10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2017

or

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                    to                    

Commission file number 001-36507

________________________________________________

ServiceMaster Global Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware	20-8738320
(State or other jurisdiction of incorporation or organization)	(IRS Employer Identification No.)

860 Ridge Lake Boulevard, Memphis, Tennessee 38120

(Address of principal executive offices) (Zip Code)

901-597-1400

(Registrant’s telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes  ☒  No  ☐

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  ☒  No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,”“accelerated filer,”“smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☒	Accelerated filer ☐	Non-accelerated filer ☐	Smaller reporting company ☐
		(Do not check if a smaller reporting company)	Emerging growth company☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ☐  No  ☒

The number of shares of the registrant’s common stock outstanding as of April 21, 2017:134,030,277  shares of common stock, par value $0.01 per share

TABLE OF CONTENTS

	Page No.
Part I. Financial Information
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Statements of Operations and Comprehensive Income	3
Condensed Consolidated Statements of Financial Position	4
Condensed Consolidated Statements of Cash Flows	5
Notes to Condensed Consolidated Financial Statements	6
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	19
Item 3. Quantitative and Qualitative Disclosures About Market Risk	32
Item 4. Controls and Procedures	32
Part II. Other Information	33
Item 1. Legal Proceedings	33
Item 1A. Risk Factors	33
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	34
Item 6. Exhibits	35
Signature	36

2

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In millions, except per share data)

	Three Months Ended
	March 31,
	2017		2016
Revenue	$	643	$	608
Cost of services rendered and products sold		346		324
Selling and administrative expenses		186		173
Amortization expense		7		8
Fumigation related matters		1		3
Impairment of software and other related costs		2		—
Restructuring charges		2		1
Gain on sale of Merry Maids branches		—		(1)
Interest expense		37		38
Interest and net investment income		—		(1)
Income from Continuing Operations before Income Taxes		62		62
Provision for income taxes		24		23
Income from Continuing Operations		38		39
Income from discontinued operations, net of income taxes		1		—
Net Income	$	39	$	39
Total Comprehensive Income	$	40	$	40
Weighted-average common shares outstanding - Basic		134.5		135.6
Weighted-average common shares outstanding - Diluted		136.0		137.8
Basic Earnings Per Share:
Income from Continuing Operations	$	0.28	$	0.29
Income from discontinued operations, net of income taxes		—		—
Net Income		0.29		0.28
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.28	$	0.28
Income from discontinued operations, net of income taxes		—		—
Net Income		0.29		0.28

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

3

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)

	As of		As of
	March 31,		December 31,
	2017		2016
Assets:
Current Assets:
Cash and cash equivalents	$	334	$	291
Marketable securities		25		25
Receivables, less allowances of $22		498		536
Inventories		45		43
Prepaid expenses and other assets		70		70
Deferred customer acquisition costs		31		34
Total Current Assets		1,003		998
Other Assets:
Property and equipment, net		215		210
Goodwill		2,258		2,247
Intangible assets, primarily trade names, service marks and trademarks, net		1,704		1,708
Restricted cash		89		95
Notes receivable		38		37
Long-term marketable securities		22		19
Other assets		72		71
Total Assets	$	5,402	$	5,386
Liabilities and Shareholders' Equity:
Current Liabilities:
Accounts payable	$	105	$	112
Accrued liabilities:
Payroll and related expenses		46		54
Self-insured claims and related expenses		102		111
Accrued interest payable		19		16
Other		78		60
Deferred revenue		645		629
Current portion of long-term debt		139		59
Total Current Liabilities		1,134		1,042
Long-Term Debt		2,694		2,772
Other Long-Term Liabilities:
Deferred taxes		717		719
Other long-term obligations, primarily self-insured claims		173		167
Total Other Long-Term Liabilities		890		886
Commitments and Contingencies (Note 3)
Shareholders' Equity:
Common stock $0.01 par value (authorized 2,000,000,000 shares with 144,854,026 shares issued and 134,206,545 outstanding at March 31, 2017 and 144,339,338 shares issued and 135,030,283 outstanding at December 31, 2016)		2		2
Additional paid-in capital		2,284		2,274
Accumulated deficit		(1,366)		(1,405)
Accumulated other comprehensive loss		(1)		(3)
Less common stock held in treasury, at cost (10,647,481 shares at March 31, 2017 and 9,309,055 shares at December 31, 2016)		(233)		(182)
Total Shareholders' Equity		685		686
Total Liabilities and Shareholders' Equity	$	5,402	$	5,386

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

4

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

	Three Months Ended
	March 31,
	2017		2016
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	$	386	$	296
Cash Flows from Operating Activities from Continuing Operations:
Net Income		39		39
Adjustments to reconcile net income to net cash provided from operating activities:
Income from discontinued operations, net of income taxes		(1)		—
Depreciation expense		18		13
Amortization expense		7		8
Amortization of debt issuance costs		1		1
Fumigation related matters		1		3
Payments on fumigation related matters		(1)		—
Impairment of software and other related costs		2		—
Gain on sale of Merry Maids branches		—		(1)
Deferred income tax provision		—		1
Stock-based compensation expense		5		3
Other		3		—
Change in working capital, net of acquisitions:
Receivables		36		28
Inventories and other current assets		(4)		(7)
Accounts payable		(4)		5
Deferred revenue		15		16
Accrued liabilities		(16)		(16)
Accrued interest payable		3		(7)
Current income taxes		23		19
Net Cash Provided from Operating Activities from Continuing Operations		126		106
Cash Flows from Investing Activities from Continuing Operations:
Property additions		(18)		(17)
Sale of equipment and other assets		—		3
Business acquisitions, net of cash acquired		(11)		(2)
Purchases of available-for-sale securities		(3)		(2)
Sales and maturities of available-for-sale securities		—		2
Origination of notes receivable		(25)		(23)
Collections on notes receivable		26		24
Net Cash Used for Investing Activities from Continuing Operations		(31)		(15)
Cash Flows from Financing Activities from Continuing Operations:
Payments of debt		(14)		(19)
Repurchase of common stock		(51)		—
Issuance of common stock		5		2
Net Cash Used for Financing Activities from Continuing Operations		(60)		(17)
Cash Flows from Discontinued Operations:
Cash provided from operating activities		1		—
Net Cash Provided from Discontinued Operations		1		—
Effect of Exchange Rate Changes on Cash		—		1
Cash Increase During the Period		37		74
Cash and Cash Equivalents and Restricted Cash at End of Period	$	423	$	371

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

5

SERVICEMASTER GLOBAL HOLDINGS,INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

ServiceMaster Global Holdings, Inc. and its majority-owned subsidiary partnerships, limited liability companies and corporations (collectively, “ServiceMaster,” the “Company,” “we,” “us, and “our”) is a leading provider of essential residential and commercial services. The Company’s services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, cabinet and wood furniture repair and home inspection. The Company provides these services through an extensive service network of company-owned, franchised and licensed locations operating primarily under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec.All consolidated Company subsidiaries are wholly-owned. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The Company recommends that the quarterly unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC (the “2016 Form 10-K”). The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for any interim period are not indicative of the results that might be achieved for a full year.

Note 2. Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company’s 2016 Form 10-K. There have been no material changes to the significant accounting policies for the three months ended March 31, 2017.

Newly Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” to provide a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This model supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company currently expects to adopt the new revenue standard in the first quarter of 2018 utilizing the full retrospective transition method. The Company does not expect adoption of the new revenue standard to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of financial liabilities measured under the fair value option that are attributable to a company’s own credit, and to change certain other disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity securities be recognized in net income. The amendments in ASU 2016-01 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and will be adopted prospectively. Upon adoption, changes in fair value of the Company’s available-for-sale securities, which are currently recognized in other comprehensive income, will be recognized in net income.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which is the final standard on accounting for leases. While both lessees and lessors are affected by the new guidance, the effects on lessees are much more significant. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. Entities are required to use a modified retrospective approach to adopt the guidance. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on the Company’s consolidated financial statements and currently expects that most of the operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption of ASU 2016-02, which will increase the amount of total assets and total liabilities that is reported relative to such amounts prior to adoption.

 [

6

Note 3. Commitments and Contingencies

The Company carries insurance policies on insurable risks at levels that it believes to be appropriate, including workers’ compensation, automobile and general liability risks. The Company purchases insurance policies from third-party insurance carriers, which typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall below the retention limits, exceed our coverage limits or are otherwise not covered by our insurance policies. In determining the Company’s accrual for self-insured claims, the Company uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

A reconciliation of beginning and ending accrued self-insured claims, which are included in Accrued liabilities—Self-insured claims and related expenses and Other long-term obligations, primarily self-insured claims on the condensed consolidated statements of financial position, net of insurance recoverables, which are included in Prepaid expenses and other assets and Other assets on the condensed consolidated statements of financial position, is presented as follows:

	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 2016	$	120
Provision for self-insured claims		9
Cash payments		(10)
Balance as of March 31, 2017	$	119
Balance as of December 31, 2015	$	114
Provision for self-insured claims		13
Cash payments		(13)
Balance as of March 31, 2016	$	114

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 accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.

In 2008, the Company amended its Profit Sharing and Retirement Plan, a tax qualified 401(k) defined contribution plan available to substantially all of its employees (the “401(k) Plan”), to implement a qualified automatic contribution arrangement (“QACA”) under the safe harbor provisions of the Internal Revenue Code of 1986, as amended (the “Code”). QACA plans, in general, require automatic enrollment of employees into the retirement plan absent an affirmative election that such employees do not wish to participate. Although the Company implemented processes to auto-enroll new hires after adopting the QACA plan in 2008, it discovered that it did not auto-enroll then existing employees who were not participating in the 401(k) Plan. In response, the Company implemented an auto-enrollment process for affected active employees and submitted to the Internal Revenue Service (the “IRS”) a voluntary correction proposal to remedy the issue for prior years. The Company’s current estimate of the cost of the correction ranges from $25 million to approximately $93 million. The Company has previously recorded in the condensed consolidated statement of operations and comprehensive income charges of $25 million. However, there can be no assurances as to the ultimate cost of the correction.

In addition to the matter discussed above and the fumigation related matters discussed below, in the ordinary course of conducting business activities, the Company and its subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. The Company has entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of the Company’s settlements are not finally approved, the Company could have additional or different exposure, which could be material. Subject to the paragraphs below, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations or cash flows; however, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, results of operations and cash flows. 

7

Fumigation Related Matters

On July 21, 2016, Terminix International USVI, LLC (“TMX USVI”) and The Terminix International Company Limited Partnership (“TMX LP”), each an indirect, wholly-owned subsidiary of the Company, entered into a superseding Plea Agreement (the “Superseding Plea Agreement”) in connection with the investigation initiated by the United States Department of Justice Environmental Crimes Section (the “DOJ”) into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. The Superseding Plea Agreement was intended to resolve four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide. Those charges were set forth in an Information, dated March 29, 2016, in the matter styled United States of America v. The Terminix International Company Limited Partnership andTerminix International USVI, LLC.  At a hearing held on August 25, 2016, the United States District Court of the U.S. Virgin Islands (the “District Court”) rejected the Superseding Plea Agreement.  On August 31, 2016, the DOJ requested that the charges be dismissed, reserving its right to re-file the charges, in light of ongoing discussions to resolve the matter. The District Court granted that request, and the March 29, 2016 Information was dismissed. 

On January 20, 2017, TMX USVI and TMX LP entered into a new Plea Agreement (the “New Plea Agreement”) with the DOJ, which has been filed with the District Court, and replaces the Superseding Plea Agreement. At a hearing on March 23, 2017, TMX USVI and TMX LP pled guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement. Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. A sentencing hearing before the District Court is scheduled for July 27, 2017. It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.  

The Company has previously recorded within Fumigation related matters in the condensed consolidated statement of operations and comprehensive income total charges of $10 million in connection with the aforementioned criminal matter. The amount and extent of any further potential penalties, fines, sanctions, costs and damages that the federal or other governmental authorities may yet impose, investigation or other costs and reputational harm, as well as the impact of any additional civil, criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to the U.S. Virgin Islands matter, which could be material, is not currently known or reasonably estimable, and any such further penalties, fines, sanctions, costs or damages would not be covered under the Company’s general liability insurance policies. On December 16, 2016, the U.S. Virgin Islands Department of Justice filed a civil complaint in the Superior Court of the Virgin Islands related to the aforementioned fumigation incident in a matter styled Government of the United States Virgin Islands v. The ServiceMaster Company, LLC, The Terminix International Company Limited Partnership, and Terminix International USVI, LLC. The Company has not recorded any charge for this new civil lawsuit.

8

Note 4. Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. The Company’s annual assessment date is October 1. There were no goodwill or trade name impairment charges recorded in the three months ended March 31, 2017 and 2016. There were no accumulated impairment losses recorded as of March 31, 2017.The table below summarizes the goodwill balances for continuing operations by reportable segment:

			American		Franchise
(In millions)	Terminix		Home Shield		Services Group		Total
Balance as of December 31, 2016	$	1,601	$	471	$	175	$	2,247
Acquisitions		1		4		5		10
Balance as of March 31, 2017	$	1,603	$	475	$	180	$	2,258

The table below summarizes the other intangible asset balances for continuing operations:

	As of March 31, 2017						As of December 31, 2016
			Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net
Trade names(1)	$	1,608	$	—	$	1,608	$	1,608	$	—	$	1,608
Customer relationships		587		(542)		45		594		(538)		56
Franchise agreements		88		(68)		20		88		(67)		21
Other		75		(44)		31		65		(42)		23
Total	$	2,359	$	(654)	$	1,704	$	2,356	$	(647)	$	1,708

___________________________________

(1) Not subject to amortization.

For the existing intangible assets, the Company anticipates amortization expense for the remainder of 2017 and each of the next five years of $20  million, $21million, $15 million, $12 million, $9 million and $5million, respectively.

Note 5. Stock-Based Compensation

For the three months ended March 31, 2017 and 2016, the Company recognized stock-based compensation expense of  $5 million ($3 million, net of tax) and $3 million ($2 million, net of tax), respectively. These charges are recorded within Selling and administrative expenses in the condensed consolidated statements of operations and comprehensive income. 

As of March 31, 2017 there was $36 million of total unrecognized compensation costs related to non-vested stock options, restricted stock units (“RSUs”) and performance shares granted under the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan (“MSIP”) and the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) and discounts associated with the ServiceMaster Global Holdings, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). These remaining costs are expected to be recognized over a weighted-average period of  2.62 years.

9

Note 6. Comprehensive Income

Comprehensive income, which primarily includes net income (loss), unrealized gain (loss) on marketable securities, unrealized gain (loss) on derivative instruments and the effect of foreign currency translation gain (loss), is disclosed in the condensed consolidated statements of operations and comprehensive income.

The following tables summarize the activity in accumulated other comprehensive income (loss), net of the related tax effects.

			Unrealized
			Gains
	Unrealized		on Available		Foreign
	Gains (Losses)		-for-Sale		Currency
(In millions)	on Derivatives		Securities		Translation		Total
Balance as of December 31, 2016	$	12	$	1	$	(15)	$	(3)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(1)		—		1		—
Tax benefit		(1)		—		—		(1)
After-tax amount		—		—		1		1
Amounts reclassified from accumulated other comprehensive income (loss)(1)		1		—		—		1
Net current period other comprehensive income		—		—		1		1
Balance as of March 31, 2017	$	12	$	1	$	(14)	$	(1)
Balance as of December 31, 2015	$	(7)	$	2	$	(15)	$	(21)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(5)		—		3		(2)
Tax benefit		(2)		—		—		(1)
After-tax amount		(3)		—		3		(1)
Amounts reclassified from accumulated other comprehensive income (loss)(1)		2		—		—		2
Net current period other comprehensive (loss) income		(1)		—		3		1
Balance as of March 31, 2016	$	(9)	$	2	$	(12)	$	(19)

___________________________________

(1) Amounts are net of tax. See reclassifications out of accumulated other comprehensive income (loss) below for further details.

Reclassifications out of accumulated other comprehensive income (loss) included the following components for the periods indicated.

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended				Condensed Consolidated Statements of
	March 31,				Operations and Comprehensive Income
(In millions)	2017		2016		Location
Losses on derivatives:
Fuel swap contracts	$	—	$	(1)	Cost of services rendered and products sold
Interest rate swap contracts		(1)		(2)	Interest expense
Net losses on derivatives		(1)		(3)
Impact of income taxes		—		1	Provision for income taxes
Total reclassifications related to derivatives	$	(1)	$	(2)
Total reclassifications for the period	$	(1)	$	(2)

10

Note 7. Supplemental Cash Flow Information

Supplemental information relating to the condensed consolidated statements of cash flows is presented in the following table:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Cash paid for or (received from):
Interest expense	$	29	$	42
Interest and dividend income		—		(1)
Income taxes, net of refunds		1		3

As of March 31, 2017 and December 31, 2016, Cash and cash equivalents of $334 million and $291 million, respectively, and Restricted cash of $89 million and $95 million, respectively, as presented on the condensed consolidated statements of financial position represent the amounts comprising Cash and cash equivalents and restricted cash of $423 million and $386 million, respectively, on the condensed consolidated statement of cash flows. There were no restricted cash balances as of March 31, 2016 and December 31, 2015.

The Company acquired $12 million and $6 million of property and equipment through capital leases and other non-cash  financing transactions in the three months ended March 31, 2017 and 2016, respectively, which have been excluded from the condensed consolidated statements of cash flows as non-cash investing and financing activities. 

In the three months ended March 31, 2016, the Company converted certain company-owned Merry Maids branches to franchises for a total purchase price of $4 million. In the three months ended March 31, 2016, the Company received cash of $3 million and provided financing of $1 million. These financed amounts have been excluded from the condensed consolidated statements of cash flows as non-cash investing activities.

Note 8. Cash and Marketable Securities

Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents on the condensed consolidated statements of financial position. As of March 31, 2017 and December 31, 2016, the Company’s investments consisted primarily of treasury bills (“Debt securities”) and common equity securities (“Equity securities”). The amortized cost, fair value and gross unrealized gains and losses of the Company’s short- and long-term investments in Debt and Equity securities are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In millions)	Cost		Gains		Losses		Value
Available-for-sale securities, March 31, 2017:
Debt securities	$	29	$	—	$	—	$	29
Equity securities		17		1		—		19
Total securities	$	46	$	1	$	—	$	47
Available-for-sale securities, December 31, 2016:
Debt securities	$	27	$	—	$	—	$	27
Equity securities		15		1		—		17
Total securities	$	43	$	1	$	—	$	44

There were no unrealized losses which had been in a loss position for more than one year as of March 31, 2017 and December 31, 2016.  

Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. The Company periodically reviews its portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes. There were no proceeds, gross realized gains or gross realized losses resulting from sales of available-for-sale securities or impairment charges due to other than temporary declines in the value of certain investments for the three months ended March 31, 2017 and 2016.  

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Note 9. Long-Term Debt

Long-term debt is summarized in the following table:

	As of		As of
	March 31,		December 31,
(In millions)	2017		2016
Senior secured term loan facility maturing in 2023(1)	$	1,624	$	1,628
Revolving credit facility maturing in 2021		—		—
5.125% notes maturing in 2024(2)		737		737
7.10% notes maturing in 2018(3)		78		77
7.45% notes maturing in 2027(3)		167		167
7.25% notes maturing in 2038(3)		66		65
Vehicle capital leases(4)		90		87
Other		70		71
Less current portion		(139)		(59)
Total long-term debt	$	2,694	$	2,772

___________________________________

(1) As of March 31, 2017 and December 31, 2016, presented net of $18 millionin unamortized debt issuance costs and $4 million in unamortized original issue discount paid.

(2) As of March 31, 2017 and December 31, 2016, presented net of $13 million in unamortized debt issuance costs.

(3) As of March 31, 2017 and December 31, 2016, collectively presented net of $47 million and $48 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

(4) The Company has entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things, allows the Company to obtain fleet vehicles through a 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 plus other contractual adjustments and a borrowing margin totaling 2.45 percent.

Interest Rate Swaps

Interest rate swap agreements in effect as of March 31, 2017 are as follows:

Trade Date	Effective Date	Expiration Date	Notional Amount	Fixed Rate(1)		Floating Rate
November 7, 2016	November 8, 2016	November 30, 2023	$650,000	1.493	%	One month LIBOR

___________________________________

(1)Before the application of the applicable borrowing margin.

Note 10. Acquisitions

Acquisitions have been accounted for using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the condensed consolidated financial statements since their dates of acquisition. The assets and liabilities of these businesses were recorded in the financial statements at their estimated fair values as of the acquisition dates. 

On November 30, 2016, the Company acquired Landmark Home Warranty, LLC (“Landmark”) for a totalpurchase price of$39 million. The Company recorded goodwill of $37 million and other intangibles, primarily customer relationships, of $13 million related to this acquisition. During the three months ended March 31, 2017, the Company updated its preliminary allocation and reclassified $4 million from other intangibles, primarily customer relationships, to goodwill. As of March 31, 2017, the purchase price allocation for this acquisition has not been finalized.In particular, the Company is still evaluating the fair value of certain intangible assets. As the Company finalizes its assessment of the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in 2017.

During the three months ended March 31, 2017, the Company completed a pest controlacquisition and purchased a ServiceMaster Clean master distributor within the Franchise Services Group. The total purchase price for these acquisitions was $13  million. The Company recorded goodwill of $6million and other intangibles, primarily reacquired rights, of $6 million related to these acquisitions.As of March 31, 2017, the purchase price allocation for the master distributor has not been finalized as the Company is still evaluating the fair value of certain intangible assets. As the Company finalizes its assessment of the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in 2017.

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During the three months ended March 31, 2016, the Company completed several pest control and termite acquisitions. The total purchase price for these acquisitions was $3 million. The Company recorded goodwill of $2 million and accounts receivable of $1 million related to these acquisitions.

Supplemental cash flow information regarding the Company’s acquisitions is as follows:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Assets acquired	$	13	$	3
Liabilities assumed		—		—
Net assets acquired	$	13	$	3
Net cash paid	$	11	$	2
Seller financed debt		2		—
Purchase price	$	13	$	3

Note 11. Income Taxes

As of March 31, 2017 and December 31, 2016,the Company had$13 million of tax benefits primarily reflected in state tax returns that have not been recognized for financial reporting purposes (“unrecognized tax benefits”). Based on information currently available, it is reasonably possible that over the next 12 month period unrecognized tax benefits may decrease by $2 million as the result of settlements of ongoing audits, statute of limitation expirations or final settlements of uncertain tax positions in multiple jurisdictions.

As required by Accounting Standard Codification (“ASC”) 740, “Income Taxes,” the Company computes interim period income taxes by applying an anticipated annual effective tax rate to the Company’s year-to-date income or loss from continuing operations before income taxes, except for significant unusual or infrequently occurring items. The Company’s estimated tax rate is adjusted each quarter in accordance with ASC 740.

The effective tax rate on income from continuing operations was 38.3 percent and 37.1 percent for the three months ended March 31, 2017 and 2016, respectively. The effective tax rate on income from continuing operations for the three months ended March 31, 2016 was primarily affected by excess tax benefits for share based awards recorded discretely during the quarter.

Note 12. Business Segment Reporting

The business of the Company is conducted through three reportable segments: Terminix, American Home Shield and Franchise Services Group.

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 residential and commercial customers and distributes pest control products. The American Home Shield segment provides home warranties for household systems and appliances. The Franchise Services Group segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore and ServiceMaster Clean brand names, home cleaning services through franchises primarily under the Merry Maids brand name, cabinet and wood furniture repair primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. Corporate includes SMAC, the Company’s financing subsidiary exclusively dedicated to providing financing to its franchisees and retail customers of its operating units, and the Company’s headquarters operations (substantially all of which costs are allocated to the Company’s reportable segments), which provide various technology, marketing, finance, legal and other support services to the reportable segments. The composition of the Company’s reportable segments is consistent with that used by the Company’s chief operating decision maker (the “CODM”) to evaluate performance and allocate resources.

Information regarding the accounting policies used by the Company is described in the Company’s 2016 Form 10-K. The Company derives substantially all of its revenue from customers and franchisees in the United States with approximatelytwo percent generated in foreign markets. Operating expenses of the business units consist primarily of direct costs and indirect costs allocated from Corporate.

The Company uses Reportable Segment Adjusted EBITDA as its measure of segment profitability. Accordingly, the CODM evaluates performance and allocates resources based primarily on Reportable Segment Adjusted EBITDA. Reportable Segment Adjusted EBITDA is defined as net income before: unallocated corporate expenses; income from discontinued operations, net of income taxes; provision for income taxes; interest expense; depreciation and amortization expense; fumigation related matters; non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids branches; andnon-cash impairment of software and other related costs. The Company’s definition of Reportable Segment Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies. The Company believes Reportable Segment Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by

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excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

Information for continuing operations for each reportable segment and Corporate is presented below:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Revenue:
Terminix	$	365	$	364
American Home Shield		227		194
Franchise Services Group		50		49
Reportable Segment Revenue	$	642	$	607
Corporate		1		1
Total Revenue	$	643	$	608
Reportable Segment Adjusted EBITDA:(1)
Terminix	$	81	$	94
American Home Shield		31		19
Franchise Services Group		21		18
Reportable Segment Adjusted EBITDA	$	133	$	131

___________________________________

Presented below is a reconciliation of Net Income to Reportable Segment Adjusted EBITDA: 

	Three Months Ended
	March 31,
(In millions)	2017		2016
Net Income	$	39	$	39
Unallocated corporate expenses		—		4
Depreciation and amortization expense		25		21
Fumigation related matters		1		3
Non-cash stock-based compensation expense		5		3
Restructuring charges		2		1
Gain on sale of Merry Maids branches		—		(1)
Non-cash impairment of software and other related costs		2		—
Income from discontinued operations, net of income taxes		(1)		—
Provision for income taxes		24		23
Interest expense		37		38
Reportable Segment Adjusted EBITDA	$	133	$	131

Note 13. Related Party Transactions

TruGreen Spin-off

In connection with the TruGreen spin-off on January 14, 2014, the Company entered into a transition services agreement with TruGreen Holding Corporation (“TruGreen”) pursuant to which the Company providesTruGreen with specified communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, marketing, facilities, information technology and other support services. The charges for the transition services are designed to allow the Company to fully recover the direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The services provided under the transition services agreement terminated at various specified times on or prior to December 31, 2016, except certain information technology services, which the Company has entered into an agreement with TruGreen to extend through June 30, 2018.  TruGreen may terminate the extended transition services agreement for convenience upon 90 days written notice.

Under this transition services agreement, the Company recorded $3 million in the three months ended March 31, 2016 of fees from TruGreen, which is included as a reduction in Selling and administrative expenses in the condensed consolidated statement of operations and comprehensive income. As of March 31, 2017, all amounts owed by TruGreen under this agreement have been paid.

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Note 14. Fair Value Measurements

The period-end carrying amounts of cash and cash equivalents, receivables, restricted cash, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The period-end carrying amounts of long-term notes receivable approximate fair value as the effective interest rates for these instruments are comparable to period-end market rates. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value, with unrealized gains and losses reported net of tax as a component of accumulated other comprehensive income (loss) on the condensed consolidated statements of financial position, or, for certain unrealized losses, reported in interest and net investment income in the condensed consolidated statements of operations and comprehensive income if the decline in value is other than temporary. The carrying amount of total debt was $2,833 million and $2,831 million and the estimated fair value was $2,942 million and $2,930million as of March 31, 2017 and December 31, 2016, respectively. The fair value of the Company’s debt is estimated based on available market prices for the same or similar instruments which are considered significant other observable inputs (Level 2) within the fair value hierarchy. The fair values presented reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to the Company as of March 31, 2017 and December 31, 2016.

The Company has estimated the fair value of its financial instruments measured at fair value on a recurring basis using the market and income approaches. For investments in marketable securities, deferred compensation trust assets and derivative contracts, which are carried at their fair values, the Company’s fair value estimates incorporate quoted market prices, other observable inputs (for example, forward interest rates) and unobservable inputs (for example, forward commodity prices) at the balance sheet date.

Interest rate swap contracts are valued using forward interest rate curves obtained from third-party market data providers. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate as of each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swap contracts.

Fuel swap contracts are valued using forward fuel price curves obtained from third-party market data providers. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing 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 providers and related changes in fair value for reasonableness utilizing information available to the Company from other published sources.

The Company has not changed its valuation techniques for measuring the fair value of any financial assets and liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period. There were no significant transfers between levels during the three monthsended March 31, 2017 and 2016.

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The carrying amount and estimated fair value of the Company’s financial instruments that are recorded at fair value on a recurring basis for the periods presented are as follows:

				Estimated Fair Value Measurements
				Quoted		Significant
				Prices In		Other		Significant
				Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2017:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		40		35		5		—
Fuel swap contracts	Prepaid expenses and other assets		2		—		—		2
Interest rate swap contracts	Other assets		26		—		26		—
Total financial assets		$	75	$	43	$	31	$	2
Financial Liabilities:
Interest rate swap contracts	Other accrued liabilities	$	2	$	—	$	2	$	—
Total financial liabilities		$	2	$	—	$	2	$	—
As of December 31, 2016:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		36		33		3		—
Fuel swap contracts	Prepaid expenses and other assets and Other assets		5		—		—		5
Interest rate swap contracts	Other assets		27		—		27		—
Total financial assets		$	75	$	40	$	30	$	5
Financial Liabilities:
Interest rate swap contracts	Other accrued liabilities and Other long-term obligations	$	4	$	—	$	4	$	—
Total financial liabilities		$	4	$	—	$	4	$	—

A  reconciliation of the beginning and ending fair values of financial instruments valued using significant unobservable inputs (Level 3) on a recurring basis is presented as follows:

	Fuel Swap
	Contract
	Assets
(In millions)	(Liabilities)		Location of Gain (Loss) included in Earnings
Balance as of December 31, 2016	$	5
Total losses (realized and unrealized)
Included in earnings		—	Cost of services rendered and products sold
Included in other comprehensive income		(3)
Settlements		—
Balance as of March 31, 2017	$	1
Balance as of December 31, 2015	$	(4)
Total (losses) gains (realized and unrealized)
Included in earnings		(1)	Cost of services rendered and products sold
Included in other comprehensive income		1
Settlements		1
Balance as of March 31, 2016	$	(3)

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The following tables present information relating to the significant unobservable inputs of the Company’s Level 3 financial instruments:

	Fair Value		Valuation			Weighted
	(in millions)		Technique	Unobservable Input	Range	Average
As of March 31, 2017:
Fuel swap contracts	$	1	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.14 - $2.63	$	2.39
As of December 31, 2016:
Fuel swap contracts	$	5	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.31 - $2.85	$	2.55

___________________________________

(1) Forward prices per gallon were derived from third-party market data providers. A decrease in the forward price would result in a decrease 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 derivative financial instruments as hedging instruments under accounting standards for derivative instruments, the Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. The Company assesses at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected changes in cash flows of the associated forecasted transactions. All of the Company’s designated hedging instruments are classified as cash flow hedges.

The Company has historically hedged a significant portion of its annual fuel consumption. The Company has also historically hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements. All of the Company’s fuel swap contracts and interest rate swap contracts are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the condensed consolidated statements of financial position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss). Any change in the fair value of the hedging instrument resulting from ineffectiveness, as defined by accounting standards, is recognized in current period earnings. Cash flows related to fuel and interest rate derivatives are classified as operating activities in the condensed consolidated statements of cash flows.

Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedge relationships were insignificant during the three months ended March 31, 2017. As of March 31, 2017, the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $34 million, maturing through 2018. Under the terms of its fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of March 31, 2017, the Company had posted $3 million in letters of credit as collateral under its fuel hedging program, which were issued under the Revolving Credit Facility.

The effective portion of the gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments is recorded in accumulated other comprehensive income (loss). These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement or the fuel settlement affects earnings. See Note 6 to the condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in accumulated other comprehensive income (loss) and for the amounts reclassified out of accumulated other comprehensive income (loss) and into earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses related to open fuel hedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains and losses in accumulated other comprehensive income (loss) expected to be recognized in earnings is a loss of $4 million, net of tax, as of March 31, 2017. The amounts that are ultimately reclassified into earnings will be based on actual fuel prices and interest rates at the time the positions are settled and may differ materially from the amount noted above.

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Note 15. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options, RSUs and performance shares are reflected in diluted net income per share by applying the treasury stock method.

A reconciliation of the amounts included in the computation of basic earnings per share from continuing operations and diluted earnings per share from continuing operations is as follows:

	Three Months Ended
	March 31,
(In millions, except per share data)	2017		2016
Income from continuing operations	$	38	$	39
Weighted-average common shares outstanding		134.5		135.6
Effect of dilutive securities:
RSUs(1)		0.1		0.2
Stock options(2)		1.4		1.9
Weighted-average common shares outstanding—assuming dilution		136.0		137.8
Basic earnings per share from continuing operations	$	0.28	$	0.29
Diluted earnings per share from continuing operations	$	0.28	$	0.28

___________________________________

(1) Unvested RSUs and performance shares of 0.3 million for the three months ended March 31, 2016 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Options to purchase  1.3 million and 0.9 million shares for the three months ended March 31, 2017 and 2016, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following information should be read in conjunction with the unaudited condensed consolidated financial statements and related notes included in Item 1 of this Quarterly Report on Form 10-Q. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this report, particularly in “—Information Regarding Forward-Looking Statements.”

Overview

Our core services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, cabinet and wood furniture repair and home inspection under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. Our operations for the periods presented in this report are organized into three reportable segments: Terminix, American Home Shield and Franchise Services Group.

Key Business Metrics

We focus on a variety of indicators and key operating and financial metrics to monitor the financial condition and performance of the continuing operations of our businesses. These metrics include:

· revenue,

· operating expenses,

· net income,

· earnings per share,

· Adjusted EBITDA,

· organic revenue growth,

· customer retention rates, and

· customer counts growth.

To the extent applicable, these measures are evaluated with and without impairment, restructuring and other charges that management believes are not indicative of the earnings capabilities of our businesses. We also focus on measures designed to monitor cash flow, including net cash provided from operating activities from continuing operations and free cash flow.

Revenue.Our revenue results are primarily a function of the volume and pricing of the services and products provided to our customers by our businesses as well as the mix of services and products provided across our businesses. The volume of our revenue in Terminix and American Home Shield is impacted by new unit sales, the retention of our existing customers and acquisitions. We expect to continue our tuck-in acquisition program at Terminixand to periodically evaluate other strategic acquisitions. Revenue results in the Franchise Services Group are driven principally by royalty fees earned from our franchisees. We serve both residential and commercial customers, principally in the United States. In 2016, approximately 98 percent of our revenue was generated by sales in the United States.

Operating Expenses.In addition to the impact of changes in our revenue results, our operating results are affected by, among other things, the level of our operating expenses. A number of our operating expenses are subject to inflationary pressures, such as fuel, chemicals, raw materials, wages and salaries, employee benefits and health care, vehicles, contractor costs, self-insurance costs and other insurance premiums, as well as various regulatory compliance costs.

Net Income and Earnings Per Share.Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and RSUs are reflected in diluted net income per share by applying the treasury stock method. The presentation of net income and earnings per share provides GAAP measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons.

Adjusted EBITDA. We evaluate performance and allocate resources based primarily on Adjusted EBITDA. We define Adjusted EBITDA as net income before: income from discontinued operations, net of income taxes; provision for income taxes; interest expense; depreciation and amortization expense; fumigation related matters;non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids branches;and non-cash impairment of software and other related costs. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

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Organic Revenue Growth.We evaluate organic revenue growth to track performance of the business, including the impacts of sales, pricing, new service offerings and other growth initiatives. Organic revenue growth excludes revenue from acquired customers for 12 months following the acquisition date.

Customer Retention Rates and Customer Counts Growth. Where applicable, we report our customer retention rates and growth in customer counts in order to track the performance of the business. Customer counts represent our recurring customer base, which includes customers with active contracts for recurring services. Retention rates are calculated as the ratio of ending customer counts to the sum of beginning customer counts, new sales and acquired accounts for the applicable period. These measures are presented on a rolling, 12-month basis in order to avoid seasonal anomalies. See “—Segment Review.”

Seasonality

We have seasonality in our business, which drives fluctuations in revenue and Adjusted EBITDA for interim periods. In 2016, approximately 22 percent, 27 percent, 28 percent and 23 percent of our revenue and approximately 19 percent, 30 percent, 29 percent and 22 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

Effect of Weather Conditions

The demand for our services and our results of operations are also affected by weather conditions, including the seasonal nature of our termite and pest control services, home inspection services and disaster restoration services. Weather conditions which have a potentially unfavorable impact to our business include cooler temperatures or droughts which can impede the development of termite swarms and lead to lower demand for our termite control services; and extreme temperatures which can lead to an increase in service requests related to household systems.  For example, in the third quarter of 2016, we experienced an increase in contract claims cost at American Home Shield driven by a higher number of HVAC work orders driven by high temperatures. Weather conditions which have a potentially favorable impact to our business include mild winters which can lead to higher demand for termite and pest control services; mild winters or summers which can lead to lower household systems claim frequency; and severe storms which can lead to an increase in demand for disaster restoration services.

Franchises

Franchises are important to the Terminix, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. Total profits from our franchised operations were $22 million and $18 million for the three months ended March 31, 2017 and 2016, respectively.  Nearly all of the franchise fees received by our Franchise Services Group segment are derived from the ServiceMaster Restore, ServiceMaster Clean and Merry Maids businesses. Franchise fees from our Terminix franchisees represented less than one percent of Terminix revenue for the three months ended March 31, 2017. We evaluate the performance of our franchise businesses based primarily on operating profit before corporate general and administrative expenses, interest expense and amortization of intangible assets. Franchise agreements entered into in the course of these businesses are generally for a term of five years. The majority of these franchise agreements are renewed prior to expiration. Internationally, we have license agreements, whereby licensees provide services under our brand names that would ordinarily be provided by franchisees in the United States. The majority of international licenses are for 10‑year terms.

Results of Operations

	Three Months Ended				Increase
	March 31,				(Decrease)		% of Revenue
(In millions)	2017		2016		2017 vs. 2016		2017		2016
Revenue	$	643	$	608	6	%	100	%	100	%
Cost of services rendered and products sold		346		324	7		54		53
Selling and administrative expenses		186		173	8		29		28
Amortization expense		7		8	(13)		1		1
Fumigation related matters		1		3	*		—		—
Impairment of software and other related costs		2		—	*		—		—
Restructuring charges		2		1	*		—		—
Gain on sale of Merry Maids branches		—		(1)	*		—		—
Interest expense		37		38	(3)		6		6
Interest and net investment income		—		(1)	*		—		—
Income from Continuing Operations before Income Taxes		62		62	—		10		10
Provision for income taxes		24		23	4		4		4
Income from Continuing Operations		38		39	(3)		6		6
Income from discontinued operations, net of income taxes		1		—	*		—		—
Net Income	$	39	$	39	—	%	6	%	6	%

_________________________________

*     not meaningful

20

Revenue

We reported revenue of $643 million and $608 million for the three months ended March 31, 2017 and 2016, respectively. A summary of changes in revenue for each of our reportable segments and Corporate is included in the table below. See “—Segment Review” for a discussion of the drivers of the year-over-year changes.

			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Three Months Ended March 31, 2016	$	364	$	194	$	49	$	1	$	608
Pest Control(1)		(4)		—		—		—		(4)
Termite and Other Services(2)		6		—		—		—		6
Home Warranties(3)		—		33		—		—		33
Franchise-Related Revenue		—		—		5		—		5
Sale of Merry Maids branches(4)		—		—		(4)		—		(4)
Other		(1)		—		—		—		(1)
Three Months Ended March 31, 2017	$	365	$	227	$	50	$	1	$	643

_________________________________

(1) Includes growth from acquisitions of approximately $3 million.

(2) Includes wildlife exclusion, crawl space encapsulation and attic insulation products which are managed as a component of our termite line of business.  Includes growth from acquisitions of approximately $1 million.

(3) Includes growth from acquisitions of approximately $17 million as a result of the acquisitions of OneGuard and Landmark.

(4) Represents a reduction in revenue from company-owned branches as a result of the conversion of certain company-owned Merry Maids branches to franchises (the “branch conversions”), which were completed in 2016.

Cost of Services Rendered and Products Sold

We reported cost of services rendered and products sold of $346 million and $324 million for the three months ended March 31, 2017 and 2016, respectively.The following table provides a summary of changes in cost of services rendered and products sold for each of our reportable segments and Corporate:

			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Three Months Ended March 31, 2016	$	195	$	105	$	20	$	4	$	324
Impact of change in revenue(1)		—		14		1		—		15
Production labor		5		—		—		—		5
Damage claims		4		—		—		—		4
Fuel prices		(1)		—		—		—		(1)
Contract claims		—		2		—		—		2
Sale of Merry Maids branches		—		—		(3)		—		(3)
Insurance program		—		—		—		(4)		(4)
Other		3		1		—		—		4
Three Months Ended March 31, 2017	$	206	$	122	$	18	$	—	$	346

_________________________________

(1) For American Home Shield, includes growth from acquisitions of approximately $7 million as a result of the acquisitions of OneGuard and Landmark.

At Terminix, the increase in production labor was driven by investments in field operations focused on improving safety, customer service and retention. The increase in damage claims at Terminix was driven by increased provisions.

The increase in contract claims cost at American Home Shield was driven by normal inflationary pressure on the underlying costs of repairs.

We realized a reduction in cost of sales of $3 million in the Franchise Services Group as a result of the branch conversions at Merry Maids, which were completed in 2016.

The decrease in expense related to our automobile, general liability and workers’ compensation insurance program was driven by the impact of increased reserves of $4 million recorded in the three months ended March 31, 2016 driven by unfavorable claims trends. There were no increased reserves in our automobile, general liability and workers’ compensation insurance program for the three months ended March 31, 2017.

21

Selling and Administrative Expenses

We reported selling and administrative expenses of $186 million and $173 million for the three months ended March 31, 2017 and 2016, respectively, which comprised general and administrative expenses of $78 million and $75 million, respectively, and selling and marketing expenses of $109 million and $98 million, respectively. The following table provides a summary of changes in selling and administrative expenses for each of our reportable segments and Corporate:

			American		Franchise
			Home		Services
(In millions)	Terminix		Shield		Group		Corporate		Total
Three Months Ended March 31, 2016	$	82	$	72	$	12	$	7	$	173
Sales and marketing costs		7		—		—		—		7
OneGuard and Landmark selling and administrative expenses		—		6		—		—		6
Technology costs		—		—		—		2		2
Other		(1)		—		(1)		1		(1)
Three Months Ended March 31, 2017	$	88	$	78	$	11	$	10	$	186

At Terminix, the increase in sales and marketing costs was driven by investments to grow and train our sales force, higher commissions attributable to the growth in core termite, wildlife exclusion and attic insulation sales and incremental marketing investments.

We incurred incremental selling and administrative expenses at American Home Shield as a result of the OneGuard and Landmark acquisitions.

The increase in technology costs was primarily due to investments to improve our customers’ experiences through technology.

Amortization Expense

Amortization expense was $7 million and $8 million in the three months ended March 31, 2017 and 2016, respectively.

Fumigation Related Matters

We recorded charges of $1 million and $3 million in the three months ended March 31, 2017 and 2016, respectively, for fumigation related matters. See Note 3 to the condensed consolidated financial statements for more details.

Impairment of Software and Other Related Costs

We recorded impairment charges of $2 million in the three months ended March 31, 2017 relating to our decision to replace certain software. There were no impairments of software and other related costs recorded in the three months ended March 31, 2016.

Restructuring Charges

We incurred restructuring charges of $2 million and $1 million in the three months ended March 31, 2017 and 2016, respectively.  For the three months ended March 31, 2017, these charges included $1 million of costs related to the relocation of our headquarters and $1 million of severance. For the three months ended March 31, 2016, these charges included $1 million of severance and other costs related to the initiative to enhance capabilities and reduce costs in our Company’s headquarters functions that provide Company-wide administrative services for our operations.

Gain on Sale of Merry Maids Branches

We recorded a gain of$1 million in the three months ended March 31, 2016, associated with the branch conversions at Merry Maids. As of October 10, 2016, the branch conversion process was complete.

Interest Expense

Interest expense was $37 million and $38 million for the three months ended March 31, 2017 and 2016, respectively.

Interest and Net Investment Income

Interest and net investment income was $1 million for the three months ended March 31, 2016 and comprised net investment gains and interest and dividend income realized on the American Home Shield investment portfolio and interest income on other cash balances. There was no interest and net investment income for the three months ended March 31, 2017.

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Income from Continuing Operations before Income Taxes

Income from continuing operations before income taxes for the three months ended March 31, 2017 was comparable to the three months ended March 31, 2016 and primarily reflects the net effect of year-over-year changes in the following items:

	Three Months Ended
	March 31,
(In millions)	2017 vs. 2016
Reportable segments and Corporate(1)	$	7
Depreciation expense(2)		(5)
Fumigation related matters(3)		2
Impairment of software and other related costs(4)		(2)
Other(5)		(2)
Increase (decrease) in income from continuing operations before income taxes	$	—

___________________________________

(1) Represents the net change in Adjusted EBITDA as described in “—Segment Review.”

(2) Represents the net change in depreciation expense, driven by investments in vehicles and technology.

(3) Represents the $1 million and $3 million charge for fumigation related matters recorded in the three months ended March 31, 2017 and 2016, respectively.See Note 3 to the condensed consolidated financial statements for more details.

(4) Represents impairment charges of $2 million recorded in the three months ended March 31, 2017 as described in “—Impairment of Software and Other Related Costs.”

(5) Primarily represents the net change in amortization expense, restructuring charges, gain on sale of Merry Maids branches, interest expense and stock-based compensation.

Provision for Income Taxes

The effective tax rate on incomefrom continuing operations was 38.3 percent and 37.1 percent for the three months ended March 31, 2017and 2016, respectively.  The effective tax rate on continuing operations for the three months ended March 31, 2016 was primarily affected by excess tax benefits for share based awards recorded discretely during the quarter.

Net Income

Net income for the three months ended March 31, 2017 was comparable to the three months ended March 31, 2016.

23

Segment Review

The following business segment reviews should be read in conjunction with the required footnote disclosures presented in the notes to the condensed consolidated financial statements included in this report.

Revenue and Adjusted EBITDA by reportable segment and for Corporate are as follows:

	Three Months Ended
	March 31,				Increase
(In millions)	2017		2016		(Decrease)
Revenue:
Terminix	$	365	$	364	—	%
American Home Shield		227		194	17
Franchise Services Group		50		49	2
Corporate		1		1	*
Total Revenue:	$	643	$	608	6	%
Adjusted EBITDA:(1)
Terminix	$	81	$	94	(14)	%
American Home Shield		31		19	63
Franchise Services Group		21		18	17
Reportable Segment Adjusted EBITDA		133		131	2
Corporate(2)		—		(4)	*
Total Adjusted EBITDA	$	134	$	127	6	%

___________________________________

*     not meaningful

(1) See Note 12 for our definition of Adjusted EBITDA and a reconciliation of Net Income to Reportable Segment Adjusted EBITDA.

(2) Represents unallocated corporate expenses.

Terminix Segment

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

The Terminix segment, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported comparable revenue and a 14 percent decrease in Adjusted EBITDA for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

Revenue

Revenue by service line is as follows:

	Three Months Ended
	March 31,
(In millions)	2017		2016		Growth				Acquired				Organic
Pest Control	$	202	$	206	$	(4)	(2)	%	$	3	1	%	$	(7)	(3)	%
Termite and Other Services		149		143		6	4	%		1	1	%		5	3	%
Other		14		15		(1)	(7)	%		—	—	%		(1)	(7)	%
Total revenue	$	365	$	364	$	1	—	%	$	4	1	%	$	(3)	(1)	%

Pest control revenue decreased two percent. Organic pest control revenue decreased three percent, which was significantly impacted by a $6 million organic revenue decline associated with Alterra Pest Control, LLC (“Alterra”). Excluding Alterra, organic pest control revenue decreased $1 million, or less than one percent.

Termite revenue, including the wildlife exclusion, crawl space encapsulation and attic insulation products, which are managed as a component of our termite line of business, increased four percent. In the three months ended March 31, 2017, termite renewal revenue comprised 53 percent of total termite revenue, while the remainder consisted of termite new unit revenue. Organic termite revenue increased three percent, reflecting an increase in core termite, wildlife exclusion and attic insulation sales, offset, in part, by an unfavorable change in the timing of termite renewal services. Termite activity is unpredictable in its nature. Factors that can impact termite activity include conducive weather conditions and consumer awareness of termite swarms.

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Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:

(In millions)
Three Months Ended March 31, 2016	$	94
Impact of change in revenue		2
Production labor		(5)
Damage claims		(4)
Fuel prices		1
Sales and marketing		(7)
Three Months Ended March 31, 2017	$	81

The increase in production labor was driven by investments in field operations focused on improving safety, customer service and retention. The increase in damage claims was driven by increasedprovisions. The increase in sales and marketing costs was driven by investments to grow and train our sales force, higher commissions attributable to the growth in core termite, wildlife exclusion and attic insulation sales and incremental marketing investments.

American Home Shield Segment

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

The American Home Shield segment, which provides home warranties for household systems and appliances, reported a 17 percent increase in revenue and a 63 percent increase in Adjusted EBITDA for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

The growth in renewable customer counts and customer retention are presented below.

	As of March 31,
	2017(1)		2016
Growth in Home Warranties	15	%	7	%
Customer Retention Rate	76	%	75	%

(1) As of March 31, 2017, excluding the OneGuard and Landmark accounts acquired on June 27, 2016 and November 30, 2016, respectively,  the growth in home warranties was seven percent, and, excluding all OneGuard and Landmark accounts, the customer retention rate for our American Home Shield segment was 75 percent. 

Revenue

The revenue results reflect an increase in new unit sales, improved price realization and the impact of the OneGuard and Landmark acquisitions (an approximate $17 million increase).

Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:

(In millions)
Three Months Ended March 31, 2016	$	19
Impact of change in revenue		19
Contract claims		(2)
OneGuard and Landmark selling and administrative expenses		(6)
Other		1
Three Months Ended March 31, 2017	$	31

The increase in contract claims cost was driven by normal inflationary pressure on the underlying costs of repairs. Additionally, we incurred incremental selling and administrative expenses as a result of the OneGuard and Landmark acquisitions. Extreme temperatures in 2017 could lead to an increase in service requests related to household systems, resulting in higher claim frequency and costs.

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Franchise Services Group Segment

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

The Franchise Services Group segment, which consists of the ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (cabinet and wood furniture repair) and AmeriSpec (home inspection) businesses, reported a two percent increase in revenue and a 17 percent increase in Adjusted EBITDA for the three months ended March 31, 2017 compared to the three months ended March 31, 2016.

Revenue

Revenue by service line is as follows:

	Three Months Ended				% of
	March 31,				Revenue
(In millions)	2017		2016		2017
Royalty Fees	$	31	$	28	64	%
Company-Owned Merry Maids Branches		—		4	—
Janitorial National Accounts		11		10	22
Sales of Products		3		3	6
Other		4		3	8
Total revenue	$	50	$	49	100	%

The increase in royalty fees was primarily driven by higher disaster restoration services. The $4 million decline in revenue from company-owned Merry Maids branches was attributable to the branch conversions, which were completed in 2016. The increase in revenue from janitorial national accounts was driven by increased sales activity.

Adjusted EBITDA

The following table provides a summary of changes in the segment’s Adjusted EBITDA:

(In millions)
Three Months Ended March 31, 2016	$	18
Impact of change in revenue		3
Three Months Ended March 31, 2017	$	21

Excluding the impact of the branch conversions at Merry Maids, the increase in revenue resulted in a $3 million increase in Adjusted EBITDA. The reduction in revenue from company-owned Merry Maids branches had a negligible impact on Adjusted EBITDA.

Corporate

Three Months Ended March 31, 2017 Compared to Three Months Ended March 31, 2016

Corporate reported a $4 million increase in Adjusted EBITDA for the three months ended March 31, 2017 compared to the three months ended March 31, 2016. The three month ended March 31, 2016 included increased reserves in our automobile, general liability and workers’ compensation insurance program of $4 million driven by unfavorable claims trends, which were impacted by a charge of $3 million in connection with civil claims related to an incident at a family’s residence in Palm Beach County, Florida (an amount equal to our insurance deductibles under our general liability insurance program). There were no increased reserves in our automobile, general liability and workers’ compensation insurance program for the three months ended March 31, 2017.

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Liquidity and Capital Resources

Liquidity

We are highly leveraged, and a substantial portion of our liquidity needs are due to service requirements on our significant indebtedness. The agreements governing the $1,650 million term loan facility maturing November 8, 2023 and the $300 million revolving credit facility maturing November 8, 2021 (together, the “Credit Facilities”)contain covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of March 31, 2017, we were in compliance with the covenants under the agreements that were in effect on such date.

Our ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the Credit Facilities. We expect that cash provided from operations and available capacity under the Revolving Credit Facility will provide sufficient funds to operate our business, make expected capital expenditures and meet our liquidity requirements for the following 12 months, including payment of interest and principal on our debt. Cash and short- and long-term marketable securities totaled $381 million as of March 31, 2017, compared with $335 million as of December 31, 2016. As of March 31, 2017, there were $35 million of letters of credit outstanding and $265 million of available borrowing capacity under the Revolving Credit Facility. The letters of credit are posted to satisfy collateral requirements under our automobile, general liability and workers’ compensation insurance program and fuel swap contracts.

In 2016, our board of directors authorized a three-year share repurchase program, under which we may repurchase up to $300 million of outstanding shares of our common stock. As of March 31, 2017, we have repurchased $111 million of outstanding shares under this program, which is included in treasury stock on the condensed consolidated statements of financial position.

In 2016, we settled all civil claims of the affected families related to the U.S. Virgin Islands and Florida fumigation matters, and payments in connection with those claims totaled $90 million ($56 million, net of tax). We have also sought to resolve by plea agreement the federal criminal consequences related to the U.S. Virgin Islands matter pursuant to which we expect to pay approximately $10 million. See Note 3 to the condensed consolidated financial statements for more details

We have submitted to the IRS a voluntary correction proposal to remedy an administrative error related to our Profit Sharing and Retirement Plan. Our current estimate of the cost of the correction ranges from $25 million to approximately $93 million. See Note 3 to the condensed consolidated financial statements for more details.

Cash and short- and long-term marketable securities include balances associated with regulatory requirements at American Home Shield. See “—Limitations on Distributions and Dividends by Subsidiaries.” American Home Shield’s investment portfolio has been invested in a combination of high-quality debt securities and equity securities. We closely monitor the performance of the investments. From time to time, we review the statutory reserve requirements to which our regulated entities are subject and any changes to such requirements. These reviews may result in identifying current reserve levels above or below minimum statutory reserve requirements, in which case we may adjust our reserves. The reviews may also identify opportunities to satisfy certain regulatory reserve requirements through alternate financial vehicles.

As of March 31, 2017, we had posted $31 million in letters of credit, which were issued under the Revolving Credit Facility, and $89 million of cash, which is included in Restricted cash on the condensed consolidated statements of financial position, as collateral under our automobile, general liability and workers’ compensation insurance program. This amount is not related to the payments made in connection with the U.S. Virgin Islands matter. We may from time to time change the amount of cash or marketable securities used to satisfy collateral requirements under our automobile, general liability and workers’ compensation insurance program.  The amount of cash or marketable securities utilized to satisfy these collateral requirements will depend on the relative cost of the issuance of letters of credit under the Revolving Credit Facility and our cash position. Any change in cash or marketable securities used as collateral would result is a corresponding change in our available borrowing capacity under the Revolving Credit Facility.

Additionally, under the terms of our fuel swap contracts, we are required to post collateral in the event the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the agreement with the counterparty. As of March 31, 2017, the estimated fair value of our fuel swap contracts was a net asset of $1 million, and we had posted $3 million in letters of credit as collateral under our fuel hedging program, which were also issued under the Revolving Credit Facility. The continued use of letters of credit for this purpose in the future could limit our ability to post letters of credit for other purposes and could limit our borrowing availability under the Revolving Credit Facility. However, we do not expect the fair value of the outstanding fuel swap contracts to materially impact our financial position or liquidity.

We may from time to time repurchase or otherwise retire or extend our debt and/or take other steps to reduce our debt or otherwise improve our financial position, results of operations or cash flows. These actions may include open market debt repurchases, negotiated repurchases, other retirements of outstanding debt and/or opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on market conditions, trading levels of our debt, our cash position, compliance with debt covenants and other considerations.

27

Fleet and Equipment Financing Arrangements

We have entered into the Fleet Agreement which, among other things, allows us to obtain fleet vehicles through a leasing program. We expect to fulfill substantially all of our vehicle fleet needs through the leasing program under the Fleet Agreement. For the three months ended March 31, 2017, we acquired $11 million of vehicles through the leasing program under the Fleet Agreement. 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 plus other contractual adjustments and a borrowing margin totaling2.45 percent. We have no minimum commitment for the number of vehicles to be obtained under the Fleet Agreement.

Additionally, a portion of our property and equipment is leased through programs outside the scope of the Fleet Agreement. For the three months ended March 31, 2017, we acquired $1 million of property and equipment through these incremental leasing programs, which are treated as capital leases for accounting purposes. We anticipate new lease financings, including the Fleet Agreement and incremental leasing programs, for the full year 2017 will range from approximately $30 million to $40 million.

Limitations on Distributions and Dividends by Subsidiaries

We are a holding company, and as such have no independent operations or material assets other than ownership of equity interests in our subsidiaries. We depend on our subsidiaries to distribute funds to us so that we may pay obligations and expenses, including satisfying obligations with respect to indebtedness. The ability of our subsidiaries to make distributions and dividends to us depends on their operating results, cash requirements and financial condition and general business conditions, as well as restrictions under the laws of our subsidiaries’ jurisdictions.

The agreements governing the Credit Facilities may restrict the ability of our subsidiaries to pay dividends, make loans or otherwise transfer assets to us. Further, our subsidiaries are permitted under the terms of the Credit Facilities and other indebtedness to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to us.

Furthermore, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The payments of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can pay to us. As of March 31, 2017, the total net assets subject to these third-party restrictions was $174 million. We expect that such limitations will be in effect for the foreseeable future. None of our subsidiaries are obligated to make funds available to us through the payment of dividends.

We consider undistributed earnings of our foreign subsidiaries as of March 31, 2017 to be indefinitely reinvested and, accordingly, no U.S. income taxes have been provided thereon.  The amount of cash associated with indefinitely reinvested foreign earnings was approximately $23 million as of March 31, 2017 and December 31, 2016. We have not repatriated, nor do we 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.

Cash Flows

Cash flows from operating, investing and financing activities, as reflected in the accompanying condensed consolidated statements of cash flows, are summarized in the following table.

	Three Months Ended
	March 31,
(In millions)	2017		2016
Net cash provided from (used for):
Operating activities	$	126	$	106
Investing activities		(31)		(15)
Financing activities		(60)		(17)
Discontinued operations		1		—
Effect of exchange rate changes on cash		—		1
Cash increase during the period	$	37	$	74

Operating Activities

Net cash provided from operating activities from continuing operations increased $20 million to $126 million for the three months ended March 31, 2017 compared to $106 million for the three months ended March 31, 2016.

Net cash provided from operating activities for the three months ended March 31, 2017comprised $75 million in earnings adjusted for non-cash charges and a $53 million decrease in cash required for working capital, offset, in part, by $1 million in payments related to fumigation matters. For the three months ended March 31, 2017, working capital requirements were favorably

28

impacted by seasonal activity, the timing of income tax payments and the timing of interest payments on the 2024 notes, offset, in part by incentive compensation payments related to 2016 performance.

Net cash provided from operating activities for the three months ended March 31, 2016 comprised $68 million in earnings adjusted for non-cash charges and a $38 million decrease in cash required for working capital. For the three months ended March 31, 2016, working capital requirements were favorably impacted by seasonal activity and timing of income tax payments, offset, in part by incentive compensation payments related to 2015 performance.

Investing Activities

Net cash used for investing activities from continuing operations was $31 million for the three months ended March 31, 2017, compared to $15 million for the three months ended March 31, 2016.

Capital expenditures increased to $18 million for the three months ended March 31, 2017 from $17 million in the three months ended March 31, 2016 and included recurring capital needs and information technology projects. We anticipate capital expenditures for the full year 2017 for recurring capital needs and the continuation of investments in information systems and productivity enhancing technology will range from approximately $50 million to $60 million.  Additionally, we expect capital needs for the full year 2017 associated with the relocation of our headquarters to be approximately $35 million for which we expect to be reimbursed through a tenant improvement allowance and grants totaling approximately $25 million for a net cash outflow of approximately $10 million. We expect to fulfill our ongoing vehicle fleet needs through vehicle capital leases. We have no additional material capital commitments at this time.

Proceeds from the sale of equipment and other assets was $3 million for the three months ended March 31, 2016, primarily driven by the branch conversions at Merry Maids.   In the three months ended March 31, 2016, the branches were sold for a total purchase price of $4 million for which we received cash of $3 million and provided financing of $1 million. As of October 10, 2016, the branch conversion process was complete.

Cash payments for acquisitions for the three months  ended March 31, 2017 totaled $11 million, compared with $2 million for the three months ended March 31, 2016.Consideration paid for the purchase of a master distributor and for a tuck-in acquisition consisted of cash payments and debt payable to sellers. We expect to continue our tuck-in acquisition program at Terminix and to periodically evaluate other strategic acquisitions.

Cash flows used for purchases, sales and maturities of securities, net, for the three months  ended March 31, 2017 totaled $3 million and were driven by the purchase of marketable securities at American Home Shield.

Cash flows provided by notes receivable, net, for the three months ended March 31, 2017 and 2016 totaled $1 million and were a result of a net reduction in financing provided by SMAC to our franchisees and retail customers of our operating units.

Financing Activities

Net cash used for financing activities from continuing operations was $60 million for the three months ended March 31, 2017 compared to $17 million for the three months ended March 31, 2016.

During the three months ended March 31, 2017, we made scheduled principal payments on long-term debt of $14 million, repurchased $51 million of common stock and received $5 million from the issuance of common stock upon the exercise of stock options.

During the three months ended March 31, 2016, we made scheduled principal payments on long-term debt of $19 million andreceived $2 million from the issuance of common stock upon the exercise of stock options.

Contractual Obligations

Our 2016 Form 10-K includes disclosures of our contractual obligations and commitments as of December 31, 2016. We continue to make the contractually required payments, and, therefore, the 2016 obligations and commitments as listed in our 2016 Form 10-K have been reduced by the required payments.

Off-Balance Sheet Arrangements

As of  March 31, 2017, we did not have any significant off-balance sheet arrangements.

We do not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the purpose of facilitating off- balance sheet arrangements or other contractually narrow or limited purposes. Accordingly, we are not materially exposed to any financing, liquidity, market or credit risk that could arise if we had engaged in such relationships.

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Regulatory Matters

On July 21, 2016, TMX USVI and TMX LP, each an indirect, wholly-owned subsidiary of the Company, entered into the Superseding Plea Agreement in connection with the investigation initiated by the DOJ into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. The Superseding Plea Agreement was intended to resolve four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide. Those charges were set forth in an Information, dated March 29, 2016, in the matter styled United States of America v. The Terminix International Company Limited Partnership andTerminix International USVI, LLC.  At a hearing held on August 25, 2016, the District Court rejected the Superseding Plea Agreement.  On August 31, 2016, the DOJ requested that the charges be dismissed, reserving its right to re-file the charges, in light of ongoing discussions to resolve the matter. The District Court granted that request, and the March 29, 2016 Information was dismissed. 

On January 20, 2017, TMX USVI and TMX LP entered into the New Plea Agreement with the DOJ, which has been filed with the District Court, and replaces the Superseding Plea Agreement. At a hearing on March 23, 2017, TMX USVI and TMX LP pled guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement.  Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. A sentencing hearing before the District Court is scheduled for July 27, 2017. It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.  

The Company has previously recorded within Fumigation related matters in the condensed consolidated statement of operations and comprehensive income total charges of $10 million in connection with the aforementioned criminal matter. The amount and extent of any further potential penalties, fines, sanctions, costs and damages that the federal or other governmental authorities may yet impose, investigation or other costs and reputational harm, as well as the impact of any additional civil, criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to the U.S. Virgin Islands matter, which could be material, is not currently known or reasonably estimable, and any such further penalties, fines, sanctions, costs or damages would not be covered under the Company’s general liability insurance policies. On December 16, 2016, the U.S. Virgin Islands Department of Justice filed a civil complaint in the Superior Court of the Virgin Islands related to the aforementioned fumigation incident in a matter styled Government of the United States Virgin Islands v. The ServiceMaster Company, LLC, The Terminix International Company Limited Partnership, and Terminix International USVI, LLC. The Company has not recorded any charge for this new civil lawsuit.

Information Regarding Forward-Looking Statements

This report 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 report 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; growth strategies or expectations; customer retention; the continuation of acquisitions, including the integration of any acquired company and risks relating to any such acquired company; fuel prices; attraction and retention of key personnel; the impact of fuel swaps; 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 warranty claims; estimates of future payments under operating and capital leases; estimates on current and deferred tax provisions; the outcome (by judgment or settlement) and costs of legal or administrative proceedings, including, without limitation, collective, representative or class action litigation; 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 report. 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 report,

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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 “Risk Factors”  in our Annual Report on Form 10-K for the year ended December 31, 2016 and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above, could cause actual results and outcomes to differ 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:

· resolution of fumigation related matters, including approval of the terms of the New Plea Agreement by the District Court related to the criminal aspects of the U.S. Virgin Islands fumigation incident;

· lawsuits, enforcement actions and other claims by third parties or governmental authorities;

· the 401(k) Plan corrective contribution and other employee benefit plan compliance issues;

· compliance with, or violation of, environmental, health and safety laws and regulations;

· weakening general economic conditions, especially as they may affect home sales, unemployment and consumer confidence or spending levels;

· our ability to generate the significant amount of cash needed to fund our operations and service our debt obligations;

· our ability to successfully implement our business strategies;

· adverse credit and financial markets impeding access, increasing financing costs or causing our customers to incur liquidity issues leading to some of our services not being purchased or cancelled;

· cyber security breaches, disruptions or failures in our information technology systems and our failure to protect the security of personal information about our customers;

· our ability to attract and retain key personnel, including our ability to attract, retain and maintain positive relations with trained workers and third-party contractors;

· increase in prices for fuel and raw materials, and in minimum wage levels;

· changes in the source and intensity of competition in our market segments;

· adverse weather conditions;

· our franchisees, subcontractors, third-party distributors and vendors taking actions that harm our business;

· changes in our services or products;

· our ability to protect our intellectual property and other material proprietary rights;

· negative reputational and financial impacts resulting from future acquisitions or strategic transactions;

· laws and governmental regulations increasing our legal and regulatory expenses;

· increases in interest rates increasing the cost of servicing our substantial indebtedness;

· increased borrowing costs due to lowering or withdrawal of the ratings, outlook or watch assigned to our debt securities;

· restrictions contained in our debt agreements;

· the effects of our substantial indebtedness and the limitations contained in the agreements governing such indebtedness; and

· other factors described in this report and from time to time in documents that we file with the SEC.

You should read this report completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this report are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this report, 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, and changes in future operating results over time or otherwise.

Comparisons of results for current and any 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. 

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The economy and its impact on discretionary consumer spending, labor wages, fuel prices and other material costs, home resales, unemployment rates, insurance costs and medical costs could have a material adverse impact on future results of operations.

We do not hold or issue derivative financial instruments for trading or speculative purposes. We have entered into specific financial arrangements, primarily fuel swap agreements and interest rate swap agreements, in the normal course of business to manage certain market risks, with a policy of matching positions and limiting the terms of contracts to relatively short durations. The effect of derivative financial instrument transactions could have a material impact on our financial statements.

Interest Rate Risk

We are exposed to the impact of interest rate changes and manage this exposure through the use of variable-rate and fixed-rate debt and by utilizing interest rate swaps. In our opinion, the market risk associated with debt obligations and other significant instruments as of March 31, 2017 has not materially changed from December 31, 2016 (see Item 7A of the 2016 Form 10-K).

Fuel Price Risk

We are exposed to market risk for changes in fuel prices through the consumption of fuel by our vehicle fleet in the delivery of services to our customers. We expect to use approximately 14 million gallons of fuel in 2017. As of March 31, 2017, a ten percent change in fuel prices would result in a change of approximately $3  million in our annual fuel cost before considering the impact of fuel swap contracts.

We use fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of March 31, 2017, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $34 million, maturing through 2018. The estimated fair value of these contracts as of March 31, 2017 was a net asset of $1 million. These fuel swap contracts provide a fixed price for approximately 83 percent and 41 percent of our estimated fuel usage for the remainder of 2017 and 2018, respectively.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our Chief Executive Officer, Robert J. Gillette, and Senior Vice President and Chief Financial Officer, Anthony D. DiLucente, have evaluated our disclosure controls and procedures (as defined in Rule 13a-15(e)and Rule 15d-15(e)under the Exchange Act) as of the end of the period covered by this Quarterly Report on Form 10-Q as required by Rule 13a-15(b)and Rule 15d-15(b)under the Exchange Act. Messrs. Gillette and DiLucente have concluded that both the design and operation of our disclosure controls and procedures were effective as of March 31, 2017.

Changes in internal control over financial reporting

No changes in our internal control over financial reporting, as defined in Rule 13a-15(f)or Rule 15d-15(f)under the Exchange Act, occurred during the three months ended March 31, 2017 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

On July 21, 2016, TMX USVI and TMX LP, each an indirect, wholly-owned subsidiary of the Company, entered into the Superseding Plea Agreement in connection with the investigation initiated by the DOJ into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. The Superseding Plea Agreement was intended to resolve four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide. Those charges were set forth in an Information, dated March 29, 2016, in the matter styledUnited States of America v. The Terminix International Company Limited Partnership andTerminix International USVI, LLC.  At a hearing held on August 25, 2016, the District Court rejected the Superseding Plea Agreement. On August 31, 2016, the DOJ requested that the charges be dismissed, reserving its right to re-file the charges, in light of ongoing discussions to resolve the matter. The District Court granted that request, and the March 29, 2016 Information was dismissed. 

On January 20, 2017, TMX USVI and TMX LP entered into the New Plea Agreement with the DOJ, which has been filed with the District Court, and replaces the Superseding Plea Agreement. At a hearing on March 23, 2017, TMX USVI and TMX LP pled guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement.  Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. A sentencing hearing before the District Court is scheduled for July 27, 2017. It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.  

The Company has previously recorded within Fumigation related matters in the condensed consolidated statement of operations and comprehensive income total charges of $10 million in connection with the aforementioned criminal matter.  The amount and extent of any further potential penalties, fines, sanctions, costs and damages that the federal or other governmental authorities may yet impose, investigation or other costs and reputational harm, as well as the impact of any additional civil, criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to the U.S. Virgin Islands matter, which could be material, is not currently known or reasonably estimable, and any such further penalties, fines, sanctions, costs or damages would not be covered under the Company’s general  liability insurance policies.  On December 16, 2016, the U.S. Virgin Islands Department of Justice filed a civil complaint in the Superior Court of the Virgin Islands related to the aforementioned fumigation incident in a matter styled Government of the United States Virgin Islands v. The ServiceMaster Company, LLC, The Terminix International Company Limited Partnership, and Terminix International USVI, LLC.  The Company has not recorded any charge for this new civil lawsuit.

In addition to the matter discussed above, in the ordinary course of conducting business activities, we and our subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. We have entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of our settlements are not finally approved, we could have additional or different exposure, which could be material. Subject to the paragraphs above, we do not expect any of these proceedings to have a material effect on our reputation, business, financial position, results of operations or cash flows; however, we can give no assurance that the results of any such proceedings will not materially affect our reputation, business, financial position, results of operations and cash flows. See Note 3 to the condensed consolidated financial statement for more details.

ITEM 1A. RISK FACTORS

We discuss in our 2016 Form 10-K and our other filings with the SEC various risks that may materially affect our business.  There have been no material changes to the risk factors disclosed in the 2016 Form 10-K. The materialization of any risks and uncertainties identified in Forward-Looking Statements contained in this report, together with those previously disclosed in the 2016 Form 10-K, and our other filings with the SEC or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations —  Information Regarding Forward-Looking Statements” above.

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ITEM 2.  UNREGISTERED SALES OF REGISTERED SECURITIES AND USE OF PROCEEDS

Share Repurchase Program

In 2016, our board of directors authorized a three-year share repurchase program, under which we may repurchase up to $300 million of outstanding shares of our common stock. We expect to fund the share repurchases from net cash provided from operating activities. The share repurchase program is part of our capital allocation strategy that focuses on sustainable growth and maximizing shareholder value.

Issuer Purchases of Equity Securities

				Total number of	Maximum dollar value
				shares purchased as	of shares that may yet
				part of publicly	be purchased under
	Total number of	Average price		announced plans or	the plans or programs
Period	shares purchased(1)	paid per share		programs	(in millions)
Jan. 1, 2017 through Jan. 31, 2017	457,417	$	37.36	457,417	$	223
Feb. 1, 2017 through Feb. 28, 2017	599,380		37.61	599,380		200
Mar. 1, 2017 through Mar. 31, 2017	281,629		40.05	281,629		189
Total	1,338,426	$	38.04	1,338,426	$	189

___________________________________

(1) All shares were acquired as part of our share repurchase program.

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ITEM 6. EXHIBITS

Exhibit Number	Description
10.1#	Separation Agreement and General Release entered into with Alan J. M. Haughie, dated March 6, 2017.
31.1#	Certification of Chief Executive Officer pursuant to Rule 13a — 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2#	Certification of Chief Financial Officer pursuant to Rule 13a — 14, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1#	Certification of Chief Executive Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2#	Certification of Chief Financial Officer pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS#	XBRL Instance Document
101.SCH#	XBRL Taxonomy Extension Schema
101.CAL#	XBRL Taxonomy Extension Calculation Linkbase
101.DEF#	XBRL Taxonomy Extension Definition Linkbase
101.LAB#	XBRL Taxonomy Extension Label Linkbase
101.PRE#	XBRL Extension Presentation Linkbase

___________________________________

# Filed herewith. 

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SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

Date: April 28, 2017

SERVICEMASTER GLOBAL HOLDINGS, INC.
(Registrant)
By:	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	Senior Vice President and Chief Financial Officer (Principal Financial Officer)

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EX-10.1

Exhibit 10.1

SEPARATION AGREEMENT AND GENERAL RELEASE

This Separation Agreement and General Release (“Agreement”), dated March 6, 2017, is entered into by you, Alan J. M. Haughie, on behalf of yourself, your heirs, executors, administrators, successors, assigns (collectively, “you”) and The ServiceMaster Company, LLC, on behalf of itself, subsidiaries, parent companies, affiliated entities, predecessors, successors, assigns, and their respective officers, directors, employees, insurers and agents (collectively, “Company” or “ServiceMaster”).  In consideration of the mutual covenants in this Agreement, the parties hereby agree as follows:

1.Separation from Employment.  You have resigned your position as chief financial officer of ServiceMaster, effective on the close of business February 24, 2017.  You resign your employment with the Company, effective March 15, 2017 (“Separation Date”), and will no longer hold any other officer or director position with ServiceMaster or any of its subsidiaries or affiliated entities.  You will continue to be paid your current base salary and benefits through your Separation Date in accordance with ServiceMaster’s normal payroll practices.

2.Severance Benefits.  In exchange for your promises as set forth in this Agreement and subject to your compliance with the terms and conditions hereof, ServiceMaster agrees to provide you with the following severance pay:

a.Monthly Salary.  You will receive payments totaling $575,000, which equals 12 times your current monthly base salary (the “Monthly Salary”);

b.ABP Bonus.  You will be receive a bonus payout (the “ABP Bonus”) under The ServiceMaster Annual Bonus Plan (“ABP”) for the 2016 Plan year in the amount of $277,725, which will be paid on March 15, 2017, subject to the terms and conditions of the ABP;

c.Target Bonus.  You will receive payments totaling $402,500 (the “Target Bonus”), which equals your target bonus under the ABP for the 2017 Plan year;

d.COBRA Premiums.  A one‑time lump sum payment equal to your COBRA premiums for 12 months based on your current benefit elections.  You will receive this payment on the first practicable payroll date after the Effective Date (as defined in Section 19 below).

The Monthly Salary and the Target Bonus will be aggregated as a single sum and paid in 12 equal monthly installments over a 12‑month period, starting on the first practicable payroll date after the Effective Date.  All compensation contemplated by this Agreement will be subject to applicable payroll taxes, income taxes and other authorized withholdings and deductions.

Except as otherwise expressly specified in this Agreement, the compensation set forth in paragraph 2 above represents all of the amounts you will be entitled to receive from the Company and you will not be paid any other compensation or benefits.  In addition to any other remedies which may be available at law, the Company may suspend, cancel and/or seek the refund of any compensation contemplated by this Agreement upon any violation by you of any representation, warranty or covenant set forth herein.

3.Outplacement.  You will be eligible for executive‑level outplacement services with a third party vendor for a period of 12 months, subject to the terms and conditions of ServiceMaster’s outplacement program.  If you wish to initiate outplacement services, you must do so no later than 60 days after your Separation Date by calling 1‑877‑700‑7220, ext. 888 or go to www.lhh.com/register.

4.Other Benefits.  Upon separation of employment, you may be eligible for payout or benefits under the following policies, compensation plans and benefit plans, even if you do not sign this Agreement:

a.Group Health Insurance.  If you participate in or are eligible to participate in the ServiceMaster Health and Welfare Benefit Plan, your eligibility to participate will end on your last day of employment.  You will become eligible for continuation of coverage under COBRA on the first day following your Separation Date.  You are solely responsible for the payment of any premiums for COBRA coverage.

b.Paid Time Off.  You will receive payment for any accrued, unused vacation time on or before the next pay date following your Separation Date.

c.PSRP.  If you participate in the ServiceMaster Profit Sharing and Retirement Plan (“PSRP”), your eligibility to participate will end on your Separation Date.  Any Company match credited to your account will follow the PSRP’s vesting schedules.  Any amounts to be paid, distributed, rolled over, or held under the PSRP will be paid, distributed, rolled over, or held in accordance with the terms of the PSRP and applicable rules and regulations.

d.Stock Plans.  If you participate in any ServiceMaster stock plans, including the ServiceMaster Employee Stock Purchase Plan, the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan, as amended and restated as of October 25, 2012 (“MSIP”), the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan, as amended and restated as of April 27, 2015, and/or the ServiceMaster Global Holdings, Inc. Employee Stock Purchase Plan, any account balances, stock options, restricted stock units or other equity owned by you as of your Separation Date are subject to the terms and conditions of the applicable stock plans.  This Agreement does not change the terms of those plans.

5.Release and Covenant Not to Sue.

a.Release:  In exchange for the consideration provided to you in this Agreement, you hereby release and forever discharge ServiceMaster, its past and present parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, successors and assigns, as well as their respective past and present directors, managers, officers, partners, agents, employees, insurers, attorneys, servants, and each of them, separately and collectively (“Releasees”), from any and all claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, whether or not mature or ripe (“Claims”), that you ever had and now have against any of the Releasees, including, but not limited to, Claims arising out of

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or in any way related to your employment with or separation from the Company.  This includes, but is not limited to, Claims based on statutes, torts, contracts and common law, Claims for discrimination, wrongful discharge, harassment, retaliation, and unpaid wages, Claims arising under Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act (“FLSA”), Family Medical Leave Act (“FMLA”), the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, and any other federal, state or local law or regulation governing the employment relationship.  You understand that this Agreement includes a release of all known and unknown claims through the Effective Date.  Notwithstanding the above, you are not waiving (i) any claim relating to directors' and officers' liability insurance coverage or any right of indemnification under the Company's organizational documents or otherwise, (ii) your rights under any retirement plan that is "qualified" under Section 401(a) of the Internal Revenue Code of 1986, as amended, or (iii) your rights to non-qualified deferred compensation due under any applicable Company plans in which you have participated.

b.Limitation of Release:  Nothing in this Agreement will prohibit you from filing a charge of discrimination with the National Labor Relations Board, the Equal Employment Opportunity Commission (“EEOC”) or an equivalent state civil rights agency, but you agree and understand that you are expressly waiving your right to monetary compensation or damages thereby if any such agency elects to pursue a claim on your behalf.  Further, nothing in this Agreement shall be construed to waive any right that is not subject to waiver by private agreement under federal, state or local employment or other laws, such as claims for workers’ compensation or unemployment benefits or any claims that may arise after the Effective Date.

c.Covenant Not To Sue.  To the extent that any Claims covered by the scope of the release herein are not subject to waiver by this Agreement under applicable law (including, without limitation, any Claims arising under or related to FMLA, FLSA, and any other local, state or federal statute governing employment and/or the payment of wages and benefits), you hereby covenant and agree not to sue or otherwise seek any remedy or other form of relief against any of the Releasees relating to such Claims.

6.Confidential Information.  You confirm and agree that (a) you have not used or disclosed any Confidential Information other than as necessary in the ordinary course of performing your duties as a ServiceMaster employee for the benefit of ServiceMaster, and (b) you will keep in confidence and trust all Confidential Information known to you, and will not use or disclose such Confidential Information without the prior written consent of ServiceMaster.  As used in this Agreement, “Confidential Information” means ServiceMaster’s trade secrets, proprietary information and/or other non‑public information relating to ServiceMaster’s business operations as well as private, proprietary and/or non¬public information obtained by ServiceMaster from customers, suppliers, contractors, employees or other third parties.  Nothing in this Agreement shall preclude you from reporting suspected unlawful activity to any government agency or providing truthful testimony or information in response to a valid subpoena, court order or request of any government agency.

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7.Non‑Compete/Non‑Solicitation/Non‑Interference.  While you remain employed by ServiceMaster and for a period of 12 months following your Separation Date, you shall not, directly or indirectly (whether as owner, stockholder, director, officer, employee, principal, agent, consultant, independent contractor, partner or otherwise), in North America or any other geographic area in which ServiceMaster or any subsidiary of ServiceMaster is then conducting business:

a.own, manage, operate, control, participate in, perform services for, or otherwise carry on, a business similar to or competitive with the business conducted by ServiceMaster, provided that the foregoing shall not prohibit your passive ownership of less than 1% of any class of voting securities of a public or privately‑held company which would otherwise be prohibited under this Section;

b.solicit the business of any customer of ServiceMaster in competition with ServiceMaster;

c.induce or attempt to induce any employee of ServiceMaster to terminate his or her employment with ServiceMaster and/or to become employed by any other business or other entity; or

d.interfere with ServiceMaster’s relations with any of its customers, franchisees, subcontractors, consultants, suppliers or business partners.

This Agreement is in addition to and does not supersede any other agreements prohibiting competition with ServiceMaster.  Failure to abide by this Agreement or other such agreements with the Company will give the Company (in addition to any other remedies which may be available to the Company) the right, exercised in its sole and absolute discretion, to (a) suspend or cancel the payments contemplated in this Agreement and (b) obtain a refund for any such payments already made (collectively, “Company Rights”).  You understand and recognize that, as a result of your executive role with ServiceMaster, you had contact with, and developed and furthered relationships with, customers and/or prospective customers, and had access to secret, proprietary and confidential information regarding ServiceMaster and its businesses, including Confidential Information (as defined above), and therefore understand and agree that (a) both the nature of this covenant and the scope of this covenant, as well as the covenants in Paragraphs 6 and 7 of this Agreement, are reasonable and necessary for the protection of ServiceMaster, including its secret, proprietary and confidential information, goodwill and customer relationships and (b) that ServiceMaster will be irreparably harmed by any breach of Paragraphs 6 and 7, entitling it to seek injunctive and other equitable relief.

8.Code of Ethics and Business Conduct.  You previously have been provided or have access through the Company intranet site to the Company Code of Ethics and Business Conduct (the “Code”).  The discovery of any failure by you to abide by the Code, whenever discovered, shall entitle the Company to exercise any and all of its Company Rights, including the suspension and recoupment of any payments paid or due under this Agreement and any other agreements between the parties.  Further, you acknowledge that you are not aware of any material breach of law or regulation by the Company or its subsidiaries that has not been reported to the Audit Committee, Chief Executive Officer or Chief Ethics Officer of the Company.

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9.Return of ServiceMaster Property.  You agree to return to ServiceMaster all ServiceMaster property, equipment and materials, including, but not limited to, any company vehicle, any laptop computer and peripherals; any cell phone or other portable computing device; any telephone calling cards; keys; ServiceMaster identification card; any credit or fuel cards; and all tangible written or graphic materials (and all copies) relating in any way to ServiceMaster or its business, including, without limitations, documents, manuals, customer lists and reports, as well as all data contained on computer files, “thumb” drives, “cloud” services, or other data storage device, or home or personal computers.

10.Assistance.  You agree that you will cooperate fully with ServiceMaster and its counsel with respect to any matter (including, but not limited to litigation, investigation or government proceeding) which relates to matters with which you were involved during your employment with ServiceMaster.  You further agree to notify ServiceMaster’s General Counsel or designee immediately upon your being asked to assist or supply information to any person or entity regarding any such matter, and also to give such notice in the event you do in fact assist or supply information to any such person or entity.

11.Non‑Disparagement.  You agree that you will refrain from publicly criticizing ServiceMaster’s products and services and from otherwise making any false and malicious statements, oral or written, concerning ServiceMaster, its directors, officers, executives, subsidiaries, parent entities, and/or employees.  You agree to direct any prospective employers seeking to verify employment data to The Work Number (1‑800‑996‑7566 or www.theworknumber.com), an automated service operated by Equifax.  Nothing in this provision, however, shall be construed to prevent you from providing truthful testimony or information in response to any valid subpoena, court order, or request of any government agency or private litigant.

12.Severability.  You and ServiceMaster agree that to the extent that any portion of this Agreement may be held to be invalid or legally unenforceable, the remaining portions will not be affected and will be given full force and effect.

13.Arbitration.  Any dispute or controversy between you and ServiceMaster, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be subject to the ServiceMaster We Listen Dispute Resolution Plan in effect on your Separation Date, which provides the mandatory and exclusive remedy and procedure for disputes between you and ServiceMaster.  Notwithstanding the foregoing, you agree that ServiceMaster may seek a temporary restraining order and/or preliminary injunction in any court of competent jurisdiction, without the posting of a bond, in order to preserve the status quo or to enforce the covenants in this Agreement.  You agree that venue shall be proper in Shelby County, Tennessee.

14.Notices.  All notices required hereunder will be in writing and will be deemed given upon receipt if delivered personally (receipt of which is confirmed) or by courier service promising overnight delivery (with delivery confirmed the next day) or three business days after deposit in the U.S. Mail, certified with return receipt requested.  All notices will be addressed as follows:

5

If to you:

Alan J. M. Haughie
xxxxxxxxxxxxxxxxx
xxxxxxxx, TN xxxxx If to ServiceMaster:

The ServiceMaster Company, LLC
860 Ridge Lake Boulevard
Memphis, TN 38120
Attn:VP & Associate General Counsel, Labor and Employment

Or to such other address as either party will have furnished to the other in writing.

15.Governing Law and Venue.  The interpretation, construction and performance of this Agreement shall be governed by and construed and enforced in accordance with the internal laws of the State of Tennessee without regard to the principle of conflicts of laws.  Subject to the arbitration provisions herein, any judicial proceeding arising from and relating to this Agreement shall be brought in courts having competent jurisdiction located in the State of Tennessee, which shall be the exclusive forum for resolving such disputes.  Both parties consent to the personal jurisdiction of such courts for the purposes of this Agreement.

16.Income Taxation.  You understand that the Company has not provided any advice regarding the tax liability resulting from this Agreement and you shall not rely upon any representations or policies of the Company related to taxation.  You are advised to seek the advice of your own personal tax advisor or counsel as to the taxability of any payments or other compensation contemplated by this Agreement.  ServiceMaster specifically disclaims that it has responsibility for the proper calculation or payment of any taxes which may be due other than for standard statutory withholding.

17.Entire Agreement.  You and ServiceMaster agree that this Agreement constitutes the complete understanding between you and ServiceMaster regarding the matters herein and that no other promises or agreements, express or implied, will be binding between you and ServiceMaster unless signed in writing by you and ServiceMaster.  This Agreement fully supersedes and replaces any and all prior agreements or understandings, if any, between you and ServiceMaster on any matter that is addressed in this Agreement with the exception of confidentiality/non‑solicitation/non‑compete issues except as stated herein.

18.Older Workers Benefit Protection Act Notice.  Pursuant to the Older Workers Benefit Protection Act, you are advised as follows:

a.This Agreement includes a waiver of claims of age discrimination under the federal Age Discrimination in Employment Act;

b.You have been advised and are again hereby advised to consult an attorney of your choosing before signing this Agreement;

c.You have (i) 21 days from your receipt of this Agreement; or (ii) seven days from your Separation Date, whichever period is longer, to consider the Agreement (the “Review Period”);

6

d.You have seven days after you sign this Agreement to revoke the Agreement.  If you want to revoke this Agreement, you must deliver a written revocation to The ServiceMaster Company, LLC, 860 Ridge Lake Blvd., Memphis, TN 38120 Attn:  Vice President and Associate General Counsel, Labor & Employment;

e.If your executed Agreement is not received by the Company within seven days from the end of the Review Period, the Agreement and any promises offered on behalf of Company contained therein will be null and void.

19.Effective Date:  This Agreement becomes effective on the 8th day after you sign, provided you do not revoke the Agreement as provided above (such date, the “Effective Date”).

HAVING ELECTED TO SIGN THIS SEPARATION AGREEMENT AND GENERAL RELEASE, TO FULFILL THE PROMISES AND TO RECEIVE THE SEVERANCE BENEFITS CONTEMPLATED HEREIN, YOU FREELY AND KNOWINGLY, AND AFTER DUE CONSIDERATION AND AFTER BEING ADVISED TO SEEK ASSISTANCE OF LEGAL COUNSEL, ENTER INTO THIS AGREEMENT.

/s/ Alan J. M. Haughie	/s/ Susan Hunsberger
Alan J. M. Haughie	Susan Hunsberger
	SeniorVicePresident,HumanResources
	TheServiceMasterCompany,LLC
Date:  March 6, 2017	Date:  March 6, 2017

7

EX-31.1

Exhibit 31.1

CERTIFICATIONS

I, Robert J. Gillette, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ServiceMaster Global Holdings,Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report 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: April 28, 2017
	/s/ Robert J. Gillette
	Robert J. Gillette
	Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATIONS

I, Anthony D. DiLucente, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of ServiceMaster Global Holdings,Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report 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: April 28, 2017
	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	Senior Vice President and Chief Financial Officer

EX-32.1

Exhibit 32.1

Certification of Chief Executive Officer

Pursuant to Section 1350 of Chapter 63 of Title 18 of The United States Code

I, Robert J. Gillette, the Chief Executive Officer of ServiceMaster Global Holdings,Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceMaster Global Holdings,Inc.

cto
	/s/ Robert J. Gillette
	Robert J. Gillette
	April 28, 2017

EX-32.2

Exhibit 32.2

Certification of Chief Financial Officer

Pursuant to Section 1350 of Chapter 63 of Title 18 of The United States Code

I, Anthony D. DiLucente, the Senior Vice President and Chief Financial Officer of ServiceMaster Global Holdings,Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2017, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceMaster Global Holdings,Inc.

z
	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	April 28, 2017

XML

Document and Entity Information - shares	3 Months Ended
	Mar. 31, 2017	Apr. 21, 2017
Document and Entity Information [Abstract]
Entity Registrant Name	SERVICEMASTER GLOBAL HOLDINGS INC
Entity Central Index Key	0001428875
Document Type	10-Q
Document Period End Date	Mar. 31, 2017
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		134,030,277
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q1

XML

Condensed Consolidated Statements of Operations and Comprehensive Income - USD ($) shares in Millions, $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Condensed Consolidated Statements of Operations and Comprehensive Income [Abstract]
Revenue	$ 643	$ 608
Cost of services rendered and products sold	346	324
Selling and administrative expenses	186	173
Amortization expense	7	8
Fumigation related matters	1	3
Impairment of software and other related costs	2
Restructuring charges	2	1
Gain on sale of Merry Maids branches		(1)
Interest expense	37	38
Interest and net investment income		(1)
Income from Continuing Operations before Income Taxes	62	62
Provision for income taxes	24	23
Income from Continuing Operations	38	39
Income from discontinued operations, net of income taxes	1
Net Income	39	39
Total Comprehensive Income	$ 40	$ 40
Weighted average common shares outstanding - Basic	134.5	135.6
Weighted-average common shares outstanding - Diluted	136.0	137.8
Basic Earnings Per Share:
Income from Continuing Operations (in dollars per share)	$ 0.28	$ 0.29
Income from discontinued operations, net of income taxes (in dollars per share)
Net Income (in dollars per share)	0.29	0.28
Diluted Earnings Per Share:
Income from Continuing Operations (in dollars per share)	0.28	0.28
Income from discontinued operations, net of income taxes (in dollars per share)
Net Income (in dollars per share)	$ 0.29	$ 0.28

XML

Condensed Consolidated Statements of Financial Position - USD ($)	Mar. 31, 2017	Dec. 31, 2016
Current Assets:
Cash and cash equivalents	$ 334,000,000	$ 291,000,000
Marketable securities	25,000,000	25,000,000
Receivables, less allowances of $22	498,000,000	536,000,000
Inventories	45,000,000	43,000,000
Prepaid expenses and other assets	70,000,000	70,000,000
Deferred customer acquisition costs	31,000,000	34,000,000
Total Current Assets	1,003,000,000	998,000,000
Other Assets:
Property and equipment, net	215,000,000	210,000,000
Goodwill	2,258,000,000	2,247,000,000
Intangible assets, primarily trade names, service marks and trademarks, net	1,704,000,000	1,708,000,000
Restricted cash	89,000,000	95,000,000
Notes receivable	38,000,000	37,000,000
Long-term marketable securities	22,000,000	19,000,000
Other assets	72,000,000	71,000,000
Total Assets	5,402,000,000	5,386,000,000
Current Liabilities:
Accounts payable	105,000,000	112,000,000
Accrued liabilities:
Payroll and related expenses	46,000,000	54,000,000
Self-insured claims and related expenses	102,000,000	111,000,000
Accrued interest payable	19,000,000	16,000,000
Other	78,000,000	60,000,000
Deferred revenue	645,000,000	629,000,000
Current portion of long-term debt	139,000,000	59,000,000
Total Current Liabilities	1,134,000,000	1,042,000,000
Long-Term Debt	2,694,000,000	2,772,000,000
Other Long-Term Liabilities:
Deferred taxes	717,000,000	719,000,000
Other long-term obligations, primarily self-insured claims	173,000,000	167,000,000
Total Other Long-Term Liabilities	890,000,000	886,000,000
Commitments and Contingencies (Note 3)
Shareholders' Equity:
Common stock $0.01 par value (authorized 2,000,000,000 shares with 144,854,026 shares issued and 134,206,545 outstanding at March 31, 2017 and 144,339,338 shares issued and 135,030,283 outstanding at December 31, 2016)	2,000,000	2,000,000
Additional paid-in capital	2,284,000,000	2,274,000,000
Accumulated deficit	(1,366,000,000)	(1,405,000,000)
Accumulated other comprehensive loss	(1,000,000)	(3,000,000)
Less common stock held in treasury, at cost (10,647,481 shares at March 31, 2017 and 9,309,055 shares at December 31, 2016)	(233,000,000)	(182,000,000)
Total Shareholders' Equity	685,000,000	686,000,000
Total Liabilities and Shareholders' Equity	$ 5,402,000,000	$ 5,386,000,000

XML

Condensed Consolidated Statements of Financial Position (Parenthetical) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Condensed Consolidated Statements of Financial Position [Abstract]
Allowance for receivables (in dollars)	$ 22	$ 22
Common stock, par value (in dollars per share)	$ 0.01	$ 0.01
Common stock, shares authorized (in shares)	2,000,000,000	2,000,000,000
Common stock, shares issued (in shares)	144,854,026	144,339,338
Common stock, shares outstanding (in shares)	134,206,545	135,030,283
Treasury stock (in shares)	10,647,481	9,309,055

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Condensed Consolidated Statements of Cash Flows [Abstract]
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	$ 386	$ 296
Cash Flows from Operating Activities from Continuing Operations:
Net Income	39	39
Adjustments to reconcile net income (loss) to net cash provided from operating activities:
Income from discontinued operations, net of income taxes	(1)
Depreciation expense	18	13
Amortization expense	7	8
Amortization of debt issuance costs	1	1
Fumigation related matters	1	3
Payments on fumigation related matters	(1)
Impairment of software and other related costs	2
Gain on sale of Merry Maids branches		(1)
Deferred income tax provision		1
Stock-based compensation expense	5	3
Other	3
Change in working capital, net of acquisitions:
Receivables	36	28
Inventories and other current assets	(4)	(7)
Accounts payable	(4)	5
Deferred revenue	15	16
Accrued liabilities	(16)	(16)
Accrued interest payable	3	(7)
Current income taxes	23	19
Net Cash Provided from Operating Activities from Continuing Operations	126	106
Cash Flows from Investing Activities from Continuing Operations:
Property additions	(18)	(17)
Sale of equipment and other assets		3
Business acquisitions, net of cash acquired	(11)	(2)
Purchases of available-for-sale securities	(3)	(2)
Sales and maturities of available-for-sale securities		2
Origination of notes receivable	(25)	(23)
Collections on notes receivable	26	24
Net Cash Used for Investing Activities from Continuing Operations	(31)	(15)
Cash Flows from Financing Activities from Continuing Operations:
Payments of debt	(14)	(19)
Repurchase of common stock	(51)
Issuance of common stock	5	2
Net Cash Used for Financing Activities from Continuing Operations	(60)	(17)
Cash Flows from Discontinued Operations:
Cash provided from operating activities	1
Net Cash Provided from Discontinued Operations	1
Effect of Exchange Rate Changes on Cash		1
Cash Increase During the Period	37	74
Cash and Cash Equivalents and Restricted Cash at End of Period	$ 423	$ 371

XML

Basis of Presentation

3 Months Ended

Mar. 31, 2017

Basis of Presentation [Abstract]

Basis of Presentation

Note 1. Basis of Presentation

ServiceMaster Global Holdings, Inc. and its majority-owned subsidiary partnerships, limited liability companies and corporations (collectively, “ServiceMaster,” the “Company,” “we,” “us, and “our”) is a leading provider of essential residential and commercial services. The Company’s services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, cabinet and wood furniture repair and home inspection. The Company provides these services through an extensive service network of company-owned, franchised and licensed locations operating primarily under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec.All consolidated Company subsidiaries are wholly-owned. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial statements have been prepared by the Company in accordance with generally accepted accounting principles in the United States (“GAAP”) and pursuant to the rules and regulations of the U.S. Securities and Exchange Commission (“SEC”). The Company recommends that the quarterly unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2016, as filed with the SEC (the “2016 Form 10-K”). The unaudited condensed consolidated financial statements reflect all normal and recurring adjustments that are, in the opinion of management, necessary for the fair presentation of the financial position, results of operations and cash flows for the interim periods presented. The results of operations for any interim period are not indicative of the results that might be achieved for a full year.

XML

Significant Accounting Policies

3 Months Ended

Mar. 31, 2017

Significant Accounting Policies [Abstract]

Significant Accounting Policies

Note 2. Significant Accounting Policies

The Company’s significant accounting policies are described in Note 2 to the audited consolidated financial statements included in the Company’s 2016 Form 10-K. There have been no material changes to the significant accounting policies for the three months ended March 31, 2017.

Newly Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” to provide a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This model supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company currently expects to adopt the new revenue standard in the first quarter of 2018 utilizing the full retrospective transition method. The Company does not expect adoption of the new revenue standard to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of financial liabilities measured under the fair value option that are attributable to a company’s own credit, and to change certain other disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity securities be recognized in net income. The amendments in ASU 2016-01 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and will be adopted prospectively. Upon adoption, changes in fair value of the Company’s available-for-sale securities, which are currently recognized in other comprehensive income, will be recognized in net income.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which is the final standard on accounting for leases. While both lessees and lessors are affected by the new guidance, the effects on lessees are much more significant. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. Entities are required to use a modified retrospective approach to adopt the guidance. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on the Company’s consolidated financial statements and currently expects that most of the operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption of ASU 2016-02, which will increase the amount of total assets and total liabilities that is reported relative to such amounts prior to adoption.

 [

XML

Commitments and Contingencies

3 Months Ended

Mar. 31, 2017

Commitments and Contingencies [Abstract]

Commitments and Contingencies

Note 3. Commitments and Contingencies

The Company carries insurance policies on insurable risks at levels that it believes to be appropriate, including workers’ compensation, automobile and general liability risks. The Company purchases insurance policies from third-party insurance carriers, which typically incorporate significant deductibles or self-insured retentions. The Company is responsible for all claims that fall below the retention limits, exceed our coverage limits or are otherwise not covered by our insurance policies. In determining the Company’s accrual for self-insured claims, the Company uses historical claims experience to establish both the current year accrual and the underlying provision for future losses. This actuarially determined provision and related accrual include known claims, as well as incurred but not reported claims. The Company adjusts its estimate of accrued self-insured claims when required to reflect changes based on factors such as changes in health care costs, accident frequency and claim severity.

A reconciliation of beginning and ending accrued self-insured claims, which are included in Accrued liabilities—Self-insured claims and related expenses and Other long-term obligations, primarily self-insured claims on the condensed consolidated statements of financial position, net of insurance recoverables, which are included in Prepaid expenses and other assets and Other assets on the condensed consolidated statements of financial position, is presented as follows:

	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 2016	$	120
Provision for self-insured claims		9
Cash payments		(10)
Balance as of March 31, 2017	$	119
Balance as of December 31, 2015	$	114
Provision for self-insured claims		13
Cash payments		(13)
Balance as of March 31, 2016	$	114

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 accruals in the Terminix business are recorded based on both the historical rates of claims incurred within a contract year and the cost per claim. Current activity could differ causing a change in estimates. The Company has certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. The Company accrues for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified.

In 2008, the Company amended its Profit Sharing and Retirement Plan, a tax qualified 401(k) defined contribution plan available to substantially all of its employees (the “401(k) Plan”), to implement a qualified automatic contribution arrangement (“QACA”) under the safe harbor provisions of the Internal Revenue Code of 1986, as amended (the “Code”). QACA plans, in general, require automatic enrollment of employees into the retirement plan absent an affirmative election that such employees do not wish to participate. Although the Company implemented processes to auto-enroll new hires after adopting the QACA plan in 2008, it discovered that it did not auto-enroll then existing employees who were not participating in the 401(k) Plan. In response, the Company implemented an auto-enrollment process for affected active employees and submitted to the Internal Revenue Service (the “IRS”) a voluntary correction proposal to remedy the issue for prior years. The Company’s current estimate of the cost of the correction ranges from $25 million to approximately $93 million. The Company has previously recorded in the condensed consolidated statement of operations and comprehensive income charges of $25 million. However, there can be no assurances as to the ultimate cost of the correction.

In addition to the matter discussed above and the fumigation related matters discussed below, in the ordinary course of conducting business activities, the Company and its subsidiaries become involved in judicial, administrative and regulatory proceedings involving both private parties and governmental authorities. These proceedings include insured and uninsured matters that are brought on an individual, collective, representative and class action basis, or other proceedings involving regulatory, employment, general and commercial liability, automobile liability, wage and hour, environmental and other matters. The Company has entered into settlement agreements in certain cases, including with respect to putative collective and class actions, which are subject to court or other approvals. If one or more of the Company’s settlements are not finally approved, the Company could have additional or different exposure, which could be material. Subject to the paragraphs below, the Company does not expect any of these proceedings to have a material effect on its reputation, business, financial position, results of operations or cash flows; however, the Company can give no assurance that the results of any such proceedings will not materially affect its reputation, business, financial position, results of operations and cash flows. 

Fumigation Related Matters

On July 21, 2016, Terminix International USVI, LLC (“TMX USVI”) and The Terminix International Company Limited Partnership (“TMX LP”), each an indirect, wholly-owned subsidiary of the Company, entered into a superseding Plea Agreement (the “Superseding Plea Agreement”) in connection with the investigation initiated by the United States Department of Justice Environmental Crimes Section (the “DOJ”) into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. The Superseding Plea Agreement was intended to resolve four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide. Those charges were set forth in an Information, dated March 29, 2016, in the matter styled United States of America v. The Terminix International Company Limited Partnership andTerminix International USVI, LLC.  At a hearing held on August 25, 2016, the United States District Court of the U.S. Virgin Islands (the “District Court”) rejected the Superseding Plea Agreement.  On August 31, 2016, the DOJ requested that the charges be dismissed, reserving its right to re-file the charges, in light of ongoing discussions to resolve the matter. The District Court granted that request, and the March 29, 2016 Information was dismissed. 

On January 20, 2017, TMX USVI and TMX LP entered into a new Plea Agreement (the “New Plea Agreement”) with the DOJ, which has been filed with the District Court, and replaces the Superseding Plea Agreement. At a hearing on March 23, 2017, TMX USVI and TMX LP pled guilty to four misdemeanor charges of violations of the Federal Insecticide, Fungicide, and Rodenticide Act related to improper applications of methyl bromide, as set forth in a new Information filed on January 20, 2017 with the District Court that is substantially similar to the March 29, 2016 Information. Under the terms of the New Plea Agreement, the parties agreed and jointly recommended to the District Court that (i) TMX USVI and TMX LP each pay a fine of $4 million (total of $8 million); (ii) TMX USVI pay $1 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; (iii) TMX USVI make a community service payment of $1 million to the National Fish and Wildlife Foundation for the purpose of engaging a third party to provide training to pesticide applicators in the U.S. Virgin Islands; and (iv) both TMX USVI and TMX LP serve a three-year probation period, subject to the special conditions of probation under the New Plea Agreement. The total financial terms of the recommended sentence under the New Plea Agreement are equivalent in total amount to the financial terms under the Superseding Plea Agreement. Unlike the Superseding Plea Agreement, however, the New Plea Agreement is non-binding on the District Court. A sentencing hearing before the District Court is scheduled for July 27, 2017. It is possible that at that hearing the District Court could use its discretion to impose fines or other terms different than those in the New Plea Agreement. If approved by the District Court, and upon compliance with the terms and conditions of the New Plea Agreement, the New Plea Agreement will resolve the federal criminal consequences associated with the DOJ investigation. The New Plea Agreement does not bind any other federal, state or local authority; however, the EPA has indicated that it does not intend to initiate any administrative enforcement action or refer the matter to the DOJ for any civil enforcement action if the New Plea Agreement is approved by the District Court.  

The Company has previously recorded within Fumigation related matters in the condensed consolidated statement of operations and comprehensive income total charges of $10 million in connection with the aforementioned criminal matter. The amount and extent of any further potential penalties, fines, sanctions, costs and damages that the federal or other governmental authorities may yet impose, investigation or other costs and reputational harm, as well as the impact of any additional civil, criminal or other claims or judicial, administrative or regulatory proceedings resulting from or related to the U.S. Virgin Islands matter, which could be material, is not currently known or reasonably estimable, and any such further penalties, fines, sanctions, costs or damages would not be covered under the Company’s general liability insurance policies. On December 16, 2016, the U.S. Virgin Islands Department of Justice filed a civil complaint in the Superior Court of the Virgin Islands related to the aforementioned fumigation incident in a matter styled Government of the United States Virgin Islands v. The ServiceMaster Company, LLC, The Terminix International Company Limited Partnership, and Terminix International USVI, LLC. The Company has not recorded any charge for this new civil lawsuit.

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Goodwill and Intangible Assets

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets [Abstract]

Goodwill and Intangible Assets

Note 4. Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. The Company’s annual assessment date is October 1. There were no goodwill or trade name impairment charges recorded in the three months ended March 31, 2017 and 2016. There were no accumulated impairment losses recorded as of March 31, 2017.The table below summarizes the goodwill balances for continuing operations by reportable segment:

			American		Franchise
(In millions)	Terminix		Home Shield		Services Group		Total
Balance as of December 31, 2016	$	1,601	$	471	$	175	$	2,247
Acquisitions		1		4		5		10
Balance as of March 31, 2017	$	1,603	$	475	$	180	$	2,258

The table below summarizes the other intangible asset balances for continuing operations:

	As of March 31, 2017						As of December 31, 2016
			Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net
Trade names(1)	$	1,608	$	—	$	1,608	$	1,608	$	—	$	1,608
Customer relationships		587		(542)		45		594		(538)		56
Franchise agreements		88		(68)		20		88		(67)		21
Other		75		(44)		31		65		(42)		23
Total	$	2,359	$	(654)	$	1,704	$	2,356	$	(647)	$	1,708

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(1) Not subject to amortization.

For the existing intangible assets, the Company anticipates amortization expense for the remainder of 2017 and each of the next five years of $20  million, $21million, $15 million, $12 million, $9 million and $5million, respectively.

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Stock-Based Compensation

3 Months Ended

Mar. 31, 2017

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 5. Stock-Based Compensation

For the three months ended March 31, 2017 and 2016, the Company recognized stock-based compensation expense of  $5 million ($3 million, net of tax) and $3 million ($2 million, net of tax), respectively.These charges are recorded within Selling and administrative expenses in the condensed consolidated statements of operations and comprehensive income. 

As of March 31, 2017 there was $36 million of total unrecognized compensation costs related to non-vested stock options, restricted stock units (“RSUs”) and performance shares granted under the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan (“MSIP”) and the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “Omnibus Incentive Plan”) and discounts associated with the ServiceMaster Global Holdings, Inc. Employee Stock Purchase Plan (the “Employee Stock Purchase Plan”). These remaining costs are expected to be recognized over a weighted-average period of  2.62 years.

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Comprehensive Income

3 Months Ended

Mar. 31, 2017

Comprehensive Income [Abstract]

Comprehensive Income

Note 6. Comprehensive Income

Comprehensive income, which primarily includes net income (loss), unrealized gain (loss) on marketable securities, unrealized gain (loss) on derivative instruments and the effect of foreign currency translation gain (loss), is disclosed in the condensed consolidated statements of operations and comprehensive income.

The following tables summarize the activity in accumulated other comprehensive income (loss), net of the related tax effects.

			Unrealized
			Gains
	Unrealized		on Available		Foreign
	Gains (Losses)		-for-Sale		Currency
(In millions)	on Derivatives		Securities		Translation		Total
Balance as of December 31, 2016	$	12	$	1	$	(15)	$	(3)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(1)		—		1		—
Tax benefit		(1)		—		—		(1)
After-tax amount		—		—		1		1
Amounts reclassified from accumulated other comprehensive income (loss)(1)		1		—		—		1
Net current period other comprehensive income		—		—		1		1
Balance as of March 31, 2017	$	12	$	1	$	(14)	$	(1)
Balance as of December 31, 2015	$	(7)	$	2	$	(15)	$	(21)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(5)		—		3		(2)
Tax benefit		(2)		—		—		(1)
After-tax amount		(3)		—		3		(1)
Amounts reclassified from accumulated other comprehensive income (loss)(1)		2		—		—		2
Net current period other comprehensive (loss) income		(1)		—		3		1
Balance as of March 31, 2016	$	(9)	$	2	$	(12)	$	(19)

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(1) Amounts are net of tax. See reclassifications out of accumulated other comprehensive income (loss) below for further details.

Reclassifications out of accumulated other comprehensive income (loss) included the following components for the periods indicated.

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended				Condensed Consolidated Statements of
	March 31,				Operations and Comprehensive Income
(In millions)	2017		2016		Location
Losses on derivatives:
Fuel swap contracts	$	—	$	(1)	Cost of services rendered and products sold
Interest rate swap contracts		(1)		(2)	Interest expense
Net losses on derivatives		(1)		(3)
Impact of income taxes		—		1	Provision for income taxes
Total reclassifications related to derivatives	$	(1)	$	(2)
Total reclassifications for the period	$	(1)	$	(2)

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Supplemental Cash Flow Information

3 Months Ended

Mar. 31, 2017

Supplemental Cash Flow Information [Abstract]

Supplemental Cash Flow Information

Note 7. Supplemental Cash Flow Information

Supplemental information relating to the condensed consolidated statements of cash flows is presented in the following table:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Cash paid for or (received from):
Interest expense	$	29	$	42
Interest and dividend income		—		(1)
Income taxes, net of refunds		1		3

As of March 31, 2017 and December 31, 2016, Cash and cash equivalents of $334 million and $291 million, respectively, and Restricted cash of $89 million and $95 million, respectively, as presented on the condensed consolidated statements of financial position represent the amounts comprising Cash and cash equivalents and restricted cash of $423 million and $386 million, respectively, on the condensed consolidated statement of cash flows. There were no restricted cash balances as of March 31, 2016 and December 31, 2015.

The Company acquired $12 million and $6 million of property and equipment through capital leases and other non-cash  financing transactions in the three months ended March 31, 2017 and 2016, respectively, which have been excluded from the condensed consolidated statements of cash flows as non-cash investing and financing activities. 

In the three months ended March 31, 2016, the Company converted certain company-owned Merry Maids branches to franchises for a total purchase price of $4 million. In the three months ended March 31, 2016, the Company received cash of $3 million and provided financing of $1 million. These financed amounts have been excluded from the condensed consolidated statements of cash flows as non-cash investing activities.

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Cash and Marketable Securities

3 Months Ended

Mar. 31, 2017

Cash and Marketable Securities [Abstract]

Cash and Marketable Securities

Note 8. Cash and Marketable Securities

Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents on the condensed consolidated statements of financial position. As of March 31, 2017 and December 31, 2016, the Company’s investments consisted primarily of treasury bills (“Debt securities”) and common equity securities (“Equity securities”). The amortized cost, fair value and gross unrealized gains and losses of the Company’s short- and long-term investments in Debt and Equity securities are as follows:

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In millions)	Cost		Gains		Losses		Value
Available-for-sale securities, March 31, 2017:
Debt securities	$	29	$	—	$	—	$	29
Equity securities		17		1		—		19
Total securities	$	46	$	1	$	—	$	47
Available-for-sale securities, December 31, 2016:
Debt securities	$	27	$	—	$	—	$	27
Equity securities		15		1		—		17
Total securities	$	43	$	1	$	—	$	44

There were no unrealized losses which had been in a loss position for more than one year as of March 31, 2017 and December 31, 2016.  

Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. The Company periodically reviews its portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes. There were no proceeds, gross realized gains or gross realized losses resulting from sales of available-for-sale securities or impairment charges due to other than temporary declines in the value of certain investments for the three months ended March 31, 2017 and 2016.  

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Long-Term Debt

3 Months Ended

Mar. 31, 2017

Long-Term Debt [Abstract]

Long-Term Debt

Note 9. Long-Term Debt

Long-term debt is summarized in the following table:

	As of		As of
	March 31,		December 31,
(In millions)	2017		2016
Senior secured term loan facility maturing in 2023(1)	$	1,624	$	1,628
Revolving credit facility maturing in 2021		—		—
5.125% notes maturing in 2024(2)		737		737
7.10% notes maturing in 2018(3)		78		77
7.45% notes maturing in 2027(3)		167		167
7.25% notes maturing in 2038(3)		66		65
Vehicle capital leases(4)		90		87
Other		70		71
Less current portion		(139)		(59)
Total long-term debt	$	2,694	$	2,772

___________________________________

(1) As of March 31, 2017 and December 31, 2016, presented net of $18 millionin unamortized debt issuance costs and $4 million in unamortized original issue discount paid.

(2) As of March 31, 2017 and December 31, 2016, presented net of $13 million in unamortized debt issuance costs.

(3) As of March 31, 2017 and December 31, 2016, collectively presented net of $47 million and $48 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

(4) The Company has entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things, allows the Company to obtain fleet vehicles through a 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 plus other contractual adjustments and a borrowing margin totaling 2.45 percent.

Interest Rate Swaps

Interest rate swap agreements in effect as of March 31, 2017 are as follows:

Trade Date	Effective Date	Expiration Date	Notional Amount	Fixed Rate(1)		Floating Rate
November 7, 2016	November 8, 2016	November 30, 2023	$650,000	1.493	%	One month LIBOR

___________________________________

(1)Before the application of the applicable borrowing margin.

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Acquisitions

3 Months Ended

Mar. 31, 2017

Acquisitions [Abstract]

Acquisitions

Note 10. Acquisitions

Acquisitions have been accounted for using the acquisition method and, accordingly, the results of operations of the acquired businesses have been included in the condensed consolidated financial statements since their dates of acquisition. The assets and liabilities of these businesses were recorded in the financial statements at their estimated fair values as of the acquisition dates. 

On November 30, 2016, the Company acquired Landmark Home Warranty, LLC (“Landmark”) for a total purchase price of $39 million. The Company recorded goodwill of $37 million and other intangibles, primarily customer relationships, of $13 million related to this acquisition. During the three months ended March 31, 2017, the Company updated its preliminary allocation and reclassified $4 million from other intangibles, primarily customer relationships, to goodwill. As of March 31, 2017, the purchase price allocation for this acquisition has not been finalized.  In particular, the Company is still evaluating the fair value of certain intangible assets. As the Company finalizes its assessment of the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in 2017.

During the three months ended March 31, 2017, the Company completed a pest control acquisition and purchased a ServiceMaster Clean master distributor within the Franchise Services Group. The total purchase price for these acquisitions was $13  million. The Company recorded goodwill of $6million and other intangibles, primarily reacquired rights, of $6 million related to these acquisitions.As of March 31, 2017, the purchase price allocation for the master distributor has not been finalized as the Company is still evaluating the fair value of certain intangible assets. As the Company finalizes its assessment of the fair value of assets acquired and liabilities assumed, additional purchase price adjustments may be recorded during the measurement period in 2017.

During the three months ended March 31, 2016, the Company completed several pest control and termite acquisitions. The total purchase price for these acquisitions was $3 million. The Company recorded goodwill of $2 million and accounts receivable of $1 million related to these acquisitions.

Supplemental cash flow information regarding the Company’s acquisitions is as follows:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Assets acquired	$	13	$	3
Liabilities assumed		—		—
Net assets acquired	$	13	$	3
Net cash paid	$	11	$	2
Seller financed debt		2		—
Purchase price	$	13	$	3

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Income Taxes

3 Months Ended

Mar. 31, 2017

Income Taxes [Abstract]

Income Taxes

Note 11. Income Taxes

As of March 31, 2017 and December 31, 2016,the Company had$13 million of tax benefits primarily reflected in state tax returns that have not been recognized for financial reporting purposes (“unrecognized tax benefits”). Based on information currently available, it is reasonably possible that over the next 12 month period unrecognized tax benefits may decrease by $2 million as the result of settlements of ongoing audits, statute of limitation expirations or final settlements of uncertain tax positions in multiple jurisdictions.

As required by Accounting Standard Codification (“ASC”) 740, “Income Taxes,” the Company computes interim period income taxes by applying an anticipated annual effective tax rate to the Company’s year-to-date income or loss from continuing operations before income taxes, except for significant unusual or infrequently occurring items. The Company’s estimated tax rate is adjusted each quarter in accordance with ASC 740.

The effective tax rate on income from continuing operations was 38.3 percent and 37.1 percent for the three months ended March 31, 2017 and 2016, respectively. The effective tax rate on income from continuing operations for the three months ended March 31, 2016 was primarily affected by excess tax benefits for share based awards recorded discretely during the quarter.

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Business Segment Reporting

3 Months Ended

Mar. 31, 2017

Business Segment Reporting [Abstract]

Business Segment Reporting

Note 12. Business Segment Reporting

The business of the Company is conducted through three reportable segments: Terminix, American Home Shield and Franchise Services Group.

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 residential and commercial customers and distributes pest control products. The American Home Shield segment provides home warranties for household systems and appliances. The Franchise Services Group segment provides residential and commercial disaster restoration, janitorial and cleaning services through franchises primarily under the ServiceMaster, ServiceMaster Restore and ServiceMaster Clean brand names, home cleaning services through franchises primarily under the Merry Maids brand name, cabinet and wood furniture repair primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. Corporate includes SMAC, the Company’s financing subsidiary exclusively dedicated to providing financing to its franchisees and retail customers of its operating units, and the Company’s headquarters operations (substantially all of which costs are allocated to the Company’s reportable segments), which provide various technology, marketing, finance, legal and other support services to the reportable segments. The composition of the Company’s reportable segments is consistent with that used by the Company’s chief operating decision maker (the “CODM”) to evaluate performance and allocate resources.

Information regarding the accounting policies used by the Company is described in the Company’s 2016 Form 10-K. The Company derives substantially all of its revenue from customers and franchisees in the United States with approximatelytwo percent generated in foreign markets. Operating expenses of the business units consist primarily of direct costs and indirect costs allocated from Corporate.

The Company uses Reportable Segment Adjusted EBITDA as its measure of segment profitability. Accordingly, the CODM evaluates performance and allocates resources based primarily on Reportable Segment Adjusted EBITDA. Reportable Segment Adjusted EBITDA is defined as net income before: unallocated corporate expenses; income from discontinued operations, net of income taxes; provision for income taxes; interest expense; depreciation and amortization expense; fumigation related matters; non-cash stock-based compensation expense; restructuring charges; gain on sale of Merry Maids branches; andnon-cash impairment of software and other related costs. The Company’s definition of Reportable Segment Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies. The Company believes Reportable Segment Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

Information for continuing operations for each reportable segment and Corporate is presented below:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Revenue:
Terminix	$	365	$	364
American Home Shield		227		194
Franchise Services Group		50		49
Reportable Segment Revenue	$	642	$	607
Corporate		1		1
Total Revenue	$	643	$	608
Reportable Segment Adjusted EBITDA:(1)
Terminix	$	81	$	94
American Home Shield		31		19
Franchise Services Group		21		18
Reportable Segment Adjusted EBITDA	$	133	$	131

___________________________________

Presented below is a reconciliation of Net Income to Reportable Segment Adjusted EBITDA:

	Three Months Ended
	March 31,
(In millions)	2017		2016
Net Income	$	39	$	39
Unallocated corporate expenses		—		4
Depreciation and amortization expense		25		21
Fumigation related matters		1		3
Non-cash stock-based compensation expense		5		3
Restructuring charges		2		1
Gain on sale of Merry Maids branches		—		(1)
Non-cash impairment of software and other related costs		2		—
Income from discontinued operations, net of income taxes		(1)		—
Provision for income taxes		24		23
Interest expense		37		38
Reportable Segment Adjusted EBITDA	$	133	$	131

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Related Party Transactions

3 Months Ended

Mar. 31, 2017

Related Party Transactions [Abstract]

Related Party Transactions

Note 13. Related Party Transactions

TruGreen Spin-off

In connection with the TruGreen spin-off on January 14, 2014, the Company entered into a transition services agreement with TruGreen Holding Corporation (“TruGreen”) pursuant to which the Company provides  TruGreen with specified communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, marketing, facilities, information technology and other support services. The charges for the transition services are designed to allow the Company to fully recover the direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The services provided under the transition services agreement terminated at various specified times on or prior to December 31, 2016, except certain information technology services, which the Company has entered into an agreement with TruGreen to extend through June 30, 2018.  TruGreen may terminate the extended transition services agreement for convenience upon 90 days written notice.

Under this transition services agreement, the Company recorded $3 million in the three months ended March 31, 2016 of fees from TruGreen, which is included as a reduction in Selling and administrative expenses in the condensed consolidated statement of operations and comprehensive income. As of March 31, 2017, all amounts owed by TruGreen under this agreement have been paid.

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Fair Value Measurements

3 Months Ended

Mar. 31, 2017

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 14. Fair Value Measurements

The period-end carrying amounts of cash and cash equivalents, receivables, restricted cash, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The period-end carrying amounts of long-term notes receivable approximate fair value as the effective interest rates for these instruments are comparable to period-end market rates. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value, with unrealized gains and losses reported net of tax as a component of accumulated other comprehensive income (loss) on the condensed consolidated statements of financial position, or, for certain unrealized losses, reported in interest and net investment income in the condensed consolidated statements of operations and comprehensive income if the decline in value is other than temporary. The carrying amount of total debt was $2,833 million and $2,831 million and the estimated fair value was $2,942 million and $2,930million as of March 31, 2017 and December 31, 2016, respectively. The fair value of the Company’s debt is estimated based on available market prices for the same or similar instruments which are considered significant other observable inputs (Level 2) within the fair value hierarchy. The fair values presented reflect the amounts that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (exit price). The fair value estimates presented in this report are based on information available to the Company as of March 31, 2017 and December 31, 2016.

The Company has estimated the fair value of its financial instruments measured at fair value on a recurring basis using the market and income approaches. For investments in marketable securities, deferred compensation trust assets and derivative contracts, which are carried at their fair values, the Company’s fair value estimates incorporate quoted market prices, other observable inputs (for example, forward interest rates) and unobservable inputs (for example, forward commodity prices) at the balance sheet date.

Interest rate swap contracts are valued using forward interest rate curves obtained from third-party market data providers. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing the contract interest rate to the expected forward interest rate as of each settlement date and applying the difference between the two rates to the notional amount of debt in the interest rate swap contracts.

Fuel swap contracts are valued using forward fuel price curves obtained from third-party market data providers. The fair value of each contract is the sum of the expected future settlements between the contract counterparties, discounted to present value. The expected future settlements are determined by comparing 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 providers and related changes in fair value for reasonableness utilizing information available to the Company from other published sources.

The Company has not changed its valuation techniques for measuring the fair value of any financial assets and liabilities during the year. Transfers between levels, if any, are recognized at the end of the reporting period. There were no significant transfers between levels during the three monthsended March 31, 2017 and 2016.

The carrying amount and estimated fair value of the Company’s financial instruments that are recorded at fair value on a recurring basis for the periods presented are as follows:

				Estimated Fair Value Measurements
				Quoted		Significant
				Prices In		Other		Significant
				Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2017:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		40		35		5		—
Fuel swap contracts	Prepaid expenses and other assets		2		—		—		2
Interest rate swap contracts	Other assets		26		—		26		—
Total financial assets		$	75	$	43	$	31	$	2
Financial Liabilities:
Interest rate swap contracts	Other accrued liabilities	$	2	$	—	$	2	$	—
Total financial liabilities		$	2	$	—	$	2	$	—
As of December 31, 2016:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		36		33		3		—
Fuel swap contracts	Prepaid expenses and other assets and Other assets		5		—		—		5
Interest rate swap contracts	Other assets		27		—		27		—
Total financial assets		$	75	$	40	$	30	$	5
Financial Liabilities:
Interest rate swap contracts	Other accrued liabilities and Other long-term obligations	$	4	$	—	$	4	$	—
Total financial liabilities		$	4	$	—	$	4	$	—

A  reconciliation of the beginning and ending fair values of financial instruments valued using significant unobservable inputs (Level 3) on a recurring basis is presented as follows:

	Fuel Swap
	Contract
	Assets
(In millions)	(Liabilities)		Location of Gain (Loss) included in Earnings
Balance as of December 31, 2016	$	5
Total losses (realized and unrealized)
Included in earnings		—	Cost of services rendered and products sold
Included in other comprehensive income		(3)
Settlements		—
Balance as of March 31, 2017	$	1
Balance as of December 31, 2015	$	(4)
Total (losses) gains (realized and unrealized)
Included in earnings		(1)	Cost of services rendered and products sold
Included in other comprehensive income		1
Settlements		1
Balance as of March 31, 2016	$	(3)

The following tables present information relating to the significant unobservable inputs of the Company’s Level 3 financial instruments:

	Fair Value		Valuation			Weighted
	(in millions)		Technique	Unobservable Input	Range	Average
As of March 31, 2017:
Fuel swap contracts	$	1	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.14 - $2.63	$	2.39
As of December 31, 2016:
Fuel swap contracts	$	5	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.31 - $2.85	$	2.55

___________________________________

(1) Forward prices per gallon were derived from third-party market data providers. A decrease in the forward price would result in a decrease 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 derivative financial instruments as hedging instruments under accounting standards for derivative instruments, the Company formally documents the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. The Company assesses at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected changes in cash flows of the associated forecasted transactions. All of the Company’s designated hedging instruments are classified as cash flow hedges.

The Company has historically hedged a significant portion of its annual fuel consumption. The Company has also historically hedged the interest payments on a portion of its variable rate debt through the use of interest rate swap agreements. All of the Company’s fuel swap contracts and interest rate swap contracts are classified as cash flow hedges, and, as such, the hedging instruments are recorded on the condensed consolidated statements of financial position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income (loss). Any change in the fair value of the hedging instrument resulting from ineffectiveness, as defined by accounting standards, is recognized in current period earnings. Cash flows related to fuel and interest rate derivatives are classified as operating activities in the condensed consolidated statements of cash flows.

Ineffective portions of derivative instruments designated in accordance with accounting standards as cash flow hedge relationships were insignificant during the three months ended March 31, 2017. As of March 31, 2017, the Company had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $34 million, maturing through 2018. Under the terms of its fuel swap contracts, the Company is required to post collateral in the event that the fair value of the contracts exceeds a certain agreed upon liability level and in other circumstances required by the counterparty. As of March 31, 2017, the Company had posted $3 million in letters of credit as collateral under its fuel hedging program, which were issued under the Revolving Credit Facility.

The effective portion of the gain or loss on derivative instruments designated and qualifying as cash flow hedging instruments is recorded in accumulated other comprehensive income (loss). These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement or the fuel settlement affects earnings. See Note 6 to the condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in accumulated other comprehensive income (loss) and for the amounts reclassified out of accumulated other comprehensive income (loss) and into earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses related to open fuel hedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains and losses in accumulated other comprehensive income (loss) expected to be recognized in earnings is a loss of $4 million, net of tax, as of March 31, 2017. The amounts that are ultimately reclassified into earnings will be based on actual fuel prices and interest rates at the time the positions are settled and may differ materially from the amount noted above.

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Earnings Per Share

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Earnings Per Share

Note 15. Earnings Per Share

Basic earnings per share is computed by dividing net income by the weighted average number of shares of common stock outstanding. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options, RSUs and performance shares are reflected in diluted net income per share by applying the treasury stock method.

A reconciliation of the amounts included in the computation of basic earnings per share from continuing operations and diluted earnings per share from continuing operations is as follows:

	Three Months Ended
	March 31,
(In millions, except per share data)	2017		2016
Income from continuing operations	$	38	$	39
Weighted-average common shares outstanding		134.5		135.6
Effect of dilutive securities:
RSUs(1)		0.1		0.2
Stock options(2)		1.4		1.9
Weighted-average common shares outstanding—assuming dilution		136.0		137.8
Basic earnings per share from continuing operations	$	0.28	$	0.29
Diluted earnings per share from continuing operations	$	0.28	$	0.28

___________________________________

(1) Unvested RSUs and performance shares of 0.3 million for the three months ended March 31, 2016 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Options to purchase  1.3 million and 0.9 million shares for the three months ended March 31, 2017 and 2016, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

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Significant Accounting Policies (Policy)

3 Months Ended

Mar. 31, 2017

Significant Accounting Policies [Abstract]

Newly Issued Accounting Standards

Newly Issued Accounting Standards

In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-09, “Revenue from Contracts with Customers” to provide a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. This model supersedes most current revenue recognition guidance, including industry-specific guidance. The core principle of the revenue model is that “an entity recognizes revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.” Entities have the option of using either a full retrospective or modified approach to adopt the guidance. ASU 2014-09 is effective for fiscal years, and interim periods within those years, beginning after December 15, 2017. Early adoption is permitted for fiscal years, and interim periods within those years, beginning after December 15, 2016. The Company currently expects to adopt the new revenue standard in the first quarter of 2018 utilizing the full retrospective transition method. The Company does not expect adoption of the new revenue standard to have a material impact on its consolidated financial statements.

In January 2016, the FASB issued ASU 2016-01, “Recognition and Measurement of Financial Assets and Financial Liabilities” to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of financial liabilities measured under the fair value option that are attributable to a company’s own credit, and to change certain other disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity securities be recognized in net income. The amendments in ASU 2016-01 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2017, and will be adopted prospectively. Upon adoption, changes in fair value of the Company’s available-for-sale securities, which are currently recognized in other comprehensive income, will be recognized in net income.

In February 2016, the FASB issued ASU 2016-02, “Leases (Topic 842),” which is the final standard on accounting for leases. While both lessees and lessors are affected by the new guidance, the effects on lessees are much more significant. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. Entities are required to use a modified retrospective approach to adopt the guidance. The amendments in ASU 2016-02 are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. Early adoption is permitted. The Company is currently evaluating the impact of the adoption of ASU 2016-02 on the Company’s consolidated financial statements and currently expects that most of the operating lease commitments will be subject to the new standard and recognized as operating lease liabilities and right-of-use assets upon adoption of ASU 2016-02, which will increase the amount of total assets and total liabilities that is reported relative to such amounts prior to adoption.

 [

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Commitments and Contingencies (Tables)

3 Months Ended

Mar. 31, 2017

Accrued Self-Insured Claims, Net [Member]

Commitments and Contingencies [Line Items]

Schedule Of Reconciliation Of Beginning And Ending Accrued Self-Insured Claims

	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 2016	$	120
Provision for self-insured claims		9
Cash payments		(10)
Balance as of March 31, 2017	$	119
Balance as of December 31, 2015	$	114
Provision for self-insured claims		13
Cash payments		(13)
Balance as of March 31, 2016	$	114

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Goodwill and Intangible Assets (Tables)

3 Months Ended

Mar. 31, 2017

Goodwill and Intangible Assets [Abstract]

Schedule Of Goodwill Balances For Continuing Operations By Reportable Segment And For Other Operations And Headquarters

			American		Franchise
(In millions)	Terminix		Home Shield		Services Group		Total
Balance as of December 31, 2016	$	1,601	$	471	$	175	$	2,247
Acquisitions		1		4		5		10
Balance as of March 31, 2017	$	1,603	$	475	$	180	$	2,258

Schedule Of Other Intangible Asset Balances For Continuing Operations

	As of March 31, 2017						As of December 31, 2016
			Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net
Trade names(1)	$	1,608	$	—	$	1,608	$	1,608	$	—	$	1,608
Customer relationships		587		(542)		45		594		(538)		56
Franchise agreements		88		(68)		20		88		(67)		21
Other		75		(44)		31		65		(42)		23
Total	$	2,359	$	(654)	$	1,704	$	2,356	$	(647)	$	1,708

___________________________________

(1) Not subject to amortization.

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Comprehensive Income (Tables)

3 Months Ended

Mar. 31, 2017

Comprehensive Income [Abstract]

Summary Of The Activity In Other Comprehensive Income (Loss), Net Of The Related Tax Effects

			Unrealized
			Gains
	Unrealized		on Available		Foreign
	Gains (Losses)		-for-Sale		Currency
(In millions)	on Derivatives		Securities		Translation		Total
Balance as of December 31, 2016	$	12	$	1	$	(15)	$	(3)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(1)		—		1		—
Tax benefit		(1)		—		—		(1)
After-tax amount		—		—		1		1
Amounts reclassified from accumulated other comprehensive income (loss)(1)		1		—		—		1
Net current period other comprehensive income		—		—		1		1
Balance as of March 31, 2017	$	12	$	1	$	(14)	$	(1)
Balance as of December 31, 2015	$	(7)	$	2	$	(15)	$	(21)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(5)		—		3		(2)
Tax benefit		(2)		—		—		(1)
After-tax amount		(3)		—		3		(1)
Amounts reclassified from accumulated other comprehensive income (loss)(1)		2		—		—		2
Net current period other comprehensive (loss) income		(1)		—		3		1
Balance as of March 31, 2016	$	(9)	$	2	$	(12)	$	(19)

___________________________________

(1) Amounts are net of tax. See reclassifications out of accumulated other comprehensive income (loss) below for further details.

Schedule Of Reclassifications Out Of Accumulated Other Comprehensive Income (Loss)

	Amounts Reclassified from Accumulated
	Other Comprehensive Income (Loss)
	Three Months Ended				Condensed Consolidated Statements of
	March 31,				Operations and Comprehensive Income
(In millions)	2017		2016		Location
Losses on derivatives:
Fuel swap contracts	$	—	$	(1)	Cost of services rendered and products sold
Interest rate swap contracts		(1)		(2)	Interest expense
Net losses on derivatives		(1)		(3)
Impact of income taxes		—		1	Provision for income taxes
Total reclassifications related to derivatives	$	(1)	$	(2)
Total reclassifications for the period	$	(1)	$	(2)

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Supplemental Cash Flow Information (Tables)

3 Months Ended

Mar. 31, 2017

Supplemental Cash Flow Information [Abstract]

Schedule Of Supplemental Information Relating To The Unaudited Condensed Consolidated Statements Of Cash Flows

	Three Months Ended
	March 31,
(In millions)	2017		2016
Cash paid for or (received from):
Interest expense	$	29	$	42
Interest and dividend income		—		(1)
Income taxes, net of refunds		1		3

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Cash and Marketable Securities (Tables)

3 Months Ended

Mar. 31, 2017

Cash and Marketable Securities [Abstract]

Schedule Of Amortized Cost, Fair Value And Gross Unrealized Gains And Losses Of The Company's Short- And Long-Term Investments In Debt And Equity Securities

			Gross		Gross
	Amortized		Unrealized		Unrealized		Fair
(In millions)	Cost		Gains		Losses		Value
Available-for-sale securities, March 31, 2017:
Debt securities	$	29	$	—	$	—	$	29
Equity securities		17		1		—		19
Total securities	$	46	$	1	$	—	$	47
Available-for-sale securities, December 31, 2016:
Debt securities	$	27	$	—	$	—	$	27
Equity securities		15		1		—		17
Total securities	$	43	$	1	$	—	$	44

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Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2017

Long-Term Debt [Abstract]

Schedule Of Long-Term Debt

	As of		As of
	March 31,		December 31,
(In millions)	2017		2016
Senior secured term loan facility maturing in 2023(1)	$	1,624	$	1,628
Revolving credit facility maturing in 2021		—		—
5.125% notes maturing in 2024(2)		737		737
7.10% notes maturing in 2018(3)		78		77
7.45% notes maturing in 2027(3)		167		167
7.25% notes maturing in 2038(3)		66		65
Vehicle capital leases(4)		90		87
Other		70		71
Less current portion		(139)		(59)
Total long-term debt	$	2,694	$	2,772

___________________________________

(1) As of March 31, 2017 and December 31, 2016, presented net of $18 millionin unamortized debt issuance costs and $4 million in unamortized original issue discount paid.

(2) As of March 31, 2017 and December 31, 2016, presented net of $13 million in unamortized debt issuance costs.

(3) As of March 31, 2017 and December 31, 2016, collectively presented net of $47 million and $48 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

(4) The Company has entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things, allows the Company to obtain fleet vehicles through a 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 plus other contractual adjustments and a borrowing margin totaling 2.45 percent.

Schedule of Interest Rate Swap Agreements

Trade Date	Effective Date	Expiration Date	Notional Amount	Fixed Rate(1)		Floating Rate
November 7, 2016	November 8, 2016	November 30, 2023	$650,000	1.493	%	One month LIBOR

___________________________________

(1)Before the application of the applicable borrowing margin.

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Acquisitions (Tables)

3 Months Ended

Mar. 31, 2017

Acquisitions [Abstract]

Schedule Of Supplemental Cash Flow Information Regarding Acquisitions

	Three Months Ended
	March 31,
(In millions)	2017		2016
Assets acquired	$	13	$	3
Liabilities assumed		—		—
Net assets acquired	$	13	$	3
Net cash paid	$	11	$	2
Seller financed debt		2		—
Purchase price	$	13	$	3

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Business Segment Reporting (Tables)

3 Months Ended

Mar. 31, 2017

Business Segment Reporting [Abstract]

Schedule Of Information For Continuing Operations For Each Reportable Segment And Other Operations And Headquarters

	Three Months Ended
	March 31,
(In millions)	2017		2016
Revenue:
Terminix	$	365	$	364
American Home Shield		227		194
Franchise Services Group		50		49
Reportable Segment Revenue	$	642	$	607
Corporate		1		1
Total Revenue	$	643	$	608
Reportable Segment Adjusted EBITDA:(1)
Terminix	$	81	$	94
American Home Shield		31		19
Franchise Services Group		21		18
Reportable Segment Adjusted EBITDA	$	133	$	131

___________________________________

Presented below is a reconciliation of Net Income to Reportable Segment Adjusted EBITDA:

Schedule Of Reconciliation Of Reportable Segment Adjusted EBITDA To Net Income (Loss)

	Three Months Ended
	March 31,
(In millions)	2017		2016
Net Income	$	39	$	39
Unallocated corporate expenses		—		4
Depreciation and amortization expense		25		21
Fumigation related matters		1		3
Non-cash stock-based compensation expense		5		3
Restructuring charges		2		1
Gain on sale of Merry Maids branches		—		(1)
Non-cash impairment of software and other related costs		2		—
Income from discontinued operations, net of income taxes		(1)		—
Provision for income taxes		24		23
Interest expense		37		38
Reportable Segment Adjusted EBITDA	$	133	$	131

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Fair Value Measurements (Tables)

3 Months Ended

Mar. 31, 2017

Fair Value Measurements [Abstract]

Schedule Of The Carrying Amount And Estimated Fair Value Of The Company's Financial Instruments That Are Recorded At Fair Value On A Recurring Basis

				Estimated Fair Value Measurements
				Quoted		Significant
				Prices In		Other		Significant
				Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2017:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		40		35		5		—
Fuel swap contracts	Prepaid expenses and other assets		2		—		—		2
Interest rate swap contracts	Other assets		26		—		26		—
Total financial assets		$	75	$	43	$	31	$	2
Financial Liabilities:
Interest rate swap contracts	Other accrued liabilities	$	2	$	—	$	2	$	—
Total financial liabilities		$	2	$	—	$	2	$	—
As of December 31, 2016:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	8	$	8	$	—	$	—
Investments in marketable securities	Marketable securities and Long-term marketable securities		36		33		3		—
Fuel swap contracts	Prepaid expenses and other assets and Other assets		5		—		—		5
Interest rate swap contracts	Other assets		27		—		27		—
Total financial assets		$	75	$	40	$	30	$	5
Financial Liabilities:
Interest rate swap contracts	Other accrued liabilities and Other long-term obligations	$	4	$	—	$	4	$	—
Total financial liabilities		$	4	$	—	$	4	$	—

Schedule Of Reconciliation Of The Beginning And Ending Fair Values Of Financial Instruments Valued Using Significant Unobservable Inputs (Level 3) On A Recurring Basis

	Fuel Swap
	Contract
	Assets
(In millions)	(Liabilities)		Location of Gain (Loss) included in Earnings
Balance as of December 31, 2016	$	5
Total losses (realized and unrealized)
Included in earnings		—	Cost of services rendered and products sold
Included in other comprehensive income		(3)
Settlements		—
Balance as of March 31, 2017	$	1
Balance as of December 31, 2015	$	(4)
Total (losses) gains (realized and unrealized)
Included in earnings		(1)	Cost of services rendered and products sold
Included in other comprehensive income		1
Settlements		1
Balance as of March 31, 2016	$	(3)

Schedule Of Level 3 Financial Instruments

	Fair Value		Valuation			Weighted
	(in millions)		Technique	Unobservable Input	Range	Average
As of March 31, 2017:
Fuel swap contracts	$	1	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.14 - $2.63	$	2.39
As of December 31, 2016:
Fuel swap contracts	$	5	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.31 - $2.85	$	2.55

___________________________________

(1) Forward prices per gallon were derived from third-party market data providers. A decrease in the forward price would result in a decrease in the fair value of the fuel swap contracts.

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Earnings Per Share (Tables)

3 Months Ended

Mar. 31, 2017

Earnings Per Share [Abstract]

Schedule Of Reconciliation Of The Amounts Included In The Computation Of Basic Earnings Per Share From Continuing Operations And Diluted Earnings Per Share From Continuing Operations

	Three Months Ended
	March 31,
(In millions, except per share data)	2017		2016
Income from continuing operations	$	38	$	39
Weighted-average common shares outstanding		134.5		135.6
Effect of dilutive securities:
RSUs(1)		0.1		0.2
Stock options(2)		1.4		1.9
Weighted-average common shares outstanding—assuming dilution		136.0		137.8
Basic earnings per share from continuing operations	$	0.28	$	0.29
Diluted earnings per share from continuing operations	$	0.28	$	0.28

___________________________________

(1) Unvested RSUs and performance shares of 0.3 million for the three months ended March 31, 2016 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

(2) Options to purchase  1.3 million and 0.9 million shares for the three months ended March 31, 2017 and 2016, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

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Commitments and Contingencies (Narrative) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($) item	Mar. 31, 2016 USD ($)
Loss Contingencies [Line Items]
401(k) Plan corrective contribution	$ 25
Number of misdemeanor charges | item	4
Gain (Loss) Related to Litigation Settlement	$ (1)	$ (3)
Maximum [Member]
Loss Contingencies [Line Items]
401(k) Plan corrective contribution	93
Minimum [Member]
Loss Contingencies [Line Items]
401(k) Plan corrective contribution	25
New Plea Agreement [Member] | National Fish and Wildlife Foundation [Member]
Loss Contingencies [Line Items]
Fines and penalties	1
New Plea Agreement [Member] | Environmental Protection Agency (the “EPA”) [Member]
Loss Contingencies [Line Items]
Fines and penalties	1
Terminix International USVI, LLC (“TMX USVI”) [Member] | New Plea Agreement [Member]
Loss Contingencies [Line Items]
Fines and penalties	4
The Terminix International Company Limited Partnership (“TMX LP”) [Member] | New Plea Agreement [Member]
Loss Contingencies [Line Items]
Fines and penalties	4
TMX USVI and TMX LP [Member] | New Plea Agreement [Member]
Loss Contingencies [Line Items]
Fines and penalties	$ 8
Probation period	3 years
Gain (Loss) Related to Litigation Settlement	$ 10

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Commitments and Contingencies (Schedule Of Reconciliation Of Beginning And Ending Accrued Self-Insured Claims) (Details) - Accrued Self-Insured Claims, Net [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Commitments and Contingencies [Line Items]
Balance at the beginning of the period	$ 120	$ 114
Provision for self-insured claims	9	13
Cash payments	(10)	(13)
Balance at the end of the period	$ 119	$ 114

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Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Indefinite-lived Intangible Assets [Line Items]
Accumulated impairment losses recorded in continuing operations	$ 0
Amortization expense	7	$ 8
Amortization expense, for the remainder of 2017	20
Amortization expense, 2018	21
Amortization expense, 2019	15
Amortization expense, 2020	12
Amortization expense, 2021	9
Amortization expense, Thereafter	5
Trade Names [Member]
Indefinite-lived Intangible Assets [Line Items]
Goodwill and trade name impairment	$ 0	$ 0

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Goodwill and Intangible Assets (Schedule Of Goodwill Balances For Continuing Operations By Reportable Segment And For Other Operations And Headquarters) (Details) $ in Millions	3 Months Ended
	Mar. 31, 2017 USD ($)
Goodwill balances by segment for continuing operations
Balance at the beginning of the period	$ 2,247
Acquisitions	10
Balance at the end of the period	2,258
Terminix [Member]
Goodwill balances by segment for continuing operations
Balance at the beginning of the period	1,601
Acquisitions	1
Balance at the end of the period	1,603
American Home Shield [Member]
Goodwill balances by segment for continuing operations
Balance at the beginning of the period	471
Acquisitions	4
Balance at the end of the period	475
Franchise Services Group [Member]
Goodwill balances by segment for continuing operations
Balance at the beginning of the period	175
Acquisitions	5
Balance at the end of the period	$ 180

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Goodwill and Intangible Assets (Schedule Of Other Intangible Asset Balances For Continuing Operations) (Details) - USD ($) $ in Millions		Mar. 31, 2017	Dec. 31, 2016
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Intangible Assets Gross, Excluding Goodwill		$ 2,359	$ 2,356
Accumulated Amortization		(654)	(647)
Intangible Assets Net, Excluding Goodwill		1,704	1,708
Customer Relationships [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Intangible Assets Gross, Excluding Goodwill		587	594
Accumulated Amortization		(542)	(538)
Intangible Assets Net, Excluding Goodwill		45	56
Franchise Agreements [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Intangible Assets Gross, Excluding Goodwill		88	88
Accumulated Amortization		(68)	(67)
Intangible Assets Net, Excluding Goodwill		20	21
Other [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Intangible Assets Gross, Excluding Goodwill		75	65
Accumulated Amortization		(44)	(42)
Intangible Assets Net, Excluding Goodwill		31	23
Trade Names [Member]
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items]
Intangible Assets Gross, Excluding Goodwill	[1]	1,608	1,608
Intangible Assets Net, Excluding Goodwill	[1]	$ 1,608	$ 1,608

[1] Not subject to amortization.

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Stock-Based Compensation (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Stock-Based Compensation [Abstract]
Stock-based compensation expense	$ 5	$ 3
Stock-based compensation expense, net of tax	3	$ 2
Total unrecognized compensation costs related to non-vested stock options and restricted share units	$ 36
Weighted-average period of recognition of stock-based compensation cost	2 years 7 months 13 days

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Comprehensive Income (Summary Of The Activity In Other Comprehensive Income (Loss), Net Of The Related Tax Effects) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period		$ (3)	$ (21)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount			(2)
Tax benefit		(1)	(1)
After-tax amount		1	(1)
Amounts reclassified from accumulated other comprehensive income (loss)	[1]	1	2
Net current-period other comprehensive income (loss)		1	1
Balance at the end of period		(1)	(19)
Unrealized Losses on Derivatives [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period		12	(7)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(1)	(5)
Tax benefit		(1)	(2)
After-tax amount			(3)
Amounts reclassified from accumulated other comprehensive income (loss)	[1]	1	2
Net current-period other comprehensive income (loss)			(1)
Balance at the end of period		12	(9)
Unrealized Gains (Losses) on Available-for-Sale Securities [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period		1	2
Other comprehensive (loss) income before reclassifications:
Balance at the end of period		1	2
Foreign Currency Translation [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Balance at the beginning of period		(15)	(15)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		1	3
After-tax amount		1	3
Net current-period other comprehensive income (loss)		1	3
Balance at the end of period		$ (14)	$ (12)

[1] Amounts are net of tax. See reclassifications out of accumulated other comprehensive income (loss) below for further details.

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Comprehensive Income (Schedule Of Reclassifications Out Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of services rendered and products sold	$ (346)	$ (324)
Interest expense	(37)	(38)
Interest and net investment income		(1)
Provision for income taxes	24	23
Total reclassifications for the period	(39)	(39)
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Total reclassifications for the period	(1)	(2)
Unrealized Losses on Derivatives [Member] | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net losses on derivatives	1	3
Provision for income taxes		1
Total reclassifications for the period	(1)	(2)
Unrealized Losses on Derivatives [Member] | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) [Member] | Fuel Swap Contracts [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of services rendered and products sold		1
Unrealized Losses on Derivatives [Member] | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) [Member] | Interest Rate Swap Contracts [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Interest expense	$ 1	$ 2

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Supplemental Cash Flow Information (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016	Dec. 31, 2015
Cash paid for or (received from):
Cash and cash equivalents	$ 334,000,000		$ 291,000,000
Restricted cash	89,000,000	$ 0	95,000,000	$ 0
Cash and Cash Equivalents Including Restricted Cash, at Carrying Value	423,000,000	371,000,000	$ 386,000,000	$ 296,000,000
Capital lease and other non-cash financing transactions	$ 12,000,000	6,000,000
Cash received for franchise		3,000,000
Merry Maids [Member]
Cash paid for or (received from):
Total purchase price for conversion of certain company-owned Merry Maids branches to franchises		4,000,000
Cash received for franchise		3,000,000
Financing provided for franchise		$ 1,000,000

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Supplemental Cash Flow Information (Schedule Of Supplemental Information Relating To The Unaudited Condensed Consolidated Statements Of Cash Flows) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Cash paid for or (received from):
Interest expense	$ 29	$ 42
Interest and dividend income		(1)
Income taxes, net of refunds	$ 1	$ 3

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Cash and Marketable Securities (Narrative) (Details) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Cash and Marketable Securities [Abstract]
Portion of unrealized losses in loss position for more than one year	$ 0	$ 0

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Cash and Marketable Securities (Schedule Of Amortized Cost, Fair Value And Gross Unrealized Gains And Losses Of The Company's Short- And Long-Term Investments In Debt And Equity Securities) (Details) - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Schedule of Available-for-sale Securities [Line Items]
Amortized cost of securities	$ 46	$ 43
Gross unrealized gains of securities	1	1
Fair value of securities	47	44
Debt Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost of debt securities	29	27
Fair value of debt securities	29	27
Equity Securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized cost of equity securities	17	15
Gross unrealized gains of equity securities	1	1
Fair value of equity securities	$ 19	$ 17

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Long-Term Debt (Schedule Of Long-Term Debt) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2017	Dec. 31, 2016
Long-term debt [Line Items]
Less current portion		$ (139)	$ (59)
Total long-term debt		2,694	2,772
Vehicle Capital Leases [Member]
Long-term debt [Line Items]
Vehicle capital leases	[1]	$ 90	87
Borrowing margin (as a percent)		2.45%
Variable rate basis		one-month LIBOR
Senior Secured Term Loan Facility Maturing In 2023 [Member]
Long-term debt [Line Items]
Long-term debt	[2]	$ 1,624	1,628
Unamortized debt issuance costs		18	18
Unamortized original issue discount		4	4
Revolving Credit Facility Maturing In 2021 [Member]
Long-term debt [Line Items]
Long-term debt	[2],[3]
5.125% Notes Maturing In 2024 [Member]
Long-term debt [Line Items]
Long-term debt	[3]	$ 737	737
Interest rate (as a percent)		5.125%
Unamortized debt issuance costs		$ 13
7.10% Notes Maturing In 2018 [Member]
Long-term debt [Line Items]
Long-term debt	[4]	$ 78	77
Interest rate (as a percent)		7.10%
7.45% Notes Maturing In 2027 [Member]
Long-term debt [Line Items]
Long-term debt	[4]	$ 167	167
Interest rate (as a percent)		7.45%
7.25% Notes Maturing In 2038 [Member]
Long-term debt [Line Items]
Long-term debt	[4]	$ 66	65
Interest rate (as a percent)		7.25%
7.10% Notes, 7.45% Notes, 7.25% Notes Collectively [Member]
Long-term debt [Line Items]
Unamortized fair value adjustments related to purchase accounting		$ 47	48
Other [Member]
Long-term debt [Line Items]
Long-term debt	[1]	$ 70	$ 71

[1] The Company has entered into a fleet management services agreement (the "Fleet Agreement") which, among other things, allows the Company to obtain fleet vehicles through a 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 plus other contractual adjustments and a borrowing margin totaling 2.45 percent.

[2] As of March 31, 2017 and December 31, 2016, presented net of $18 million in unamortized debt issuance costs and $4 million in unamortized original issue discount paid.

[3] As of March 31, 2017 and December 31, 2016, presented net of $13 million in unamortized debt issuance costs.

[4] As of March 31, 2017 and December 31, 2016, collectively presented net of $47 million and $48 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

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Long-Term Debt (Schedule of Interest Rate Swap Agreements) (Details) - Interest Rate Swap Contracts [Member] $ in Thousands	3 Months Ended
	Mar. 31, 2017 USD ($)
Derivative, Trade Date	Nov. 07, 2016
Derivative, Effective Date	Nov. 08, 2016
Derivative, Expiration Date	Nov. 30, 2023
Notional amount	$ 650,000
Fixed Rate (as a percent)	1.493%	[1]
Floating Rate	One month LIBOR

[1] Before the application of the applicable borrowing margin.

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Acquisitions (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Acquisitions [Line Items]
Net purchase price	$ 13	$ 3
Goodwill	2,258		$ 2,247
Landmark [Member]
Acquisitions [Line Items]
Net purchase price	39
Goodwill	37
Other intangibles related to acquisitions	13
Pest control, termite and franchise acquisitions [Member]
Acquisitions [Line Items]
Net purchase price	13	3
Goodwill	6	2
Other intangibles related to acquisitions	$ 6	$ 1

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Acquisitions (Schedule Of Supplemental Cash Flow Information Regarding Acquisitions) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Supplemental cash flow information regarding acquisitions
Assets acquired	$ 13	$ 3
Net assets acquired	13	3
Net cash paid	11	2
Seller financed debt	2
Purchase price	$ 13	$ 3

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Income Taxes (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016	Dec. 31, 2016
Income Taxes [Abstract]
Unrecognized tax benefits that would impact effective tax rate if recognized			$ 13
Estimated reduction in unrecognized tax benefits during the next 12 months	$ 2
Effective tax rate on income from continuing operations (as a percent)	38.30%	37.10%

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Business Segment Reporting (Narrative) (Details)	3 Months Ended
	Mar. 31, 2017 segment
Business Segment Reporting [Abstract]
Number of reportable segments	3
Maximum percentage of revenue from customers and franchisees generated in foreign market	2.00%

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Business Segment Reporting (Schedule Of Information For Continuing Operations For Each Reportable Segment And Other Operations And Headquarters) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Segment Reporting Information [Line Items]
Revenue		$ 643	$ 608
Adjusted EBITDA		133	131
Depreciation & Amortization Expense		25	21
Capital Expenditures		18	17
Operating Segment [Member]
Segment Reporting Information [Line Items]
Revenue		642	607
Adjusted EBITDA	[1]	133	131
Terminix [Member] | Operating Segment [Member]
Segment Reporting Information [Line Items]
Revenue		365	364
Adjusted EBITDA	[1]	81	94
American Home Shield [Member] | Operating Segment [Member]
Segment Reporting Information [Line Items]
Revenue		227	194
Adjusted EBITDA	[1]	31	19
Franchise Services Group [Member] | Operating Segment [Member]
Segment Reporting Information [Line Items]
Revenue		50	49
Adjusted EBITDA	[1]	21	18
Corporate [Member]
Segment Reporting Information [Line Items]
Revenue		$ 1	1
Adjusted EBITDA			$ 4

[1] Presented below is a reconciliation of Net Income to Reportable Segment Adjusted EBITDA: Three Months EndedMarch 31,(In millions)20172016Net Income$ 39$ 39Unallocated corporate expenses - 4Depreciation and amortization expense 25 21Fumigation related matters 1 3Non-cash stock-based compensation expense 5 3Restructuring charges 2 1Gain on sale of Merry Maids branches - (1)Non-cash impairment of software and other related costs 2 -Income from discontinued operations, net of income taxes (1) -Provision for income taxes 24 23Interest expense 37 38Reportable Segment Adjusted EBITDA $ 133$ 131

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Business Segment Reporting (Schedule Of Reconciliation Of Reportable Segment Adjusted EBITDA To Net Income (Loss)) (Details) - USD ($) $ in Millions		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Reconciliation of Reportable Segment Adjusted EBITDA to Net Income (Loss)
Net Income		$ 39	$ 39
Depreciation and amortization expense		25	21
Fumigation related matters		1	3
Non-cash stock-based compensation expense		5	3
Restructuring charges		2	1
Gain on sale of Merry Maids branches			(1)
Non-cash impairment of software and other related costs		2
Income from discontinued operations, net of income taxes		(1)
Provision for income taxes		24	23
Interest expense		37	38
Reportable Segment Adjusted EBITDA		133	131
Operating Segment [Member]
Reconciliation of Reportable Segment Adjusted EBITDA to Net Income (Loss)
Reportable Segment Adjusted EBITDA	[1]	133	131
Terminix [Member] | Operating Segment [Member]
Reconciliation of Reportable Segment Adjusted EBITDA to Net Income (Loss)
Reportable Segment Adjusted EBITDA	[1]	81	94
American Home Shield [Member] | Operating Segment [Member]
Reconciliation of Reportable Segment Adjusted EBITDA to Net Income (Loss)
Reportable Segment Adjusted EBITDA	[1]	31	19
Franchise Services Group [Member] | Operating Segment [Member]
Reconciliation of Reportable Segment Adjusted EBITDA to Net Income (Loss)
Reportable Segment Adjusted EBITDA	[1]	$ 21	18
Corporate [Member]
Reconciliation of Reportable Segment Adjusted EBITDA to Net Income (Loss)
Reportable Segment Adjusted EBITDA			$ 4

[1] Presented below is a reconciliation of Net Income to Reportable Segment Adjusted EBITDA: Three Months EndedMarch 31,(In millions)20172016Net Income$ 39$ 39Unallocated corporate expenses - 4Depreciation and amortization expense 25 21Fumigation related matters 1 3Non-cash stock-based compensation expense 5 3Restructuring charges 2 1Gain on sale of Merry Maids branches - (1)Non-cash impairment of software and other related costs 2 -Income from discontinued operations, net of income taxes (1) -Provision for income taxes 24 23Interest expense 37 38Reportable Segment Adjusted EBITDA $ 133$ 131

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Related Party Transactions (Narrative) (Details) - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Related party transactions
Written notice period for termination of service agreement	90 days
New TruGreen's [Member]
Related party transactions
Fees due from New TruGreen		$ 3

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Fair Value Measurements (Narrative) (Details) - USD ($)	3 Months Ended
	Mar. 31, 2017	Dec. 31, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Letters of credit posted as collateral under fuel hedging program	$ 3,000,000
Hedging gains and losses in accumulated other comprehensive income expected to be recognized in earnings, net of tax	4,000,000
Carrying Value [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Long Term Debt And Capital Lease Obligation	2,833,000,000	$ 2,831,000,000
Estimated Fair Value [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Fair value of total debt	2,942,000,000	$ 2,930,000,000
Fuel Swap Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate notional amount	34,000,000
Interest Rate Swap Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Aggregate notional amount	$ 650,000,000

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Fair Value Measurements (Schedule Of The Carrying Amount And Estimated Fair Value Of The Company's Financial Instruments That Are Recorded At Fair Value On A Recurring Basis) (Details) - Recurring [Member] - USD ($) $ in Millions	Mar. 31, 2017	Dec. 31, 2016
Quoted Price In Active Markets (Level 1) [Member]
Financial Assets:
Deferred compensation trust assets	$ 8	$ 8
Investments in marketable securities	35	33
Total financial assets	43	40
Significant Other Observable Inputs (Level 2) [Member]
Financial Assets:
Investments in marketable securities	5	3
Total financial assets	31	30
Total financial liabilities	2	4
Significant Other Observable Inputs (Level 2) [Member] | Interest Rate Swap Contracts [Member]
Financial Assets:
Derivative asset, Current	26	27
Derivative liability, Current	2
Total financial liabilities		4
Significant Unobservable Inputs (Level 3) [Member]
Financial Assets:
Total financial assets	2	5
Significant Unobservable Inputs (Level 3) [Member] | Fuel Swap Contracts [Member]
Financial Assets:
Derivative asset, Current	2
Total financial assets		5
Carrying Value [Member]
Financial Assets:
Deferred compensation trust assets	8	8
Investments in marketable securities	40	36
Total financial assets	75	75
Total financial liabilities	2	4
Carrying Value [Member] | Fuel Swap Contracts [Member]
Financial Assets:
Derivative asset, Current	2
Total financial assets		5
Carrying Value [Member] | Interest Rate Swap Contracts [Member]
Financial Assets:
Derivative asset, Current	26	27
Derivative liability, Current	$ 2
Total financial liabilities		$ 4

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Fair Value Measurements (Schedule Of Reconciliation Of The Beginning And Ending Fair Values Of Financial Instruments Valued Using Significant Unobservable Inputs (Level 3) On A Recurring Basis) (Details) - Fuel Swap Contracts [Member] - USD ($) $ in Millions	3 Months Ended
	Mar. 31, 2017	Mar. 31, 2016
Reconciliation of the beginning and ending fair values of financial instruments valued using significant unobservable inputs (Level 3)
Balance at the beginning of the period	$ 5	$ (4)
Total (losses) gains (realized and unrealized)
Included in earnings		(1)
Included in other comprehensive income	(3)	1
Settlements		1
Balance at the end of the period	$ 1	$ (3)

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Fair Value Measurements (Schedule Of Level 3 Financial Instruments) (Details) - Fuel Swap Contracts [Member] $ in Millions		Mar. 31, 2017 USD ($) $ / gal	Dec. 31, 2016 USD ($) $ / gal	Mar. 31, 2016 USD ($)	Dec. 31, 2015 USD ($)
Information relating to the significant unobservable inputs of Level 3 financial instruments
Fair value at the end of the period | $		$ 1	$ 5	$ (3)	$ (4)
Discounted Cash Flows [Member] | Minimum [Member]
Information relating to the significant unobservable inputs of Level 3 financial instruments
Forward Unleaded Price per Gallon (in dollars per gallon)	[1]	2.14	2.31
Discounted Cash Flows [Member] | Maximum [Member]
Information relating to the significant unobservable inputs of Level 3 financial instruments
Forward Unleaded Price per Gallon (in dollars per gallon)	[1]	2.63	2.85
Discounted Cash Flows [Member] | Weighted Average [Member]
Information relating to the significant unobservable inputs of Level 3 financial instruments
Forward Unleaded Price per Gallon (in dollars per gallon)	[1]	2.39	2.55

[1] Forward prices per gallon were derived from third-party market data providers. A decrease in the forward price would result in a decrease in the fair value of the fuel swap contracts.

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Earnings Per Share (Schedule Of Reconciliation Of The Amounts Included In The Computation Of Basic Earnings Per Share From Continuing Operations And Diluted Earnings Per Share From Continuing Operations) (Details) - USD ($) $ / shares in Units, shares in Millions, $ in Millions		3 Months Ended
		Mar. 31, 2017	Mar. 31, 2016
Income from continuing operations		$ 38	$ 39
Weighted average common shares outstanding		134.5	135.6
Effect of dilutive securities:
Weighted average common shares outstanding-assuming dilution		136.0	137.8
Basic earnings per share from continuing operations (in dollars per share)		$ 0.28	$ 0.29
Diluted earnings per share from continuing operations (in dollars per share)		$ 0.28	$ 0.28
RSUs [Member]
Effect of dilutive securities:
Dilutive securities	[1]	0.1	0.2
Antidilutive securities excluded from computation of diluted earnings per share (in shares)			0.3
Stock Options [Member]
Effect of dilutive securities:
Dilutive securities	[2]	1.4	1.9
Antidilutive securities excluded from computation of diluted earnings per share (in shares)		1.3	0.9

[1] Unvested RSUs and performance shares of 0.3 million for the three months ended March 31, 2016 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

[2] Options to purchase 1.3 million and 0.9 million shares for the three months ended March 31, 2017 and 2016, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.