certification of Chief Executive Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of The United States Code -
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..., the Senior Vice President, Interim Chief Financial Officer and Chief Accounting Officer of The ServiceMaster Company, certify that (i) the Annual Report on Form 10-K for the year ended December 31, 2012, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act... -
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QuickLinks Exhibit 32.2 Certification of Chief Financial Officer Pursuant to Section 1350 of Chapter 63 of Title 18 of The United States Code -
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