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8-K - 8-K - SERVICEMASTER CO, LLC | a12-6093_18k.htm |
Exhibit 99
News Release |
FOR IMMEDIATE RELEASE
For further information contact:
Investor Relations:
Marty Ketelaar
901.597.8847
Marty.Ketelaar@servicemaster.com
Media:
Peter Tosches
901.597.8449
Peter.Tosches@servicemaster.com
The ServiceMaster Company Reports Preliminary
Full-Year and Fourth-Quarter 2011 Financial Results
2011 operating revenue increased 2.5% to $3.206 billion, while
2011 operating income increased 22.4% to $375 million
· 2011 operating performance increased 10.8% to $610 million
· 2011 operating performance margin increased to 19% from 17.6%
· Year-to-date cash flow from operations increased 32% to $295 million
· Fourth-quarter operating revenue increased 0.7% to $693 million
· Fourth-quarter operating income decreased 19% to $45 million; operating income includes a $36.7 million non-cash trade name impairment charge
· Fourth-quarter operating performance increased 20.7% to $129 million
MEMPHIS, TENN, February 29, 2012 The ServiceMaster Company today announced preliminary, unaudited 2011 results, led by a 2.5 percent increase in operating revenue, to $3.206 billion and a 22.4 percent increase in operating income, to $375.5 million compared to $306.7 million reported in 2010.
Meanwhile, operating performance increased 10.8 percent to $610 million. A reconciliation of operating income to operating performance is set forth below in this press release. Cash flow from operating activities in 2011 improved $72 million, or 32 percent, to $295 million compared to $222 million a year ago. The company plans to issue its audited 2011 results in early March 2012.
ServiceMaster also reported fourth-quarter operating revenue of $693 million, a 0.7 percent increase compared to prior year results. Fourth-quarter 2011 operating income was $44.9 million compared to prior year results of $55.5 million. Fourth-quarter operating performance was $129 million, an increase of approximately 21 percent compared to fourth-quarter 2010 results.
Our fourth-quarter performance reflects our continued focus on driving growth by literally transforming our customers experiences and becoming a world-class service provider, said ServiceMaster CEO Hank Mullany, Im extremely pleased by the progress we made in 2011, and specifically in the fourth quarter, to simplify and improve the quality of our customers lives.
|
|
Three months ended |
|
Twelve months ended |
| ||||||||
(In thousands) |
|
2011 |
|
2010 |
|
2011 |
|
2010 |
| ||||
Operating Revenue: |
|
|
|
|
|
|
|
|
| ||||
TruGreen |
|
$ |
214,336 |
|
$ |
222,645 |
|
$ |
1,100,741 |
|
$ |
1,096,667 |
|
Terminix |
|
274,056 |
|
267,864 |
|
1,193,075 |
|
1,157,346 |
| ||||
American Home Shield |
|
145,830 |
|
142,662 |
|
686,737 |
|
656,572 |
| ||||
ServiceMaster Clean |
|
36,591 |
|
33,795 |
|
138,691 |
|
132,132 |
| ||||
Other Operations and Headquarters |
|
22,028 |
|
21,239 |
|
86,628 |
|
84,677 |
| ||||
Total Operating Revenue |
|
$ |
692,841 |
|
$ |
688,205 |
|
$ |
3,205,872 |
|
$ |
3,127,394 |
|
Operating Income (Loss): |
|
|
|
|
|
|
|
|
| ||||
TruGreen |
|
$ |
1,358 |
|
$ |
32,064 |
|
$ |
129,324 |
|
$ |
112,312 |
|
Terminix |
|
48,499 |
|
33,036 |
|
220,622 |
|
199,750 |
| ||||
American Home Shield |
|
19,363 |
|
11,135 |
|
94,869 |
|
68,380 |
| ||||
ServiceMaster Clean |
|
18,176 |
|
16,742 |
|
57,674 |
|
55,450 |
| ||||
Other Operations and Headquarters |
|
(42,457 |
) |
(37,501 |
) |
(127,029 |
) |
(129,200 |
) | ||||
Total Operating Income |
|
$ |
44,939 |
|
$ |
55,476 |
|
$ |
375,460 |
|
$ |
306,692 |
|
Segment Review
The company is comprised of five reportable segments: TruGreen, Terminix, American Home Shield, ServiceMaster Clean and Other Operations and Headquarters, which includes the companys Merry Maids business.
The TruGreen segment provides residential and commercial lawn care services. The Terminix segment provides termite and pest control services to residential and commercial customers. The American Home Shield segment provides home warranties to consumers that cover heating, ventilation, air conditioning, plumbing and other home systems and appliances. The ServiceMaster Clean segment provides residential and commercial disaster restoration and cleaning services primarily under the ServiceMaster and ServiceMaster Clean brand names, on-site furniture repair and restoration services primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. The Other Operations and Headquarters segment includes our Merry Maids business that provides house cleaning services. It also includes The ServiceMaster Acceptance Company Limited Partnership (SMAC), our financing subsidiary exclusively dedicated to providing financing to our franchisees and retail customers of our operating units, and the companys headquarters operations, which provide various technology, marketing, finance, legal and other support services to the business units.
Preliminary Full-Year Review
The companys 2011 operating revenue increased 2.5% to $3.206 billion compared to $3.127 billion in 2010. Operating income increased 22.4% to $375.5 million compared to $306.7 million in 2010. The 2011 operating income included a $36.7 million non-cash trade name impairment charge. The 2011 operating performance increased 10.8% to $610 million compared to $551 million in 2010. Cash flow from operating activities in 2011 increased $72.5 million, or 32 percent, to $295 million, compared to $222.5 million in 2010.
Preliminary Fourth-Quarter Segment Information for Continuing Operations
TruGreen
TruGreen reported fourth-quarter operating revenue of $214 million, a decrease of 3.7 percent compared to fourth-quarter 2010 results. The decline in operating revenue was due to a 5.3 percent reduction in customer counts and a decrease in sales of expanded services. This was partially offset by a 5.6 percent increase in the average application price. The decline in customer counts was driven by a decrease in new unit sales resulting from TruGreens decision to rationalize its neighborhood sales program, partially offset by a 70 basis point increase in the customer retention rate. TruGreen is continuing its efforts to reduce customer cancellations by
focusing on a consistent service delivery and customer experience, an improved recovery program for problem lawns, reduced lawn specialist turnover and improved communication with customers.
Operating performance for the fourth quarter was $49 million, an increase of 19 percent compared to fourth- quarter 2010 results. The improvement was primarily due to reduced sales and marketing expenses resulting from the reduced focus on the neighborhood sales channel and cost reductions from ongoing initiatives. This was partially offset by the impact of lower revenue and higher fuel and fertilizer prices.
Terminix
Terminix reported fourth-quarter operating revenue of $274 million, an increase of 2.3 percent over fourth-quarter 2010 results. The growth in operating revenue was primarily driven by pest control, which reflects a 6.4 percent increase in pest control customer counts and a 1 percent increase in average annual account value. The increase in pest control customer counts was driven by an increase in new unit sales, acquisitions and a 70 basis point increase in the customer retention rate. Operating revenue was impacted by a 1 percent decline in termite renewal customer counts, which was partially offset by an increase in average price. The decline in termite customer counts was driven by a decrease in new unit sales, partially offset by a 10 basis point increase in the customer retention rate.
Fourth-quarter operating performance was $69 million, an increase of 29 percent compared to fourth-quarter 2010 results. The improvement was primarily due to the impact of higher revenue, branch labor efficiencies, lower termite damage claims and other cost reductions realized through ongoing initiatives and lower legal-related expenses. This improvement was partially offset by higher fuel prices.
American Home Shield
American Home Shield reported fourth quarter operating revenue of $146 million, an increase of 2.2 percent over fourth-quarter 2010 results. The increase in operating revenue was primarily the result of a 2.3 percent increase in average contract price and a 1.6 percent increase in customer counts. Earlier in 2011, American Home Shield introduced several new products that offered customers the choice of which systems and appliances they wish to have covered. The increase in average price was driven, in part, by the introduction of these new product options. These new products have proven to be popular with customers. The increase in customer counts was driven by a 210 basis point increase in the customer retention rate, partially offset by a decrease in new unit sales.
Fourth-quarter operating performance was $23 million, a decrease of 1 percent compared to fourth-quarter 2010 results. The decrease was primarily due to higher claims costs, primarily HVAC-related claims, and related service expense, as well as investments in a new customer relationship management system which is expected to enhance the ability to interact with customers. This was partially offset by the impact of higher revenue, lower sales and marketing expenses and an increase in interest and investment income.
ServiceMaster Clean
ServiceMaster Clean reported fourth-quarter operating revenue of $36 million, an increase of 8.3 percent over fourth-quarter 2010 results. The improved operating revenue results were primarily due to higher royalty fee revenue from disaster restoration services.
Fourth-quarter operating performance was $20 million, an increase of 6 percent over fourth-quarter 2010 results. The improvement was primarily the result of the impact of higher revenue and cost reduction initiatives, partially offset by key executive transition charges and an increase in support services, sales and marketing expense, and technology and other costs, all driven by ongoing initiatives to increase commercial, fire remediation and janitorial market segment share.
Other Operations and Headquarters
This segment includes the operations of Merry Maids, SMAC and the companys headquarters functions. The segment reported a 3.7 percent increase in operating revenue, a 13.2 percent increase in operating loss and a 7.5 percent decrease in operating performance for the fourth quarter of 2011 compared to 2010.
Merry Maids, which was 93.5 percent of the segments revenue for 2011, reported a 4.6 increase in revenue, a 49.7 percent increase in operating income and a 39.3 percent increase in operating performance for the fourth quarter of 2011 compared to 2010. Revenue from company-owned branches, which was 77 percent of Merry Maids operating revenue in the fourth quarter of 2011, increased 2.6 percent in 2011 compared to 2010, driven
by a 1.8 percent increase in the average service price, from $111 in 2010 to $113 in 2011, offset, in part, by a 3.6 percent decline in customer counts. The decline in customer counts was driven by the sale of certain company-owned branches to existing and new franchisees in the fourth quarter of 2011, offset, in part, by a 630 basis point increase in the customer retention rate. Royalty fees, which were 18 percent of Merry Maids operating revenue in 2011, increased 7.4 percent in 2011 compared to 2010, primarily driven by market expansion.
Merry Maids operating performance was $7.7 million, an increase of 39.3 percent over fourth quarter 2010 results. The increase reflects the impact of higher revenue, the gain resulting from the sale of certain branches, a reduction in sales and marketing expense and cost reductions realized through ongoing initiatives, offset, in part, by an increase in fuel costs.
The operating performance of SMAC and the companys headquarters functions declined $4.4 million for the fourth quarter of 2011 compared to the fourth quarter of 2010. This decline reflects an increase in technology-related costs for payment card industry (PCI) standards compliance purposes and other support services costs.
Corporate Actions
In January 2012, the company entered into an amendment of its syndicated revolving credit agreement, extending the maturity date for a portion of its facility until January 31, 2017. Under the amendment, the company has available borrowing capacity under its amended revolving credit facility of approximately $447 million through July 24, 2013, approximately $304 million of available borrowing capacity from July 25, 2013 through July 24, 2014 and approximately $265 million of available borrowing capacity from July 24, 2014 through January 31, 2017. Additionally, in February 2012, the company issued $600 million of its 8% Senior Notes maturing February 15, 2020. Proceeds from the issuance have been or will be used to redeem $600 million of the companys 10.75% Senior Toggle Notes.
About ServiceMaster
With a global network of more than 6,900 company-owned, franchise and licensed locations, Memphis-based ServiceMaster is one of the worlds largest residential and commercial service networks. The companys high-profile brands are TruGreen, Terminix, American Home Shield, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. Through approximately 21,000 employees and a franchise network that independently employs over 31,000 additional people, the ServiceMaster family of brands serves more than 8.2 million customers every year and hold market-leading positions in residential and commercial lawn, tree and shrub care, termite and pest control, home warranties, furniture repair, home inspections, residential and commercial cleaning and disaster restoration. Go to www.servicemaster.com or twitter.com/ServiceMaster for more information about ServiceMaster.
Forward-Looking Statements
This press release contains forward-looking statements and cautionary statements. Some of the forward-looking statements can be identified by the use of forward-looking terms such as believes, expects, may, will, shall, should, would, could, seeks, aims, projects, is optimistic, intends, plans, estimates, anticipates or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this press release and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; the sharing of best practices and talent across our businesses; growth strategies and/or expectations; expanding our commercial services; expansion opportunities in domestic and international territories; our estimates of market segment size and segment share; expectations for enhancing American Home Shields ability to interact with customers through its new customer relationship management system; projections for increases in existing home re-sales in 2012; capital expenditures and requirements; customer retention; the continuation of acquisitions; fuel prices; impairment charges related to goodwill and intangible assets; estimates of future amortization expense for intangible assets; attraction and retention of key personnel; the impact of interest rate hedges and fuel swaps; the cost savings from restructurings and reorganizations and expected charges related to such restructurings and reorganizations; the impact on the amount of unrecognized tax benefits resulting from pending tax settlements and expiration of statutes of limitations; the valuation of marketable securities; estimates of accruals for self-insured claims related to workers compensation, auto and general liability risks; estimates of accruals for home service contract claims; estimates of future payments under operating and capital leases; estimates for increases in healthcare costs; the outcome (by judgment or settlement) and costs of legal or administrative proceedings,
including, without limitation, collective, representative or class action litigation; post-closing purchase price adjustments, including, without limitation, items related to working capital and potential indemnification claims associated with the TruGreen LandCare disposition; our ability to renegotiate or extend our $50.0 million receivable securitization arrangement; and the impact of prevailing economic conditions.
Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. 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. In addition, even if our results of operations, financial condition and cash flows, and the development of the market segments in which we operate, are consistent with the forward-looking statements contained in this press release, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed in our annual and quarterly reports filed with the Securities and Exchange Commission (SEC), could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. 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 and the limitations contained in the agreements governing such indebtedness;
· our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations and debt repurchases;
· changes in interest rates, because a significant portion of our indebtedness bears interest at variable rates;
· our ability to secure sources of financing or other funding to allow for direct purchases or leasing of commercial vehicles, primarily for TruGreen and Terminix;
· changes in the source and intensity of competition in our market segments;
· our ability to attract and retain key personnel;
· weather conditions, including, without limitation, potential impacts, if any, from climate change, known and unknown, and seasonality factors that affect the demand for, or our ability to provide, our services and the cost of our claims and services;
· higher commodity prices and lack of availability thereof, including, without limitation, fuel and chemicals (primarily at TruGreen and Terminix), which could impact our ability to provide our services and the profitability of our brands;
· increases in operating costs, such as higher insurance premiums, self-insurance costs and compensation and benefits costs, including, without limitation, costs related to the comprehensive health care reform law enacted in the first quarter of 2010;
· employee retention and labor shortages;
· epidemics, pandemics or other public health concerns or crises that could affect the demand for, or our ability to provide our services, resulting in a reduction in revenues;
· a continuation or change in general economic, financial and credit conditions in the United States and elsewhere (for example, any adverse developments in the global credit and financial markets due to the recent downgrade of the U.S. long-term sovereign credit rating or the European debt crisis), especially as such may affect home sales, consumer or business liquidity, bank failures, consumer or commercial confidence or spending levels including as a result of inflation or deflation, unemployment, interest rate fluctuations, changes in discount rates, mortgage foreclosures and subprime credit dislocations;
· adverse economic conditions or other factors that would result in significant impairment charges to our goodwill and/or intangible assets;
· a failure of any insurance company that provides insurance or reinsurance to us or of third party contract partners, including counterparties to our fuel 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; restricting or banning of telemarketing; door-to-door solicitation; direct mail or other marketing activities; Terminixs termite inspection and protection plan; chemicals used in our businesses; or other legislation, regulation or interpretations impacting our business;
· laws and regulations relating to financial reform and the use of derivative instruments and any new regulations promulgated by the U.S. Consumer Financial Protection Bureau;
· the success of, and costs associated with, restructuring initiatives;
· the number, type, outcomes (by judgment or settlement) and costs of legal or administrative proceedings, including, without limitation, collective, representative or class action litigation;
· labor organizing activities at the company or its franchisees;
· risk of liabilities being passed through from our franchisees;
· risks associated with acquisitions, including, without limitation, acquired liabilities, retaining customers from businesses acquired, difficulties in integrating acquired businesses and achieving expected synergies therefrom;
· risks associated with dispositions, for example, post-closing claims being made against us, post-closing purchase price adjustments (including, without limitation, items related to working capital), disruption to our other businesses during the sale process or thereafter; credit risks associated with any buyer of such disposed businesses and our ability to collect funds due from any such buyer related to seller financings, licensing arrangements or transition services arrangements;
· constraints associated with non-compete agreements or other restrictive covenants entered into by the company, including, without limitation, in connection with business dispositions or strategic contracts and which may restrict our ability to conduct business in particular market segments or compete in particular geographic regions;
· risks associated with budget deficits at federal, state and local levels resulting from economic conditions, which could result in federal, state and local governments decreasing their purchasing of our products or services and/or increasing taxes or other fees on businesses to generate more tax revenues;
· regulations imposed by several states related to our home service and insurance subsidiaries, including those limiting the amount of funds that can be paid to the Company by its subsidiaries;
· changes in claims trends in our medical plan and our automobile, general liability and workers compensation program;
· significant disruptions, terminations or substandard performance of our outsourced services, including possible breaches by third party vendors of their agreements with us;
· the cost, timing, structuring or results of our business process outsourcing, including, without limitation, any current or future outsourcing (or insourcing) or restructuring of all or portions of our information technology, call center, certain human resource functions and other corporate functions, and risks associated with such outsourcing (or insourcing) or restructuring or transitioning from outsourcing providers to insourcing;
· successful implementation of upgrades to our information technology systems that are being undertaken, among other reasons, to enhance customer service; protect against theft of customer and corporate sensitive information; compliance with industry standards; and minimize disruptions in the companys operations; and
· other factors described from time to time in documents that we file with the SEC.
You should read this press release completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this press release are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this press release, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, changes in future operating results over time or otherwise.
Comparisons of results between current and prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.
THE SERVICEMASTER COMPANY
Preliminary Condensed Consolidated Statements of Operations (Unaudited)
(In thousands)
|
|
Three Months Ended |
| ||||
|
|
2011 |
|
2010 |
| ||
Operating Revenue |
|
$ |
692,841 |
|
$ |
688,205 |
|
Operating Costs and Expenses: |
|
|
|
|
| ||
Cost of services rendered and products sold |
|
404,747 |
|
404,207 |
| ||
Selling and administrative expenses |
|
184,104 |
|
199,495 |
| ||
Amortization expense |
|
18,465 |
|
26,575 |
| ||
Trade name impairment |
|
36,700 |
|
|
| ||
Restructuring charges |
|
3,886 |
|
2,452 |
| ||
Total operating costs and expenses |
|
647,902 |
|
632,729 |
| ||
Operating Income |
|
44,939 |
|
55,476 |
| ||
Non-operating Expense (Income) |
|
|
|
|
| ||
Interest expense |
|
67,913 |
|
69,850 |
| ||
Interest and net investment income |
|
(2,667 |
) |
(1,871 |
) | ||
Loss on extinguishment of debt |
|
774 |
|
|
| ||
Other expense |
|
178 |
|
177 |
| ||
Loss from Continuing Operations before Income Taxes |
|
(21,259 |
) |
(12,680 |
) | ||
Benefit for income taxes |
|
(6,614 |
) |
(12,845 |
) | ||
(Loss) Income from Continuing Operations |
|
(14,645 |
) |
165 |
| ||
(Loss) income from discontinued operations, net of income taxes |
|
(586 |
) |
202 |
| ||
Net (Loss) Income |
|
$ |
(15,231 |
) |
$ |
367 |
|
THE SERVICEMASTER COMPANY
Preliminary Condensed Consolidated Statements of Operations (Unaudited)
(In thousands)
|
|
Year Ended |
| ||||
|
|
2011 |
|
2010 |
| ||
Operating Revenue |
|
$ |
3,205,872 |
|
$ |
3,127,394 |
|
Operating Costs and Expenses: |
|
|
|
|
| ||
Cost of services rendered and products sold |
|
1,813,706 |
|
1,777,304 |
| ||
Selling and administrative expenses |
|
880,492 |
|
895,950 |
| ||
Amortization expense |
|
91,352 |
|
136,000 |
| ||
Trade name impairment |
|
36,700 |
|
|
| ||
Restructuring charges |
|
8,162 |
|
11,448 |
| ||
Total operating costs and expenses |
|
2,830,412 |
|
2,820,702 |
| ||
Operating Income |
|
375,460 |
|
306,692 |
| ||
Non-operating Expense (Income) |
|
|
|
|
| ||
Interest expense |
|
273,123 |
|
286,933 |
| ||
Interest and net investment income |
|
(10,886 |
) |
(9,358 |
) | ||
Loss on extinguishment of debt |
|
774 |
|
|
| ||
Other expense |
|
700 |
|
733 |
| ||
Income from Continuing Operations before Income Taxes |
|
111,749 |
|
28,384 |
| ||
Provision for income taxes |
|
43,912 |
|
10,945 |
| ||
Income from Continuing Operations |
|
67,837 |
|
17,439 |
| ||
Loss from discontinued operations, net of income taxes |
|
(27,016 |
) |
(31,998 |
) | ||
Net Income (Loss) |
|
$ |
40,821 |
|
$ |
(14,559 |
) |
THE SERVICEMASTER COMPANY
Preliminary Condensed Consolidated Statements of Financial Position (Unaudited)
(In thousands, except share data)
As of December 31, |
|
2011 |
|
2010 |
| ||
Assets: |
|
|
|
|
| ||
Current Assets: |
|
|
|
|
| ||
Cash and cash equivalents |
|
$ |
328,930 |
|
$ |
252,698 |
|
Marketable securities |
|
12,026 |
|
30,406 |
| ||
Receivables, less allowances of $20,362 and $16,709, respectively |
|
374,200 |
|
352,094 |
| ||
Inventories |
|
59,643 |
|
54,732 |
| ||
Prepaid expenses and other assets |
|
38,295 |
|
40,864 |
| ||
Deferred customer acquisition costs |
|
30,403 |
|
34,377 |
| ||
Deferred taxes |
|
90,609 |
|
11,558 |
| ||
Assets of discontinued operations |
|
17 |
|
51,004 |
| ||
Total Current Assets |
|
934,123 |
|
827,733 |
| ||
Property and Equipment: |
|
|
|
|
| ||
At cost |
|
541,817 |
|
440,049 |
| ||
Less: accumulated depreciation |
|
(235,058 |
) |
(173,151 |
) | ||
Net Property and Equipment |
|
306,759 |
|
266,898 |
| ||
Other Assets: |
|
|
|
|
| ||
Goodwill |
|
3,161,980 |
|
3,125,293 |
| ||
Intangible assets, primarily trade names, service marks and trademarks, net |
|
2,543,539 |
|
2,653,511 |
| ||
Notes receivable |
|
23,322 |
|
22,550 |
| ||
Long-term marketable securities |
|
130,456 |
|
110,177 |
| ||
Other assets |
|
8,846 |
|
7,164 |
| ||
Debt issuance costs |
|
37,798 |
|
52,366 |
| ||
Assets of discontinued operations |
|
|
|
32,398 |
| ||
Total Assets |
|
$ |
7,146,823 |
|
$ |
7,098,090 |
|
Liabilities and Shareholders Equity: |
|
|
|
|
| ||
Current Liabilities: |
|
|
|
|
| ||
Accounts payable |
|
$ |
81,641 |
|
$ |
72,645 |
|
Accrued liabilities: |
|
|
|
|
| ||
Payroll and related expenses |
|
85,346 |
|
85,647 |
| ||
Self-insured claims and related expenses |
|
73,071 |
|
81,278 |
| ||
Accrued interest payable |
|
67,011 |
|
69,645 |
| ||
Other |
|
70,103 |
|
83,114 |
| ||
Deferred revenue |
|
473,242 |
|
449,647 |
| ||
Liabilities of discontinued operations |
|
805 |
|
16,300 |
| ||
Current portion of long-term debt |
|
51,838 |
|
49,412 |
| ||
Total Current Liabilities |
|
903,057 |
|
907,688 |
| ||
Long-Term Debt |
|
3,824,032 |
|
3,899,075 |
| ||
Other Long-Term Liabilities: |
|
|
|
|
| ||
Deferred taxes |
|
1,036,693 |
|
934,971 |
| ||
Liabilities of discontinued operations |
|
2,070 |
|
4,848 |
| ||
Other long-term obligations, primarily self-insured claims |
|
133,052 |
|
163,981 |
| ||
Total Other Long-Term Liabilities |
|
1,171,815 |
|
1,103,800 |
| ||
Commitments and Contingencies |
|
|
|
|
| ||
Shareholders Equity: |
|
|
|
|
| ||
Common stock $0.01 par value, authorized 1,000 shares; issued 1,000 shares |
|
|
|
|
| ||
Additional paid-in capital |
|
1,464,293 |
|
1,455,881 |
| ||
Retained deficit |
|
(210,162 |
) |
(250,983 |
) | ||
Accumulated other comprehensive loss |
|
(6,212 |
) |
(17,371 |
) | ||
Total Shareholders Equity |
|
1,247,919 |
|
1,187,527 |
| ||
Total Liabilities and Shareholders Equity |
|
$ |
7,146,823 |
|
$ |
7,098,090 |
|
Key Performance Indicators
The table below presents selected operating metrics related to customer counts and customer retention for the three largest profit businesses in the Company. These measures are presented on a rolling, twelve-month basis in order to avoid seasonal anomalies.
|
|
Key Performance Indicators as |
| ||
|
|
2011 |
|
2010 |
|
TruGreen |
|
|
|
|
|
Reduction in Full Program Accounts |
|
(5.3 |
)% |
(1.7 |
)% |
Customer Retention Rate |
|
66.7 |
% |
66.0 |
% |
Terminix |
|
|
|
|
|
Growth in Pest Control Customers |
|
6.4 |
% |
3.6 |
% |
Pest Control Customer Retention Rate |
|
80.6 |
% |
79.9 |
% |
(Reduction) Growth in Termite Customers |
|
(1.0 |
)% |
0.3 |
% |
Termite Customer Retention Rate |
|
86.1 |
% |
86.0 |
% |
American Home Shield |
|
|
|
|
|
Growth in Home Service Contracts |
|
1.6 |
% |
0.1 |
% |
Customer Retention Rate(1) |
|
75.1 |
% |
73.0 |
% |
(1) During the fourth quarter of 2011, the Company changed its calculation methodology of Customer Retention Rate for American Home Shield to be consistent with the calculation methodology for TruGreen and Terminix. The Customer Retention Rate for American Home Shield has been adjusted to reflect the 2011 calculation methodology for all periods presented.
Disclosure Regarding Non-GAAP Financial Measures
The Company uses Adjusted EBITDA, Comparable Operating Performance and Operating Performance to facilitate operating performance comparisons from period to period. Adjusted EBITDA, Comparable Operating Performance and Operating Performance are supplemental measures of the Companys performance that are not required by, or presented in accordance with, accounting principles generally accepted in the United States of America (GAAP). Adjusted EBITDA, Comparable Operating Performance and Operating Performance are not measurements of the Companys financial performance under GAAP and should not be considered as alternatives to net income or any other performance measures derived in accordance with GAAP or as alternatives to net cash provided by operating activities or any other measures of the Companys cash flow or liquidity. Adjusted EBITDA means net income (loss) before net income (loss) from discontinued operations; provision (benefit) for income taxes; other expense; interest expense and interest and net investment income; and depreciation and amortization expense; as well as adding back interest and net investment income, residual value guarantee charges and pre-tax non-cash trade name impairment. Comparable Operating Performance is calculated by adding back to Adjusted EBITDA an amount equal to the non-cash stock-based compensation expense and non-cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger (1). Operating Performance is calculated by adding back to Comparable Operating Performance restructuring charges and management and consulting fees paid to Clayton, Dubilier & Rice, Inc. (now operated as Clayton, Dubilier & Rice, LLC, CD&R), Citigroup Private Equity LP (together with its affiliate, Citigroup Alternative Investments LLC, Citigroup), BAS Capital Funding Corporation (BAS) and J.P. Morgan Ventures Corporation (now known as JPMorgan Chase Funding Inc., JPMorgan). On September 30, 2010, Citigroup transferred the management responsibility for certain investment funds that own shares of common stock of ServiceMaster Global Holdings, Inc. (Holdings), the ultimate parent company of ServiceMaster, to StepStone Group LLC (StepStone and collectively with CD&R, Citigroup, BAS and JPMorgan, the Equity Sponsors) and its proprietary interest in such investment funds to Lexington Partners Advisors LP. Citigroup also assigned its obligations and rights under its consulting agreement to StepStone, and beginning in the fourth quarter of 2010, the consulting fee otherwise payable to Citigroup became payable to StepStone. Effective January 1, 2012, the annual management fee payable to BAS was reduced to $0.25 million. On December 22, 2011, Holdings purchased from BAS 7.5 million shares of capital stock of Holdings. Affiliates of BAS continue to hold 10 million shares of Holdings.
The Company believes Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest income and expense), taxation and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. In addition, the Company excludes residual value guarantee charges that do not result in additional cash payments to exit the facility at the end of the lease term. The Company uses Comparable Operating Performance as a supplemental measure to assess the Companys performance because it excludes non-cash stock-based compensation expense and non-cash effects on Adjusted EBITDA attributable to the application of purchase accounting in connection with the Merger. The Company uses Operating Performance as a supplemental measure to assess the Companys performance because it excludes restructuring charges and management and consulting fees paid to the Equity Sponsors. The Company presents Comparable Operating Performance and Operating Performance because it believes that they are useful for investors, analysts and other interested parties in their analysis of the Companys operating results.
Charges relating to stock-based compensation expense and the impact of purchase accounting are non-cash and the exclusion of the impact of these items from Comparable Operating Performance and Operating Performance allows investors to understand the current period results of operations of the business on a comparable basis with previous periods and, secondarily, gives the investors added insight into cash earnings available to service the Companys debt. We believe this to be of particular importance to the Companys public investors, which are debt holders. The Company also believes that the exclusion of the impact of purchase accounting and non-cash stock-based compensation expense may provide an additional means for comparing the Companys performance to the performance of other companies by eliminating the impact of differently structured equity-based, long-term incentive plans (although care must be taken in making any such comparison, as there may be inconsistencies among companies in the manner of computing similarly titled financial measures).
Adjusted EBITDA, Comparable Operating Performance and Operating Performance are not necessarily comparable to other Adjusted EBITDA and Comparable Operating Performance are not necessarily comparable to other similarly titled financial measures of other companies due to the potential inconsistencies in the methods of calculation.
Adjusted EBITDA and Comparable Operating Performance have limitations as analytical tools, and should not be considered in isolation or as substitutes for analyzing the Companys results as reported under GAAP. Some of these limitations are:
· Adjusted EBITDA and Comparable Operating Performance do not reflect changes in, or cash requirements for, the Companys working capital needs;
· Adjusted EBITDA and Comparable Operating Performance do not reflect the Companys interest expense, or the cash requirements necessary to service interest or principal payments on the Companys debt;
· Adjusted EBITDA and Comparable Operating Performance do not reflect the Companys tax expense or the cash requirements to pay the Companys taxes;
· Adjusted EBITDA and Comparable Operating Performance do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments;
· Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA and Comparable Operating Performance do not reflect any cash requirements for such replacements;
· Other companies in the Companys industries may calculate Adjusted EBITDA and Comparable Operating Performance differently, limiting their usefulness as comparative measures; and
· Comparable Operating Performance does not include the impact of purchase accounting and non-cash stock based compensation expense; the latter exclusion may cause the overall compensation cost of the business to be understated.
Preliminary, unaudited Operating Revenues and Operating Performance by operating segment are as follows:
|
|
Three months ended |
| ||||
(In thousands) |
|
2011 |
|
2010 |
| ||
Operating Revenue: |
|
|
|
|
| ||
TruGreen |
|
$ |
214,336 |
|
$ |
222,645 |
|
Terminix |
|
274,056 |
|
267,864 |
| ||
American Home Shield |
|
145,830 |
|
142,662 |
| ||
ServiceMaster Clean |
|
36,591 |
|
33,795 |
| ||
Other Operations and Headquarters |
|
22,028 |
|
21,239 |
| ||
Total Operating Revenue |
|
$ |
692,841 |
|
$ |
688,205 |
|
|
|
|
|
|
| ||
Operating Performance: |
|
|
|
|
| ||
TruGreen |
|
$ |
49,426 |
|
$ |
41,542 |
|
Terminix |
|
68,712 |
|
53,290 |
| ||
American Home Shield |
|
22,538 |
|
22,665 |
| ||
ServiceMaster Clean |
|
19,639 |
|
18,484 |
| ||
Other Operations and Headquarters |
|
(31,199 |
) |
(29,018 |
) | ||
Total Operating Performance |
|
$ |
129,116 |
|
$ |
106,963 |
|
|
|
|
|
|
| ||
Memo: Items excluded from Operating Performance: |
|
|
|
|
| ||
Operating Performance of discontinued operations |
|
$ |
(580 |
) |
$ |
5,305 |
|
|
|
Year ended December 31, |
| ||||
(In thousands) |
|
2011 |
|
2010 |
| ||
Operating Revenue: |
|
|
|
|
| ||
TruGreen |
|
$ |
1,100,741 |
|
$ |
1,096,667 |
|
Terminix |
|
1,193,075 |
|
1,157,346 |
| ||
American Home Shield |
|
686,737 |
|
656,572 |
| ||
ServiceMaster Clean |
|
138,691 |
|
132,132 |
| ||
Other Operations and Headquarters |
|
86,628 |
|
84,677 |
| ||
Total Operating Revenue |
|
$ |
3,205,872 |
|
$ |
3,127,394 |
|
|
|
|
|
|
| ||
Operating Performance: |
|
|
|
|
| ||
TruGreen |
|
$ |
209,031 |
|
$ |
194,472 |
|
Terminix |
|
299,485 |
|
270,829 |
| ||
American Home Shield |
|
131,977 |
|
116,609 |
| ||
ServiceMaster Clean |
|
64,018 |
|
63,762 |
| ||
Other Operations and Headquarters |
|
(94,036 |
) |
(94,620 |
) | ||
Total Operating Performance |
|
$ |
610,475 |
|
$ |
551,052 |
|
|
|
|
|
|
| ||
Memo: Items excluded from Operating Performance: |
|
|
|
|
| ||
Operating Performance of discontinued operations |
|
$ |
(3,267 |
) |
$ |
8,640 |
|
The following table presents reconciliations of preliminary, unaudited operating income to Adjusted EBITDA, Comparable Operating Performance and Operating Performance for the periods presented.
(in thousands) |
|
TruGreen |
|
Terminix |
|
American |
|
Service |
|
Other |
|
Total |
| ||||||
Three months ended December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income (loss)(1) |
|
$ |
1,358 |
|
$ |
48,499 |
|
$ |
19,363 |
|
$ |
18,176 |
|
$ |
(42,457 |
) |
$ |
44,939 |
|
Depreciation and amortization expense |
|
10,952 |
|
19,613 |
|
1,668 |
|
1,463 |
|
3,209 |
|
36,905 |
| ||||||
EBITDA |
|
12,310 |
|
68,112 |
|
21,031 |
|
19,639 |
|
(39,248 |
) |
81,844 |
| ||||||
Interest and net investment income(2) |
|
|
|
|
|
1,507 |
|
|
|
1,160 |
|
2,667 |
| ||||||
Non-cash trade name impairment(3) |
|
36,700 |
|
|
|
|
|
|
|
|
|
36,700 |
| ||||||
Adjusted EBITDA |
|
49,010 |
|
68,112 |
|
22,538 |
|
19,639 |
|
(38,088 |
) |
121,211 |
| ||||||
Non-cash stock-based compensation expense |
|
|
|
|
|
|
|
|
|
2,161 |
|
2,161 |
| ||||||
Non-cash credits attributable to purchase accounting(4) |
|
(9 |
) |
(8 |
) |
|
|
|
|
|
|
(17 |
) | ||||||
Comparable Operating Performance |
|
49,001 |
|
68,104 |
|
22,538 |
|
19,639 |
|
(35,927 |
) |
123,355 |
| ||||||
Restructuring charges(5) |
|
425 |
|
608 |
|
|
|
|
|
2,853 |
|
3,886 |
| ||||||
Management and consulting fees(6) |
|
|
|
|
|
|
|
|
|
1,875 |
|
1,875 |
| ||||||
Operating Performance |
|
$ |
49,426 |
|
$ |
68,712 |
|
$ |
22,538 |
|
$ |
19,639 |
|
$ |
(31,199 |
) |
$ |
129,116 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Memo: Items excluded from Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Performance of discontinued operations(7) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(580 |
) |
$ |
(580 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Three months ended December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income (loss)(1) |
|
$ |
32,064 |
|
$ |
33,036 |
|
$ |
11,135 |
|
$ |
16,742 |
|
$ |
(37,501 |
) |
$ |
55,476 |
|
Depreciation and amortization expense |
|
9,226 |
|
17,923 |
|
10,545 |
|
1,732 |
|
3,423 |
|
42,849 |
| ||||||
EBITDA |
|
41,290 |
|
50,959 |
|
21,680 |
|
18,474 |
|
(34,078 |
) |
98,325 |
| ||||||
Interest and net investment income(2) |
|
|
|
|
|
999 |
|
|
|
872 |
|
1,871 |
| ||||||
Adjusted EBITDA |
|
41,290 |
|
50,959 |
|
22,679 |
|
18,474 |
|
(33,206 |
) |
100,196 |
| ||||||
Non-cash stock-based compensation expense |
|
|
|
|
|
|
|
|
|
2,488 |
|
2,488 |
| ||||||
Non-cash credits attributable to purchase accounting(4) |
|
(13 |
) |
(21 |
) |
(14 |
) |
|
|
|
|
(48 |
) | ||||||
Comparable Operating Performance |
|
41,277 |
|
50,938 |
|
22,665 |
|
18,474 |
|
(30,718 |
) |
102,636 |
| ||||||
Restructuring charges (credits)(5) |
|
265 |
|
2,352 |
|
|
|
10 |
|
(175 |
) |
2,452 |
| ||||||
Management and consulting fees(6) |
|
|
|
|
|
|
|
|
|
1,875 |
|
1,875 |
| ||||||
Operating Performance |
|
$ |
41,542 |
|
$ |
53,290 |
|
$ |
22,665 |
|
$ |
18,484 |
|
$ |
(29,018 |
) |
$ |
106,963 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Memo: Items excluded from Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Performance of discontinued operations(7) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
5,305 |
|
$ |
5,305 |
|
(in thousands) |
|
TruGreen |
|
Terminix |
|
American |
|
Service |
|
Other |
|
Total |
| ||||||
Year ended December 31, 2011 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income (loss)(1) |
|
$ |
129,324 |
|
$ |
220,622 |
|
$ |
94,869 |
|
$ |
57,674 |
|
$ |
(127,029 |
) |
$ |
375,460 |
|
Depreciation and amortization expense |
|
41,929 |
|
75,347 |
|
27,331 |
|
6,150 |
|
12,679 |
|
163,436 |
| ||||||
EBITDA |
|
171,253 |
|
295,969 |
|
122,200 |
|
63,824 |
|
(114,350 |
) |
538,896 |
| ||||||
Interest and net investment income(2) |
|
|
|
|
|
9,777 |
|
158 |
|
951 |
|
10,886 |
| ||||||
Non-cash trade name impairment(3) |
|
36,700 |
|
|
|
|
|
|
|
|
|
36,700 |
| ||||||
Adjusted EBITDA |
|
207,953 |
|
295,969 |
|
131,977 |
|
63,982 |
|
(113,399 |
) |
586,482 |
| ||||||
Non-cash stock-based compensation expense |
|
|
|
|
|
|
|
|
|
8,412 |
|
8,412 |
| ||||||
Non-cash credits attributable to purchase accounting(4) |
|
(37 |
) |
(44 |
) |
|
|
|
|
|
|
(81 |
) | ||||||
Comparable Operating Performance |
|
207,916 |
|
295,925 |
|
131,977 |
|
63,982 |
|
(104,987 |
) |
594,813 |
| ||||||
Restructuring charges(5) |
|
1,115 |
|
3,560 |
|
|
|
36 |
|
3,451 |
|
8,162 |
| ||||||
Management and consulting fees(6) |
|
|
|
|
|
|
|
|
|
7,500 |
|
7,500 |
| ||||||
Operating Performance |
|
$ |
209,031 |
|
$ |
299,485 |
|
$ |
131,977 |
|
$ |
64,018 |
|
$ |
(94,036 |
) |
$ |
610,475 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Memo: Items excluded from Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Performance of discontinued operations(7) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
(3,267 |
) |
$ |
(3,267 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Year ended December 31, 2010 |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating income (loss)(1) |
|
$ |
112,312 |
|
$ |
199,750 |
|
$ |
68,380 |
|
$ |
55,450 |
|
$ |
(129,200 |
) |
$ |
306,692 |
|
Depreciation and amortization expense |
|
66,069 |
|
67,761 |
|
42,259 |
|
7,106 |
|
13,430 |
|
196,625 |
| ||||||
EBITDA |
|
178,381 |
|
267,511 |
|
110,639 |
|
62,556 |
|
(115,770 |
) |
503,317 |
| ||||||
Interest and net investment income(2) |
|
|
|
|
|
6,243 |
|
153 |
|
2,962 |
|
9,358 |
| ||||||
Residual value guarantee charge(8) |
|
9,222 |
|
|
|
|
|
982 |
|
245 |
|
10,449 |
| ||||||
Adjusted EBITDA |
|
187,603 |
|
267,511 |
|
116,882 |
|
63,691 |
|
(112,563 |
) |
523,124 |
| ||||||
Non-cash stock-based compensation expense |
|
|
|
|
|
|
|
|
|
9,352 |
|
9,352 |
| ||||||
Non-cash credits attributable to purchase accounting(4) |
|
(53 |
) |
(173 |
) |
(146 |
) |
|
|
|
|
(372 |
) | ||||||
Comparable Operating Performance |
|
187,550 |
|
267,338 |
|
116,736 |
|
63,691 |
|
(103,211 |
) |
532,104 |
| ||||||
Restructuring charges (credits)(5) |
|
6,922 |
|
3,491 |
|
(127 |
) |
71 |
|
1,091 |
|
11,448 |
| ||||||
Management and consulting fees(6) |
|
|
|
|
|
|
|
|
|
7,500 |
|
7,500 |
| ||||||
Operating Performance |
|
$ |
194,472 |
|
$ |
270,829 |
|
$ |
116,609 |
|
$ |
63,762 |
|
$ |
(94,620 |
) |
$ |
551,052 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Memo: Items excluded from Operating Performance: |
|
|
|
|
|
|
|
|
|
|
|
|
| ||||||
Operating Performance of discontinued operations(7) |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
8,640 |
|
$ |
8,640 |
|
(1) Presented below is a reconciliation of total segment operating income to net (loss) income.
|
|
Three months ended |
| ||||
(In thousands) |
|
2011 |
|
2010 |
| ||
Total Segment Operating Income |
|
$ |
44,939 |
|
$ |
55,476 |
|
Non-operating Expense (Income): |
|
|
|
|
| ||
Interest expense |
|
67,913 |
|
69,850 |
| ||
Interest and net investment income |
|
(2,667 |
) |
(1,871 |
) | ||
Loss on extinguishment of debt |
|
774 |
|
|
| ||
Other expense |
|
178 |
|
177 |
| ||
Loss from Continuing Operations before Income Taxes |
|
$ |
(21,259 |
) |
$ |
(12,680 |
) |
Benefit for income taxes |
|
(6,614 |
) |
(12,845 |
) | ||
(Loss) Income from Continuing Operations |
|
(14,645 |
) |
165 |
| ||
(Loss) income from discontinued operations, net of income taxes |
|
(586 |
) |
202 |
| ||
Net (Loss) Income |
|
$ |
(15,231 |
) |
$ |
367 |
|
|
|
Year ended |
| ||||
(In thousands) |
|
2011 |
|
2010 |
| ||
Total Segment Operating Income |
|
$ |
375,460 |
|
$ |
306,692 |
|
Non-operating Expense (Income): |
|
|
|
|
| ||
Interest expense |
|
273,123 |
|
286,933 |
| ||
Interest and net investment income |
|
(10,886 |
) |
(9,358 |
) | ||
Loss on extinguishment of debt |
|
774 |
|
|
| ||
Other expense |
|
700 |
|
733 |
| ||
Income from Continuing Operations before Income Taxes |
|
$ |
111,749 |
|
$ |
28,384 |
|
Provision for income taxes |
|
43,912 |
|
10,945 |
| ||
Income from Continuing Operations |
|
67,837 |
|
17,439 |
| ||
Loss from discontinued operations, net of income taxes |
|
(27,016 |
) |
(31,998 |
) | ||
Net Income (Loss) |
|
$ |
40,821 |
|
$ |
(14,559 |
) |
(2) Interest and net investment income is primarily comprised of investment income and realized gain (loss) on our American Home Shield segment investment portfolio. Cash, short-term and long-term marketable securities associated with regulatory requirements in connection with American Home Shield and for other purposes totaled $226.2 million as of December 31, 2011. American Home Shield interest and net investment income was $1.5 million and $1.0 million for the three months ended December 31, 2011 and 2010, respectively, and $9.8 million and $6.2 million for the years ended December 31, 2011 and 2010, respectively. The balance of interest and net investment income primarily relates to (i) investment income (loss) from our employee deferred compensation trust (for which there is a corresponding and offsetting change in compensation expense within (loss) income from continuing operations before income taxes) and (ii) interest income on other cash balances.
(3) Represents a pre-tax, non-cash impairment charge recorded in 2011 to reduce the carrying value of a trade name as a result of the Companys annual impairment testing of goodwill and indefinite-lived intangible assets.
(4) The Merger was accounted for using purchase accounting. This adjustment represents the aggregate, non-cash adjustments (other than amortization and depreciation) attributable to the application of purchase accounting.
(5) Represents restructuring charges related to a reorganization of field leadership and a restructuring of branch operations at TruGreen, a branch optimization project at Terminix, an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters, Merger related charges and other restructuring costs.
(6) Represents management and consulting fees payable to certain related parties.
(7) The table below presents reconciliations of operating (loss) income, the most directly comparable financial measure under GAAP, to EBITDA and Operating Performance for the periods presented.
|
|
Three months ended |
| ||||
(In thousands) |
|
2011 |
|
2010 |
| ||
Operating (loss) income |
|
$ |
(580 |
) |
$ |
2,615 |
|
Interest expense |
|
|
|
12 |
| ||
Depreciation and amortization expense |
|
|
|
2,840 |
| ||
EBITDA |
|
(580 |
) |
5,467 |
| ||
Non-cash credits attributable to purchase accounting |
|
|
|
(155 |
) | ||
Comparable Operating Performance |
|
(580 |
) |
5,312 |
| ||
Restructuring credits |
|
|
|
(7 |
) | ||
Operating Performance of discontinued operations |
|
$ |
(580 |
) |
$ |
5,305 |
|
|
|
Year ended |
| ||||
(In thousands) |
|
2011 |
|
2010 |
| ||
Operating loss |
|
$ |
(40,620 |
) |
$ |
(49,971 |
) |
Interest expense |
|
16 |
|
46 |
| ||
Depreciation and amortization expense |
|
3,509 |
|
11,524 |
| ||
EBITDA |
|
(37,095 |
) |
(38,401 |
) | ||
Non-cash goodwill and trade name impairment |
|
34,185 |
|
46,884 |
| ||
Adjusted EBITDA |
|
(2,910 |
) |
8,483 |
| ||
Non-cash credits attributable to purchase accounting |
|
(154 |
) |
(621 |
) | ||
Comparable Operating Performance |
|
(3,064 |
) |
7,862 |
| ||
Restructuring (credits) charges |
|
(203 |
) |
778 |
| ||
Operating Performance of discontinued operations |
|
$ |
(3,267 |
) |
$ |
8,640 |
|
(8) Represents non-cash residual value guarantee charges recorded in 2010 related to a synthetic lease for operating properties, which was internalized in July 2010. There were no similar changes in 2011.