UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________


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

For the quarterly period ended March 31, ~~2019~~2020


☐o	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.)

150 Peabody Place, Memphis, Tennessee 38103

(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 ☒x No ☐o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files).


	Yes ☒x No ☐o

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 x	Accelerated ~~filer ☐~~Filer o	~~Non-accelerated filer ☐~~Non-Accelerated Filer o	Smaller ~~reporting company ☐~~Reporting Company o
			Emerging ~~growth company ☐~~Growth Company o

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. ☐o

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


	Yes ☐o No ☒x

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common, par value $0.01	SERV	NYSE

The number of shares of the registrant’s common stock outstanding as of ~~April 30, 2019:135,964,207~~May 1, 2020:131,934,902 shares of common stock, par value $0.01 per share.

Table of Contents

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 Stockholders’ Equity	5


Condensed Consolidated Statements of Cash Flows	6


Notes to Condensed Consolidated Financial Statements	7


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	26


Item 3. Quantitative and Qualitative Disclosures About Market Risk	38
	40

Item 4. Controls and Procedures	39
	40

Part II. Other Information	39
	41

Item 1. Legal Proceedings	39
	41

Item 1A. Risk Factors	39
	41

Item 2. Unregistered Sales of Registered Securities and Use of Proceeds	41
	42
~~Item 6. Exhibits~~	41

~~Signature~~Item 6. Exhibits	42 43

Signature	44

Table of Contents

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				Three Months Ended
	March 31,				March 31,
	2019		2018		2020		2019
Revenue	$	482	$	428	$	456	$	419
Cost of services rendered and products sold		261		226		279		236
Selling and administrative expenses		136		125		140		123
Amortization expense		6		3		9		5
Acquisition-related costs		1		—		1		1
Fumigation related matters		1		—		—		1
Restructuring charges		7		12
Restructuring and other charges						4		6
Realized (gain) on investment in frontdoor, inc.		(40)		—		—		(40)
Interest expense		27		37		23		27
Interest and net investment income		(1)		—		—		(1)
Loss on extinguishment of debt		6		—		—		6
Income from Continuing Operations before Income Taxes		79		23
Provision for income taxes		9		6
(Loss) Income from Continuing Operations before Income Taxes						(1)		56
(Benefit) provision for income taxes						(2)		3
Income from Continuing Operations		70		17		1		53
Gain from discontinued operations, net of income taxes		—		23
Net earnings from discontinued operations						13		16
Net Income	$	70	$	40	$	14	$	70
Total Comprehensive Income	$	68	$	50
Total Comprehensive (Loss) Income					$	(36)	$	68
Weighted-average common shares outstanding - Basic		135.8		135.2		134.9		135.8
Weighted-average common shares outstanding - Diluted		136.4		135.6		135.1		136.2
Basic Earnings Per Share:
Income from Continuing Operations	$	0.51	$	0.12	$	0.01	$	0.39
Gain from discontinued operations, net of income taxes		—		0.17
Net earnings from discontinued operations						0.09		0.12
Net Income		0.51		0.30		0.10		0.51
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.51	$	0.12	$	0.01	$	0.39
Gain from discontinued operations, net of income taxes		—		0.17
Net earnings from discontinued operations						0.09		0.12
Net Income		0.51		0.30		0.10		0.51

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

Table of Contents

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)



	As of		As of		As of		As of
	March 31,		December 31,		March 31,		December 31,
	2019		2018		2020		2019
Assets:
Current Assets:
Cash and cash equivalents	$	255	$	224	$	185	$	280
Investment in frontdoor, inc.		—		445
Receivables, less allowances of $20 and $21, respectively		183		186
Receivables, less allowances of $19 and $21, respectively						177		178
Inventories		46		45		41		46
Prepaid expenses and other assets		64		61		89		81
Current assets held for sale						883		45
Total Current Assets		548		962		1,376		629
Other Assets:
Property and equipment, net		201		201		192		205
Operating lease right-of-use assets		105		—		91		95
Goodwill		2,037		1,956		2,095		2,096
Intangible assets, primarily trade names, service marks and trademarks, net		1,603		1,588		1,149		1,169
Restricted cash		89		89		89		89
Notes receivable		44		43		30		32
Long-term marketable securities		17		21		12		13
Deferred customer acquisition costs		74		77		86		94
Other assets		52		87		81		72
Long-term assets held for sale						—		829
Total Assets	$	4,769	$	5,023	$	5,201	$	5,322
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	94	$	89	$	92	$	96
Accrued liabilities:
Payroll and related expenses		47		60		50		54
Self-insured claims and related expenses		55		58		84		72
Accrued interest payable		20		14		22		16
Other		57		61		95		82
Deferred revenue		100		95		108		107
Current portion of lease liability		17		—		19		19
Current portion of long-term debt		52		49		100		70
Current liabilities held for sale						48		40
Total Current Liabilities		443		425		617		557
Long-Term Debt		1,289		1,727		1,622		1,667
Other Long-Term Liabilities:
Deferred taxes		483		484		486		499
Other long-term obligations, primarily self-insured claims		156		182		180		158
Long-term lease liability		119		—		107		110
Long-term liabilities held for sale						—		9
Total Other Long-Term Liabilities		757		666		772		776
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Common stock $0.01 par value (authorized 2,000,000,000 shares with 147,605,165 shares issued and 136,046,435 outstanding at March 31, 2019 and 147,209,928 shares issued and 135,687,558 outstanding at December 31, 2018)		2		2
Common stock $0.01 par value (authorized 2,000,000,000 shares with 148,135,587 shares issued and 131,923,361 outstanding at March 31, 2020 and 147,872,959 shares issued and 135,408,054 outstanding at December 31, 2019)						2		2
Additional paid-in capital		2,318		2,309		2,341		2,334
Retained Earnings		226		156		305		291
Accumulated other comprehensive income		3		5
Less common stock held in treasury, at cost (11,558,730 shares at March 31, 2019 and 11,552,370 shares at December 31, 2018)		(269)		(267)
Accumulated other comprehensive (loss) income						(41)		9
Less common stock held in treasury, at cost (16,212,226 shares at March 31, 2020 and 12,464,905 shares at December 31, 2019)						(417)		(313)
Total Stockholders' Equity		2,280		2,204		2,190		2,322
Total Liabilities and Stockholders' Equity	$	4,769	$	5,023	$	5,201	$	5,322

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

‎

Table of Contents

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In millions)



							Retained		Accumulated														Retained		Accumulated
					Additional		Earnings		Other												Additional		Earnings		Other
			Common		Paid-in		(Accumulated		Comprehensive		Treasury				Total				Common		Paid-in		(Accumulated		Comprehensive		Treasury				Total
	Shares		Stock		Capital		Deficit)		Income		Shares		Amount		Equity
Balance December 31, 2017		147	$	2	$	2,321	$	(895)	$	5		(12)	$	(267)	$	1,167
Net income		—		—		—		40		—		—		—		40
Other comprehensive income, net of tax		—		—		—		—		10		—		—		10
Total comprehensive income		—		—		—		40		10		—		—		50
Cumulative effect of accounting changes		—		—		—		14		2		—		—		16
Exercise of stock options		—		—		2		—		—		—		—		2
Stock-based employee compensation		—		—		4		—		—		—		—		4
Balance March 31, 2018		147	$	2	$	2,328	$	(841)	$	17		(12)	$	(267)	$	1,239
																	Shares		Stock		Capital		Deficit)		(Loss) Income		Shares		Amount		Equity
Balance December 31, 2018		147	$	2	$	2,309	$	156	$	5		(12)	$	(267)	$	2,204		147	$	2	$	2,309	$	156	$	5		(12)	$	(267)	$	2,204
Net income		—		—		—		70		—		—		—		70		—		—		—		70		—		—		—		70
Other comprehensive loss, net of tax		—		—		—		—		(2)		—		—		(2)		—		—		—		—		(2)		—		—		(2)
Total comprehensive income (loss)		—		—		—		70		(2)		—		—		68		—		—		—		70		(2)		—		—		68
Exercise of stock options		—		—		5		—		—		—		—		5		—		—		5		—		—		—		—		5
Stock-based employee compensation		—		—		4		—		—		—		—		4		—		—		4		—		—		—		—		4
Repurchase of common stock		—		—		—		—		—		—		(2)		(2)		—		—		—		—		—		—		(2)		(2)
Balance March 31, 2019		148	$	2	$	2,318	$	226	$	3		(12)	$	(269)	$	2,280		148	$	2	$	2,318	$	226	$	3		(12)	$	(269)	$	2,280

Balance December 31, 2019																		148	$	2	$	2,334	$	291	$	9		(12)	$	(313)	$	2,322
Net income																		—		—		—		14		—		—		—		14
Other comprehensive loss, net of tax																		—		—		—		—		(50)		—		—		(50)
Total comprehensive income (loss)																		—		—		—		14		(50)		—		—		(36)
Exercise of stock options																		—		—		2		—		—		—		—		2
Stock-based employee compensation																		—		—		5		—		—		—		—		5
Repurchase of common stock																		—		—		—		—		—		(4)		(103)		(103)
Balance March 31, 2020																		148	$	2	$	2,341	$	305	$	(41)		(16)	$	(417)	$	2,190

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

Table of Contents

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)



	Three Months Ended				Three Months Ended
	March 31,				March 31,
	2019		2018		2020		2019
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	$	313	$	563	$	368	$	313
Cash Flows from Operating Activities from Continuing Operations:
Net Income		70		40		14		70
Adjustments to reconcile net income to net cash provided from operating activities:
Gain from discontinued operations, net of income taxes		—		(23)
Net earnings from discontinued operations						(13)		(16)
Depreciation expense		19		17		19		18
Amortization expense		6		3		9		5
Amortization of debt issuance costs		1		1		1		1
Amortization of lease right-of-use assets		5		—		5		5
Fumigation related matters		1		—		—		1
Payments on fumigation related matters		(1)		—		—		(1)
Realized (gain) on investment in frontdoor, inc.		(40)		—		—		(40)
Loss on extinguishment of debt		6		—		—		6
Deferred income tax provision		3		2		1		3
Stock-based compensation expense		4		4		4		4
Gain on sale of marketable securities		(1)		—		—		(1)
Restructuring charges		7		12
Payments for restructuring charges		(5)		(4)
Restructuring and other charges						4		6
Payments for restructuring and other charges						(1)		(5)
Acquisition-related costs						1		1
Payments for acquisition-related costs						(3)		(1)
Other		13		9		3		13
Change in working capital, net of acquisitions:
Receivables		8		14		(1)		9
Inventories and other current assets		(2)		(10)		5		(1)
Accounts payable		6		9		2		4
Deferred revenue		5		5		2		5
Accrued liabilities		(24)		(11)		(3)		(21)
Accrued interest payable		6		3		6		6
Current income taxes		4		12		—		4
Net Cash Provided from Operating Activities from Continuing Operations		90		84		55		73
Cash Flows from Investing Activities from Continuing Operations:
Property additions		(9)		(20)		(9)		(9)
Government grant fundings for property additions		—		1
Business acquisitions, net of cash acquired		(100)		(92)		(26)		(100)
Sales and maturities of available-for-sale securities		3		—
Origination of notes receivable		(25)		(23)		(7)		(24)
Collections on notes receivable		42		24		11		40
Net Cash Used for Investing Activities from Continuing Operations		(89)		(110)		(31)		(93)
Cash Flows from Financing Activities from Continuing Operations:
Borrowings of debt		600		—		—		600
Payments of debt		(572)		(95)		(25)		(572)
Repurchase of common stock		(2)		—		(103)		(2)
Issuance of common stock		5		2		3		5
Net Cash Provided from (Used for) Financing Activities from Continuing Operations		31		(93)
Net Cash (Used For) Provided from Financing Activities from Continuing Operations						(126)		31
Cash Flows from Discontinued Operations:
Cash (used for) provided from operating activities		(1)		58
Cash used for investing activities		—		(3)
Net Cash (Used for) Provided from Discontinued Operations		(1)		55
Cash Increase (Decrease) During the Period		31		(64)
Cash provided from operating activities						11		16
Cash provided from investing activities						—		3
Cash used for financing activities						—		—
Net Cash Provided from Discontinued Operations						10		19
Effect of Exchange Rate Changes on Cash						(2)		—
Cash (Decrease) Increase During the Period						(94)		31
Cash and Cash Equivalents and Restricted Cash at End of Period	$	344	$	500	$	274	$	344

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

Table of Contents

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 services to residential and commercial customers in the termite and pest control ~~cleaning and restoration markets, operating through an extensive service network of more than 8,000 company‑owned locations and franchise and license agreements.~~markets. Our mission is to ~~simplify and improve the quality of~~create cleaner, healthier, safer environments for our ~~customers’ lives by delivering services that help them protect and maintain their homes~~customers wherever they are – at home, at work or ~~businesses, typically their most highly valued assets.~~at play. Our portfolio of well‑recognized brands includes ~~AmeriSpec (home inspections)~~Terminix (residential termite and pest control), Terminix Commercial (commercial termite and pest control), Copesan (commercial national accounts pest management), ~~Furniture Medic (cabinet and furniture repair)~~Assured Environments (commercial pest control), ~~Merry Maids (residential cleaning)~~Gregory Pest Solutions (commercial pest control), ~~ServiceMaster Clean~~McCloud Services (commercial ~~cleaning), ServiceMaster Restore (restoration), Terminix (residential termite and~~ pest control) and ~~Terminix Commercial (commercial termite and~~Nomor (European pest control). All consolidated Company subsidiaries are wholly-owned. Intercompany transactions and balances have been eliminated.

The unaudited condensed consolidated financial statements have been prepared by us 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”). We recommend that the quarterly unaudited condensed consolidated financial statements be read in conjunction with the audited consolidated financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, ~~2018,~~2019, as filed with the SEC (the ~~“2018~~“2019 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 necessarily indicative of the results that might be achieved for any other interim period or for the full year.

~~American Home Shield Spin-off~~Exploration of Strategic Alternatives for ServiceMaster Brands

On ~~October 1, 2018,~~January 21, 2020, we ~~completed~~announced we are exploring strategic alternatives related to ServiceMaster Brands, including the ~~spin-off~~potential sale of the business. The divestiture group includes the assets and liabilities of the ServiceMaster Brands businesses, which is comprised of the Amerispec, Furniture Medic, Merry Maids, ServiceMaster Clean and ServiceMaster Restore brands, ServiceMaster Acceptance Corporation, our financing subsidiary which was historically reported as part of European Pest Control and Other, and the ServiceMaster trade name (the “ServiceMaster Brands Divestiture Group”). These operations were reported in our Annual Report on Form 10-K as part of continuing operations. Beginning with this quarterly report on Form 10-Q for the period ended March 31, 2020, the ServiceMaster Brands business is classified as held for sale and reported in discontinued operations for all periods presented.

Recent Events

During the three months ended March 31, 2020, the effects of COVID-19 and related actions to attempt to control its spread negatively impacted our business, primarily in the last few weeks of March. On March 11, 2020, the World Health Organization designated COVID-19 as a global pandemic, and governments around the world have mandated, and continue to introduce, orders to slow the transmission of the virus. States in the United States, including Tennessee, where we are headquartered, have declared states of emergency, and countries around the world, including the United States, have taken steps to restrict travel, instituted work from home policies, enacted temporary closures of businesses, issued quarantine orders and taken other restrictive measures in response to the COVID-19 pandemic. Uncertainty with respect to the economic effects of the pandemic and the restrictive policies to mitigate its spread have introduced significant volatility in the financial markets.

Within the United States, our residential and commercial pest control and cleaning and restore businesses have been designated essential businesses by the U.S. Department of Homeland Security, which allows us to continue to serve our customers while constantly ensuring the health and safety of our ~~American Home Shield business. The separation was effectuated through a pro rata dividend (the “Distribution”) to~~employees and our ~~stockholders of approximately 80.2% of the outstanding shares of common stock of frontdoor, inc. (“Frontdoor”), which was formed as a wholly owned subsidiary to hold~~customers. We have also continued serving our American Home Shield business. The Distribution was made to our stockholders of record as of the close of business on September 14, 2018 (the “Record Date”), and such stockholders received one share of Frontdoor common stock for every two shares of ServiceMaster common stock held as of the close of business on the Record Date.

~~In March 2019, we exchanged~~customers in all of the ~~19.8% of the outstanding shares of common stock of Frontdoor~~international markets in which we ~~retained for certain of our outstanding indebtedness, which obligations were subsequently cancelled and discharged upon delivery to us. See Note 12 for further discussion regarding this transaction.~~ operate.

~~The American Home Shield Segment is reported in this Quarterly Report on Form 10-Q in discontinued operations.~~

Note 2. Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in our ~~2018~~2019 Form 10-K. There have been no material changes to the significant accounting policies for the three months ended March 31, ~~2019,~~2020, other than those described below.

Adoption of New Accounting Standards

In ~~February~~June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) ~~2016-02, “Leases~~2016-13, “Financial Instruments-Credit Losses (Topic ~~842)~~326): Measurement of Credit Losses on Financial Instruments.” ~~(codified within FASB Accounting Standards Codification (“ASC”) 842) which is~~This ASU requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the ~~final standard on accounting~~current “incurred loss” model. These expected credit losses for ~~leases. In July 2018,~~financial assets held at the FASB issued ASU 2018-10 and ASU 2018-11, which amend ASU 2016-02 to provide companies an alternative transition method whereby it may elect to recognize and measure leases by applying the cumulative impact of adopting ASU 2016-02 to the opening retained earnings balance in the period of adoption, thereby removing the requirement that the financial statements of prior periods be restated. We utilized this alternative transition method. While both lessees and lessorsreporting date 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 this ASU are effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. We adopted the new lease guidance effective January 1, 2019, and elected the available practical expedients upon adoption. See Note 13 for further discussion of our lease assets and liabilities.

~~Table of Contents~~

~~The impacts of the adoption of this ASU on our condensed consolidated statements of financial position are as follows:~~

As previously reported,

Impact of adopting

(In millions)

December 31, 2018

ASC 842

January 1, 2019
Operating lease right-of-use assets

$
—

$
107

$
107
Finance lease assets, within Property and equipment, net

89

—

89
Total right-of-use assets

$
89

$
107

$
195
Other assets

87

—

86
Total assets

$
5,023

$
106

$
5,129

Current portion of long-term lease liability

$
—

$
15

$
15
Long-term lease liability

—

120

120
Current finance lease liability, within Current portion of long-term debt

31

—

31
Long-term finance lease liability, within Long-term debt

60

—

60
Total lease liabilities

$
90

$
135

$
225
Accrued liabilities, Other

61

(1)

60
Other long-term obligations, primarily self-insured claims

182

(28)

155
Total liabilities

$
2,818

$
106

$
2,925

~~In August 2017, the FASB issued ASU 2017-12, “Derivatives and Hedging (Topic 815): Targeted Improvements to Accounting for Hedging Activities~~.” The ASU simplifies certain aspects of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. The ASU generally requires the entire change in the fair value of a hedging instrument to be ~~presented~~based on historical experience, current conditions and reasonable and supportable forecasts. This ASU also requires enhanced disclosures relating to significant estimates and judgments used in ~~the same income statement line~~estimating credit losses, as well as the hedged item in order to align financial reporting of hedging relationships with economic results. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. credit quality. We adopted this ASU on January 1, ~~2019,~~2020, and it did not have a ~~significant~~material impact on our financial condition or the results of our operations.

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In ~~July~~August 2018, the FASB issued ASU ~~2018-09,~~2018-13, “Fair Value Measurement.” Under ASU 2018-13, entities are required to disclose the amount of total gains or losses for the period recognized in other comprehensive income that is attributable to fair value changes in assets and liabilities held as of the balance sheet date and categorized within Level 3 of the fair value hierarchy. Additionally, the ASU requires the disclosure the range and weighted average used to develop significant unobservable inputs and how the weighted average was calculated for fair value measurements categorized within Level 3 of the fair value hierarchy. We adopted this ASU on January 1, 2020, and it had no impact to our disclosures. See Note 17 for further discussion of our Level 3 investments.

In March 2020, the FASB issued ASU 2020-03, “Codification Improvements.” This ASU does not prescribe any new accounting guidance, but instead makes minor improvements and clarifications of several different FASB Accounting Standards Codification areas based on comments and suggestions made by various stakeholders. Certain updates are applicable immediately while others provide for a transition period to adopt as part of the next fiscal year beginning after December 15, ~~2018.~~2020. We adopted ~~this ASU on January 1, 2019,~~the updates applicable immediately in the first quarter of 2020, and it did not have a ~~significant~~material impact on our financial condition or the results of our operations. We are currently evaluating the impact the remaining aspects of this ASU will have on our financial statements.

In ~~August 2018,~~March 2020, the FASB issued ASU ~~2018-15,~~2020-04, “~~Intangibles—Goodwill~~Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting.” The ASU provides optional guidance to ease the potential burden in accounting for reference rate reform on financial reporting in response to the risk of cessation of the London Interbank Offered Rate (LIBOR). This amendment provides for optional expedients and ~~Other—Internal-Use Software: Customer’s~~exceptions for applying generally accepted accounting principles to contracts and hedging relationships that are affected by LIBOR and other reference rates. The ASU generally allows for a hedge accounting to continue if the hedge was highly effective or met other standards prior to reference rate reform. Entities are permitted to apply the amendments to all contracts, cash flow and net investment hedge relationships that exist as of March 12, 2020. The relief provided in this ASU is only available for a limited time, generally through December 31, 2022. Our debt agreement and interest rate swap that utilize LIBOR have not yet discontinued the use of LIBOR and, therefore, this ASU is not yet effective for us. To the extent our debt and interest rate swap arrangements change to another accepted rate, we will utilize the relief in this ASU to continue hedge accounting as we expect the remaining critical terms of our hedging relationship will still match.

Accounting Standards Issued But Not Yet Effective

In December 2019, the FASB issued ASU No. 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for ~~Implementation Costs Incurred in a Cloud Computing Arrangement that~~Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions. The ASU is ~~a Service Contract~~.” This ASU requires implementation costs incurred by customers in cloud computing arrangements (i.e., hosting arrangements) to be capitalized under the same premises of authoritative guidance for internal-use software, and deferred over the noncancellable term of the cloud computing arrangements plus any optional renewal periods that are reasonably certain to be exercised by the customer or for which the exercise is controlled by the service provider. The amendments in ASU 2018-15 are effective for fiscal years beginning after December 15, ~~2019, and~~2020, including interim periods within those fiscal ~~years. We~~years, and early ~~adopted this ASU on January 1, 2019, resulting in the capitalization of certain development costs, primarily related to our implementation of Salesforce to replace legacy operating systems.~~

~~In August 2018, the SEC adopted the final rule under SEC Release No. 33-10532, “Disclosure Update and Simplification~~,” amending certain disclosure requirements that were redundant, duplicative, overlapping, outdated or superseded. In addition, the amendments expanded the disclosure requirements on the analysis of stockholders’ equity for interim financial statements. Under the amendments, an analysis of changes in each caption of stockholders’ equity presented in the balance sheet must be provided in a note or separate statement. The analysis should present a reconciliation of the beginning balance to the ending balance of each period for which a statement of comprehensive incomeadoption is required to be filed. This final rule is effective on November 5, 2018, with relief provided for filings made shortly after the final rule’s effective date in SEC Question 105.09 of the Exchange Act Forms C&DIs. We adopted this final rule on November 5, 2018, and modified our disclosures as necessary, which included the presentation of a condensed consolidated statement of stockholders’ equity for the three months ended March 31, 2019 and 2018.

~~In October 2018, the FASB issued ASU No. 2018-16, “Inclusion of the Secured Overnight Financing Rate (SOFR) Overnight Index Swap (OIS) Rate as a Benchmark Interest Rate for Hedge Accounting Purposes~~,” which amends ASC 815, Derivatives and Hedging. This ASU adds the OIS rate based on SOFR to the list of permissible benchmark rates for hedge accounting purposes. We adopted the ASU on January 1, 2019, and it did not have a significant impact on our financial condition or the results of our operations.

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~~Accounting Standards Issued But Not Yet Effective~~

~~In June 2016, the FASB issued ASU 2016-13, “Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments.~~” This ASU requires entities to report “expected” credit losses on financial instruments and other commitments to extend credit rather than the current “incurred loss” model. These expected credit losses for financial assets held at the reporting date are to be based on historical experience, current conditions and reasonable and supportable forecasts. This ASU will also require enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality. The amendments in ASU 2016-13 will be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. ~~Subsequent to the issuance of ASU 2016-13, the FASB issued ASU 2018-19, “Codification Improvements to Topic 326, Financial Instruments —Credit Losses~~.” This ASU does not change the core principle of the guidance in ASU 2016-13; instead these amendments are intended to clarify and improve operability of certain topics included within the credit losses standard. This ASU will have the same effective date and transition requirements as ASU 2016-13.permitted. We are currently evaluating the impact the adoption of this ASU ~~2016-13 and ASU 2018-19~~ will have on our consolidated financial statements.

~~In August 2018, the FASB issued ASU 2018-13, “Fair Value Measurement.~~”This ASU modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. The amendments in ASU 2018-13 will be effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is permitted for the removed disclosures and delayed adoption is permitted until fiscal 2021 for the new disclosures. We are currently evaluating the disclosure changes necessary to our consolidated financial statements.

We have reviewed all other recently issued, but not yet effective, accounting pronouncements and do not expect the future adoption of any such pronouncements will have a material impact on our financial condition or the results of our operations.

Note 3. Revenues

~~Effective January 1, 2018, we adopted ASC 606, using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018.~~

The following table presents our reportable segment revenues from continuing operations, disaggregated by revenue source. We disaggregate revenue from contracts with customers into major product lines. We have determined that disaggregating revenue into these categories achieves the disclosure objective to depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. As noted in the business segment reporting information in Note 16, our reportable ~~segments are Terminix~~segment is Terminix. Revenue related to fumigation completion services and ~~ServiceMaster Brands.~~the related renewals (the “Fumigation Services”) is shown in Fumigation below and prior period amounts related to the Fumigation Services have been reclassified from Termite and Home Services to Fumigation to conform to the current period presentation. Additionally, prior period revenue for Residential Pest Control and Commercial Pest Control has been reclassified to conform to the current period presentation.


																	European Pest Control
													Terminix				and Other				Total
	Terminix				ServiceMaster Brands				Total				Three months ended				Three months ended				Three months ended
	Three months ended March 31,				Three months ended March 31,				Three months ended March 31,				March 31,				March 31,				March 31,
(In millions)		2019		2018		2019		2018		2019		2018		2020		2019		2020		2019		2020		2019
Major service line
Residential Pest Control	$	158	$	140	$	—	$	—	$	158	$	140	$	159	$	154	$	—	$	—	$	159	$	154
Commercial Pest Control		89		62		—		—		89		62		107		94		—		—		107		94
Termite and Home Services		156		151		—		—		156		151		148		146		—		—		148		146
Royalty Fees		—		—		34		33		34		33
Commercial Cleaning National Accounts		—		—		17		15		17		15
Sales of Products and Other		16		15		11		12		27		27		18		16		—		—		18		16
Fumigation														7		10		—		—		7		10
European Pest Control														—		—		18		—		18		—
Total	$	419	$	368	$	62	$	60	$	482	$	428	$	438	$	419	$	18	$	—	$	456	$	419

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Contract ~~balances~~Balances

Timing of revenue recognition may differ from the timing of invoicing to customers. Contracts with customers are generally for a period of one year or less and are generally renewable. We record a receivable related to revenue recognized on services once we have an unconditional right to invoice and receive payment in the future related to the services provided. All accounts receivables are recorded within Receivables, less allowances, on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position.~~Financial Position. The current portion of Notes receivable, which represents amounts financed for Terminix customers, ~~through our financing subsidiary,~~ are included within Receivables, less allowances, on the condensed consolidated statement of financial position and totaled ~~$40~~$32 million and ~~$42~~$38 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively.

Deferred revenue represents a contract liability and is recognized when cash payments are received in advance of the performance of services, including when the amounts are refundable. For Terminix, amounts are recognized as revenue upon completion of services. Terminix had deferred revenue of $93 million and $92 million as of March 31, 2020 and December 31, 2019, respectively.

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~~Deferred revenue by segment was as follows:~~

As of

As of
(In millions)

March 31, 2019

December 31, 2018
Terminix

$
96

$
91
ServiceMaster Brands(1)

11

11
Total

$
107

$
101

~~(1)~~

Includes approximately $7 million of ServiceMaster Brands Deferred revenue included within Other long-term obligations, primarily self-insurance claims on the condensed consolidated statement of financial position as of March 31, 2019 and December 31, 2018.

Changes in deferred revenue for the three months ended March 31, ~~2019~~2020 and ~~2018~~2019 were as ~~follows (in millions):~~

follows:


(In millions)		Deferred revenue
Balance, December 31, 2019		$	92
Deferral of revenue			31
Recognition of deferred revenue			(31)
Balance, March 31, 2020		$	93

Balance, December 31, 2018		$	~~101~~ 91
Deferral of revenue			39 38
Recognition of deferred revenue			~~(34)~~ (33)
Balance, March 31, 2019		$	~~107~~
	96
~~Balance, January 1, 2018~~		$	~~101~~
~~Deferral of revenue~~			42
~~Recognition of deferred revenue~~			~~(36)~~
~~Balance, March 31, 2018~~		$	~~107~~

Approximately $15 million of deferred revenue is recognized in the Condensed Consolidated Statements of Financial Position in European Pest Control and Other as of March 31, 2020 and December 31, 2019, primarily related to our acquisition of Nomor. This amount is being evaluated and is subject to change as we finalize our purchase accounting. See Note 14 for further discussion.

There was approximately ~~$27~~$24 million of revenue recognized in the three months ended March 31, 2020, that was included in the deferred revenue balance as of December 31, 2019. There was approximately $25 million of revenue recognized in the three months ended March 31, 2019, that was included in the deferred revenue balance as of December 31, 2018. There was approximately $29 million of revenue recognized in the three months ended March 31, 2018, that was included in the deferred revenue balance as of January 1, 2018, the date we adopted ASC 606.

Note 4. Restructuring and Other Charges

Restructuring Charges

We incurred restructuring charges of $7$4 million ($53 million, net of tax) and ~~$12~~$6 million ($94 million, net of tax) in the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. Restructuring charges were comprised of the following:



	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In millions)	2019		2018		2020		2019
Terminix(1)	$	2	$	2	$	1	$	2
ServiceMaster Brands(2)		1		—
Corporate(3)		4		3
Global Service Center relocation(4)		—		7
European Pest Control and Other⁽²⁾						3		4
Total restructuring charges	$	7	$	12	$	4	$	6

___________________________________

~~(1)~~

For the three months ended March 31, 2019 and 2018, these charges included $2 million in each period of severance and other costs. Severance and other costs of $2 million were unpaid and accrued as of March 31, 2019, which includes amounts previously accrued as of December 31, 2018.

~~(2)~~

~~For the three months ended March 31, 2019, these charges included $1 million of severance and other costs. Severance and other costs of $1 million were unpaid and accrued as of March 31, 2019.~~

~~(3)~~

We have historically made changes on an ongoing basis to enhance capabilities and reduce costs in our corporate functions that provide company-wide administrative services to support operations. For the three months ended March 31, 2019, these charges included $1 million of severance costs and $3 million of other costs to enhance capabilities and align corporate functions with those required to support our strategic needs after the American Home Shield spin-off. For the three months ended March 31, 2018, these charges include $3 million of severance and other costs. Corporate restructuring costs of $5 million were unpaid and accrued as of March 31, 2019, which includes amounts previously accrued as of December 31, 2018.

~~(4)~~

~~For the three months ended March 31, 2018, these charges included lease termination and other charges of $7 million related to the relocation of our Global Service Center.~~

(1)For the three months ended March 31, 2020 and 2019, these charges included $1 million and $2 million, respectively, of severance and other costs. Of this amount, $1 million was unpaid and accrued as of March 31, 2020.

(2)We have historically made changes on an ongoing basis to enhance capabilities and reduce costs in our corporate functions that provide company-wide administrative services to support operations. For the three months ended March 31, 2020 and 2019, these charges included $2 million and $1 million, respectively, of severance and other costs, including accelerated depreciation on systems we are replacing with the implementation of our new customer experience platform, and $1 million and $3 million, respectively, of other costs to enhance capabilities and align corporate functions with those required to support our strategic needs as a pure play pest control company after the potential sale of the ServiceMaster Brands business and after the American Home Shield spin-off, respectively. Of this amount, $3 million was unpaid and accrued as of March 31, 2020.

The pretax charges discussed above are reported in Restructuring and other charges in the unaudited ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income.~~Comprehensive Income.

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A reconciliation of the beginning and ending balances of accrued restructuring charges, which are included in Accrued liabilities—Other on the unaudited ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position,~~Financial Position, is presented as follows:



		Accrued
		Restructuring
(In millions)		Charges
Balance as of December 31, 2019		$	1
Costs incurred			4
Costs paid or otherwise settled			(1)
Balance as of March 31, 2020		$	4

Balance as of December 31, 2018		$	7
Costs incurred			7 6
Costs paid or otherwise settled			(7)
Balance as of March 31, 2019		$	7
	6
~~Balance as of December 31, 2017~~		$	6
~~Costs incurred~~			12
~~Costs paid or otherwise settled~~			~~(4)~~
~~Balance as of March 31, 2018~~		$	14

We expect substantially all of our accrued restructuring charges to be paid by December 31, ~~2019.~~2020.

Note 5. Discontinued Operations

~~American Home Shield Spin-off~~

~~On October 1, 2018,~~In January 2020, we ~~completed the spin-off~~announced that our board of ~~our American Home Shield business. The separation was effectuated through a Distribution~~directors committed to explore strategic alternatives related to our ~~stockholders~~ServiceMaster Brands segment in order to focus on our core pest control and termite business. We intend to complete our review of ~~approximately 80.2%~~strategic alternatives and consummate a transaction, which may include the sale of the ~~outstanding shares of common stock of Frontdoor, which was formed~~business, during the current year.

The ServiceMaster Brands Divestiture Group is classified as a wholly owned subsidiary to hold our American Home Shield business. The Distribution was made to our stockholders of record as of the close of business on September 14, 2018, and such stockholders received one share of Frontdoor common stockheld for ~~every two shares of ServiceMaster common stock held as of the close of business~~sale on the ~~Record Date.~~Condensed Consolidated Statements of Financial Position and as discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income and Condensed Consolidated Statements of Cash Flows for all periods presented. The net of assets and liabilities held for sale related to discontinued operations are required to be recorded at the lower of carrying value or fair value less costs to sell.

~~In March 2019, we exchanged all~~The following table summarizes the comparative financial results of discontinued operations which are presented as Net earnings from discontinued operations on the ~~19.8%~~Condensed Consolidated Statements of ~~the outstanding shares~~Operations and Comprehensive Income:


	Three Months Ended March 31,
(In millions)	2020		2019
Revenue	$	65	$	63
Cost of services rendered and products sold		29		25
Selling and administrative expenses		13		13
Amortization expense		1		1
Restructuring and other charges⁽¹⁾		4		1
Income before income taxes		17		22
Provision for income taxes		5		6
Net earnings from discontinued operations	$	13	$	16

___________________________________

(1)Includes $4 million of ~~common stock of Frontdoor we retained for certain of our outstanding indebtedness, which obligations were subsequently cancelled~~professional fees and ~~discharged upon delivery to us.~~ ~~See Note 12 for further discussion regarding this transaction.~~

~~The American Home Shield Segment is reported~~other costs incurred in ~~this Quarterly Report on Form 10-Q in discontinued operations.~~

In connection with the ~~American Home Shield spin-off, the Company~~strategic evaluation.

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The total assets and ~~Frontdoor entered into (1) a separation and distribution agreement containing key provisions relating~~liabilities held for sale related to the separation of Frontdoor effectuated through the Distribution, as well as insurance coverage, non-competition, indemnification and other matters, (2) an employee matters agreement allocating liabilities and responsibilities relating to employee benefit plans and programs and other related matters and (3) a tax matters agreement governing the respective rights, responsibilities and obligations of the parties thereto with respect to taxes, including allocating liabilities for income taxes attributable to Frontdoor and its subsidiaries generally to the Company for tax periods (or portions thereof) ending on or before October 1, 2018, and generally to Frontdoor for tax periods (or portions thereof) beginning after that date.

~~The charges for the transition services~~discontinued operations are designed to allow us 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 will terminate at various specified times, and in no event later than December 31, 2019. Frontdoor may terminate the transition services agreement (or certain services under the transition services agreement) for convenience upon 90 days written notice, in which case Frontdoor will be required to reimburse us for early termination costs. Under this transition services agreement,stated separately in the ~~three months ended~~Condensed Consolidated Statements of Financial Position and comprised the following items:


	As of		As of
(In millions)	March 31, 2020		December 31, 2019
Assets:
Current Assets:
Receivables, less allowances of $3 and $3, respectively	$	43	$	40
Inventories		2		2
Prepaid expenses and other assets		4		3
Total Current Assets		49		45
Other Assets:
Property and equipment, net		8		8
Operating lease right-of-use assets		2		2
Goodwill		178		183
Intangible assets, primarily trade names, service marks and trademarks, net		626		622
Notes receivable		12		13
Deferred customer acquisition costs		1		1
Other assets		1		1
Total Assets	$	877	$	875
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	8	$	8
Accrued liabilities:
Payroll and related expenses		2		5
Other		24		23
Deferred revenue		3		4
Current portion of lease liability		1		1
Total Current Liabilities		38		40
Other Long-Term Liabilities:
Deferred taxes		2		1
Other long-term obligations, primarily self-insured claims		6		6
Long-term lease liability		2		2
Total Liabilities	$	48	$	50

All assets and liabilities held for sale were classified as Current assets held for sale and Current liabilities held for sale as of March 31, ~~2019, we recorded approximately $1 million~~2020 in the Condensed Consolidated Statements of ~~fees from Frontdoor, which~~Financial Position as it is probable the sale will occur within one year.

The following selected financial information of ServiceMaster Brands is included ~~net of costs incurred, in Selling and administrative expenses~~ in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations and comprehensive income. Payments received~~Cash Flows as cash flows from discontinued operations:


	Three Months Ended March 31,
(In millions)	2020		2019
Depreciation	$	—	$	1
Amortization		1		1
Capital expenditures		(1)		(1)

In addition, during the three months ended March 31, ~~2019 totaled approximately $1 million.~~

~~The~~2020, the Company began marketing its corporate aircraft for sale and ~~Frontdoor also entered into a sublease agreement~~reclassified its book value of $6 million to Current assets held for the space Frontdoor retained in our Global Service Center and Memphis customer care center after the spin-off. We recognized approximately $1 million of rental income and $3 million of other cost reimbursements related to these sublease agreements during the three months ended March 31, 2019, recorded as a reduction of Selling and administrative expensessale on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations and comprehensive income. Payments received under the sublease agreements during the three months ended March 31, 2019 totaled approximately $~~2 ~~million.~~

The historical results of the American Home Shield business, including the results of operations, cash flows and related assets and liabilities, are reported as discontinued operations for all periods presented herein.

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Financial ~~Information for Discontinued Operations~~Position.

~~Gain from discontinued operations, net of income taxes, for all periods presented includes the operating results of Frontdoor and previously sold businesses.~~


	~~Three Months Ended~~
~~(In millions)~~	~~March 31, 2018~~
~~Revenue~~	$	~~247~~
~~Cost of services rendered and products sold~~		~~135~~
~~Operating expenses(1)~~		81
~~Interest and net investment income~~		~~(1)~~
~~Income before income taxes~~		31
~~Provision for income taxes~~		8
~~Gain from discontinued operations, net of income taxes~~	$	23

~~(1)~~

~~Includes spin-off transaction costs incurred of $7 million for the three months ended March 31, 2018.~~

~~The following selected financial information of American Home Shield is included in the statements of cash flows:~~


	~~Three Months Ended~~
~~(In millions)~~	~~March 31, 2018~~
~~Depreciation~~	$	2
~~Amortization~~		2
~~Capital expenditures~~		~~(4)~~

Note 6. Commitments and Contingencies

We carry insurance policies on insurable risks at levels that we believe to be appropriate, including workers’ compensation, automobile and general liability risks. We purchase insurance policies from third-party insurance carriers, which typically incorporate significant deductibles or self-insured retentions. We are 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 our accrual for self-insured claims, we use 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. We adjust our 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.

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In the normal course of business, we periodically enter into agreements that incorporate indemnification provisions. While the maximum amount to which we may be exposed under such agreements cannot be estimated, we do not expect these guarantees and indemnifications to have a material effect on our business, financial condition, results of operations or cash flows.

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~~Condensed Consolidated Statements of ~~financial position,~~Financial Position, net of insurance recoverables, which are included in Prepaid expenses and other assets and Other assets on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position,~~Financial Position, is presented as follows:



		Accrued
		Self-insured
(In millions)		Claims, Net
Balance as of December 31, 2019		$	111
Provision for self-insured claims			13
Cash payments			(8)
Balance as of March 31, 2020		$	116

Balance as of December 31, 2018		$	111
Provision for self-insured claims			8
Cash payments			(6)
Balance as of March 31, 2019		$	~~113~~
	113
~~Balance as of December 31, 2017~~		$	~~115~~
~~Provision for self-insured claims~~			10
~~Cash payments~~			~~(10)~~
~~Balance as of March 31, 2018~~		$	~~114~~

Termite damage ~~claim accruals in~~claims include circumstances when a customer notifies us that they have experienced damage to their property and we reach an agreement to remediate that damage (a “Non-litigated Claim”); and circumstances when we do not reach an agreement with a customer to remediate the ~~Terminix business are recorded based on both the historical rates of claims incurred within a contract year~~damage and ~~the cost per claim. Current activity could differ causing a change in estimates.~~

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that customer initiates litigation or arbitration proceedings (a “Litigated Claim”). We have certain liabilities with respect to existing or potential claims, lawsuits and other ~~proceedings.~~proceedings, including Litigated Claims. We accrue 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.

During the fourth quarter of the year ended December 31, 2019, we recorded a change in estimate of our reserve for termite damages for Litigated Claims and Non-Litigated Claims in the amount of $53 million.

A reconciliation of beginning and ending accrued Litigated Claims, which are included in Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims on the Condensed Consolidated Statements of Financial Position, and Non-Litigated Claims, which are included in Accrued liabilities—Self-insured claims and related expenses on the Condensed Consolidated Statements of Financial Position, is presented as follows:


	Accrued
	Termite Damage
(In millions)	Claims
Balance as of December 31, 2019	$	80
Provision for termite damage claims		12
Cash payments		(11)
Balance as of March 31, 2020	$	81

Balance as of December 31, 2018	$	28
Provision for termite damage claims		6
Cash payments		(11)
Balance as of March 31, 2019	$	24

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 a 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 amount and extent of any 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 fumigation matter, which could be material, is not currently known, and any such further penalties, fines, sanctions, costs or damages would not be covered under our general liability insurance policies.

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collective and class actions, which are subject to court or other approvals, and which require compliance with the terms of the agreements. If one or more of our settlements are not finally approved and implemented, 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.

Note 7. Goodwill and Intangible Assets

Goodwill and indefinite-lived intangible assets, primarily trade names, 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. Our annual assessment date is October 1. There were no0 impairment charges recorded in the three months ended March 31, ~~2019~~2020 and ~~2018.~~2019. There were no0 accumulated impairment losses recorded as of March 31, ~~2019.~~2020. The table below summarizes the goodwill balances for continuing operations by reportable ~~segment:~~segment and European Pest Control and Other:


			European Pest
(In millions)	Terminix		Control and Other⁽¹⁾		Total
Balance as of December 31, 2019	$	1,946	$	150	$	2,096
Acquisitions		11		—		11
Impact of foreign exchange rates		(2)		(10)		(12)
Balance as of March 31, 2020	$	1,955	$	140	$	2,095

___________________________________

ServiceMaster

(In millions)

Terminix

Brands

Total
Balance as of December 31, 2018

$
1,781

$
175

$
1,956
Acquisitions

80

—

80
Balance as of March 31, 2019

$
1,861

$
175

$
2,037

(1)European Pest Control and Other includes goodwill related to pest control operations in Europe. See Note 14 for further discussion of these acquisitions and purchase price allocations.

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



	As of March 31, 2019						As of December 31, 2018						As of March 31, 2020						As of December 31, 2019
			Accumulated						Accumulated						Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net		Gross		Amortization		Net		Gross		Amortization		Net
Trade names(1)	$	1,482	$	—	$	1,482	$	1,482	$	—	$	1,482	$	888	$	—	$	888	$	888	$	—	$	888
Customer relationships		486		(409)		76		469		(406)		64		649		(429)		219		659		(423)		236
Franchise agreements		88		(73)		15		88		(73)		15		—		—		—		—		—		—
Other		66		(36)		30		62		(35)		27		77		(35)		41		79		(34)		45
Total	$	2,122	$	(519)	$	1,603	$	2,101	$	(513)	$	1,588	$	1,614	$	(465)	$	1,149	$	1,626	$	(457)	$	1,169

___________________________________

~~(1)~~

~~Not subject to amortization.~~

(1)Not subject to amortization.

For the existing intangible assets, we anticipate amortization expense for the remainder of ~~2019~~2020 and each of the next five years of ~~$17~~$26 million, ~~$21~~$35 million, $33 million, $29 million, $20 million ~~$18~~and $11 million, ~~$15 million and $9 million,~~ respectively.

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Note 8. Stock-Based Compensation

For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, we recognized stock-based compensation expense of $4 million ($3 million, net of tax) and $4 million ($3 million, net of tax), respectively. These charges are recorded within Selling and administrative expenses in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income.~~Comprehensive Income.

As of March 31, ~~2019,~~2020, there ~~was $38~~were $48 million of total unrecognized compensation costs related to non-vested stock options, restricted stock units (“RSUs”) and performance share units granted under the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “Omnibus Incentive Plan”). These remaining costs are expected to be recognized over a weighted-average period of ~~2.51~~2.30 years.

On February 24, 2015, our board of directors approved and recommended for approval by our stockholders the ServiceMaster Global Holdings, Inc. Employee Stock Purchase Plan (“Employee Stock Purchase Plan”), which became effective for offering periods commencing July 1, 2015. The Employee Stock Purchase Plan was intended to qualify for the favorable tax treatment under Section 423 of the Code. Under the plan, eligible employees of the Company may purchase common stock, subject to IRS limits, during pre-specified offering periods at a discount established by the Company not to exceed 10 percent of the then current fair market value. On April 27, 2015, our stockholders approved the Employee Stock Purchase Plan with a maximum of ~~one~~1 million shares of common stock authorized for sale under the plan. On November 3, 2015, we filed a registration statement on Form S-8 under the Securities Act to register the one million shares of common stock that may be issued under the Employee Stock Purchase Plan and, as a result, all shares of common stock acquired under the Employee Stock Purchase Plan will be freely tradable under the Securities Act, unless purchased by our affiliates. Our Compensation Committee amended the Employee Stock Purchase Plan in February 2019

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to allow for more frequent purchase periods and to change the allowed 10 percent discount to a company match of 10 percent of employee contributions. The authorized number of shares remaining in the Employee Stock Purchase Plan was not changed from 843,584 and the expiration date of the Employee Stock Purchase Plan was not changed from April 27, 2025.

~~Stock Options~~

~~In February 2019, our board~~ As of ~~directors approved an amended~~March 31, 2020 there were 814,400 shares available for issuance under the Employee Stock Option Agreement, whereby all options granted in 2019 and thereafter will generally vest in three equal annual installments (rather than four), have a term of eight years (rather than 10 years) and remain subject to an employee’s continued employment. The three-year vesting period is the requisite service period over which compensation cost will be recognized on a straight-line basis for all grants. All options issued are accounted for as equity-classified awards.Purchase Plan.

On January 1, 2019, in connection with an acquisition, we granted 136,092 RSUs to an executive key to our urban markets strategy. All such RSUs cliff vest on the third anniversary of their grant and are subject to the executive’s continued employment.

Note 9. Comprehensive (Loss) Income

Comprehensive (loss) income, which primarily includes net income, unrealized gain (loss) on derivative instruments and the effect of foreign currency translation, ~~gain,~~ is ~~disclosed~~included in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income. Unrealized gains on marketable securities~~Comprehensive Income.

In the first quarter of $32019, we terminated $441 million ~~($2~~of our then-existing $650 million ~~net~~interest rate swap, receiving $11 million from the counterparty. We terminated the remaining $209 million of ~~tax) were included~~our then-existing $650 million interest rate swap later in 2019, receiving $1 million from the counterparty. The fair value of the terminated agreement of $11 million as of March 31, 2019, and $12 million as of December 31, 2019, is recorded within accumulated other comprehensive (loss) income ~~prior to our adoption~~on the Condensed Consolidated Statements of ASU 2016-01 on January 1, 2018. Subsequent to the adoption, these unrealized gains have been reclassified to retained earnings. Additionally, stranded tax effects of approximately $4 million resulting from the corporate income tax rate change in U.S. Tax Reform were reclassified upon our adoption of ASU 2018-02 on January 1, 2018. The income tax effects remaining in Accumulated other comprehensive incomeFinancial Position and will be ~~released~~amortized into ~~earnings as~~interest expense over the ~~related pre-tax amounts are reclassified to earnings.~~original term of the agreement. The remaining unamortized balance at March 31, 2020 is $7 million.

~~Table of Contents~~

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



			Unrealized
	Unrealized		Gains (Losses)						Unrealized
	Gains		on Available		Foreign				Gains		Foreign
	(Losses) on		-for-Sale		Currency				(Losses) on		Currency
(In millions)	Derivatives		Securities		Translation		Total		Derivatives		Translation		Total
Balance as of December 31, 2018	$	20	$	—	$	(15)	$	5
Balance as of December 31, 2019									$	13	$	(5)	$	9
Other comprehensive income before reclassifications:
Pre-tax amount		(7)		—		1		(7)		(45)		(15)		(61)
Tax provision		5		—		—		5		12		—		12
After-tax amount		(2)		—		1		(1)		(34)		(15)		(49)
Amounts reclassified from accumulated other comprehensive income(1)		—		—		—		—
Net current period other comprehensive income		(3)		—		1		(2)
Balance as of March 31, 2019	$	17	$	—	$	(14)	$	3
Amounts reclassified from accumulated other comprehensive (loss) income⁽¹⁾										(1)		—		(1)
Net current period other comprehensive (loss) income										(34)		(15)		(50)
Balance as of March 31, 2020									$	(21)	$	(20)	$	(41)

Balance as of December 31, 2017	$	16	$	2	$	(12)	$	5
Reclassification of unrealized gain/loss on equity securities		—		(2)		—		(2)
Reclassification of tax rate change		3		1		—		4
As revised, January 1, 2018		19		—		(12)		7
Balance as of December 31, 2018									$	20	$	(15)	$	5
Other comprehensive income before reclassifications:
Pre-tax amount		13		—		—		13		(7)		1		(7)
Tax benefit		3		—		—		3		5		—		5
After-tax amount		9		—		—		9		(2)		1		(1)
Amounts reclassified from accumulated other comprehensive income(1)		1		—		—		1
Net current period other comprehensive income		10		—		—		10
Balance as of March 31, 2018	$	29	$	—	$	(12)	$	17
Amounts reclassified from accumulated other comprehensive (loss) income⁽¹⁾										—		—		—
Net current period other comprehensive (loss) income										(3)		1		(2)
Balance as of March 31, 2019									$	17	$	(14)	$	3

___________________________________

(1)Amounts are net of tax. Reclassifications out of accumulated other comprehensive (loss) income included the following components for the periods indicated.


	Amounts Reclassified from Accumulated
	Other Comprehensive (Loss) Income
	Three Months Ended
	March 31,
(In millions)	2020		2019
Gains (losses) on derivatives:
Fuel swap contracts	$	—	$	(1)
Interest rate swap contracts		1		1
Net gains (losses) on derivatives		—		—
Impact of income taxes		—		—
Total reclassifications for the period	$	1	$	—

‎

~~(1)~~

~~Amounts are net of tax. Reclassifications out of accumulated other comprehensive income included the following components for the periods indicated.~~

Amounts Reclassified from Accumulated

Other Comprehensive Income

Three Months Ended

March 31,

(In millions)

2019

2018

Gains (losses) on derivatives:

Fuel swap contracts

$
(1)

$
—

Interest rate swap contracts

1

(1)

Net losses on derivatives

—

(1)

Impact of income taxes

—

—

Total reclassifications related to derivatives

$
—

$
(1)

Total reclassifications for the period

$
—

$
(1)

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Note 10. Supplemental Cash Flow Information

Supplemental information relating to the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~cash flows~~Cash Flows is presented in the following table:



	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In millions)	2019		2018		2020		2019
Cash paid for or (received from):
Interest expense(1)	$	19	$	30	$	16	$	19
Interest and dividend income		(1)		—		(1)		(1)
Income taxes, net of refunds		1		—		2		1

~~(1)~~

~~For the three months ended March 31, 2019, excludes $11 million received in connection with the partial termination of the interest rate swap.~~

___________________________________

~~Table~~(1)For the three months ended March 31, 2019, excludes $11 million received in connection with our partial terminations of ~~Contents~~the then-existing interest rate swap.

As of March 31, 2020 and December 31, 2019, Cash and cash equivalents of $185 million and $280 million, respectively, and Restricted cash of $89 million and $89 million, respectively, as presented on the condensed consolidated statements of financial position represent the amounts comprising Cash and cash equivalents and Restricted cash of $274 million and $368 million, respectively, on the Condensed Consolidated Statement of Cash Flows.

As of March 31, 2019 and December 31, 2018, Cash and cash equivalents of $255 million and $224 million, respectively, and Restricted cash of $89 million and $89 million, respectively, as presented on the condensed consolidated statements of financial position represent the amounts comprising Cash and cash equivalents and restricted cash of $344 million and $313 million, respectively, on the ~~condensed consolidated statement~~Condensed Consolidated Statement of ~~cash flows.~~Cash Flows.

As of March 31, 2018 and December 31, 2017, Cash and cash equivalents of $121 million and $192 million, respectively, and Restricted cash of $89 million and $89 million, respectively, as presented on the condensed consolidated statements of financial position, and cash related to discontinued operations of $290 million and $282 million, respectively, represent the amounts comprising Cash and cash equivalents and restricted cash of $500 million and $563 million, respectively, on the condensed consolidated statement of cash flows.

~~We acquired $10 million and $3 million of property and equipment through finance leases and other~~The non-cash ~~financing~~lease transactions are described in ~~each of the three months ended March 31, 2019 and 2018, respectively, which have been excluded from the condensed consolidated statements of cash flows as non-cash investing and financing activities.~~

Note 13. The proceeds from the Frontdoor debt issuances described in Note 12 were retained by the lender in satisfaction of the short-term credit facility and have been excluded from the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~cash flows~~Cash Flows as non-cash financing activities.

~~The non-cash lease transactions resulting from our adoption of ASC 842 are described in Note 13.~~

Note 11. 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~~Condensed Consolidated Statements of ~~financial position.~~Financial Position. As of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, our marketable securities consisted primarily of ~~a deferred compensation trust~~common debt securities (“Debt securities”) and common equity securities (“Equity securities”). The amortized cost, fair value and gross realized and unrealized gains and losses of our short- and long-term investments in Debt and Equity securities are as follows:



			Gross Realized		Gross Realized						Gross Realized		Gross Realized
	Amortized		and Unrealized		and Unrealized		Fair		Amortized		and Unrealized		and Unrealized		Fair
(In millions)	Cost		Gains		Losses		Value		Cost		Gains		Losses		Value
March 31, 2019:
March 31, 2020:
Debt securities	$	4	$	—	$	—	$	4	$	4	$	—	$	—	$	4
Equity securities		12		1		—		13		8		—		—		8
Total securities	$	16	$	1	$	—	$	17	$	12	$	—	$	—	$	12
December 31, 2018:
December 31, 2019:
Debt securities	$	4	$	—	$	—	$	4	$	4	$	—	$	—	$	4
Equity securities		15		1		—		16		9		—		—		9
Total securities	$	19	$	1	$	—	$	21	$	13	$	—	$	—	$	13

~~Following the adoption of ASU 2016-01, we~~We account for Equity securities at fair value with adjustments to fair value recognized in Interest and net investment income in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income.~~Comprehensive Income. For the three months ended March 31, 2020, approximately $1 million of unrealized loss were recognized within Interest and net investment income in the Condensed Consolidated Statements of Operations and Comprehensive Income. There were no0 unrealized gains or losses recognized for the three months ended March 31, 2019. For the three months ended March 31, 2018, approximately $1 million of unrealized losses were recorded within Interest and net investment income in the condensed consolidated statements of operations and comprehensive income.

We periodically review our Debt securities to determine whether ~~there has been~~ an ~~other than temporary decline in value.~~allowance for credit losses is necessary. There were ~~no impairment charges~~0 credit losses due to declines in the value of these investments recognized for the three months ended March 31, 2020 and 2019.

Additionally, we hold minority interests in several strategic investments that do not have readily determinable fair values and are recorded at cost and are remeasured upon the occurrence of observable price changes or impairments. We account for these investments at fair value with adjustments to fair value recognized in ~~unrealized gain (loss) on investments in~~ our ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and Comprehensive Income within Interest and net investment income. The investments are included within Other Assets on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position.~~Financial Position. At March 31, ~~2019,~~2020, the carrying amount of these investments iswas $4 million.

1615

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Note 12. Long-Term Debt

Long-term debt is summarized in the following table:



	As of		As of
	March 31,		December 31,
(In millions)	2020		2019
Senior secured term loan facility maturing in 2026⁽¹⁾	$	592	$	593
Revolving credit facility maturing 2024		—		—
5.125% notes maturing in 2024⁽²⁾		742		742
7.45% notes maturing in 2027⁽³⁾		167		167
7.25% notes maturing in 2038⁽³⁾		40		40
Vehicle finance leases⁽⁴⁾		94		95
Other⁽⁵⁾		86		100
Less current portion⁽⁶⁾		(100)		(70)
Total long-term debt	$	1,622	$	1,667

__________________________________

(1)As of March 31, 2020 and December 31, 2019, presented net of $6 million in unamortized debt issuance costs in each period and $1 million of unamortized original issue discount in each period.

As of

As of

March 31,

December 31,
(In millions)

2019

2018
Senior secured term loan facility maturing in 2023(1)

$
207

637
Revolving credit facility maturing in 2021

—

—
5.125% notes maturing in 2024(2)

741

740
7.45% notes maturing in 2027(3)

166

172
7.25% notes maturing in 2038(3)

40

42
Vehicle finance leases(4)

92

90
Other(5)

95

94
Less current portion

(52)

(49)
Total long-term debt

$
1,289

$
1,727

(2)As of March 31, 2020 and December 31, 2019, presented net of $8 million in unamortized debt issuance costs in each period.

~~(1)~~

As of March 31, 2019 and December 31, 2018, presented net of $2 million and $5 million, respectively, in unamortized debt issuance costs. As of December 31, 2018, presented net of $1 million in unamortized original issue discount paid.

~~(2)~~

~~As of March 31, 2019 and December 31, 2018, presented net of $9 million and $10 million, respectively, in unamortized debt issuance costs.~~

~~(3)~~

As of March 31, 2019 and December 31, 2018, collectively presented net of $31 million and $33 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

~~(4)~~

We have entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things, allows us to obtain fleet vehicles through a leasing program. All leases under the Fleet Agreement are finance 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.

~~(5)~~

As of March 31, 2019 and December 31, 2018, includes approximately $83 million and $82 million, respectively, of future payments in connection with our acquisitions of Copesan and other companies as further described in Note 14.

(3)As of March 31, 2020 and December 31, 2019, collectively presented net of $27 million and $28 million, respectively, of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates shown above.

(4)We have entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things, allows us to obtain fleet vehicles through a leasing program. All leases under the Fleet Agreement are finance 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.

(5)As of March 31, 2020 and December 31, 2019, includes approximately $86 million and $91 million, respectively, of future payments in connection with acquisitions.

(6)The increase in the current portion of long-term debt consists of deferred purchase price and earnout payments on acquisitions due within 12 months.

Term Loan Facility

On November 5, 2019, we closed on an amended $600 million Term Loan B due 2026, as well as a $400 million revolving credit agreement due 2024 (the “Amended Term Loan Facility”).

The interest rates applicable to the loans under the Amended Term Loan Facility are based on a fluctuating rate of interest measured by reference to either, at the borrower’s option, (i) an adjusted LIBOR plus 1.75% per annum, or (ii) an alternate base rate (“ABR”) plus 0.75% per annum.Voluntary prepayments of borrowings under the Amended Term Loan Facility are permitted at any time, in minimum principal amounts, without premium or penalty unless such prepayment is in connection with a repricing transaction on or prior to the 6-month anniversary of the closing date of the Amended Credit Facilities, in which case a 1% premium shall be required to be paid.

The Term Loan Facility and the guarantees thereof are secured by substantially all of the tangible and intangible assets of the Company and certain of our domestic subsidiaries, excluding certain subsidiaries subject to regulatory requirements in various states, including pledges of all the capital stock of all direct domestic subsidiaries (other than foreign subsidiary holding companies, which are deemed to be foreign subsidiaries) owned by the Company or any Guarantor and of up to 65% of the capital stock of each direct foreign subsidiary owned by the Company or any Guarantor. The Term Loan Facility security interests are subject to certain exceptions, including, but not limited to, exceptions for (i) equity interests, (ii) indebtedness or other obligations of subsidiaries, (iii) real estate or (iv) any other assets, if the granting of a security interest therein would require that the 7.45% notes maturing in 2027 or 7.25% notes maturing in 2038 be secured. The Term Loan Facility is secured on a pari passu basis with the security interests created in the same collateral securing the Revolving Credit Facility.

Extinguishment of Debt and Repurchase of Notes

On March 12, 2019, in connection with the spin-off of the American Home Shield segment, we borrowed an aggregate principal amount of $600 million under a short-term credit facility ~~the~~to effectuate a debt-for-equity exchange of our Frontdoor retained shares. The proceeds of ~~which~~this short-term credit facility were used to repay ~~$434~~$468 million aggregate principal amount of term loans

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outstanding under our senior secured term loan ~~facility.~~facility in March and April of 2019. Such ~~prepayment~~prepayments resulted in a loss on extinguishment of debt of $4 million for the three months ended March 31, 2019.

On March 27, 2019, we completed a non-cash debt-for-equity exchange in which we exchanged the 16.7 million ~~shares or 19.8% of the outstanding~~retained shares of Frontdoor common stock (proceeds of $486 million, net), plus used $114 million of proceeds from the short-term credit facility, to extinguish $600 million of our indebtedness under the short-term credit facility. The sale of the Frontdoor common stock resulted in a realized gain of $40 million, which was recorded within Realized (gain) on investment in frontdoor, inc. on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income~~Comprehensive Income for the three months ended March 31, 2019.

~~The proceeds from and the use of proceeds in connection with the debt-for-equity exchange are as follows:~~


~~(in millions)~~
~~Proceeds from the short-term credit facility~~	$	~~600~~
~~Proceeds from the Frontdoor common shares retained, net of $16 million of fees paid~~		~~486~~
~~Total proceeds~~		~~1,086~~
~~Repayment of the term loan facility~~		~~(434)~~
~~Debt-for-equity exchange using net proceeds from the Frontdoor common shares retained~~		~~(486)~~
~~Use of cash to retire short-term credit facility~~		~~(114)~~
~~Total uses~~		~~(1,034)~~
~~Excess cash~~	$	52

Also, on March 27, 2019, we terminated $441 million of our interest rate swap agreement, receiving $11 million in connection with the termination. The fair value of the terminated portion of the agreement of $11 million is recorded within accumulated other comprehensive income on the condensed consolidated statements of financial position and will be amortized into interest expense over the original term of the agreement.

~~Table of Contents~~

In March 2019, we purchased approximately $7 million in aggregate principal amount of our 7.45% notes maturing in 2027 at a price of 105.5% and $3 million in aggregate principal amount of our 7.25% notes maturing in 2038 at a price of 99.5% using available cash. The repurchased notes were delivered to the trustee for cancellation. In connection with these partial repurchases, we recorded a loss on extinguishment of debt of $2 million in the three months ended March 31, 2019.

In April 2019, we purchased $1 million in aggregate principal amount of our 7.45% notes maturing in 2027 at a price of 105.5%.

Interest Rate Swaps

We have historically entered into interest rate swap agreements. Under the terms of these agreements, we pay a fixed rate of interest on the stated notional amount and ~~prepaid $38~~receive a floating rate of interest (based on one month LIBOR) on the stated notional amount. Therefore, during the term of the swap agreements, the effective interest rate on the portion of the term loans equal to the stated notional amount is fixed at the stated rate in the interest rate swap agreements plus the incremental borrowing margin.

On November 5, 2019, we entered into a seven year interest swap agreement effective November 5, 2019. The notional amount of the agreement is $550 million. Under the terms of the agreement, we will pay a fixed rate of interest of 1.615% on the $550 million notional amount, and we will receive a floating rate of interest (based on one-month LIBOR, subject to a floor of 0 percent) on the notional amount. Therefore, during the term of the agreement, the effective interest rate on $550 million of ~~our senior secured term loan facility.~~ the new Term Loan B is fixed at a rate of 3.365%.

In connection with the ~~prepayment on our senior secured term loan facility, we terminated $38 million~~repayments of our ~~interest rate swap.~~

~~On March 1, 2018, we paid $79 million upon~~previous Term Loan B due 2023 in 2019, in the ~~maturity of our 2018 7.10% notes.~~

~~Interest Rate Swaps~~

~~Interest rate swap agreements in effect as of~~three months ended March 31, 2019, ~~are as follows:~~

Trade Date

Effective
Date

Expiration
Date

Notional
Amount(1)

Fixed
Rate(2)

Floating
Rate
November 7, 2016

November 8, 2016

November 30, 2023

$209,250

1.493
%
One month LIBOR

~~(1)During the first quarter of 2019, concurrent with the debt-for-equity exchange which reduced our term loan facility by $434 million,~~ we terminated $441 million of our then existing $650 million interest rate swap ~~resulting~~agreement, receiving $11 million from the counterparty. We terminated an additional $38 million of the remaining interest rate swap in ~~a notional amount~~the three months ended June 30, 2019, receiving $1 million from the counterparty. The remaining $171 million interest rate swap was terminated in November 2019 upon the final repayment of ~~$209~~our previous Term Loan B due 2023, with 0 proceeds from the counterparty. The fair value of the terminated agreement of $12 million is recorded within accumulated other comprehensive income on the Condensed Consolidated Statements of Financial Position and will be amortized into interest expense over the original term of the agreement. The remaining unamortized balance at March 31, ~~2019.~~2020 is $7 million.

~~(2)~~The changes in our interest rate swap agreement, as well as the cumulative interest rate swap outstanding, are as follows:



	Notional
(In millions)	Amount		Fixed Rate⁽¹⁾
Interest rate swap agreement in effect as of December 31, 2018	$	650	1.493	%
Terminated		—
Entered into effect		—
Interest rate swap agreement in effect as of March 31, 2019	$	650	1.493	%
Terminated		(650)
Entered into effect		550	1.615	%
Interest rate swap agreement in effect as of December 31, 2019	$	550	1.615	%
Terminated		—
Entered into effect		—
Interest rate swap agreement in effect as of March 31, 2020	$	550	1.615	%

___________________________________

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

In accordance with accounting standards for derivative instruments and hedging activities, and as further described in Note 17, our interest rate swap agreement is classified as a cash flow hedge, and, as such, is recorded on the Condensed Consolidated Statements of Financial Position as either an asset or liability at fair value, with changes in fair value attributable to the hedged risks recorded in accumulated other comprehensive income.

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Note 13. Leases

We determine if an arrangement is a lease at inception. Operating leases are included in Operating lease right-of-use assets, Current portion of lease liability and Long-term lease liability on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position.~~Financial Position. Finance leases are included in Property and equipment, net; Current portion of long-term debt and Long-term debt on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position.~~Financial Position.

We lease a variety of facilities, principally in the United States, for branch and service center operations and for office, storage, customer care centers and data processing space. These leases are classified as operating leases. Our facilities leases have remaining lease terms of less than one year to 23 years, some of which may include options to extend the leases for up to 15 years, and some of which may include options to terminate the leases within one year. These lease agreements contain lease and non-lease components. Non-lease components include items such as common area maintenance. For facility leases, we account for the lease and non-lease components as a single lease component.

Additionally, our Fleet Agreement allows us to obtain fleet vehicles through a leasing program. These leases are classified as finance leases. Our vehicle leases have remaining lease terms of less than one year to eight years. For vehicle leases, we account for the lease and non-lease components separately.

Operating lease right-of-use (“ROU”) assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments, including fixed non-lease components, over the lease term at commencement date. As most of our leases do not provide an implicit rate, we use our incremental borrowing rate based on the information available at commencement date in determining the present value of future payments. The operating lease ROU asset also includes any lease payments made and excludes lease incentives. Our lease terms may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Lease expense for minimum lease payments and fixed non-lease components is recognized on a straight-line basis over the lease term.

As of March 31, 2020 and December 31, 2019, assets recorded under finance leases were ~~$198~~$222 million and $220 million, respectively, and accumulated depreciation associated with finance leases was ~~$109 million.~~$134 million and $127 million, respectively.

The components of lease expense were as follows:


	~~As of~~
~~(In millions)~~	~~March 31, 2019~~
~~Finance lease cost~~
~~Depreciation of finance lease ROU assets~~	$	8
~~Interest on finance lease liabilities~~		1
~~Operating lease cost~~		7
~~Variable lease cost~~		—
~~Sublease income~~		~~(1)~~
~~Total lease cost~~	$	16


	Three months ended March 31,
(In millions)	2020		2019
Finance lease cost
Depreciation of finance lease ROU assets	$	10	$	8
Interest on finance lease liabilities		1		1
Operating lease cost		7		7
Variable lease cost		—		—
Sublease income		(1)		(1)
Total lease cost	$	17	$	16

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Supplemental cash flow information and other information for leases was as follows:


~~(In millions)~~	~~March 31, 2019~~
~~Cash paid for amounts included in the measurement of lease liabilities:~~
~~Operating cash flows for operating leases~~	$	6
~~Operating cash flows for finance leases~~		1
~~Financing cash flows for finance leases~~		8
~~ROU assets obtained in exchange for lease obligations:~~
~~Operating leases~~		3
~~Finance leases~~		10
~~Weighted Average Remaining Lease Term (in years):~~
~~Operating leases~~		~~10.79~~
~~Finance leases~~		~~3.56~~
~~Weighted Average Discount Rate:~~
~~Operating leases~~		~~5.54~~	%
~~Finance leases~~		~~4.23~~	%


	As of March 31,
(In millions)	2020		2019
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases		7	$	6
Operating cash flows for finance leases		1		1
Financing cash flows for finance leases		9		8
ROU assets obtained in exchange for lease obligations:
Operating leases		2		3
Finance leases		5		10

As of March 31, ~~2019,~~2020, there was ~~$32~~$35 million and ~~$60~~$58 million of finance leases included within Current portion of long-term debt and Long-term debt, respectively, on the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~financial position.~~Financial Position. Future minimum lease payments under non-cancellable leases as of March 31, ~~2019~~2020 were as follows:


(In millions)	Operating Leases		Finance Leases		Operating Leases		Finance Leases
Year ended December 31,
2019 (excluding the three months ended March 31, 2019)	$	17	$	26
2020		24		30
2020 (excluding the three months ended March 31, 2020)					$	20	$	27
2021		20		22		23		29
2022		18		12		20		19
2023		14		5		15		12
2024						11		5
Thereafter		94		1		85		1
Total future minimum lease payments		187		97		174		92
Less imputed interest		(52)		(5)
Total	$	136	$	92

~~Following is a summary of the future minimum lease payments due under capital and operating leases with terms of more than one year at December 31, 2018:~~

(In millions)

Operating Leases

Capital Leases
Year ended December 31,

Less than 1 Yr

$
17

$
31
1 - 3 Yrs

36

46
3 - 5 Yrs

25

14
More than 5 Yrs

67

1
Total future minimum lease payments

$
146

$
92

~~As of March 31, 2019, we have additional vehicle finance leases that have not yet commenced of $26 million. These leases are scheduled to commence in 2019 with lease terms generally of five years.~~

~~Practical Expedients~~

We adopted the new standard using the modified retrospective approach and applied the transition approach as of the beginning of the period of adoption. We adopted the package of practical expedients and therefore did not reassess prior conclusions related to contracts containing leases, lease classification and initial direct costs for all leases. We elected to make the accounting policy election for short-term leases resulting in lease payments being recorded as an expense on a straight-line basis over the lease term. We elected to not separate lease and non-lease components for real estate operating leases. We did not elect the hindsight practical expedient.

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~~Impact of ASC 842 on the Condensed Consolidated Financial Statements~~

Changes to the condensed consolidated statements of financial position include the recognition of an operating lease right-of-use asset, a current portion of lease liability and long-term lease liability. Changes to the condensed consolidated statements of cash flows include the presentation of ROU asset amortization. The adoption of ASC 842 did not have a significant impact on the Company’s condensed consolidated statements of operations and comprehensive income.

Note 14. Acquisitions

Acquisitions have been accounted for as business combinations 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. Asset acquisitions have been accounted for under ASU 2017-01. The assets and liabilities of these businesses were recorded in the financial statements at their estimated fair values as of the acquisition dates.

During the three months ended March 31, 2020, our investment in acquisitions was $26 million, using available cash on hand, which included $6 million for 5 tuck-in pest control acquisitions which have been accounted for as business combinations, as well as $18 million for final funding for 2 pest control acquisitions and minority interests completed in 2019 that were included in Accrued liabilities—Other on the Consolidated Statements of Financial Position as of December 31, 2019. Another $2 million of deferred purchase price on the 2020 acquisitions is due to the sellers between one year and three years from the acquisition dates. We recorded a preliminary value of $7 million of goodwill for the 2020 acquisitions. We also made a minority investment in a pest control company for approximately $7 million, which was unfunded and is included in the Condensed Consolidated Statements of Financial Position as of March 31, 2020.

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During the three months ended March 31, 2019, ~~we completed~~our investment in acquisitions was $100 million, using available cash on hand, for 11 pest control acquisitions which have been accounted for as business combinations and ~~purchased two~~2 pest control ~~companies~~acquisitions which have been accounted for as asset acquisitions. We funded $100 million at closing for these acquisitions using available cash on hand. Another $6 million of deferred purchase price is due to the sellers between one and five years from the acquisition dates. As a result of these acquisitions, we recorded ~~a preliminary value of $82~~$60 million of goodwill, $4 million of ~~tradenames~~trade names and ~~$16~~$36 million of other intangibles, primarily customer ~~lists. As of~~lists, related to these acquisitions.

The following sets forth the adjustments made to purchase price allocations during the three months ended March 31, 2020:


					Other
(In millions)	Goodwill		Trade Names⁽¹⁾		Intangible Assets⁽²⁾
Balance as of December 31, 2019	$	309	$	31	$	197
Measurement period adjustments		4		—		(4)
Balance as of March 31, 2020	$	314	$	31	$	192

___________________________________

(1)Subject to amortization.

(2)Primarily customer lists.

Nomor

On September 6, 2019, we acquired Nomor, a leading provider of pest control services in Sweden and Norway, for approximately 2 billion Swedish krona (approximately $198 million using the September 6, 2019 exchange rate, net of approximately $9 million of cash acquired). This strategic acquisition launched our expansion into the European pest control market. We funded the acquisition using cash on hand and proceeds from a $120 million borrowing under our revolving credit facility.

Nomor is included in the Condensed Consolidated Statements of Financial Position based on an allocation of the purchase price. Given the timing and complexity of this acquisition, the presentation of Nomor in our financial statements, including the allocation of the purchase price, ~~allocations for these acquisitions have not been finalized~~is preliminary and will likely change in future periods, perhaps significantly, as fair value estimates of the assets acquired and liabilities assumed are refined during the measurement period. Specifically, we are still evaluating working capital balances, the intangible and tangible assets acquired, deferred revenue balances, as well as the ~~fair value and~~appropriate useful lives to assign to all assets, including intangibles. The majority of ~~the acquired intangible assets.~~this purchase price is allocated to goodwill and is not expected to be deductible for income tax purposes. We ~~expect to~~will complete the purchase price ~~allocations~~allocation no later than the ~~first~~third quarter of 2020.

~~On March 30, 2018, we acquired all of the outstanding stock of Copesan Services, Inc. (“Copesan”) for an aggregate~~A preliminary purchase price allocation is as follows (in millions):


Current assets⁽¹⁾	$	11
Property and equipment		6
Goodwill		127
Identifiable intangible assets⁽²⁾		94
Current liabilities⁽³⁾		(18)
Long-term liabilities⁽⁴⁾		(22)
Total purchase price	$	198

___________________________________

(1)Primarily trade receivables and net of ~~$148~~approximately $9 million subject to certain post-closing net working capital adjustments. The acquisition has improved Terminix’s capabilities in commercial pest control as Copesan has provided us with significant expertise, system capabilities and processes for delivering pest management solutions to sophisticated commercialof cash acquired.

(2)Primarily customer lists.

(3)Primarily advanced collections from customers. ~~We funded $104 million at closing using available cash on hand. An additional $35~~

(4)Includes $20 million of deferred ~~purchase price~~tax liabilities as a result of tax basis differences in intangible assets.

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The following unaudited pro forma consolidated financial information presents the combined operations of ServiceMaster and upNomor for the three months ended March 31, 2019 (in millions, except per share data):


	(Unaudited)
	Three months ended
	March 31, 2019
Consolidated revenue	$	433
Consolidated net income	$	71
Basic earnings per share	$	0.52
Diluted earnings per share	$	0.52

ASC 805, “Business Combinations,” establishes guidelines regarding the presentation of the unaudited pro forma information. Therefore, this unaudited pro forma information is not intended to ~~$10 million earnout contingent on~~represent, nor do we believe it is indicative of, the ~~successful achievement~~consolidated results of ~~projected revenue targets are both due~~operations of ServiceMaster that would have been reported had the acquisition been completed at the beginning of 2018. This unaudited pro forma information does not give effect to the ~~sellers three years from~~anticipated business and tax synergies of the acquisition ~~date. Changes in projected revenue would result in a change in the fair value~~and is not representative or indicative of the ~~recorded earnout obligation. Subsequent changes~~anticipated future consolidated results of operations of ServiceMaster. The most significant adjustment made to the pro forma financial information is the inclusion of estimated ~~earnout obligation will be recognized in~~quarterly interest expense of approximately $1 million related to financing obtained for the ~~condensed consolidated statements~~transaction and the estimated tax impact of ~~operations and comprehensive income when incurred.~~ this adjustment. The ~~Copesan~~unaudited pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation, ~~was complete as~~that may be impacted by the finalization of ~~March 31, 2019, and we recognized $97 million of goodwill, a decrease of $1 million from our initial~~the purchase price ~~allocation as~~allocation. The tax impact of ~~March 31, 2018,~~ which is primarily attributable to the expected benefits from synergies of the combination with existing businesses and growth opportunities and Copesan’s workforce and is not deductible for tax purposes. In connection with this acquisition, we also recognized ~~$16 million of tradenames and $39 million of other intangibles, primarily customer lists.~~these adjustments was calculated based on Nomor’s statutory rate.

Supplemental cash flow information regarding the acquisitions is as follows:


	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In millions)	2019		2018		2020		2019
Assets acquired	$	110	$	173	$	7	$	110
Liabilities assumed~~(1)~~		(4)		(25)		—		(4)
Net assets acquired	$	106	$	148	$	7	$	106

Net cash paid	$	100	$	104	$	6	$	100
Seller financed debt		6		35		2		6
Contingent earnout		—		9
Purchase price	$	106	$	148	$	7	$	106

~~(1)~~

~~Includes $14 million of deferred tax liabilities recognized as a result of tax basis differences in intangible assets for the three months ended March 31, 2018.~~

Note 15. Income Taxes

As required by ASC 740, “Income Taxes,” we compute interim period income taxes by applying an anticipated annual effective tax rate to our year-to-date income or loss from continuing operations before income taxes, except for significant unusual or infrequently occurring items. Our estimated tax rate is adjusted each quarter in accordance with ASC 740.

The effective tax rate on income from continuing operations was ~~11.3~~227.3 percent and ~~27.6~~5.5 percent for the three months ended March 31, 2020 and 2019, respectively. The effective tax rates on income from continuing operations for the three months ended March 31, 2020 and ~~2018, respectively.~~2019, were primarily affected by the classification of ServiceMaster Brands Divestiture Group as held for sale. The effective tax rate on loss from continuing operations for the three months ended March 31, 2020 was also favorably impacted by the release of a federal reserve that was recorded discretely in the quarter. The effective tax rate on income from continuing operations for the three months ended March 31, 2019 was ~~primarily~~ affected by the disposition of the Frontdoor retained shares in a non-taxable debt-for-equity exchange pursuant to the private letter ruling from the IRS that was recorded ~~discretely in the three months ended~~discretely.

As of March 31, ~~2019.~~

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~~As of both March 31, 2019~~2020 and December 31, ~~2018,~~2019, we had ~~$15~~$13 million and $14 million, respectively, of tax benefits primarily reflected in US Federal and 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. Our policy is to recognize interest income, interest expense and penalties related to our tax positions within the tax provision.

Note 16. Business Segment Reporting

~~Our~~Through January 2020, when we announced were exploring strategic alternatives related to the ServiceMaster Brands business isthat resulted in it being classified as held for sale, we conducted business through ~~two~~2 reportable segments: Terminix and ServiceMaster Brands. We now have 1 reportable segment, Terminix.

In accordance with accounting standards for segments, we identified Terminix as our reportable ~~segments~~segment primarily based on the nature of the services it provides and the operating results that are ~~strategic business units that offer different services.~~regularly reviewed by our chief operating decision maker (the

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“CODM”) to evaluate performance and allocate resources. The Terminix segment provides termite and pest control services to residential and commercial customers and distributes pest control products, primarily under the Terminix, Terminix Commercial, Copesan, Assured Environments, Gregory Pest Solutions and ~~Copesan~~McCloud Services brand names. ~~The ServiceMaster Brands segment provides residential~~

European Pest Control and ~~commercial disaster restoration and commercial cleaning services through franchises~~Other includes our European pest control operations, primarily under ~~the ServiceMaster, ServiceMaster Restore~~our Nomor brand, our captive insurance subsidiary, which provides automobile, workers' compensation and ServiceMaster Clean brand names, home cleaning services through franchises primarily under the Merry Maids brand name, cabinet and furniture repair primarily under the Furniture Medic brand name and home inspection services primarily under the AmeriSpec brand name. Corporate includes our financing subsidiary exclusively dedicated to providing financinggeneral liability coverage to our ~~franchisees and retail customers of our operating units,~~reportable segment, and our headquarters operations (substantially all of which costs are allocated to our reportable ~~segments)~~segment), which ~~provide~~provides various technology, ~~marketing,~~ finance, legal and other support services to Terminix. Our European pest control operations meet the definition of an operating segment, but do not meet the quantitative thresholds to require them to be reported as a reportable ~~segments. The composition of our reportable segments is consistent with that used by our chief operating decision maker (the “CODM”) to evaluate performance and allocate resources.~~segment.

Information regarding the accounting policies used by us are described in our ~~2018~~2019 Form 10-K. We derive substantially all of our revenue from customers and franchisees in the United States with approximately ~~three~~5 percent generated in foreign ~~markets.~~markets as of March 31, 2020. Operating expenses of ~~the business units~~Terminix consist primarily of direct costs and indirect costs allocated from Corporate.

We use Reportable Segment Adjusted EBITDA as our measure of reportable 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; ~~gain from discontinued operations, net of income taxes; provision for income taxes; interest expense;~~costs historically allocated to ServiceMaster Brands; European pest control; depreciation and amortization expense; acquisition-related costs; fumigation related matters; non-cash stock-based compensation expense; restructuring and other charges; realized (gain) on investment in frontdoor, inc.; net earnings from discontinued operations; (benefit) provision for income taxes; loss on extinguishment of debt; and ~~realized (gain) on investment in frontdoor, inc.~~interest expense. Our definition of Reportable Segment Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies. We believe 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.

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Information for continuing operations for ~~each reportable segment~~Terminix and ~~Corporate~~European Pest Control and Other is presented below:



	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In millions)	2019		2018		2020		2019
Revenue:
Terminix	$	419	$	368	$	438	$	419
ServiceMaster Brands		62		60
Reportable Segment Revenue	$	481	$	427
Corporate		—		—
European Pest Control and Other						18		—
Total Revenue	$	482	$	428	$	456	$	419
Reportable Segment Adjusted EBITDA:(1)
Terminix	$	83	$	86	$	63	$	83
ServiceMaster Brands		23		23
Reportable Segment Adjusted EBITDA	$	106	$	109

___________________________________

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

~~(1)~~

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


	Three Months Ended
	March 31,
(In millions)	2020		2019
Net Income	$	14	$	70
Unallocated corporate expenses		1		(3)
Costs historically allocated to ServiceMaster Brands		3		3
European pest control		(1)		—
Depreciation and amortization expense		28		23
Acquisition-related costs		1		1
Fumigation related matters		—		1
Non-cash stock-based compensation expense		4		4
Restructuring and other charges		4		6
Realized (gain) on investment in frontdoor, inc.		—		(40)
Net earnings from discontinued operations		(13)		(16)
(Benefit) provision for income taxes		(2)		3
Loss on extinguishment of debt		—		6
Interest expense		23		27
Reportable Segment Adjusted EBITDA	$	63	$	83

Three Months Ended

March 31,
(In millions)

2019

2018
Net Income

$
70

$
40
Unallocated corporate expenses

(3)

—
Costs historically allocated to American Home Shield

—

11
Depreciation and amortization expense

24

21
Acquisition-related costs

1

—
Fumigation related matters

1

—
Non-cash stock-based compensation expense

4

4
Restructuring charges

7

12
Realized (gain) on investment in frontdoor, inc.

(40)

—
Gain from discontinued operations, net of income taxes

—

(23)
Provision for income taxes

9

6
Loss on extinguishment of debt

6

—
Interest expense

27

37
Reportable Segment Adjusted EBITDA

$
106

$
109

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Note 17. 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 in interest and net investment income in the ~~condensed consolidated statements~~Condensed Consolidated Statements of ~~operations~~Operations and ~~comprehensive income.~~Comprehensive Income. The carrying amount of total debt was ~~$1,341~~$1,721 million and ~~$1,776~~$1,737 million, and the estimated fair value was ~~$1,400~~$1,713 million and ~~$1,791~~$1,841 million as of March 31, ~~2019~~2020 and December 31, ~~2018,~~2019, respectively. The fair value of our 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 us as of March 31, ~~2019~~2020 and December 31, ~~2018.~~2019.

We have estimated the fair value of our 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, our 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.

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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. We regularly review the forward price curves obtained from third-party market data providers and related changes in fair value for reasonableness utilizing information available to us from other published sources.

Effective March 3, 2020, we entered into a fixed-to-fixed cross-currency interest rate swap to hedge foreign currency risk associated with the fixed-rate Swedish krona denominated intercompany debt at Nomor. The five year interest rate swap matures March 31, 2025 and has a notional amount of 725 million Swedish krona, or approximately $74 million, and swaps interest payments of 3.5 percent Swedish krona for interest receipts of 4.147 percent U.S. dollar. This hedge was entered into to mitigate foreign currency risk inherent in Swedish krona denominated debt and is not for speculative trading purposes. This contract has been designated as a cash flow hedge of a fixed rate borrowing and is recorded at fair value.

We also entered into a cross-currency swap agreement to hedge a portion of our net investment in Nomor against future volatility in the exchange rates between the Swedish krona and the U.S. dollar. The five year cross-currency swap has a fixed notional amount of 1.275 billion Swedish krona, or approximately $131 million, at an annual rate of 0 percent and a maturity date of March 31, 2025. At inception, the cross-currency swap was designated as a net investment hedge and is recorded at fair value.

Changes in the fair value of these contracts are recorded within foreign currency translation gains and losses (“CTA”) as a component of other comprehensive income on the Condensed Consolidated Statements of Financial Position. Interest accruals and coupon payments are recognized directly in interest expense, thus reflecting a Swedish krona fixed rate. Upon discontinuation of the hedge, the changes in spot value and any amounts excluded from the assessment of hedge effectiveness that have not been recognized in earnings will remain within CTA until the hedged net investment is sold, diluted, or liquidated.

We have not changed our 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 each of the three month periods ended March 31, ~~2019~~2020 and ~~2018.~~2019.

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



				Estimated Fair Value Measurements									Estimated Fair Value Measurements
				Quoted		Significant							Quoted		Significant
				Prices In		Other		Significant					Prices In		Other		Significant
				Active		Observable		Unobservable					Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs		Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)		Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2019:
As of March 31, 2020:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	12	$	12	$	—	$	—	Long-term marketable securities	$	12	$	12	$	—	$	—
Investments in marketable securities	Long-term marketable securities		5		5		—		—
Interest rate swap contract	Prepaid expenses and other assets and Other assets		6		—		6		—
Total financial assets		$	24	$	17	$	6	$	—

As of December 31, 2018:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	13	$	13	$	—	$	—
Investment in Frontdoor	Investment in frontdoor, inc.		445		—		445		—
Investments in marketable securities	Long-term marketable securities		8		8		—		—
Interest rate swap contract	Other assets		30		—		30		—
Cross-currency interest rate swap										Prepaid expenses and other assets and Other assets		2		—		2		—
Net investment hedge										Prepaid expenses and other assets and Other assets		3		—		3		—
Total financial assets		$	496	$	21	$	475	$	—		$	18	$	12	$	6	$	—
Financial Liabilities:
Fuel swap contracts	Other accrued liabilities	$	4	$	—	$	—	$	4	Accrued liabilities—Other and Other long-term obligations	$	8	$	—	$	—	$	8
Interest rate swap contract										Accrued liabilities—Other and Other long-term obligations		33		—		33		—
Total financial liabilities		$	4	$	—	$	—	$	4		$	41	$	—	$	33	$	8

As of December 31, 2019:
Financial Assets:
Deferred compensation trust assets										Long-term marketable securities	$	13	$	13	$	—	$	—
Fuel swap contracts										Prepaid expenses and other assets and Other assets		1		—		—		1
Interest rate swap contracts										Other assets		5		—		5		—
Total financial assets											$	19	$	13	$	5	$	1
Financial Liabilities:
Interest rate swap contracts										Accrued liabilities—Other and Other long-term obligations		1		—		1		—
Total financial liabilities											$	1	$	—	$	1	$	—

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, ~~2018~~2019	$	~~(4)~~	1
Total gains (losses) ~~gains~~ (realized and unrealized)
Included in earnings		1	—	Cost of services rendered and products sold
Included in other comprehensive income		4	(9)
Settlements		~~(1)~~	—
Balance as of March 31, ~~2019~~2020	$	—(8)

Balance as of December 31, ~~2017~~2018	$	3	(4)
Total gains (losses) ~~gains~~ (realized and unrealized)
Included in earnings		—1	Cost of services rendered and products sold
Included in other comprehensive income		—4
Settlements		—(1)
Balance as of March 31, ~~2018~~2019	$	3	—

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



	Fair Value		Valuation			Weighted		Fair Value		Valuation			Weighted
	(in millions)		Technique	Unobservable Input	Range	Average		(in millions)		Technique	Unobservable Input	Range	Average
As of March 31, 2019:
As of March 31, 2020:
Fuel swap contracts	$	—	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.39 - $2.74	$	2.58	$	(8)	Discounted Cash Flows	Forward Unleaded Price per Gallon⁽¹⁾	$1.35 - $1.96	$	1.75
As of December 31, 2018:
As of December 31, 2019:
Fuel swap contracts	$	(4)	Discounted Cash Flows	Forward Unleaded Price per Gallon(1)	$2.09 - $2.43	$	2.26	$	1	Discounted Cash Flows	Forward Unleaded Price per Gallon⁽¹⁾	$2.37 - $2.80	$	2.61

___________________________________

~~(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.~~

(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.

We use derivative financial instruments to manage risks associated with changes in fuel prices and interest rates. We do not hold or issue derivative financial instruments for trading or speculative purposes. In designating ~~our~~ derivative financial instruments as hedging instruments under accounting standards for derivative instruments, we formally document 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. We assess 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 our designated hedging instruments are classified as cash flow hedges.

We have historically hedged a significant portion of our annual fuel consumption. We have also historically hedged the interest payments on a portion of our variable rate debt through the use of interest rate swap agreements. All of our 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~~Consolidated Statements of ~~financial position~~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. Cash flows related to fuel and interest rate derivatives are classified as operating activities in the ~~condensed consolidated statements~~Consolidated Statements of ~~cash flows.~~Cash Flows.

As of March 31, ~~2019,~~2020, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of ~~$32~~$25 million, maturing through ~~2020.~~2021. Under the terms of our fuel swap contracts, we are 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, 2019,~~31,2020, we had posted $2 million in letters of credit as collateral under our 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. 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 9 to the condensed consolidated financial statements for the effective portion of the gain or loss on derivative instruments recorded in accumulated other comprehensive income and for the amounts reclassified out of accumulated other comprehensive income 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 expected to be recognized in earnings is a ~~gain~~loss of $1$12 million, net of tax, as of March 31, ~~2019.~~2020. 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 18. 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 share units are reflected in diluted earnings 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				Three Months Ended
	March 31,				March 31,
(In millions, except per share data)	2019		2018		2020		2019
Income from continuing operations	$	70	$	17	$	1	$	53
Weighted-average common shares outstanding		135.8		135.2		134.9		135.8
Effect of dilutive securities:
RSUs~~(1)~~		0.2		0.2		0.1		0.2
Stock options~~(2)~~(1)		0.3		0.2		0.1		0.2
Weighted-average common shares outstanding—assuming dilution		136.4		135.6		135.1		136.2
Basic earnings per share from continuing operations	$	0.51	$	0.12	$	0.01	$	0.39
Diluted earnings per share from continuing operations	$	0.51	$	0.12	$	0.01	$	0.39

___________________________________

(1)Options to purchase 1.2 million and 0.7 million shares for the three months ended March 31, 2020 and 2019, respectively, were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

‎

~~(1)~~

Unvested RSUs and performance shares of 0.1 million and 0.2 million for the three months ended March 31, 2019 and 2018, respectively, were not included in the diluted earnings to share calculation because their effect would have been anti-dilutive.

~~(2)~~

Options to purchase 0.8 million and 0.5 million shares for the three months ended March 31, 2019 and 2018, 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~~On January 21, 2020, we announced we are exploring strategic alternatives relating to ServiceMaster Brands, including the potential sale of the business. As a result of this plan, the ServiceMaster Brands Divestiture Group is classified as held for sale and the financial results of the ServiceMaster Brands Divestiture Group as of and for the period ended March 31, 2020, and for all periods prior to March 31, 2020, have been reflected within the disclosures of this Management’s Discussion and Analysis of Financial Condition and Results of Operations as discontinued operations. See Note 5 to the condensed consolidated financial statements for further information.

Overview

Our ~~core services include~~reportable segment, Terminix, provides residential and commercial termite and pest control ~~restoration, commercial and residential cleaning, cabinet and furniture repair and home inspection~~ under the following leading brands: ~~AmeriSpec,~~Terminix, Terminix Commercial, Copesan, ~~Furniture Medic, Merry Maids,~~Assured Environments, Gregory Pest Solutions and McCloud Services. Our European pest control operations, primarily operating under our Nomor brand, are reported in European Pest Control and Other, in addition to our captive insurance subsidiary which provides automobile, workers’ compensation and general liability coverage to our reportable segment and other headquarters operations (substantially all of which costs are allocated to our reportable segment), which provide various technology, finance, legal and other support services to the reportable segment.

Our financial statements will include non-recurring costs incurred to evaluate, plan and execute the exploration of strategic alternatives related to ServiceMaster ~~Clean, ServiceMaster Restore, Terminix~~Brands, including the potential sale of the business. Costs will primarily be related to third-party consulting and ~~Terminix Commercial. Our~~other incremental costs directly associated with the strategic alternatives process. Net earnings from discontinued operations for the ~~periods presented~~three months ended March 31, 2020 included charges of $4 million related to the initiative. We expect to incur charges of $10 million to $15 million in 2020 related to the initiative. In addition, we expect incremental capital expenditures will be required to effect the initiative of $8 million to $12 million principally reflecting costs to replicate information technology systems historically shared by our business units.

On January 21, 2020, Nikhil M. Varty resigned from his position as Chief Executive Officer and as a member of our board of directors. Our board of directors appointed our current Chairman of the Board, Naren K. Gursahaney, as interim Chief Executive Officer until a replacement Chief Executive Officer is identified.

Recent Events and 2020 Outlook

Within the United States, our residential and commercial pest control and cleaning and restore businesses have been designated an essential business by the U.S. Department of Homeland Security, which allows us to continue to serve our customers while constantly ensuring the health and safety of our employees and our customers. We have also continued serving our customers in all of the international markets in which we operate.

We have three priorities while navigating through this ~~report~~period of volatility and uncertainty:

First, to ensure the health and safety of our employees and our customers.

Second, to continue to deliver essential services to our customers to maintain the financial strength of our business.

Third, to ensure ServiceMaster emerges stronger from this global event. We believe that we will emerge from this pandemic stronger by balancing short-term service interruptions with investments in our long-term strategies.

As of the date of this filing, we have implemented contingency planning designed to ensure the safety and productivity of our workforce. We have implemented technology to facilitate remote working, with most back-office and call center employees working remotely and field support personnel working remotely where possible. We plan to leverage these new remote working capabilities to reduce ongoing operating costs once we emerge from this event. We have global and regional crisis teams in place monitoring the rapidly evolving situation and recommending risk mitigation actions that we have already implemented, including instituting travel restrictions as well as visitor protocols and developing and maintaining social distancing practices. We have assessed and are ~~organized into two reportable segments:~~

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implementing continuity plans to provide customers with continued service, including procuring and providing personal protective equipment to all front-line personnel. There has been no material impact on supply for most of our sourced materials and for those sourced materials that have been impacted to any degree, continuity plans have been activated. Additionally, we are taking additional actions to improve our liquidity, including capital expenditure and operating expense reductions.

In reaction to customer demands, Terminix and ServiceMaster ~~Brands.~~Brands have launched one time and recurring sanitation and disinfection services, which will help essential businesses maintain clean work areas while staying in compliance with federal, state, and local public health protocols and will help prepare shuttered businesses to reopen when we emerge from this event.

In the first quarter of 2020, we leveraged our strong cash flow position and cash flow generation profile to repurchase $103 million of common stock under our previously authorized share repurchase plan at an average price per share of $27.64. These purchases exhaust the authority for purchases under this program. In the first quarter of 2020, cash payments for acquisitions totaled $26 million, net of cash acquired. Our strong liquidity position may afford us the opportunity to gain market share through our acquisition program during this event. We expect to selectively continue our tuck-in acquisition program at Terminix and to periodically evaluate other acquisitions in the United States and internationally.

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.~~business. These metrics include:

~~revenue,~~

~~operating expenses,~~

~~net income,~~

~~earnings per share,~~

~~Adjusted EBITDA, and~~

~~organic revenue growth.~~

revenue,

operating expenses,

net income,

earnings per share,

Adjusted EBITDA, and

organic revenue 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.~~business. 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~~business as well as the mix of services and products ~~provided across our businesses.~~provided. The volume of our revenue in Terminix ~~Terminix Commercial and Copesan~~ is impacted by new unit sales, the retention of our existing customers and acquisitions. Revenue results presented in ~~the ServiceMaster Brands~~European Pest Control and Other are ~~driven principally by royalty fees earned from~~primarily comprised of our ~~franchisees.~~pest control operations in Europe. We serve both residential and commercial customers, principally in the United States. ~~In 2018,~~As of March 31, 2020, approximately 9795 percent of our revenue was generated by sales in the United States. Franchise fees from our Terminix franchisees represented less than one percent of revenue for the three months ended March 31, 2020.

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, wages and salaries, employee benefits and health care, vehicles, personal protective equipment, 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 basic and diluted 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: ~~gain~~net earnings from discontinued ~~operations, net of income taxes;~~operations; (benefit) provision for income taxes; interest expense; depreciation and amortization expense; acquisition-related costs; fumigation related matters; non-cash stock-based compensation expense; restructuring and other charges; loss on extinguishment of debt; and realized (gain) on investment in frontdoor, inc. 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.

We evaluate performance of the ServiceMaster Brands Divestiture Group based on ServiceMaster Brands Divestiture Group Adjusted EBITDA, which is defined as net earnings from discontinued operations before the following expenses directly attributable to the ServiceMaster Brands Divestiture Group and recorded in discontinued operations: depreciation and amortization expense; non-cash stock based compensation expense; restructuring and other charges; and provision for income taxes.

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

Seasonality

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~~Seasonality~~

We have seasonality in our business, which drives fluctuations in revenue and Adjusted EBITDA for interim periods. In ~~2018,~~2019, approximately 23 percent, 27 percent, 26 percent and 24 percent of our revenue and approximately 2526 percent, 3132 percent, 2423 percent and 2019 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. For example, in the third quarter of 2017, our Terminix business was negatively impacted by hurricanes Harvey and Irma, which resulted in 53 branches, primarily in Texas and Florida, being temporarily closed for a period of time during August and September. 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; and severe storms which can lead to an increase in demand for restoration~~ services. ~~For example, in~~

Results of Operations

The following table shows the ~~third and fourth quarters~~results of 2018 and 2017, our ServiceMaster Restore business saw a significant increase in royalty fees related to hurricanes Florence and Michael in 2018 and hurricanes Harvey and Irma in 2017 as well as wildfires.

~~Franchises~~

~~Franchises are important to the Terminix, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec businesses. Total profits~~operations from ~~our franchised~~continuing operations were $22 million for both of the three months ended March 31, 2019 and 2018. Nearly all of the franchise fees received by our ServiceMaster Brands 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, ~~2019. We evaluate~~2020 and 2019, which reflects the ~~performance~~results of ~~our franchise~~acquired businesses ~~based primarily on operating profit before corporate general and administrative expenses, interest expense and amortization~~from the relevant acquisition dates. Results 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.

~~For the three months ended March 31, 2019, approximately 55% of our revenue in~~ the ServiceMaster Brands ~~segment consisted of ongoing monthly royalty fees. Royalty fees~~Divestiture Group are the amounts paid to us by our franchisees and are based on a percentage of our franchisees’ customer-level revenue. Franchise fees from Terminix franchisees represented less than one percent of Terminix revenuepresented below in ~~the three months ended March 31, 2019. We estimate that customer-level revenue for the~~“—Discontinued Operations – ServiceMaster Brands ~~segment and Terminix segment were $649 million and $499 million, respectively, for the three months ended March 31, 2019.~~Divestiture Group.”

~~Results of Operations~~


	Three Months Ended				Increase
	March 31,				(Decrease)		% of Revenue
(In millions)	2020		2019		2020 vs. 2019		2020		2019
Revenue	$	456	$	419	9	%	100	%	100	%
Cost of services rendered and products sold		279		236	18		61		56
Selling and administrative expenses		140		123	15		31		29
Amortization expense		9		5	89		2		1
Acquisition-related costs		1		1	*		—		—
Fumigation related matters		—		1	*		—		—
Restructuring and other charges		4		6	*		1		1
Realized (gain) on investment in frontdoor, inc.		—		(40)	*		—		(10)
Interest expense		23		27	(14)		5		6
Interest and net investment income		—		(1)	*		—		—
Loss on extinguishment of debt		—		6	*		—		1
(Loss) Income from Continuing Operations before Income Taxes		(1)		56	*		—		13
(Benefit) provision for income taxes		(2)		3	*		—		1
Income from Continuing Operations	$	1	$	53	*		—	%	13	%

________________________________

Three Months Ended

Increase

March 31,

(Decrease)

% of Revenue
(In millions)

2019

2018

2019 vs. 2018

2019

2018
Revenue

$
482

$
428

13
%

100
%

100
%
Cost of services rendered and products sold

261

226

15

54

53

Selling and administrative expenses

136

125

8

28

29

Amortization expense

6

3

72

1

1

Acquisition-related costs

1

—

*

—

—

Fumigation related matters

1

—

*

—

—

Restructuring charges

7

12

*

1

3

Realized (gain) on investment in frontdoor, inc.

(40)

—

*

(8)

—

Interest expense

27

37

(29)

6

9

Interest and net investment income

(1)

—

*

—

—

Loss on extinguishment of debt

6

—

*

1

—

Income from Continuing Operations before Income Taxes

79

23

*

16

5

Provision for income taxes

9

6

*

2

1

Income from Continuing Operations

$
70

$
17

319
%

15
%

4
%

* not meaningful

‎

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~~Revenue~~

Revenue

We reported revenue from continuing operations of ~~$482~~$456 million and ~~$428~~$419 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. A summary of changes in revenue ~~for each of our reportable segments and Corporate~~ is included in the ~~table~~tables below. See “—Segment Review” for a discussion of the drivers of the year-over-year changes.



			ServiceMaster								European Pest
(In millions)	Terminix		Brands		Corporate		Total		Terminix		Control and Other		Total
Three Months Ended March 31, 2018	$	368	$	60	$	—	$	428
Three Months Ended March 31, 2019									$	419	$	—	$	419
Residential Pest Control(1)		18		—		—		18		5		—		5
Commercial Pest Control(2)		27		—		—		27		13		—		13
Termite and Home Services(3)		5		—		—		5		1		—		1
Royalty Fees		—		1		—		1
Commercial Cleaning National Accounts		—		2		—		2
Sale of Products and Other		1		(1)		—		—
Three Months Ended March 31, 2019	$	419	$	62	$	—	$	482
Sale of Products and Other⁽⁴⁾										2		—		2
Fumigation										(3)		—		(3)
European Pest Control										—		18		18
Three Months Ended March 31, 2020									$	438	$	18	$	456

~~(1)~~

~~Includes growth from acquisitions of approximately $12 million for the three months ended March 31, 2019.~~

~~(2)~~

~~Includes growth from acquisitions of approximately $27 million for the three months ended March 31, 2019.~~

~~(3)~~

~~Includes growth from acquisitions of approximately $2 million for the three months ended March 31, 2019.~~

_________________________________

(1)Includes growth from acquisitions of approximately $2 million for the three months ended March 31, 2020.

(2)Includes growth from acquisitions of approximately $10 million for the three months ended March 31, 2020.

(3)Includes growth from acquisitions of approximately $2 million for the three months ended March 31, 2020.

(4)Includes growth from acquisitions of approximately $3 million for the three months ended March 31, 2020.

Cost of Services Rendered and Products Sold

We reported cost of services rendered and products sold of ~~$261~~$279 million and ~~$226~~$236 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The following tables provide a summary of changes in cost of services rendered and products ~~sold~~sold:




			European Pest
(In millions)	Terminix		Control and Other		Total
Three Months Ended March 31, 2019	$	239	$	(2)	$	236
Impact of change in revenue⁽¹⁾		15		12		28
Damage claims		6		—		6
Production labor		3		—		3
Chemicals and materials		4		—		4
Insurance program		—		4		4
Fumigation services		2		—		2
Other		(4)		—		(4)
Three Months Ended March 31, 2020	$	265	$	14	$	279

_________________________________

(1)For Terminix, includes approximately $13 million for ~~each of our reportable segments~~the three months ended March 31, 2020 from acquisitions. For European Pest Control and ~~Corporate:~~Other, includes approximately $12 million for the three months ended March 31, 2020 from acquisitions.

ServiceMaster

(In millions)

Terminix

Brands

Corporate

Total
Three Months Ended March 31, 2018

$
204

$
23

$
—

$
226
Impact of change in revenue(1)

36

2

—

38
Production labor

1

—

—

1
Insurance program

—

—

(2)

(2)
Other

(2)

—

1

(1)
Three Months Ended March 31, 2019

$
239

$
25

$
(2)

$
261

~~(1)~~

~~For Terminix, includes approximately $31 million for the three months ended March 31, 2019, as a result of the acquisitions of Copesan and other pest control companies.~~

For Terminix, the ~~impact of the change in revenue reflects the~~ increase in ~~relatively low margin revenue from our acquisition of Copesan. The decrease in chemicals and materials~~damage claims was driven by ~~sourcing savings.~~ increased Non-Litigated Claims and Litigated Claims, primarily in the Mobile Bay Area. The increase in production labor was driven, in part, by ~~an investment~~accelerated hiring in ~~our workforce~~advance of the 2020 peak season, in addition to ~~improve service levels.~~labor inefficiencies due to lower work order volume related to COVID-19 pressure in March 2020. The increase in chemicals and materials was driven, in part, by increased personal protective equipment and sanitation purchases in response to COVID-19. Fumigation services represents the reduced fumigation margin driven by the outsourcing of fumigation completion services.

For ~~Corporate,~~European Pest Control and Other, the ~~decrease in insurance program expense was primarily attributable to favorable claims results~~three months ended March 31, 2020 were unfavorably impacted by a $2 million adjustment in our automobile, general liability and workers’ compensation ~~program.~~program, as compared to a favorable $2 million adjustment in our automobile, general liability and workers’ compensation program in the three months ended March 31, 2019. Favorable adjustments related to our automobile, general liability and worker’s compensation program for the year ended December 31, 2019 amounted to $6 million. We are continuing to make progress on our safety initiatives.

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Selling and Administrative Expenses

We reported selling and administrative expenses of ~~$136~~$140 million and ~~$125~~$123 million for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. For the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, selling and administrative expenses comprised general and administrative expenses of ~~$76~~$80 million and ~~$70~~$68 million, respectively, and selling and marketing expenses of $60 million and ~~$56~~$54 million, respectively. The following tables provide a summary of changes in selling and administrative ~~expenses for each of our reportable segments and Corporate:~~expenses:

ServiceMaster

(In millions)

Terminix

Brands

Corporate

Total
Three Months Ended March 31, 2018

$
89

$
15

$
22

$
125
Sales and marketing costs

2

(1)

—

1
Impact of acquisitions on selling and administrative expenses

7

—

—

7
Investments in growth

4

—

—

4
Spin-off dis-synergies

4

—

—

4
Costs historically allocated to American Home Shield

—

—

(11)

(11)
Other

5

1

—

6
Three Months Ended March 31, 2019

$
110

$
16

$
11

$
136



			European Pest
(In millions)	Terminix		Control and Other		Total
Three Months Ended March 31, 2019	$	110	$	13	$	123
Sales and marketing		2		—		2
Acquisition selling and administrative expenses		4		5		9
Investments in growth		3		—		3
Other		4		—		4
Three Months Ended March 31, 2020	$	123	$	18	$	140

The increase in sales and marketing costs, ~~at Terminix~~comprised of sales commissions and marketing and promotional expenses, was driven by targeted investments to drive sales growth. Additionally, Terminix and European Pest Control and Other incurred incremental selling and administrative expenses as a result of ~~the Copesan acquisition and other~~ acquisitions. The increase in investments in growth ~~includes~~is primarily related to our ~~partnership with Salesforce to replace legacy operating systems.~~investment in a new customer experience platform.

Amortization Expense

Amortization expense was $6$9 million and $3$5 million in the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively. The change in amortization expense primarily reflects the effect of recent acquisitions.

Acquisition-Related Costs

Acquisition-related costs were $1 million in each of the three months ended March 31, 2020 and 2019.

Fumigation Related Matters

There were $1 million of charges for fumigation related matters in the three months ended March 31, 2019.

Restructuring and Other Charges

We incurred restructuring charges of approximately $4 million and $6 million in the three months ended March 31, ~~2019. There were no charges for acquisition-related costs recorded in the three months ended March 31, 2018.~~

~~Fumigation Related Matters~~

~~We recorded a charge of approximately $1 million in the three months ended March 31, 2019. There were no charges for fumigation related matters recorded in the three months ended March 31, 2018.~~

~~Restructuring Charges~~

~~We incurred restructuring charges of approximately $7 million~~2020 and ~~$12 million in the three months ended March 31,~~ 2019, ~~and 2018,~~ respectively. Restructuring charges were comprised of the following:



	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In millions)	2019		2018		2020		2019
Terminix(1)	$	2	$	2	$	1	$	2
ServiceMaster Brands(2)		1		—
Corporate(3)		4		3
Global Service Center relocation(4)		—		7
European Pest Control and Other⁽²⁾						3		4
Total restructuring charges	$	7	$	12	$	4	$	6

~~(1)~~

~~For the three months ended March 31, 2019 and March 31, 2018, these charges included $2 million each period of severance and other costs.~~

~~(2)~~

~~For the three months ended March 31, 2019, these charges included $1 million of severance and other costs.~~

~~(3)~~

~~(4)~~

For the three months ended March 31, 2018, these charges included lease termination and other charges of $7 million related to the relocation of our Global Service Center. There were no such charges in the three months ended March 31, 2019.

_________________________________

~~Table~~(1)For the three months ended March 31, 2020 and 2019, these charges included $1 million and $2 million, respectively, of ~~Contents~~severance and other costs.

Realized (Gain) on Investment in frontdoor, inc.

We recorded a gain of ~~approximately~~ $40 million related to the sale of our retained investment in Frontdoor in the three months ended March 31, 2019. ~~There was no gain recorded in the three months ended March 31, 2018.~~

Interest Expense

Interest expense was ~~$27~~$23 million and ~~$37~~$27 million in the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The decrease in interest expense was driven by lower interest rates under the ~~repayment~~new debt agreements as refinanced in November 2019.

Table of ~~approximately $1 billion of our senior secured term loan facility in connection with the spin-off of the American Home Shield segment.~~Contents

Interest and Net Investment Income

Interest and net investment income was $1 million for the three months ended March 31, ~~2019.~~ ~~There was no interest and net investment income in the three months ended March 31, 2018.~~2019. Interest and net investment income is comprised of net investment gains and losses from equity investments and other strategic investments and interest income on other cash balances.

Loss on Extinguishment of Debt

A loss on extinguishment of debt of $6 million was recorded in the three months ended March 31, ~~2019.~~ ~~There~~2019. No similar loss was ~~no loss on the extinguishment of debt recorded~~recognized in the three months ended March 31, ~~2018.~~2020. See Note 12 to the condensed consolidated financial statements for more details.

(Loss) Income from Continuing Operations before Income Taxes

(Loss) Income from continuing operations before income taxes was ~~$79~~a $1 million loss and ~~$23~~$56 million income for the three months ended March 31, ~~2019~~2020 and ~~2018,~~2019, respectively. The change in (loss) income from continuing operations before income taxes primarily reflects the net effect of year-over-year changes in the following items:



	~~Three Months Ended~~
	~~March 31,~~
~~(In millions)~~	~~2019 vs. 2018~~
~~Reportable segments and Corporate(1)~~	$	11
~~Depreciation expense(2)~~		~~(1)~~
~~Amortization expense(3)~~		~~(2)~~
~~Acquisition-related costs(4)~~		1
~~Restructuring charges(5)~~		5
~~Loss on extinguishment of debt(6)~~		~~(6)~~
~~Realized (gain) on investment in frontdoor, inc.(7)~~		40
~~Other(8)~~		8
~~Decrease in income from continuing operations before income taxes~~	$	56



	Three Months Ended
	March 31,
(In millions)	2020 vs. 2019
Income from continuing operations before income taxes, March 31, 2019	$	56
Reportable segments and European Pest Control and Other(1)		(23)
Depreciation expense⁽²⁾		1
Amortization expense⁽³⁾		(4)
Restructuring and other charges⁽⁴⁾		2
Loss on extinguishment of debt⁽⁵⁾		6
Realized (gain) on investment in frontdoor, inc.⁽⁶⁾		(40)
Interest Expense⁽⁷⁾		4
Other⁽⁸⁾		(2)
Loss from continuing operations before income taxes, March 31, 2020	$	(1)

~~(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 net change in amortization expense as described in “—Amortization Expense.”~~

~~(4)~~

~~Represents the net change in acquisition-related costs as described in “—Acquisition-Related Costs.”~~

~~(5)~~

~~Represents the net change in restructuring expense as described in “—Restructuring Charges.”~~

~~(6)~~

~~Represents the net change in the loss on extinguishment of debt as described in “—Loss on Extinguishment of Debt.”~~

~~(7)~~

~~Represents the net change in the investment in frontdoor, inc. as described in “—Realized (Gain) on Investment in frontdoor, inc.”~~

~~(8)~~

~~Primarily represents the net change in interest expense.~~

___________________________________

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

30(2)Represents the net change in depreciation expense, driven by investments in vehicles and technology.

(3)Represents the net change in amortization expense as described in “—Amortization Expense.”

~~Table~~(4)Represents the net change in restructuring and other charges as described in “—Restructuring and Other Charges.”

(5)Represents the net change in the loss on extinguishment of ~~Contents~~debt as described in “—Loss on Extinguishment of Debt.”

(6)Represents the net change in the investment in frontdoor, inc. as described in “—Realized (Gain) on Investment in frontdoor, inc.”

(7)Primarily represents the net change in interest expense, as described in “—Interest Expense.”

(8)Primarily represents the net change in stock-based compensation.

(Benefit) Provision for Income Taxes

The effective tax rate on income from continuing operations was ~~11.3~~227.3 percent and ~~27.6~~5.5 percent for the three months ended March 31, 2020 and 2019, ~~and 2018,~~ respectively. The effective tax rate on loss from continuing operations for the three months ended March 31, 2020 was favorably impacted by the release of a federal reserve that was recorded discretely in the quarter. The effective tax rate on income from continuing operations for the three months ended March 31, 2019 was ~~primarily~~ affected by the disposition of the Frontdoor retained shares in a non-taxable debt-for-equity exchange pursuant to the private letter ruling from the IRS that was recorded ~~discretely in~~discretely.

Net Earnings from Discontinued Operations

In January 2020, we announced that our board of directors decided to explore strategic alternatives related to our ServiceMaster Brands segment, including a potential sale of the business. Net earnings from discontinued operations was $13 million and $16 million for the three months ended March 31, ~~2019.~~2020 and 2019, and reflects the results of the ServiceMaster Brands Divestiture Group.

~~Gain from Discontinued Operations,~~ Net of Income ~~Taxes~~

~~Gain from discontinued operations, net of~~Net income ~~taxes,~~ was ~~$23~~$14 million and $70 million for the three months ended March 31, ~~2018, related to operating results~~2020 and 2019, respectively, and was primarily driven by a $57 million decrease in income from continuing operations before income taxes and $4 million lower net earnings from discontinued operations.

Table of ~~Frontdoor.~~Contents

~~Net Income~~

~~Net income was $70 million and $40 million for the three months ended March 31, 2019 and 2018.~~

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						Three Months Ended
	March 31,				Increase		March 31,				Increase
(In millions)	2019		2018		(Decrease)		2020		2019		(Decrease)
Revenue:
Terminix	$	419	$	368	14	%	$	438	$	419	5	%
ServiceMaster Brands		62		60	5
Corporate		—		—	*
European Pest Control and Other								18		—	*
Total Revenue:	$	482	$	428	13	%	$	456	$	419	9	%
Adjusted EBITDA:(1)
Terminix	$	83	$	86	(4)	%
ServiceMaster Brands		23		23	2
Reportable Segment Adjusted EBITDA		106		109	(3)
Corporate(2)		3		—	*
Costs historically allocated to American Home Shield(3)		—		(11)	*
Terminix Reportable Segment Adjusted EBITDA							$	63	$	83	(24)	%
European Pest Control and Other⁽²⁾								—		3	*
Costs historically allocated to ServiceMaster Brands⁽³⁾								(3)		(3)	*
Total Adjusted EBITDA	$	109	$	97	12	%	$	60	$	83	(28)	%

___________________________________

* not meaningful

~~(1)~~

~~See Note 16 to the condensed consolidated financial statements for our definition of Adjusted EBITDA and a reconciliation of Net Income to Reportable Segment Adjusted EBITDA.~~

~~(2)~~

~~Represents unallocated corporate gains, net of expenses.~~

~~(3)~~

Includes amounts historically allocated to the American Home Shield business not permitted to be classified as discontinued operations under GAAP as described in Note 5 to the condensed consolidated financial statements.

~~Table~~(1)See Note 16 to the condensed consolidated financial statements for our definition of ~~Contents~~Adjusted EBITDA and a reconciliation of Net Income to Reportable Segment Adjusted EBITDA.

(2)Represents results from our pest control operations in Europe and unallocated corporate gains, net of expenses, primarily related to our automobile, general liability and workers’ compensation insurance program.

(3)Includes amounts historically allocated to the ServiceMaster Brands Divestiture Group not permitted to be classified as discontinued operations under GAAP.

Terminix Segment

Three Months Ended March 31, ~~2019~~2020 Compared to Three Months Ended March 31, ~~2018~~2019

The Terminix segment, which provides termite and pest control services to residential and commercial customers and distributes pest control products, reported a 14five percent increase in revenue and a ~~four~~24 percent decrease in Adjusted EBITDA for the three months ended March 31, ~~2019~~2020 compared to the three months ended March 31, ~~2018.~~2019.

Revenue

Revenue by service line is as follows:



	Three Months Ended																Three Months Ended
	March 31,																March 31,

(In millions)	2019		2018		Growth				Acquired				Organic				2020		2019		Growth				Acquired				Organic
Residential Pest Control	$	158	$	140	$	18	13	%	$	12	9	%	$	6	4	%	$	159	$	154	$	5	3	%	$	2	1	%	$	3	2	%
Commercial Pest Control		89		62		27	43	%		27	43	%		—	—	%		107		94		13	14	%		10	11	%		3	3	%
Termite and Home Services		156		151		5	4	%		2	1	%		4	2	%		148		146		1	1	%		2	1	%		—	—	%
Other		16		15		1	9	%		—	—	%		1	9	%		18		16		2	14	%		3	21	%		(1)	(7)	%
																	$	431	$	409	$	22	5	%	$	17	4	%	$	5	1	%
Fumigation																		7		10		(3)	(27)	%		—	—	%		(3)	(27)	%
Total revenue	$	419	$	368	$	51	14	%	$	41	11	%	$	11	3	%	$	438	$	419	$	19	5	%	$	17	4	%	$	2	—	%

Residential pest control revenue increased ~~13 percent. Organic residential pest control~~three percent reflecting organic revenue ~~increased~~growth of two percent, comprised of four percent ~~primarily reflecting~~growth in the two months ended February 29, 2020, and a three percent decline in March as a result of COVID-19. Organic growth in January and February was driven by improved price realization and an improvement in customer retention, despite the impact of ~~new unit sales and operational improvements~~COVID-19. The decline in ~~start rates and completion rates,~~March was driven by temporary service cancellations as ~~well as improved price realization.~~a result of COVID-19. Residential pest control revenue in the quarter also increased ~~nine~~one percent from acquisitions completed during the last 12 months.

Commercial pest control revenue increased 4314 percent reflecting organic revenue growth of three percent, comprised of five percent growth in the two months ended February 29, 2020, and a one percent decline in March as a result of COVID-19. Organic growth in January and February was driven by higher price realization, particularly in recurring services. The decline in March was driven by lower sales of non-recurring services and service postponements due to business closures in response to COVID-19. Commercial pest control revenue in the ~~impact~~quarter also increased 11 percent from acquisitions completed during the last 12 months, including Gregory Pest Solutions and McCloud Services which were completed during the fourth quarter of ~~the Copesan and other acquisitions.~~2019.

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Termite revenue, including wildlife exclusion, crawl space encapsulation and attic insulation, which are managed as a component of our termite line of business, increased two percent in the two months ended February 29, 2020, driven by improved retention rates, and a four percent ~~compared~~decline in March 2020 as a result of lower home services sales and, to ~~prior year, primarily reflecting an increase in home services~~a lesser extent, lower new unit sales ~~and improved price realization.~~ in core termite completions, due to COVID-19.

In the three months ended March 31 ~~2019,~~, 2020, termite renewal revenue comprised 5455 percent of total termite revenue, while the remainder consisted of termite new unit revenue. Termite activity is unpredictable in its nature. Factors that can impact termite activity include conducive weather conditions and consumer awareness of termite swarms.

Revenue growth for the three months ended March 31, 2019 was negatively impacted by approximately $3 million due to unseasonably cold weather conditions and flooding that affected branch operations and lead flow. Revenue for the three months ended March 31, 2018 was also negatively impacted by approximately $3 million due to unfavorable weather conditions.

Adjusted EBITDA

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



~~(In millions)~~
~~Three Months Ended March 31, 2018~~	$	86
~~Impact of change in revenue~~		6
~~Sales and marketing~~		~~(2)~~
~~Production labor~~		~~(1)~~
~~Spin-off dis-synergies~~		~~(4)~~
~~Investments in growth~~		~~(4)~~
~~Other~~		~~(3)~~
~~Impact of acquisitions~~		4
~~Three Months Ended March 31, 2019~~	$	83



(In millions)
Three Months Ended March 31, 2019	$	83
Impact of organic revenue growth		2
Damage claims		(6)
Production labor		(3)
Chemicals and materials		(4)
Sales and marketing		(2)
Investments in growth		(3)
Fumigation services		(2)
Other		(2)
Impact of acquisitions		1
Three Months Ended March 31, 2020	$	63

The increase in termite damage claims was driven by increased Non-Litigated Claims and Litigated Claims, primarily in the Mobile Bay Area. The increase in production labor was driven, in part, by accelerated hiring in advance of the 2020 peak season, in addition to labor inefficiencies due to lower work order volume related to COVID-19 pressure in March 2020. The increase in chemicals and materials was driven, in part, by increased personal protective equipment and sanitation purchases in response to COVID-19. The increase in sales and marketing costs was driven by targeted investments to drive sales growth. The increase in production labor was driven by an investment in our workforce to improve service levels. The increase in spin-off dis-synergies represent increased corporate allocations to Terminix as a result of the American Home Shield spin-off. The increase in investments in growth is primarily related to our investment in a new customer experience platform. The decrease in fumigation services represents margin compression driven by the impact of outsourcing our fumigation services.

Termite Damage Claims

A summary of Litigated Claims and Non-Litigated Claims for the three months ended March 31, 2020 and 2019 is as follows:


	Litigated Claims						Non-Litigated Claims
	Mobile Bay		All Other				Mobile Bay		All Other
(In millions)	Area		Regions		Total		Area		Regions		Total
Outstanding claims as of December 31, 2018		31		17		48		264		602		866
New claims filed		12		—		12		135		623		758
Claims resolved		(2)		(1)		(3)		(122)		(497)		(619)
Outstanding claims as of March 31, 2019		41		16		57		277		728		1005

Outstanding claims as of December 31, 2019		56		11		67		376		618		994
New claims filed		6		2		8		127		505		632
Claims resolved		(6)		—		(6)		(183)		(546)		(729)
Outstanding claims as of March 31, 2020		56		13		69		320		577		897

We restated previously reported Non-Litigated Claims to include claims that were received and settled without payment, which is consistent with our current period presentation. Litigated Claims exclude a number of claims in which the only material issue in dispute is the actual amount of repair costs, which are simpler to resolve and less volatile (“Non-Complex Litigated Claims”). There were no Non-Complex Litigated Claims filed in the three months ended March 31, 2020 in the Mobile Bay Area, and eight in the three months ended March 31, 2020 in our branches outside of the Mobile Bay Area (“All Other Regions”) which are excluded from this table. The financial impacts of these Non-Complex Litigated Claims are included in the summary of Litigated and Non-Litigated Reserve Activity below and are not material to our financial condition or the results of our operations.

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A summary of Litigated Claims and Non-Litigated Claims reserve activity for the three months ended March 31, 2020 and 2019 is as follows:


	Litigated Claims						Non-Litigated Claims
	Mobile Bay		All Other				Mobile Bay		All Other
(In millions)	Area		Regions		Total		Area		Regions		Total
Reserves as of December 31, 2018	$	4	$	4	$	8	$	7	$	13	$	20
Expense		(1)		2		1		2		3		5
Payments		(2)		(2)		(4)		(2)		(4)		(6)
Reserves as of March 31, 2019	$	1	$	4	$	5	$	6	$	12	$	19

Reserves as of December 31, 2019	$	40	$	12	$	52	$	15	$	13	$	28
Expense		3		3		5		2		4		6
Payments		(3)		(1)		(3)		(3)		(5)		(8)
Reserves as of March 31, 2020	$	40	$	14	$	54	$	15	$	12	$	27

Our results of operations for the three months ended March 31, 2020 include charges for legal fees associated with Litigated Claims of $2 million.

European Pest Control and Other

European Pest Control and Other includes our ~~partnership with Salesforce~~pest control operations in Europe, our captive insurance subsidiary which provides automobile, workers’ compensation and ~~other transformational activity~~general liability coverage to ~~replace legacy operating systems and transform~~ our operations. The impact of acquisitions represents the increase in relatively low margin revenue from our acquisition of Copesan. We expect the Adjusted EBITDA contribution from Copesan and other acquisition revenues to increase in the future as we continue to drive synergies from Copesan and other acquisitions, leveraging world-class service capabilities from Copesanreportable segment and our ~~service partners, and working towards systematically incorporating those service capabilities into our owned branch locations.~~

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headquarters functions (whose costs are allocated to Terminix or previously allocated to ServiceMaster Brands ~~Segment~~which is now classified as discontinued operations).

Three Months Ended March 31, ~~2019~~2020 Compared to Three Months Ended March 31, ~~2018~~2019

~~The ServiceMaster Brands segment, which consists~~Revenue

Our European pest control operations reported revenue of the ServiceMaster Restore (disaster restoration), ServiceMaster Clean (commercial cleaning), Merry Maids (residential cleaning), Furniture Medic (cabinet and furniture repair) and AmeriSpec (home inspection) businesses, reported a five percent increase in revenue and a two percent increase in Adjusted EBITDA$18 million for the three months ended March 31, ~~2019 compared to the three months ended March 31, 2018.~~2020.

~~Revenue~~

~~Revenue by service line is as follows:~~

Three Months Ended

% of

% of

March 31,

Revenue

Revenue
(In millions)

2019

2018

2019

2018
Royalty Fees

$
34

$
33

55
%

55
%
Commercial Cleaning National Accounts

17

15

28

25

Sales of Products

3

3

6

6

Other

7

9

12

14

Total revenue

$
62

$
60

100
%

100
%

The increase in royalty fees was driven by higher disaster restoration services due to focused sales efforts to commercial segment customers. The increase in revenue from commercial cleaning national accounts was driven by increased sales activity.

Adjusted EBITDA

The following table provides a summary of changes in ~~the segment’s~~European Pest Control and Other’s Adjusted EBITDA:



~~(In millions)~~
~~Three Months Ended March 31, 2018~~	$	23
~~Impact of change in revenue~~		1
~~Other~~		~~(1)~~
~~Three Months Ended March 31, 2019~~	$	23



(In millions)
Three Months Ended March 31, 2019	$	3
European pest control		1
Insurance program		(4)
Three Months Ended March 31, 2020	$	—

~~Corporate~~

~~Three Months Ended March 31, 2019 Compared to Three Months Ended March 31, 2018~~

European Pest Control and Other includes Adjusted EBITDA ~~for Corporate for the~~of approximately $2 million from Nomor, partially offset by additional optimization expenses incurred by Terminix UK as part of our efforts to separate it from its former owner’s operations and systems. The three months ended March 31, ~~2019 increased $3~~2020 were also unfavorably impacted by a $2 million ~~when compared to the three months ended March 31, 2018, primarily attributable to favorable claims results~~adjustment in our automobile, general liability and workers’ compensation ~~program.~~program, as compared to a favorable $2 million adjustment in our automobile, general liability and workers’ compensation program in the three months ended March 31, 2019.

Costs Historically Allocated to ~~American Home Shield~~ServiceMaster Brands

We have historically incurred the cost of certain corporate-level activities which we performed on behalf of our businesses, including ~~American Home Shield,~~ServiceMaster Brands, such as executive functions, communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, legal, ~~marketing,~~ facilities, information technology and other general corporate support services. The ~~cost~~costs of such activities were historically allocated to our segments, including ~~American Home Shield.~~ServiceMaster Brands. Certain corporate expenses which were historically allocated to the ~~American Home Shield business~~ServiceMaster Brands segment are not permitted to be classified as discontinued operations under GAAP (“Historically Allocated Services”). Such Historically Allocated Services amounted to ~~$11~~$3 million ~~for~~in each of the three months ended March 31, ~~2018~~2020 and 2019, and are included in ~~Corporate through the date~~European Pest Control and Other.

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Discontinued Operations – ServiceMaster Brands Divestiture Group

Three Months Ended March 31, 2020 Compared to Three Months Ended March 31, 2019

The ServiceMaster Brands Divestiture Group, which consists of the ~~Separation.~~ServiceMaster Restore (disaster restoration), ServiceMaster Clean (commercial cleaning), Merry Maids (residential cleaning), Furniture Medic (cabinet and furniture repair) and AmeriSpec (home inspection) businesses, as well as our financing subsidiary which provides financing to franchisees that was historically reported within European Pest Control and Other, is classified as held for sale as of March 31, 2020.

OnRevenue

Revenue by service line for the ~~date~~ServiceMaster Brands Divestiture Group is as follows:



	Three Months Ended				% of		% of
	March 31,				Revenue		Revenue
(In millions)	2020		2019		2020		2019
Royalty Fees	$	32	$	34	49	%	55	%
Commercial Cleaning and other National Accounts		20		17	30		28
Sales of Products		3		3	4		6
Other		11		8	16		12
Total revenue	$	65	$	63	100	%	100	%

The ServiceMaster Brands Divestiture Group reported $65 million in revenue, an increase of three percent over the ~~spin-off, where it was practicable, employees who provided Historically Allocated Services~~prior year. Revenue growth in national accounts and owned branch operations more than exceeded revenue declines in royalty fees in the period. A mild winter coupled with a decline in area-wide events year-over-year in ServiceMaster Restore, and the late March COVID-19 related shutdown of Merry Maids locations and, to a lesser extent, customers of ServiceMaster Clean, drove lower royalty revenue.

Adjusted EBITDA

The following table provides a summary of changes in the ServiceMaster Brands Divestiture Group’s Adjusted EBITDA:



(In millions)
Three Months Ended March 31, 2019	$	26
Impact of change in revenue		(2)
Other		(1)
Three Months Ended March 31, 2020	$	23

The ServiceMaster Brands Divestiture Group generated Adjusted EBITDA of $23 million as a result of a decrease in high margin royalty revenue offset, in part, by an increase in lower margin national accounts and owned branch operations.

Presented below is a reconciliation of Net earnings from discontinued operations to the ~~American Home Shield business were separated from us and transferred to Frontdoor.~~ServiceMaster Brands Divestiture Group’s Adjusted EBITDA:

The costs of Historically Allocated Services which were not transferred to Frontdoor will be borne by our remaining businesses in the future as dis-synergies. We continue to estimate these dis-synergies to be approximately $18 million in 2019.


		Three Months Ended
		March 31,
(In millions)		2020		2019
Net earnings from discontinued operations	$	13	$	16
Depreciation and amortization expense		1		2
Non-cash stock-based compensation expense		1		1
Restructuring and other charges		4		1
Provision for income taxes		5		6
ServiceMaster Brands Divestiture Group Adjusted EBITDA	$	23	$	26

‎

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Liquidity and Capital Resources

Liquidity

A ~~substantial~~ portion of our liquidity needs are due to service requirements on our ~~significant~~ indebtedness. The ~~agreements governing our term loan facility maturing November 8, 2023 and revolving credit facility (the “Revolving~~ Credit ~~Facility”) maturing November 8, 2021 (together, the “Credit Facilities”)~~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, ~~2019,~~2020, we were in compliance with the covenants under the agreements that were in effect on such date.

On October 1, 2018, we completed the spin-off of our American Home Shield business. The separation was effectuated through the Distribution to our stockholders of approximately 80.2% of the outstanding shares of common stock of Frontdoor, which was formed as a wholly owned subsidiary to hold our American Home Shield business. The Distribution was made to our stockholders of record as of the close of business on September 14, 2018, and such stockholders received one share of Frontdoor common stock for every two shares of ServiceMaster common stock held as of the close of business on the Record Date. Subsequent to the Distribution, we retained 16,734,092 shares, or approximately 19.8%, of the common stock of Frontdoor immediately following the Distribution.

On March 12, 2019, we borrowed an aggregate principal amount of $600 million under a short-term credit facility, the proceeds of which were used to repay $434 million aggregate principal amount of term loans outstanding under our senior secured term loan facility. Such prepayment resulted in a loss on extinguishment of debt of $4 million for the three months ended March 31, 2019.

On March 27, 2019, we completed a non-cash debt-for-equity exchange in which we exchanged the 16.7 million retained shares of Frontdoor common stock, plus used proceeds from the short-term credit facility, to extinguish $600 million of our indebtedness under the short-term credit facility. The sale of the Frontdoor common stock resulted in a realized gain of $40 million, which was recorded within Realized (gain) on investment in frontdoor, inc. on the condensed consolidated statements of operations and comprehensive income for the three months ended March 31, 2019. The proceeds from and the use of proceeds in connection with the debt-for-equity exchange are as follows:


~~(in millions)~~
~~Proceeds from the short-term credit facility~~	$	~~600~~
~~Proceeds from the Frontdoor common shares retained, net of $16 million of fees paid~~		~~486~~
~~Total proceeds~~		~~1,086~~
~~Repayment of the term loan facility~~		~~(434)~~
~~Debt-for-equity exchange using net proceeds from the Frontdoor common shares retained~~		~~(486)~~
~~Use of cash to retire short-term credit facility~~		~~(114)~~
~~Total uses~~		~~(1,034)~~
~~Excess cash~~	$	52

Also, on March 27, 2019, we terminated $441 million of our interest rate swap agreement, receiving $11 million in connection with the termination. The fair value of the terminated agreement of $11 million is recorded within accumulated other comprehensive income on the condensed consolidated statements of financial position and will be amortized into interest expense over the original term of the agreement.

In April 2019, we purchased $1 million in aggregate principal amount of our 7.45% notes maturing in 2027 at a price of 105.5% and prepaid $38 million of our senior secured term loan facility. In connection with the prepayment on our senior secured term loan facility, we terminated $38 million of our interest rate swap.

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 $273 million as of March 31, 2019, compared with $690 million as of December 31, 2018, which included our investment in Frontdoor. As of March 31, ~~2019,~~2020, we had $556 million of immediate liquidity, which consisted of available cash and cash equivalents and available borrowings under our Existing Revolving Credit Facility.

As previously described, the impact of COVID-19 is highly uncertain and far reaching. We are taking actions to improve our liquidity, including capital expenditure and operating expense reductions and enhancements to our working capital management practices. Based on these actions and assumptions regarding the impact of COVID-19, we expect to be able to generate sufficient liquidity to satisfy our obligations and remain in compliance with our existing debt covenants for the next twelve months prior to giving effect to any additional financing that may occur.

The Company has a covenant-lite debt structure and as such has no maintenance financial covenants in place unless its revolving credit facility is drawn by more than 30 percent, or $120 million. The Company currently has no cash drawn under the revolving credit facility. In the event more than 30 percent of the revolving credit facility is drawn, the applicable maintenance financial covenant is 4.0x net first lien debt to Consolidated EBITDA, as defined in the credit agreement, for the most recently completed four-quarter period. With the inclusion of EBITDA from discontinued operations, the Companies first lien net debt leverage ratio was approximately 1.3x Adjusted EBITDA at quarter end, with total net debt leverage at approximately 4.0x Adjusted EBITDA.

At March 31, 2020, there were ~~$33~~$30 million of letters of credit outstanding and ~~$267~~$370 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 (that expired in February 2019), under which we may repurchase up to $300 million of outstanding shares of our common stock. ~~On February 19, 2019, our board of~~

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~~directors approved a three-year extension of the share repurchase plan allowing for an aggregate of $150 million of repurchases though February 19, 2022.~~ ~~As of March 31, 2019, we~~ We also have ~~repurchased $2 million of outstanding shares under this program, which are included in treasury stock on the condensed consolidated statements of financial position.~~

Cash and short- and long-term marketable securities include balances associated with a subsidiary borrowing arrangement at our financing subsidiary. See “—Limitations on Distributions and Dividends by Subsidiaries.” As of March 31, 2019, the total net assets subject to these third-party restrictions was $23 million. We expect that such limitations will be in effect for the foreseeable future.

~~As of March 31, 2019, 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.~~program that is included as Restricted cash on the Condensed Consolidated Statements of Financial Position as of March 31, 2020. 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 new Revolving Credit Facility and our cash position. Any change in cash or marketable securities used as collateral would result in a corresponding change in our available borrowing capacity under the new Revolving Credit Facility.

On February 19, 2019, our board of directors approved a three-year extension of a previously authorized share repurchase plan allowing for $150 million of repurchases of our common stock through February 19, 2022. We utilized all remaining authority under this program and repurchased $103 million of shares in the three months ended March 31, 2020, at an average share price of $27.64, using cash from operations.

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, ~~2019,~~2020, the estimated fair value of our fuel swap contracts was ~~immaterial,~~$8 million, and we had posted $2 million in letters of credit as collateral under our fuel hedging program, which were also issued under the old 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 new 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.

Long-Term Debt

On November 5, 2019, the Company closed on an amended $600 million Term Loan B due 2026, as well as a $400 million revolving credit agreement due 2024. Concurrently with the refinancing, we entered into a seven year interest rate swap agreement with a notional amount of $550 million. During the term on the agreement, the effective interest rate on $550 million of the new Term Loan B is fixed at a rate of 1.615 percent, plus the incremental borrowing margin of 1.75 percent, or 3.365 percent.

Fleet and Equipment Financing Arrangements

~~We have entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things,~~Our Fleet Agreement allows us to obtain fleet vehicles through a leasing ~~program.~~program, among other things. 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

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31, ~~2019,~~2020, we acquired ~~$10~~$5 million of vehicles through the leasing program under the Fleet Agreement. All leases under the Fleet Agreement are finance 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. 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, ~~2019,~~2020, an immaterial amount of property and equipment that was acquired through these incremental leasing programs. We anticipate new lease financings, including the Fleet Agreement and incremental leasing programs, for the full year ~~2019~~2020 will range from ~~$35~~$40 million to ~~$45~~$50 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 a subsidiary borrowing arrangement at our financing subsidiary. As of March 31, 2019, the total net assets subject to these third-party restrictions was $23 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 previously considered the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. ~~The~~The Tax Cuts and Jobs Act (the “Act” or “U.S. Tax Reform”) imposes a one-time tax (“Transition Tax”) on undistributed and previously untaxed post-1986

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foreign earnings and profits, as determined in accordance with U.S. tax principles, of certain foreign owned corporations owned by U.S. stockholders. While the Transition Tax resulted in all pre-2018 undistributed foreign earnings being subject to U.S. tax, an actual repatriation from our non-U.S. subsidiaries could still be subject to additional foreign withholding taxes and U.S. state taxes.

Cash Flows

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



	Three Months Ended				Three Months Ended
	March 31,				March 31,
(In millions)	2019		2018		2020		2019
Net cash provided from (used for):
Operating activities	$	90	$	84	$	55	$	73
Investing activities		(89)		(110)		(31)		(93)
Financing activities		31		(93)		(126)		31
Discontinued operations		(1)		55		10		19
Effect of exchange rate changes on cash						(2)		—
Cash (decrease) increase during the period	$	31	$	(64)	$	(94)	$	31

Operating Activities

Net cash provided from operating activities from continuing operations ~~increased $7~~decreased $18 million to ~~$90~~$55 million for the three months ended March 31 ~~2019~~, 2020 compared to ~~$84~~$73 million for ~~the~~ three months ended March 31 ~~2018.~~, 2019.

Net cash provided from operating activities for the three months ended March 31, 2020 comprised $44 million in earnings adjusted for non-cash charges, offset, in part, by $1 million in payments related to restructuring and other and fumigation matters and a $12 million decrease in cash required for working capital (a $5 million decrease excluding the working capital impact of accrued interest and taxes). For the three months ended March 31, 2019, working capital requirements were favorably impacted by seasonal activity and the timing of interest and income tax payments.

Net cash provided from operating activities for the three months ended March 31, 2019 comprised ~~$93~~$73 million in earnings adjusted for non-cash charges, offset, in part, by $6 million in payments related to restructuring and other and fumigation matters, and a $3$6 million decrease in cash required for working capital (a $7$4 million increase excluding the working capital impact of accrued interest and taxes). For the three months ended March 31, 2019 ~~working capital requirements were favorably impacted by seasonal activity and the timing of interest and income tax payments.~~

Net cash provided from operating activities for the three months ended March 31, 2018 comprised $66 million in earnings adjusted for non-cash charges, offset, in part, by $4 million in payments related to restructuring, and a $22 million decrease in cash required for working capital (a $6 million decrease excluding the working capital impact of accrued interest and taxes). For the three months ended March 31, 2018,, working capital requirements were favorably impacted by seasonal activity and the timing of income tax ~~payments, offset, in part, by incentive compensation payments related to 2017 performance.~~payments.

Investing Activities

Net cash used for investing activities from continuing operations was ~~$89~~$31 million for the three months ended March 31 ~~2019,~~, 2020, compared to ~~$110~~$93 million for the three months ended March 31 ~~2018.~~, 2019.

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Cash paid for business acquisitions, which ~~increased~~decreased to $26 million, for the three months ended March 31, 2020, from $100 million, for the three months ended March 31, 2019 ~~from $92 million, net of $1 million of cash acquired, for the three months ended March 31, 2018.~~. We expect to continue our tuck-in acquisition program at Terminix and to periodically evaluate other strategic acquisitions.

Capital expenditures ~~decreased to~~were $9 million for the three months ended March 31, 2020 and 2019 ~~from $20 million ($19 million net of government grants) in the three months ended March 31, 2018~~ and included recurring capital needs, information technology projects and a reduction in Global Service Center relocation ~~costs and information technology projects.~~costs. We anticipate capital expenditures for the full year ~~2019~~2020 will range from ~~$35~~$40 million to ~~$45~~$50 million, reflecting ~~our partnership with Salesforce to upgrade our technology platforms and additional~~ recurring capital needs. We expect to fulfill our ongoing vehicle fleet needs through vehicle finance leases. We have no additional material capital commitments at this time.

Cash flows received from the sale and maturity of securities for the three months ended March 31, 2019 totaled $3 million and was driven by the sale of equity securities. There was no cash received from the sale and maturity of securities for the three months ended March 31, 2018.

~~Cash flows used~~ for notes receivable, net, for the three months ended March 31 ~~2019 and~~, 2020 totaled $5 million. Cash flows received for notes receivable, net, for the three months ended March 31 ~~2018,~~, 2019 totaled ~~$17 million and $1 million, respectively, and were~~$16 million. This was a result of a net increase in financing provided by our financing subsidiary to our franchisees and retail customers of our operating units and collections from other long-term financing arrangements.

Financing Activities

Net cash used for financing activities from continuing operations was $126 million for the three months ended March 31, 2020. Net cash provided from financing activities from continuing operations was $31 million for the three months ended March 31, 2019 ~~compared to net cash used for financing activities~~.

During the three months ended March 31, 2020, we repurchased $103 million of common stock and received $3 million from ~~continuing operations~~the issuance of ~~$93~~common stock through the exercise of stock options. In addition, we repaid $25 million ~~for~~of debt. During the three months ended March 31, ~~2018.~~2019, we repurchased $2 million of common stock and received $5 million from the issuance of common stock through the exercise of stock options.

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During the first quarter of 2019, we completed a debt-for-equity exchange which resulted in $600 million of borrowings of debt under a short-term credit facility, $434 million of repayments of our senior secured term loan facility and $114 million of repayments under a short-term credit facility. In addition, we repaid $23 million of other debt.

~~During the three months ended March 31, 2019, we repurchased $2 million of common stock and received $5 million from the issuance of common stock through the exercise of stock options.~~

~~During the three months ended March 31, 2018, we received $2 million from the issuance of common stock through the exercise of stock options.~~

Contractual Obligations

Our ~~Annual Report on~~2019 Form 10-K ~~for the year ended December 31, 2018 (“2018 Form 10-K”)~~ includes disclosures of our contractual obligations and commitments as of December 31, ~~2018. As indicated above, in connection with the debt-for-equity exchange transaction, we repaid $434 million of our outstanding term loan debt. In addition, we~~2019. We continue to make the contractually required payments, and, therefore, the 2019 obligations and commitments as listed in our ~~2018~~2019 Form 10-K have been reduced by the required ~~payments and the debt-for-equity exchange.~~payments.

Off-Balance Sheet Arrangements

As of March 31, ~~2019~~2020, 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.

Regulatory Matters

Information Regarding Forward-Looking Statements

This report contains forward-looking statements and cautionary statements. 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 are subject to known and unknown risks and uncertainties. These forward-looking statements also include, but are not limited to statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; impact from COVID-19; 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; expected termite damage claims costs; estimates of future payments under operating and finance leases; estimates on current and deferred tax provisions; the outcome (by judgment or

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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, 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 ~~2018~~2019 Form 10-K and in “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:

~~our ability to successfully implement our business strategies;~~

~~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;~~

~~Table~~Any financial impact from the COVID-19 pandemic, including a global recession or a recession in the U.S., credit and capital markets volatility and an economic or financial crisis, or otherwise, which could affect our financial performance or operations, the health of ~~Contents~~our employees or the health and operations and our customers;

Weakening general economic conditions, especially as they may affect unemployment and consumer confidence or discretionary spending levels, all of which could impact the demand for our services;

risks associated with acquisitions, including, without limitation, retaining customers from businesses acquired, difficulties in integrating acquired businesses and achieving expected synergies therefrom;

~~resolution of fumigation related matters;~~

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

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

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

~~adverse weather conditions;~~

~~weakening general economic conditions, 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;~~

~~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;~~

~~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;~~

~~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.~~

the possibility that the review of strategic alternatives for our ServiceMaster Brands businesses will not result in a transaction or that the anticipated benefits will not be realized;

the diversion of management time and other business disruption during the review of strategic alternatives for our ServiceMaster Brands businesses;

the impact of reserves attributable to pending Litigated Claims and Non-Litigated Claims for termite damages;

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

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

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;

adverse weather conditions;

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;

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

changes in the source and intensity of competition in our segments;

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 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.

On November 5, 2019, we repaid approximately $171 million of debt outstanding under the existing Term Loan B due 2023, $120 million outstanding under the existing revolving credit agreement due 2021, and $150 million from a recent short-term borrowing entered on October 4, 2019. We repaid the approximately $441 million in debt with the proceeds from a new $600 million Term Loan B due 2026, and also entered into a $400 million revolving credit facility due 2024. In ~~our opinion, other than~~conjunction with the ~~impact~~debt refinancing, we entered into a seven year interest rate swap agreement with a notional amount of $550 million. During the term of the agreement, the effective interest rate on $550 million of the new Term Loan B is fixed at a rate of 3.365%.

We have hedged substantially all of our ~~repayment of $434 million of our term loan facility and the termination of $441 million of~~variable rate debt under our interest rate swap ~~the market risk associated with~~and, therefore, we believe our ~~remaining debt obligations and other significant instruments~~exposure to interest rate fluctuations, when viewed on a net basis, is not material to our overall results of operations. Assuming all revolving loans were fully drawn as of March 31, ~~2019 has not materially changed from December 31, 2018 (see Item 7A of the 2018 Form 10-K).~~2020, each one percentage point change in interest rates would result in an approximate $4 million change in annual interest expense on our Revolving Credit Facility.

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 1213 million gallons of fuel in ~~2019.~~2020. As of March 31, ~~2019,~~2020, a 10 percent

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change in fuel prices would result in a change of approximately $2$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, ~~2019,~~2020, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of ~~$32~~$25 million, maturing through ~~2020.~~2021. The estimated fair value of these contracts as of March 31, ~~2019~~2020 was ~~an immaterial amount.~~a net liability of $8 million. These fuel swap contracts provide a fixed price for approximately 7972 percent and 4020 percent of our estimated fuel usage for the remainder of ~~2019~~2020 and 2021 respectively.

Foreign Currency Risk

We are principally exposed to foreign currency exchange risk in Swedish krona and Norwegian krone, but also have foreign currency exchange risk related to the euro, British pound, Canadian dollar, Mexican peso and Chinese yuan. A strengthening of the U.S. dollar relative to the currencies of the foreign countries in which we operate can have an impact on our operating results.

Effective March 3, 2020, ~~respectively.~~ we entered into a cross currency interest rate swap and a net investment hedge to mitigate the financial impact of fluctuations in foreign currency exchange rates between the U.S. dollar and Swedish Krone, our largest foreign currency exposure. The estimated fair value of these contracts as of March 31, 2020 was a net asset of $6 million. These instruments provide a fixed translation rate on our approximately $200 million investment in Nomor. As of March 31, 2020, a 10 percent change in average exchange rates would not have a material impact on our results of operations.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our Interim Chief Executive Officer, ~~Nikhil M. Varty,~~Naren K. Gursahaney, 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. ~~Varty~~Gursahaney and DiLucente have concluded that both the design and operation of our disclosure controls and procedures were effective as of March 31, ~~2019.~~2020.

Changes in internal control over financial reporting

On January 1, 2019, we adopted ASC 842 and implemented a new lease accounting system and processes. This implementation resulted in a material change to a component of our internal control over financial reporting as of that date. The operating effectiveness of these changes will be evaluated as part of our annual assessment of the effectiveness of internal control over financial reporting for the year ended December 31, 2019.

No ~~other~~ 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, ~~2019~~2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~Item~~

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

Our Terminix business is subject to a significant number of damage claims related to termite activity in homes for which we provide termite control services, often accompanied by a termite damage warranty. Our termite damage warranty is a differentiator in the industry that has enabled us to become the market leader of this product line. Damage claims include Non-litigated Claims and Litigated Claims. Recently we have experienced higher Non-Litigated Claims activity concentrated in the Mobile Bay Area of the United States related to Formosan termites, an invasive species, which has driven higher Non-Litigated Claims expense. In addition, since the beginning of 2017, we have been served with an increasing number of Litigated Claims, again primarily concentrated in the Mobile Bay Area and related to Formosan termite activity, which has driven higher Litigated Claim expense. Some plaintiffs have sought to demonstrate a pattern and practice of fraud in connection with Litigated Claims and have sought awards, in addition to repair costs, which included punitive damages and damages for mental anguish. We defend these Litigated Claims vigorously, and we are taking decisive actions to mitigate increasing claims costs, however, we cannot give assurance that these mitigation actions will be effective in reducing claims or costs related thereto, nor can we give assurance that lawsuits or other proceedings related to termite damage claims will not materially affect our reputation, business, financial position, results of operations and cash flows.

In addition to the ~~matter~~matters 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, and which require compliance with the terms of the agreements. If one or more of our settlements are not finally approved and implemented, 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 6 to the condensed consolidated financial statement for more details.

ITEM 1A. RISK FACTORS

~~We discuss~~The following risk factor is in addition to our risk factors—included in Part 1, Item A to our 2019 Form 10-K—that could affect our business, financial condition and results of operations. These risk factors should be considered in connection with evaluating the forward-looking statements included in this Quarterly Report on Form 10-Q because these factors could cause the actual results and conditions to differ materially from those projected in forward-looking statements. Before you buy our common stock, you should know that making such an investment involves risks, including the risks described in our ~~2018~~2019 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 2018 Form 10-K. The materialization of anyas included below. Additional risks and uncertainties ~~identified in Forward-Looking Statements contained in this report, together with those previously disclosed in the 2018 Form 10-K and our other filings with the SEC or those~~ that are not presently ~~unforeseen could result in significant adverse effects on~~known to us or that we currently believe to be immaterial may also materially adversely affect our reputation, business, financial ~~condition,~~position, results of operations and cash ~~flows. See “Item 2. Management’s Discussion~~flows in the future. If any of the risks actually occur, our business, financial position or results of operations could be negatively affected. In that case, the trading price of our securities could decline, and ~~Analysis~~you may lose part or all of ~~Financial Condition~~your investment.

Our operations may be adversely impacted as a result of pandemic outbreaks, including COVID-19.

In December 2019, COVID-19 was first reported in Wuhan, China, and ~~Results~~by March 11, 2020, as COVID-19 spread outside of ~~Operations — Information Regarding Forward-Looking Statements” above.~~China, the World Health Organization designated the outbreak as a global pandemic. The COVID-19 pandemic could have negative impacts, including a global recession or a recession in the U.S., credit and capital markets volatility and an economic or financial crisis, or otherwise, and could affect our operations, major facilities or employees’ and consumers’ health. As the global pandemic and its negative impact on the global economy continue, we expect COVID-19 to interfere with general commercial activity related to our supply chain and customer base, which could have a material adverse effect on our business, financial condition or results of operations. To the extent that COVID-19 continues or worsens, governments may impose new or additional restrictions to slow its spread. The result of COVID-19 and those restrictions could result in additional businesses being shut down, additional work restrictions and supply chains being interrupted, slowed, or rendered inoperable. As a result, it may be challenging to obtain raw materials to support our business needs, and individuals could become ill, quarantined or otherwise unable to work and/or travel due to health reasons or governmental restrictions. Also, governments may impose other laws, regulations or taxes which could adversely

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impact our business, financial condition or results of operations. Further, if our customers’ businesses are similarly affected, they might delay or reduce purchases from us.

The potential effects of COVID-19 also could impact us in a number of other ways including, but not limited to, reductions to our profitability, laws and regulations affecting our business, fluctuations in foreign currency markets, the availability of future borrowings, the cost of borrowings, credit risks of our customers and counterparties, and potential impairment of the carrying value of goodwill or other indefinite-lived intangible assets. Such increased costs and reductions in profitability may not be fully recoverable. The impact of the COVID-19 pandemic depends on factors beyond our knowledge or control, including the duration and severity of the outbreak and actions taken to contain its spread and mitigate its public health effects. We cannot at this time predict the impact of the COVID-19 pandemic on our financial condition or results of operation, but the impact could be material over time.

The potential effects of COVID-19 also could impact many of our risk factors, included in Part 1, Item A of our 2019 Form 10-K, including, but not limited to our profitability, laws and regulations affecting our business, fluctuations in foreign currency markets, the availability of future borrowings, the costs of current and future borrowings, credit risks of our customers and counterparties, including loans issued through our franchise lending program through ServiceMaster Acceptance Corporation (which is classified as discontinued operations as part of the ServiceMaster Brands Divestiture Group), our business transformation initiative and an impairment of the carrying value of goodwill or other indefinite-lived intangible assets. However, given the evolving health, economic, social, and governmental environments, the potential impact that COVID-19 could have on our risk factors that are further described in our 2019 Form 10-K remain uncertain.

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

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

paid per share

programs

(in millions)(1)
Jan. 1, 2019 through Jan. 31, 2019

—

$
—

—

$
150
Feb. 1, 2019 through Feb. 28, 2019

—

—

—

150
Mar. 1, 2019 through Mar. 31, 2019

36,360

47.02

36,360

148
Total

36,360

$
47.02

36,360

$
148



				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	paid per share		programs	(in millions)⁽¹⁾
January 1, 2020 through January 31, 2020	95,445	$	37.25	95,445	$	100
February 1, 2020 through February 29, 2020	86,355		36.52	86,355		97
March 1, 2020 through March 31, 2020	3,565,521		27.16	3,565,521		—
Total	3,747,321	$	27.64	3,747,321	$	—

~~(1)~~

On February 23, 2016, our board of directors authorized a three-year share repurchase program (that expired February 23, 2019), under which we were authorized to repurchase up to $300 million of outstanding shares of our common stock. Of the total amount authorized, $155 million was remaining on the date the program expired. On February 19, 2019, our board of directors approved a three-year extension of the share repurchase plan allowing for an aggregate of $150 million of repurchases through February 19, 2022.

___________________________________

(1)On February 23, 2016, our board of directors authorized a three-year share repurchase program (that expired February 23, 2019), under which we were authorized to repurchase up to $300 million of outstanding shares of our common stock. Of the total amount authorized, $155 million was remaining on the date the program expired. On February 19, 2019, our board of directors approved a three-year extension of the share repurchase plan allowing for an aggregate of $150 million of repurchases through February 19, 2022. We utilized all remaining authority in the three months ended March 31, 2020.

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ITEM 6. EXHIBITS



Exhibit ‎Number		Description
~~10.1~~10.1#		~~Credit~~Letter Agreement, dated as of ~~March 12, 2019, among The~~January 17, 2020, by and between Nikhil M. Varty and ServiceMaster ~~Company, LLC, JPMorgan Chase Bank, N.A., as administrative agent, and the several banks and other financial institutions from time to time party thereto~~Global Holdings, Inc. is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K offiled January 21, 2020.
10.2#*		Employment Agreement, dated January 31, 2020, by and between Naren K. Gursahaney and ServiceMaster Global Holdings, Inc. ~~filed on March 18, 2019.~~
10.2#10.3#		~~Form of~~ Employee ~~Performance~~Restricted Stock Unit Agreement, ~~under the~~dated January 31, 2020, by and between Naren K. Gursahaney and ServiceMaster Global Holdings, Inc. ~~2014 Omnibus Incentive Plan for awards granted on or after February 18, 2019~~.
~~10.3#~~10.4#*		~~Form~~ Employee Stock Option Agreement, ~~under the Omnibus Plan for awards granted on or after February 18, 2019 is incorporated~~dated January 31, 2020, by ~~reference to Exhibit 10.54 to the Annual Report on Form 10-K of~~and between Naren K. Gursahaney and ServiceMaster Global Holdings, Inc.~~, filed on February 28, 2019.~~
~~10.4#~~10.5#*		Retention Agreement, dated January 28, 2020, by and between Dion Persson and ServiceMaster Global Holdings, Inc. ~~Employee Stock Purchase Plan as amended~~
10.6#*		Retention Agreement, dated February 26, 2020, by and ~~restated as of February 19, 2019, is incorporated by reference to Exhibit 10.55 to the Annual Report on Form 10-K of~~between Anthony D. DiLucente and ServiceMaster Global Holdings, Inc.~~, filed on February 28, 2019.~~
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 - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL 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
104*		Cover Page Interactive Data File (embedded within the Inline XBRL document and contained in Exhibit 101)

___________________________________

# Denotes management compensatory plans, contracts or arrangements.

* Filed herewith.

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~~SIGNATURE~~

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: May 8, ~~2019~~2020


	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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	As previously reported,		Impact of adopting
(In millions)	December 31, 2018		ASC 842		January 1, 2019
Operating lease right-of-use assets	$	—	$	107	$	107
Finance lease assets, within Property and equipment, net		89		—		89
Total right-of-use assets	$	89	$	107	$	195
Other assets		87		—		86
Total assets	$	5,023	$	106	$	5,129

Current portion of long-term lease liability	$	—	$	15	$	15
Long-term lease liability		—		120		120
Current finance lease liability, within Current portion of long-term debt		31		—		31
Long-term finance lease liability, within Long-term debt		60		—		60
Total lease liabilities	$	90	$	135	$	225
Accrued liabilities, Other		61		(1)		60
Other long-term obligations, primarily self-insured claims		182		(28)		155
Total liabilities	$	2,818	$	106	$	2,925


	Amounts Reclassified from Accumulated
	Other Comprehensive Income
	Three Months Ended
	March 31,
(In millions)	2019		2018
Gains (losses) on derivatives:
Fuel swap contracts	$	(1)	$	—
Interest rate swap contracts		1		(1)
Net losses on derivatives		—		(1)
Impact of income taxes		—		—
Total reclassifications related to derivatives	$	—	$	(1)
Total reclassifications for the period	$	—	$	(1)


Trade Date	Effective Date	Expiration Date	Notional Amount(1)	Fixed Rate(2)		Floating Rate
November 7, 2016	November 8, 2016	November 30, 2023	$209,250	1.493	%	One month LIBOR


(In millions)	Operating Leases		Capital Leases
Year ended December 31,
Less than 1 Yr	$	17	$	31
1 - 3 Yrs		36		46
3 - 5 Yrs		25		14
More than 5 Yrs		67		1
Total future minimum lease payments	$	146	$	92