SERVICEMASTER GLOBAL HOLDINGS INC (Form: 10-Q, Received: 05/08/2020 16:05:54)

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Table of Contents

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, 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 x	Accelerated Filer o	Non-Accelerated Filer o	Smaller Reporting Company o
			Emerging 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 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	40

Item 4. Controls and Procedures	40

Part II. Other Information	41

Item 1. Legal Proceedings	41

Item 1A. Risk Factors	41

Item 2. Unregistered Sales of Registered Securities and Use of Proceeds	42

Item 6. Exhibits	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
	March 31,
	2020		2019
Revenue	$	456	$	419
Cost of services rendered and products sold		279		236
Selling and administrative expenses		140		123
Amortization expense		9		5
Acquisition-related costs		1		1
Fumigation related matters		—		1
Restructuring and other charges		4		6
Realized (gain) on investment in frontdoor, inc.		—		(40)
Interest expense		23		27
Interest and net investment income		—		(1)
Loss on extinguishment of debt		—		6
(Loss) Income from Continuing Operations before Income Taxes		(1)		56
(Benefit) provision for income taxes		(2)		3
Income from Continuing Operations		1		53
Net earnings from discontinued operations		13		16
Net Income	$	14	$	70
Total Comprehensive (Loss) Income	$	(36)	$	68
Weighted-average common shares outstanding - Basic		134.9		135.8
Weighted-average common shares outstanding - Diluted		135.1		136.2
Basic Earnings Per Share:
Income from Continuing Operations	$	0.01	$	0.39
Net earnings from discontinued operations		0.09		0.12
Net Income		0.10		0.51
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.01	$	0.39
Net earnings from discontinued operations		0.09		0.12
Net Income		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
	March 31,		December 31,
	2020		2019
Assets:
Current Assets:
Cash and cash equivalents	$	185	$	280
Receivables, less allowances of $19 and $21, respectively		177		178
Inventories		41		46
Prepaid expenses and other assets		89		81
Current assets held for sale		883		45
Total Current Assets		1,376		629
Other Assets:
Property and equipment, net		192		205
Operating lease right-of-use assets		91		95
Goodwill		2,095		2,096
Intangible assets, primarily trade names, service marks and trademarks, net		1,149		1,169
Restricted cash		89		89
Notes receivable		30		32
Long-term marketable securities		12		13
Deferred customer acquisition costs		86		94
Other assets		81		72
Long-term assets held for sale		—		829
Total Assets	$	5,201	$	5,322
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	92	$	96
Accrued liabilities:
Payroll and related expenses		50		54
Self-insured claims and related expenses		84		72
Accrued interest payable		22		16
Other		95		82
Deferred revenue		108		107
Current portion of lease liability		19		19
Current portion of long-term debt		100		70
Current liabilities held for sale		48		40
Total Current Liabilities		617		557
Long-Term Debt		1,622		1,667
Other Long-Term Liabilities:
Deferred taxes		486		499
Other long-term obligations, primarily self-insured claims		180		158
Long-term lease liability		107		110
Long-term liabilities held for sale		—		9
Total Other Long-Term Liabilities		772		776
Commitments and Contingencies (Note 6)
Stockholders' Equity:
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		2,341		2,334
Retained Earnings		305		291
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		2,190		2,322
Total Liabilities and Stockholders' Equity	$	5,201	$	5,322

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

‎

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Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In millions)



							Retained		Accumulated
					Additional		Earnings		Other
			Common		Paid-in		(Accumulated		Comprehensive		Treasury				Total
	Shares		Stock		Capital		Deficit)		(Loss) Income		Shares		Amount		Equity
Balance December 31, 2018		147	$	2	$	2,309	$	156	$	5		(12)	$	(267)	$	2,204
Net income		—		—		—		70		—		—		—		70
Other comprehensive loss, net of tax		—		—		—		—		(2)		—		—		(2)
Total comprehensive income (loss)		—		—		—		70		(2)		—		—		68
Exercise of stock options		—		—		5		—		—		—		—		5
Stock-based employee compensation		—		—		4		—		—		—		—		4
Repurchase of common stock		—		—		—		—		—		—		(2)		(2)
Balance March 31, 2019		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

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Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)



	Three Months Ended
	March 31,
	2020		2019
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	$	368	$	313
Cash Flows from Operating Activities from Continuing Operations:
Net Income		14		70
Adjustments to reconcile net income to net cash provided from operating activities:
Net earnings from discontinued operations		(13)		(16)
Depreciation expense		19		18
Amortization expense		9		5
Amortization of debt issuance costs		1		1
Amortization of lease right-of-use assets		5		5
Fumigation related matters		—		1
Payments on fumigation related matters		—		(1)
Realized (gain) on investment in frontdoor, inc.		—		(40)
Loss on extinguishment of debt		—		6
Deferred income tax provision		1		3
Stock-based compensation expense		4		4
Gain on sale of marketable securities		—		(1)
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		3		13
Change in working capital, net of acquisitions:
Receivables		(1)		9
Inventories and other current assets		5		(1)
Accounts payable		2		4
Deferred revenue		2		5
Accrued liabilities		(3)		(21)
Accrued interest payable		6		6
Current income taxes		—		4
Net Cash Provided from Operating Activities from Continuing Operations		55		73
Cash Flows from Investing Activities from Continuing Operations:
Property additions		(9)		(9)
Business acquisitions, net of cash acquired		(26)		(100)
Origination of notes receivable		(7)		(24)
Collections on notes receivable		11		40
Net Cash Used for Investing Activities from Continuing Operations		(31)		(93)
Cash Flows from Financing Activities from Continuing Operations:
Borrowings of debt		—		600
Payments of debt		(25)		(572)
Repurchase of common stock		(103)		(2)
Issuance of common stock		3		5
Net Cash (Used For) Provided from Financing Activities from Continuing Operations		(126)		31
Cash Flows from Discontinued Operations:
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	$	274	$	344

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

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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 markets. Our mission is to create cleaner, healthier, safer environments for our customers wherever they are – at home, at work or at play. Our portfolio of well‑recognized brands includes Terminix (residential termite and pest control), Terminix Commercial (commercial termite and pest control), Copesan (commercial national accounts pest management), Assured Environments (commercial pest control), Gregory Pest Solutions (commercial pest control), McCloud Services (commercial pest control) 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, 2019, as filed with the SEC (the “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.

Exploration of Strategic Alternatives for ServiceMaster Brands

On January 21, 2020, we announced we are exploring strategic alternatives related to ServiceMaster Brands, including the 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 employees and our customers. We have also continued serving our customers in all of the international markets in which we operate.

Note 2. Significant Accounting Policies

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

Adoption of New Accounting Standards

In June 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 also requires enhanced disclosures relating to significant estimates and judgments used in estimating credit losses, as well as the credit quality. We adopted this ASU on January 1, 2020, and it did not have a material impact on our financial condition or the results of our operations.

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In August 2018, the FASB issued ASU 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, 2020. We adopted the updates applicable immediately in the first quarter of 2020, and it did not have a 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 March 2020, the FASB issued ASU 2020-04, “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 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 Income Taxes,” which simplifies the accounting for income taxes by removing certain exceptions. The ASU is effective for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years, and early adoption is permitted. We are currently evaluating the impact the adoption of this ASU will have on 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

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 segment is Terminix. Revenue related to fumigation completion services and 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
	Three months ended				Three months ended				Three months ended
	March 31,				March 31,				March 31,
(In millions)		2020		2019		2020		2019		2020		2019
Major service line
Residential Pest Control	$	159	$	154	$	—	$	—	$	159	$	154
Commercial Pest Control		107		94		—		—		107		94
Termite and Home Services		148		146		—		—		148		146
Sales of Products and Other		18		16		—		—		18		16
Fumigation		7		10		—		—		7		10
European Pest Control		—		—		18		—		18		—
Total	$	438	$	419	$	18	$	—	$	456	$	419

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Contract 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 of Financial Position. The current portion of Notes receivable, which represents amounts financed for Terminix customers, are included within Receivables, less allowances, on the condensed consolidated statement of financial position and totaled $32 million and $38 million as of March 31, 2020 and December 31, 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.

Changes in deferred revenue for the three months ended March 31, 2020 and 2019 were as 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	$	91
Deferral of revenue		38
Recognition of deferred revenue		(33)
Balance, March 31, 2019	$	96

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 $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.

Note 4. Restructuring and Other Charges

Restructuring Charges

We incurred restructuring charges of $4 million ($3 million, net of tax) and $6 million ($4 million, net of tax) in the three months ended March 31, 2020 and 2019, respectively. Restructuring charges were comprised of the following:



	Three Months Ended
	March 31,
(In millions)	2020		2019
Terminix⁽¹⁾	$	1	$	2
European Pest Control and Other⁽²⁾		3		4
Total restructuring charges	$	4	$	6

___________________________________

(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 of Operations and 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 of 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		6
Costs paid or otherwise settled		(7)
Balance as of March 31, 2019	$	6

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

Note 5. Discontinued Operations

In January 2020, we announced that our board of directors committed to explore strategic alternatives related to our ServiceMaster Brands segment in order to focus on our core pest control and termite business. We intend to complete our review of strategic alternatives and consummate a transaction, which may include the sale of the business, during the current year.

The ServiceMaster Brands Divestiture Group is classified as held for sale on the 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.

The following table summarizes the comparative financial results of discontinued operations which are presented as Net earnings from discontinued operations on the Condensed Consolidated Statements of 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 professional fees and other costs incurred in connection with the strategic evaluation.

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The total assets and liabilities held for sale related to discontinued operations are stated separately in the 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, 2020 in the Condensed Consolidated Statements of Financial Position as it is probable the sale will occur within one year.

The following selected financial information of ServiceMaster Brands is included in the Condensed Consolidated Statements of 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, 2020, the Company began marketing its corporate aircraft for sale and reclassified its book value of $6 million to Current assets held for sale on the Condensed Consolidated Statements of Financial Position.

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



	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 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

Termite damage 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 damage and 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, 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 no impairment charges recorded in the three months ended March 31, 2020 and 2019. There were no accumulated impairment losses recorded as of March 31, 2020. The table below summarizes the goodwill balances for continuing operations by reportable 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

___________________________________

(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, 2020						As of December 31, 2019
			Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net
Trade names⁽¹⁾	$	888	$	—	$	888	$	888	$	—	$	888
Customer relationships		649		(429)		219		659		(423)		236
Franchise agreements		—		—		—		—		—		—
Other		77		(35)		41		79		(34)		45
Total	$	1,614	$	(465)	$	1,149	$	1,626	$	(457)	$	1,169

___________________________________

(1)Not subject to amortization.

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

Note 8. Stock-Based Compensation

For the three months ended March 31, 2020 and 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 of Operations and Comprehensive Income.

As of March 31, 2020, there 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 2.30 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 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. As of March 31, 2020 there were 814,400 shares available for issuance under the Employee Stock Purchase Plan.

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, is included in the Condensed Consolidated Statements of Operations and Comprehensive Income.

In the first quarter of 2019, we terminated $441 million of our then-existing $650 million interest rate swap, receiving $11 million from the counterparty. We terminated the remaining $209 million of 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 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, 2020 is $7 million.

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




	Unrealized
	Gains		Foreign
	(Losses) on		Currency
(In millions)	Derivatives		Translation		Total
Balance as of December 31, 2019	$	13	$	(5)	$	9
Other comprehensive income before reclassifications:
Pre-tax amount		(45)		(15)		(61)
Tax provision		12		—		12
After-tax amount		(34)		(15)		(49)
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, 2018	$	20	$	(15)	$	5
Other comprehensive income before reclassifications:
Pre-tax amount		(7)		1		(7)
Tax benefit		5		—		5
After-tax amount		(2)		1		(1)
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

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(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	$	—

‎

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Note 10. Supplemental Cash Flow Information

Supplemental information relating to the Condensed Consolidated Statements of Cash Flows is presented in the following table:



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

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(1)For the three months ended March 31, 2019, excludes $11 million received in connection with our partial terminations of 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 of Cash Flows.

The non-cash lease transactions are described in 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 of Cash Flows as non-cash financing activities.

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 of Financial Position. As March 31, 2020 and December 31, 2019, our marketable securities consisted primarily of 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
	Amortized		and Unrealized		and Unrealized		Fair
(In millions)	Cost		Gains		Losses		Value
March 31, 2020:
Debt securities	$	4	$	—	$	—	$	4
Equity securities		8		—		—		8
Total securities	$	12	$	—	$	—	$	12
December 31, 2019:
Debt securities	$	4	$	—	$	—	$	4
Equity securities		9		—		—		9
Total securities	$	13	$	—	$	—	$	13

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 of Operations and 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 no unrealized gains or losses recognized for the three months ended March 31, 2019.

We periodically review our Debt securities to determine whether an allowance for credit losses is necessary. There were no 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 our Condensed Consolidated Statements of Operations and Comprehensive Income within Interest and net investment income. The investments are included within Other Assets on the Condensed Consolidated Statements of Financial Position. At March 31, 2020, the carrying amount of these investments was $4 million.

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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

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(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.

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

(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 to effectuate a debt-for-equity exchange of our Frontdoor retained shares. The proceeds of this short-term credit facility were used to repay $468 million aggregate principal amount of term loans

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outstanding under our senior secured term loan facility in March and April of 2019. Such 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 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 of Operations and Comprehensive Income for the three months ended March 31, 2019.

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 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 zero percent) on the notional amount. Therefore, 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%.

In connection with the repayments of our previous Term Loan B due 2023 in 2019, in the three months ended March 31, 2019, we terminated $441 million of our then existing $650 million interest rate swap agreement, receiving $11 million from the counterparty. We terminated an additional $38 million of the remaining interest rate swap in 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 our previous Term Loan B due 2023, with no 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, 2020 is $7 million.

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 of 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 of Financial Position.

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

The components of lease expense were as follows:


	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

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


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


(In millions)	Operating Leases		Finance Leases
Year ended December 31,
2020 (excluding the three months ended March 31, 2020)	$	20	$	27
2021		23		29
2022		20		19
2023		15		12
2024		11		5
Thereafter		85		1
Total future minimum lease payments		174		92

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 five tuck-in pest control acquisitions which have been accounted for as business combinations, as well as $18 million for final funding for two 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, 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 two pest control acquisitions which have been accounted for as asset acquisitions. We recorded $60 million of goodwill, $4 million of trade names and $36 million of other intangibles, primarily customer 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

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(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, 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 appropriate useful lives to assign to all assets, including intangibles. The majority of this purchase price is allocated to goodwill and is not expected to be deductible for income tax purposes. We will complete the purchase price allocation no later than the third quarter of 2020.

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

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(1)Primarily trade receivables and net of approximately $9 million of cash acquired.

(2)Primarily customer lists.

(3)Primarily advanced collections from customers.

(4)Includes $20 million of deferred 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 Nomor 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 represent, nor do we believe it is indicative of, the consolidated results of 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 anticipated business and tax synergies of the acquisition and is not representative or indicative of the anticipated future consolidated results of operations of ServiceMaster. The most significant adjustment made to the pro forma financial information is the inclusion of estimated quarterly interest expense of approximately $1 million related to financing obtained for the transaction and the estimated tax impact of this adjustment. The unaudited pro forma financial information includes various assumptions, including those related to the preliminary purchase price allocation, that may be impacted by the finalization of the purchase price allocation. The tax impact of these adjustments was calculated based on Nomor’s statutory rate.

Supplemental cash flow information regarding the acquisitions is as follows:


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

Net cash paid	$	6	$	100
Seller financed debt		2		6
Purchase price	$	7	$	106

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 227.3 percent and 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 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 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.

As of March 31, 2020 and December 31, 2019, we had $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

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

In accordance with accounting standards for segments, we identified Terminix as our reportable segment primarily based on the nature of the services it provides and the operating results that are 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 McCloud Services brand names.

European Pest Control and Other includes our European pest control operations, primarily under our Nomor brand, our captive insurance subsidiary, which provides automobile, workers' compensation and general liability coverage to our reportable segment, and our headquarters operations (substantially all of which costs are allocated to our reportable segment), which provides various technology, 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 segment.

Information regarding the accounting policies used by us are described in our 2019 Form 10-K. We derive substantially all of our revenue from customers and franchisees in the United States with approximately five percent generated in foreign markets as of March 31, 2020. Operating expenses of 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; 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 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.

Information for continuing operations for Terminix and European Pest Control and Other is presented below:



	Three Months Ended
	March 31,
(In millions)	2020		2019
Revenue:
Terminix	$	438	$	419
European Pest Control and Other		18		—
Total Revenue	$	456	$	419
Reportable Segment Adjusted EBITDA:⁽¹⁾
Terminix	$	63	$	83

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(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

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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 of Operations and Comprehensive Income. The carrying amount of total debt was $1,721 million and $1,737 million, and the estimated fair value was $1,713 million and $1,841 million as of March 31, 2020 and December 31, 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, 2020 and December 31, 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.

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 zero 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, 2020 and 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
				Quoted		Significant
				Prices In		Other		Significant
				Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of March 31, 2020:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	12	$	12	$	—	$	—
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		$	18	$	12	$	6	$	—
Financial Liabilities:
Fuel swap contracts	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		$	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, 2019	$	1
Total gains (losses) (realized and unrealized)
Included in earnings		—	Cost of services rendered and products sold
Included in other comprehensive income		(9)
Settlements		—
Balance as of March 31, 2020	$	(8)

Balance as of December 31, 2018	$	(4)
Total gains (losses) (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, 2019	$	—

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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

(in millions)

Technique

Unobservable Input

Range

Average

As of March 31, 2020:

Fuel swap contracts

(8)

Discounted Cash Flows

Forward Unleaded Price per Gallon⁽¹⁾

$1.35 - $1.96

1.75

As of December 31, 2019:

Fuel swap contracts

Discounted Cash Flows

Forward Unleaded Price per Gallon⁽¹⁾

$2.37 - $2.80

2.61

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(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 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 Consolidated Statements of Financial Position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in accumulated other comprehensive income. Cash flows related to fuel and interest rate derivatives are classified as operating activities in the Consolidated Statements of Cash Flows.

As of March 31, 2020, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $25 million, maturing through 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 31,2020, 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 loss of $12 million, net of tax, as of March 31, 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
	March 31,
(In millions, except per share data)	2020		2019
Income from continuing operations	$	1	$	53
Weighted-average common shares outstanding		134.9		135.8
Effect of dilutive securities:
RSUs		0.1		0.2
Stock options⁽¹⁾		0.1		0.2
Weighted-average common shares outstanding—assuming dilution		135.1		136.2
Basic earnings per share from continuing operations	$	0.01	$	0.39
Diluted earnings per share from continuing operations	$	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.

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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.”

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 reportable segment, Terminix, provides residential and commercial termite and pest control under the following leading brands: Terminix, Terminix Commercial, Copesan, 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 Brands, including the potential sale of the business. Costs will primarily be related to third-party consulting and other incremental costs directly associated with the strategic alternatives process. Net earnings from discontinued operations for the 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 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

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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 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 business. These metrics include:

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 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 business as well as the mix of services and products provided. The volume of our revenue in Terminix is impacted by new unit sales, the retention of our existing customers and acquisitions. Revenue results presented in European Pest Control and Other are primarily comprised of our pest control operations in Europe. We serve both residential and commercial customers, principally in the United States. As of March 31, 2020, approximately 95 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: net earnings from discontinued 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 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

We have seasonality in our business, which drives fluctuations in revenue and Adjusted EBITDA for interim periods. In 2019, approximately 23 percent, 27 percent, 26 percent and 24 percent of our revenue and approximately 26 percent, 32 percent, 23 percent and 19 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. 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. 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.

Results of Operations

The following table shows the results of operations from continuing operations for the three months ended March 31, 2020 and 2019, which reflects the results of acquired businesses from the relevant acquisition dates. Results of the ServiceMaster Brands Divestiture Group are presented below in “—Discontinued Operations – ServiceMaster Brands Divestiture Group.”


	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	%

________________________________

* not meaningful

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Revenue

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


			European Pest
(In millions)	Terminix		Control and Other		Total
Three Months Ended March 31, 2019	$	419	$	—	$	419
Residential Pest Control⁽¹⁾		5		—		5
Commercial Pest Control⁽²⁾		13		—		13
Termite and Home Services⁽³⁾		1		—		1
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

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(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 $279 million and $236 million for the three months ended March 31, 2020 and 2019, respectively. The following tables provide a summary of changes in cost of services rendered and products 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

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(1)For Terminix, includes approximately $13 million for the three months ended March 31, 2020 from acquisitions. For European Pest Control and Other, includes approximately $12 million for the three months ended March 31, 2020 from acquisitions.

For Terminix, the increase in 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. Fumigation services represents the reduced fumigation margin driven by the outsourcing of fumigation completion services.

For European Pest Control and Other, the three months ended March 31, 2020 were unfavorably impacted by a $2 million adjustment in our automobile, general liability and workers’ compensation 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 $140 million and $123 million for the three months ended March 31, 2020 and 2019, respectively. For the three months ended March 31, 2020 and 2019, selling and administrative expenses comprised general and administrative expenses of $80 million and $68 million, respectively, and selling and marketing expenses of $60 million and $54 million, respectively. The following tables provide a summary of changes in selling and administrative expenses:



			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, 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 acquisitions. The increase in investments in growth is primarily related to our investment in a new customer experience platform.

Amortization Expense

Amortization expense was $9 million and $5 million in the three months ended March 31, 2020 and 2019, 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, 2020 and 2019, respectively. Restructuring charges were comprised of the following:



	Three Months Ended
	March 31,
(In millions)	2020		2019
Terminix⁽¹⁾	$	1	$	2
European Pest Control and Other⁽²⁾		3		4
Total restructuring charges	$	4	$	6

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(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.

Realized (Gain) on Investment in frontdoor, inc.

We recorded a gain of $40 million related to the sale of our retained investment in Frontdoor in the three months ended March 31, 2019.

Interest Expense

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

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Interest and Net Investment Income

Interest and net investment income was $1 million for the three months ended March 31, 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. No similar loss was recognized in the three months ended March 31, 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 a $1 million loss and $56 million income for the three months ended March 31, 2020 and 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)	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)

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(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 restructuring and other charges as described in “—Restructuring and Other Charges.”

(5)Represents the net change in the loss on extinguishment of 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 227.3 percent and 5.5 percent for the three months ended March 31, 2020 and 2019, 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 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.

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, 2020 and 2019, and reflects the results of the ServiceMaster Brands Divestiture Group.

Net Income

Net income was $14 million and $70 million for the three months ended March 31, 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.

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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 are as follows:



	Three Months Ended
	March 31,				Increase
(In millions)	2020		2019		(Decrease)
Revenue:
Terminix	$	438	$	419	5	%
European Pest Control and Other		18		—	*
Total Revenue:	$	456	$	419	9	%
Adjusted EBITDA:⁽¹⁾
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	$	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 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, 2020 Compared to Three Months Ended March 31, 2019

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

Revenue

Revenue by service line is as follows:



	Three Months Ended
	March 31,

(In millions)	2020		2019		Growth				Acquired				Organic
Residential Pest Control	$	159	$	154	$	5	3	%	$	2	1	%	$	3	2	%
Commercial Pest Control		107		94		13	14	%		10	11	%		3	3	%
Termite and Home Services		148		146		1	1	%		2	1	%		—	—	%
Other		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	$	438	$	419	$	19	5	%	$	17	4	%	$	2	—	%

Residential pest control revenue increased three percent reflecting organic revenue growth of two percent, comprised of four percent 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 COVID-19. The decline in March was driven by temporary service cancellations as a result of COVID-19. Residential pest control revenue in the quarter also increased one percent from acquisitions completed during the last 12 months.

Commercial pest control revenue increased 14 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 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 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 decline in March 2020 as a result of lower home services sales and, to a lesser extent, lower new unit sales in core termite completions, due to COVID-19.

In the three months ended March 31, 2020, termite renewal revenue comprised 55 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.

Adjusted EBITDA

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



(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 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 pest control operations in Europe, our captive insurance subsidiary which provides automobile, workers’ compensation and general liability coverage to our reportable segment and our headquarters functions (whose costs are allocated to Terminix or previously allocated to ServiceMaster Brands which is now classified as discontinued operations).

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

Revenue

Our European pest control operations reported revenue of $18 million for the three months ended March 31, 2020.

Adjusted EBITDA

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



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

European Pest Control and Other includes Adjusted EBITDA 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, 2020 were also unfavorably impacted by a $2 million adjustment in our automobile, general liability and workers’ compensation 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 ServiceMaster Brands

We have historically incurred the cost of certain corporate-level activities which we performed on behalf of our businesses, including 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, facilities, information technology and other general corporate support services. The costs of such activities were historically allocated to our segments, including ServiceMaster Brands. Certain corporate expenses which were historically allocated to the ServiceMaster Brands segment are not permitted to be classified as discontinued operations under GAAP (“Historically Allocated Services”). Such Historically Allocated Services amounted to $3 million in each of the three months ended March 31, 2020 and 2019, and are included in 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 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.

Revenue

Revenue by service line for the 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 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 ServiceMaster Brands Divestiture Group’s Adjusted EBITDA:


		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 portion of our liquidity needs are due to service requirements on our indebtedness. The Credit Facilities contain covenants that limit or restrict our ability, including the ability of certain of our subsidiaries, to incur additional indebtedness, repurchase debt, incur liens, sell assets, make certain payments (including dividends) and enter into transactions with affiliates. As of March 31, 2020, we were in compliance with the covenants under the agreements that were in effect on such date.

Our ongoing liquidity needs are expected to be funded by cash on hand, net cash provided by operating activities and, as required, borrowings under the Credit Facilities. As of March 31, 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 $30 million of letters of credit outstanding and $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. We also have $89 million of cash collateral under our automobile, general liability and workers’ compensation insurance 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, 2020, the estimated fair value of our fuel swap contracts was $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

Our Fleet Agreement allows us to obtain fleet vehicles through a leasing 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, 2020, we acquired $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, 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 2020 will range from $40 million to $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.

We previously considered the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. 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 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 of Cash Flows, are summarized in the following table.



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

Operating Activities

Net cash provided from operating activities from continuing operations decreased $18 million to $55 million for the three months ended March 31, 2020 compared to $73 million for three months ended March 31, 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 $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 $6 million decrease in cash required for working capital (a $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 income tax payments.

Investing Activities

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

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

Capital expenditures were $9 million for the three months ended March 31, 2020 and 2019 and included recurring capital needs, information technology projects and a reduction in Global Service Center relocation costs. We anticipate capital expenditures for the full year 2020 will range from $40 million to $50 million, reflecting 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 for notes receivable, net, for the three months ended March 31, 2020 totaled $5 million. Cash flows received for notes receivable, net, for the three months ended March 31, 2019 totaled $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.

During the three months ended March 31, 2020, we repurchased $103 million of common stock and received $3 million from the issuance of common stock through the exercise of stock options. In addition, we repaid $25 million of 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 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.

Contractual Obligations

Our 2019 Form 10-K includes disclosures of our contractual obligations and commitments as of December 31, 2019. We continue to make the contractually required payments, and, therefore, the 2019 obligations and commitments as listed in our 2019 Form 10-K have been reduced by the required payments.

Off-Balance Sheet Arrangements

As of March 31, 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; 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 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:

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 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;

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, 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 conjunction with the 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 variable rate debt under our interest rate swap and, therefore, we believe our 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, 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 13 million gallons of fuel in 2020. As of March 31, 2020, a 10 percent change in fuel prices would result in a change of approximately $3 million in our annual fuel cost before considering the impact of fuel swap contracts.

We use fuel swap contracts to mitigate the financial impact of fluctuations in fuel prices. As of March 31, 2020, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $25 million, maturing through 2021. The estimated fair value of these contracts as of March 31, 2020 was a net liability of $8 million. These fuel swap contracts provide a fixed price for approximately 72 percent and 20 percent of our estimated fuel usage for the remainder of 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, 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, 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. Gursahaney and DiLucente have concluded that both the design and operation of our disclosure controls and procedures were effective as of March 31, 2020.

Changes in internal control over financial reporting

No changes in our internal control over financial reporting, as defined in Rule 13a-15(f) or Rule 15d-15(f) under the Exchange Act, occurred during the three months ended March 31, 2020 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

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 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

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 2019 Form 10-K and as included below. Additional risks and uncertainties that are not presently known to us or that we currently believe to be immaterial may also materially adversely affect our reputation, business, financial position, results of operations and cash 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 you may lose part or all of 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 by March 11, 2020, as COVID-19 spread outside of 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⁾
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. 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#		Letter Agreement, dated as of January 17, 2020, by and between Nikhil M. Varty and ServiceMaster Global Holdings, Inc. is incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed January 21, 2020.
10.2#*		Employment Agreement, dated January 31, 2020, by and between Naren K. Gursahaney and ServiceMaster Global Holdings, Inc.
10.3#*		Employee Restricted Stock Unit Agreement, dated January 31, 2020, by and between Naren K. Gursahaney and ServiceMaster Global Holdings, Inc.
10.4#*		Employee Stock Option Agreement, dated January 31, 2020, by and between Naren K. Gursahaney and ServiceMaster Global Holdings, Inc.
10.5#*		Retention Agreement, dated January 28, 2020, by and between Dion Persson and ServiceMaster Global Holdings, Inc.
10.6#*		Retention Agreement, dated February 26, 2020, by and between Anthony D. DiLucente and ServiceMaster Global Holdings, Inc.
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

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, 2020


	SERVICEMASTER GLOBAL HOLDINGS, INC.
	(Registrant)

	By:	/s/ Anthony D. DiLucente
		Anthony D. DiLucente
		Senior Vice President and Chief Financial Officer (Principal Financial Officer)

Exhibit 10.2

January 31, 2020

Naren K. Gursahaney

[ADDRESS WITHHELD FOR PRIVACY]

Re: Employment as Interim Chief Executive Officer

Dear Naren:

This letter agreement (this “Agreement”) memorializes our discussions and agreement concerning your employment on an interim and temporary basis as the Interim Chief Executive Officer (the “Interim CEO”) of ServiceMaster Global Holdings, Inc. (the “Company”), in addition to your service on the Board of Directors of the Company (the “Board”) as the Chairman of the Board. The compensation contemplated hereunder is solely in respect of your employment as the Interim CEO.

1. Effective Date; Interim Period

The term of this Agreement and your employment as the Interim CEO commenced effective as of January 21, 2020 (the “Effective Date”) and will terminate on the first to occur of (a) the date on which a new Chief Executive Officer of the Company is appointed by the Board and such individual commences employment with the Company or (b) such earlier date as shall be agreed between you and the Board (such period, the “Interim Period”).

2. Positions

(a) Interim Period. During the Interim Period, you shall (i) be employed as Interim CEO of the Company, with such duties, responsibilities and authority as are consistent with such position, and (ii) report directly to the Board. While serving as Interim CEO, you shall continue to be a member, and the Chairman, of the Board, and in your capacity as the Chairman of the Board, shall lead the search for a permanent Chief Executive Officer of the Company.

(b) Following the Interim Period. Upon the expiration of the Interim Period, your employment as Interim CEO shall cease automatically and, to the extent necessary, you shall resign as the Interim CEO and from any other officer and subsidiary director positions you then hold in your capacity as Interim CEO with the Company or its affiliates. Immediately following the Interim Period, you shall recommence (i) serving solely as the Chairman of the Board and on such committees, including any applicable chairman positions, as in effect prior to the Effective Date, including on the Nominating & Corporate Governance Committee of the Board (which Committee you shall cease serving on during the Interim Period), and (ii) receiving non-employee director compensation on the same basis as applicable to non-employee members of the Board at such time, with any periodic retainers and equity awards to be prorated for the applicable period of service as a non-employee member of the Board.

3. Compensation

(a) Base Salary. During the Interim Period, you shall receive an annual base salary of one million dollars ($1,000,000) (the “Base Salary”), prorated based on the number of days in the Interim Period relative to 365 days, payable in accordance with the Company’s normal payroll practices applicable to executive officers of the Company. During the Interim Period, you shall not be eligible to receive regular annual non-employee director compensation (i.e., annual and committee retainers and equity grant).

(b) Annual Incentive Plan. During the Interim Period, you shall be eligible to participate in the Company’s Annual Bonus Plan (the “Bonus Plan”) and earn an annual bonus thereunder (with such bonus payment not to be less than 100% of your Base Salary), with such amount to be prorated based on the number of days in the Interim Period relative to 365 days, payable in accordance with the Company’s normal payroll practices applicable to other executive officers of the Company under the Bonus Plan, whether or not you are still employed as Interim CEO at the time such bonuses are payable.

(c) Equity Awards. Effective as of the Effective Date, the Company shall grant to you restricted stock units covering Company Common Stock (“RSUs”) and non-qualified stock options to purchase shares of Company Common Stock (“Options” and, together with the RSUs the “Equity Awards”), each having a grant date value of $1,750,000. The Equity Awards shall vest on the earlier of (i) the first anniversary of the Effective Date or (ii) your termination as Interim Chief Executive Officer (other than for Cause), in which case the Equity Awards shall vest, on a prorated basis based on the number of days in the Interim Period relative to 365 days. The terms and conditions of the Equity Awards shall be set forth in separate award agreements substantially in the forms most recently used to make annual RSU and Option grants to executive officers of the Company in 2020 (subject to the vesting provision of this paragraph 3(c)) and will be granted under the Company’s 2014 Omnibus Incentive Plan.

(d) Employee Benefits; Corporate Housing. During the Interim Period, you shall be eligible for employee benefits on the terms generally provided by the Company or its affiliates from time to time. In addition, you shall be entitled to the use of the Company’s aircraft (or, if no such aircraft exists, the Company shall provide comparable private aircraft services pursuant to a leasing arrangement) for purposes of commuting between your residence in Boca Raton, Florida and Memphis, Tennessee or for other solely business-related purposes. In addition, during the Interim Period, the Company shall provide you with corporate housing in the greater Memphis metropolitan area (including the costs of any imputed income imposed upon you, if any, in respect of such corporate housing benefit).

(e) Expense Reimbursement. You shall be reimbursed for (i) all business expenses incurred in connection with your service as Interim CEO during the Interim Period in accordance with the terms of the Company’s policies applicable to senior executive officers of the Company, and (ii) all expenses incurred in connection with your service as a member of the Board during the Interim Period, in accordance with the terms of the Company’s policies applicable to members of the Board, in each case to the extent applicable and as the same may in effect from time to time.

4. Indemnification

During the Interim Period and thereafter, the Company shall indemnify you with respect to your services to the Company in your role as Interim CEO, and you shall be covered by directors and officers liability insurance to the same extent that such coverage is then-maintained for officers or directors of the Company in active service, including any “tail” policy coverage.

5. At-will Employment

Your employment shall be at-will. You shall not be entitled to any severance benefits upon your termination of employment, but shall receive all accrued and unpaid compensation and all reimbursable amounts hereunder and business expenses. Following any termination of your employment as the Interim CEO, you shall be eligible to elect continued healthcare coverage under federal COBRA, in accordance with the terms of the Company’s plans to the maximum extent permitted.

6. Confidential Information; Return of Company Property

You agree that, during your employment as the Interim CEO and at all times thereafter, you shall hold for the benefit of the Company all secret or confidential information, knowledge or data relating to the Company and its affiliates, which shall have been obtained by you during your employment with the Company and which shall not be or become public knowledge (other than by acts by you in violation of this Agreement). Except in the good faith performance of your services to the Company, you shall not, without the prior written consent of the Company or as may otherwise be required by law or legal process, communicate or divulge any such information, knowledge or data to anyone other than the Company and those individuals designated by it. In addition, you agree that upon your cessation of employment as the Interim CEO, you shall provide to the Company all documents, papers, files or other material in your possession and under your control that are connected with or derived from your employment as the Interim CEO under this Agreement. You acknowledge that the Company would be irreparably injured by a violation of this Section 6, and you agree that the Company, in addition to any other remedies available to it for such breach or threatened breach shall be entitled to a preliminary injunction, temporary restraining order, or other equivalent relief, restraining you from any actual or threatened breach of this Section 6. Notwithstanding any provision of this Agreement to the contrary, nothing contained herein is intended to, or shall be interpreted in a manner that does, limit or restrict you from exercising any legally protected whistleblower rights, including pursuant to Rule 21F under the Securities Exchange Act of 1934.

7. Section 409A

This Agreement is intended to comply with the provisions of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”) and the Treasury regulations relating thereto or an exception to Section 409A of the Code. For purposes of compliance with Section 409A of the Code, each payment of compensation under this Agreement shall be treated as a separate payment of compensation, and in no event may you, directly or indirectly, designate the calendar year of any payment under this Agreement. All reimbursements provided under this Agreement shall be provided in accordance with the requirements of Section 409A of the Code, including, where applicable, the requirement that (a) the amount of expenses eligible for reimbursement during one calendar year shall not affect the amount of expenses eligible for reimbursement in any other calendar year; (b) the reimbursement of an eligible expense shall be made no later than the last day of the calendar year following the calendar year in which the expense is incurred; and (c) the right to any reimbursement shall not be subject to liquidation or exchange for another benefit. Any tax indemnification payments shall be paid by the Company to you (or the applicable tax authority as may be agreed between the parties) within five business days of the date the obligation arises and in all events no later than the end of your taxable year next following your taxable year in which the applicable tax (and any income or other related taxes or interest or penalties thereon) are remitted to the applicable taxing authority or, in the case of amounts relating to a claim that does not result in the remittance of any federal, state or local income, social security or other taxes, the calendar year in which the claim is finally settled or otherwise resolved.

8. Miscellaneous

(a) Tax Withholding. The Company may withhold from any amounts payable under this Agreement such federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation.

(b) Amendment. This Agreement may not be amended or modified otherwise than by a written agreement executed by the parties hereto or their respective successors and legal representatives.

(c) Entire Agreement. This Agreement constitutes the entire agreement of the parties hereto in respect of your employment as the Interim CEO, and effective as of the Effective Date, supersedes all prior understandings, term sheets or commitments, whether written or oral, relating to the terms and conditions of employment between you and the Company and its affiliates.

(d) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of Tennessee, without reference to principles of conflicts of law.

(e) Severability. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, and this Agreement shall be construed as if such invalid or unenforceable provision were omitted (but only to the extent that such provision cannot be appropriately reformed or modified).

(f) Successors. This Agreement and any rights and benefits hereunder shall inure to the benefit of and be enforceable by your legal representatives, heirs or legatees. This Agreement and any rights and benefits hereunder shall inure to the benefit of and be binding upon the Company and its successors and assigns. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise.

(g) Headings. The headings of this Agreement are for reference purposes only and shall not affect in any way the meaning or interpretation of this Agreement.

[Signature Page Follows]

To confirm the foregoing terms are acceptable to you, please sign this Agreement and return a copy to the Company.


	Very truly yours,

	ServiceMaster Global Holdings, Inc.

	/s/ John Corness
	Name:	John Corness
	Title:	Chair of the Compensation Committee of the Board of Directors

Accepted and Agreed
on January 31, 2020:

/s/ Naren K. Gursahaney
Naren K. Gursahaney

Exhibit 10.3

Employee Restricted Stock Unit Agreement

This Employee Restricted Stock Unit Agreement, dated as of January 31, 2020 (the “Grant Date”), between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “Company”), and the associate whose name appears on the signature page hereof and who is employed by the Company or one of its Subsidiaries, is being entered into pursuant to the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “Plan”). The meaning of capitalized terms may be found in the Plan.

The Company and the Associate hereby agree as follows:

Section 1. Grant of Restricted Stock Units. Subject to the terms of this Agreement, the Company hereby evidences and confirms, effective as of the date hereof, its grant to the Associate of Restricted Stock Units (“RSUs”) representing the right to receive the number of shares of Company Common Stock specified on the signature page hereof. This Agreement is entered into pursuant to, and the terms of the RSUs are subject to, the terms of the Plan. If there is any conflict between this Agreement and the terms of the Plan, the terms of the Plan shall govern.

Section 2. Vesting and Forfeiture

(a) Vesting Schedule. The Associate’s RSUs shall vest on the first anniversary of the Grant Date, subject to the provisions of Section 2(c) below.

(b) Discretionary Acceleration. The Administrator, in its sole discretion, may accelerate the vesting of all or a portion of the RSUs at any time and from time to time.

(c) Effect of Termination of Employment. Upon termination of the Associate’s employment as Interim Chief Executive Officer of the Company and its Subsidiaries for any reason prior to the first anniversary of the Grant Date (other than for Cause), the RSUs shall vest, on a prorated basis, in an amount equal to (x) the number of RSUs granted to the Associate under this Agreement, multiplied by (y) a fraction, the numerator of which is the number of days elapsed between the Grant Date and the date the Associate’s employment terminates, and the denominator of which is 365. Upon termination of the Associate’s employment with the Company and its Subsidiaries for Cause prior to the first anniversary of the Grant Date, all unvested RSUs shall be forfeited.

(d) Effect of a Change in Control. Unless otherwise determined by the Administrator, no cancellation, acceleration of vesting or other payment shall occur with respect to any RSU in connection with a Change in Control occurring prior to the first anniversary of the Grant Date, if the Administrator reasonably determines prior to the Change in Control that the Associate shall receive an “Alternative Award” meeting the requirements of the Plan; provided, however, that if within two years following a Change in Control, the Associate's employment is involuntarily (other than for Cause) terminated or the Associate resigns with Good Reason (as

defined below), at a time when any portion of the Alternative Award is unvested, the unvested portion of such Alternative Award shall immediately vest in full and such Associate shall be provided with either cash or marketable stock equal to the fair market value of the stock subject to the Alternative Award on the date of termination.

(i) Good Reason means, without the Associate’s written consent, the occurrence of any of the following events:

a. The reduction in any material respect in the Associate’s position(s), authorities or responsibilities that they had with the Company immediately prior to the time of the Change in Control;

b. A material reduction in Associate’s annual rate of base salary, annual target cash bonus opportunity or annual target long-term incentive opportunity, each in effect as of immediately prior to the date of the Change in Control; or

c. A material change in the location of Associate’s location of work which will be at least more than 50 miles from their place at work at the Company immediately prior to the date of the Change in Control.

If the Associate determines that Good Reason exists, the Associate must notify the Company in writing, within ninety (90) days following the initial existence of such grounds that the Associate determines constitutes Good Reason, or else such event shall not constitute Good Reason under the terms of the Associate’s employment. If the Company remedies such event within thirty (30) days following receipt of such notice, the Associate may not terminate employment for Good Reason as a result of such event (the “Cure Period”). In the event the Company does not timely remedy such event, the Associate must terminate his employment ninety (90) days following the end of the Cure Period.

Section 3. Dividend Equivalents.

If the Company pays any cash dividend or similar cash distribution on the Common Stock, the Company shall credit to the Associate’s account with additional RSUs in an amount equal to (A) the product of (x) the number of the Associate’s RSUs as of the record date for such distribution times (y) the per share amount of such dividend or similar cash distribution on Common Stock, divided by (B) the Fair Market Value on the date such additional RSUs are so credited, rounded down to the nearest whole number of shares. If the Company makes any dividend or other distribution on the Common Stock in the form of Common Stock or other securities, the Company will credit the Associate’s account with that number of additional shares of Common Stock or other securities that would have been distributed with respect to that number of shares of Common Stock

underlying the Associate’s RSUs as of the record date thereof. Any cash amounts or shares of Common Stock or other securities credited to the Associate’s account shall be paid to the Associate on the Settlement Date.

Section 4. Settlement. Subject to Section 6(a), promptly following the date on which a RSUs becomes vested, and in any event no later than March 15th of the calendar year following the calendar year in which such vesting occurs (the “Settlement Date”), the Associate shall receive, without payment, one Settlement Share in respect of each such RSUs.

Section 5. Restriction on Transfer; Non-Transferability of RSUs. The RSUs are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise). Any purported transfer in violation of this Section 6 shall be void ab initio.

Section 6. Miscellaneous

(a) Withholding. The Company or one of its Subsidiaries shall require the Associate to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding obligations that may arise in connection with the vesting of the RSUs and the related issuance of the Shares. Notwithstanding the preceding sentence, if the Associate elects not to remit cash in respect of such obligations and a facility is not available to the Associate by which the Associate may sell a number of Shares in the public market to satisfy such obligations, the Company shall retain a number of Shares subject to the RSUs then vesting that have an aggregate Fair Market Value as of the Settlement Date equal to the amount of such taxes required to be withheld (and the Associate shall thereupon be deemed to have satisfied his or her obligations under this Section 6(a)); provided that the number of Shares retained shall not be in excess of the minimum amount required to satisfy the statutory withholding tax obligations (it being understood that the value of any fractional share of Company Common Stock shall be paid in cash). The number of Shares to be issued shall thereupon be reduced by the number of Shares so retained. The method of withholding set forth in the immediately preceding sentence shall not be available if withholding in this manner would violate any financing instrument of the Company or any of its Subsidiaries or to the extent that a facility is available to the Associate by which the Associate may sell Shares in the public market to satisfy such obligations.

(b) Incorporation of Forfeiture Provisions. The Associate acknowledges and aggress that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the date of this Agreement or as required by applicable law after the date of this Agreement.

(c) Restrictive Covenants. In consideration of the grant of the RSUs, during the Associate’s employment with the Company and its Subsidiaries (the “Company Group”) and for a period of twelve (12) months following the termination of the Associate’s employment (whether such termination is initiated by the Associate or the Associate’s employer), the Associate shall not (i) become employed by, operate or provide services to any business or other entity that competes with the Company Group; (ii) solicit or sell any product or service in competition with the Company Group to any person, business or other entity that is a customer of the Company Group; (iii) interfere with the Company Group’s relations with any of its customers, franchisees, subcontractors, consultants, vendors or business partners; or (iv) induce or encourage any Company Group employee to leave his/her position or to seek employment or association with any person or entity other than the Company Group. This Agreement is in addition to and does not supersede any other agreements between the Associate and the Company Group prohibiting competition with the Company Group. Nothing in this paragraph shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct.

(d) Dispute Resolution. Any dispute or controversy between Associate and the Company, whether arising out of or relating to this Agreement, the breach of this Agreement, or otherwise, shall be resolved in accordance with the ServiceMaster We Listen Dispute Resolution Plan then in effect. Notwithstanding the foregoing, the Associate agrees that the Company may seek a temporary restraining order and/or preliminary injunction in any court of competent jurisdiction, without the posting of a bond, in order to preserve the status quo or to enforce the restrictive covenants in Section 8(c) of this Agreement.

(e) Authorization to Share Personal Data. The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge such personal data to the Company if and to the extent appropriate in connection with this Agreement or the administration of the Plan.

(f) No Rights as Stockholder; No Voting Rights. The Associate shall have no rights as a stockholder of the Company with respect to any RSUs or Shares covered by the RSUs until the delivery of the Shares.

(g) No Right to Continued Employment. Nothing in this Agreement shall be deemed to confer on the Associate any right to continue in the employ of the Company or any Subsidiary, or to interfere with or limit in any way the right of the Company or any Subsidiary to terminate such employment at any time.

(h) Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(i) Waiver; Amendment.

(i) Waiver. Any party hereto or beneficiary hereof may by written notice to the other parties (A) extend the time for the performance of any of the obligations or other actions of the other parties under this Agreement, (B) waive compliance with any of the conditions or covenants of the other parties contained in this Agreement and (C) waive or modify performance of any of the obligations of the other parties under this Agreement. Except as provided in the preceding sentence, no action taken pursuant to this Agreement, including, without limitation, any investigation by or on behalf of any party or beneficiary, shall be deemed to constitute a waiver by the party or beneficiary taking such action of compliance with any representations, warranties, covenants or agreements contained herein. The waiver by any party hereto or beneficiary hereof of a breach of any provision of this Agreement shall not operate or be construed as a waiver of any preceding or succeeding breach and no failure by a party or beneficiary to exercise any right or privilege hereunder shall be deemed a waiver of such party’s or beneficiary’s rights or privileges hereunder or shall be deemed a waiver of such party’s or beneficiary’s rights to exercise the same at any subsequent time or times hereunder.

(ii) Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Associate and the Company.

(j) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other.

(k) Applicable Law and Forum. This Agreement shall be governed in all respects, including, but not limited to, as to validity, interpretation and effect, by the internal laws of the State of Delaware, without reference to principles of conflict of law that would require application of the law of another jurisdiction. Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge this Agreement shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes. Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(l) Section and Other Headings, etc. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

(m) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

[signature page follows]

IN WITNESS WHEREOF, the Company and the Associate have executed this Agreement as of the date first above written.

	SERVICEMASTER GLOBAL HOLDINGS, INC.

	By:	/s/ John Corness
	Name:	John Corness
	Title:	Chair of the Compensation Committee of the Board of Directors

	THE ASSOCIATE:

	/s/ Naren K. Gursahaney
	Name:	Naren K. Gursahaney

Total Number of Shares
of Company Common Stock as to which RSUs have been Granted Pursuant Hereto: 47,620

Exhibit 10.4

Employee Stock Option Agreement

This Employee Stock Option Agreement, dated as of January 31, 2020, between ServiceMaster Global Holdings, Inc., a Delaware corporation (the “Company”), and the associate whose name appears on the signature page hereof and who is employed by the Company or one of its Subsidiaries, is being entered into pursuant to the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan (the “Plan”). The meaning of capitalized terms used, but not otherwise defined, in this Agreement may be found in the Plan.

The Company and the Associate hereby agree as follows:

Section 1. Grant of Options.

(a) Confirmation of Grant. The Company hereby evidences and confirms, effective as of the date hereof, its grant to the Associate of Options to purchase the number of shares of Company Common Stock specified on the signature page hereof. The Options are not intended to be Incentive Stock Options. This Agreement is entered into pursuant to, and the terms of the Options are subject to, the terms of the Plan. If there is any inconsistency between this Agreement and the terms of the Plan, the terms of the Plan shall govern.

(b) Option Price. Each share covered by an Option shall have the Option Price specified on the signature page hereof.

Section 2. Vesting and Exercisability.

(a) Except as otherwise provided in the Plan or Section 2(b) of this Agreement, the Options shall become vested on the first anniversary of the Grant Date, provided that (i) if the Associate’s employment with the Company is terminated by reason of the Associate’s death or Disability, any Options held by the Associate shall immediately vest as of the effective date of such death or Disability and (ii) upon termination of the Associate’s employment as Interim Chief Executive Officer of the Company and its Subsidiaries for any reason prior to the first anniversary of the Grant Date (other

than for Cause), the Options shall vest, on a prorated basis, in an amount equal to (x) the number of shares of Company Common Stock granted subject to the Options, multiplied by (y) a fraction, the numerator of which is the number of days elapsed between the Grant Date and the date the Associate’s employment terminates, and the denominator of which is 365. Upon termination of the Associate’s employment with the Company and its Subsidiaries for Cause prior to the first anniversary of the Grant Date, all unvested options shall be forfeited.

(b) Discretionary Acceleration. The Administrator, in its sole discretion, may accelerate the vesting or exercisability of all or a portion of the Options, at any time and from time to time.

(c) Exercise. Once vested in accordance with the provisions of this Agreement, the Options may be exercised at any time and from time to time prior to the date such Options terminate pursuant to Section 3. Options may only be exercised with respect to whole shares and must be exercised in accordance with Section 4.

Section 3. Termination of Options.

(a) Normal Termination Date. Unless earlier terminated pursuant to Section 3(b) or the Plan, the Options shall terminate on the eighth anniversary of the Grant Date (the “Normal Termination Date”), if not exercised prior to such date.

(b) Early Termination. If the Associate’s employment is terminated for Cause, all Options (whether or not then vested or exercisable) shall automatically terminate immediately upon such termination. All vested Options held by the Associate following the effective date of the termination of the Associate’s employment as Interim Chief Executive Officer of the Company and its Subsidiaries other than for Cause (the “Covered Options”) shall remain exercisable until the first to occur of (i) (x) the one-year anniversary in the case of such termination of employment by reason of the Associate’s death or Disability, or (y) in the event of any other termination of the Associate’s employment as Interim Chief Executive Officer of the Company and its Subsidiaries, the three-month anniversary of the

effective date of the Associate’s “termination of service”, as such term is defined in the Plan, as a Director, (ii) the Normal Termination Date or (iii) the cancellation of the Options pursuant to Section 5(a), and if not exercised within such period the Options shall automatically terminate upon the expiration of such period, .

Section 4. Manner of Exercise. Subject to such reasonable administrative regulations as the Administrator may adopt from time to time, the exercise of vested Options by the Associate shall be pursuant to procedures set forth in the Plan or established by the Administrator from time to time and shall include the Associate specifying the proposed date on which the Associate desires to exercise a vested Option (the “Exercise Date”), the number of whole shares with respect to which the Options are being exercised (the “Exercise Shares”) and the aggregate Option Price for such Exercise Shares (the “Exercise Price”) or such other or different requirements as may be imposed by the Company. Unless otherwise determined by the Administrator, (i) on or before the Exercise Date the Associate shall deliver to the Company full payment for the Exercise Shares in United States dollars in cash, or cash equivalents satisfactory to the Company, in an amount equal to the Exercise Price plus any required withholding taxes or other similar taxes, charges or fees (including, if available, pursuant to a broker-assisted cashless exercise program established by the Company whereby the Associate may exercise vested Options by an exercise-and-sell procedure in which the Exercise Price (together with any required withholding taxes or other similar taxes, charges or fees) is obtained from the sale of shares in the public market) and (ii) the Company shall register the issuance of the Exercise Shares on its records (or direct such issuance to be registered by the Company’s transfer agent). The Company may require the Associate to furnish or execute such other documents as the Company shall reasonably deem necessary (i) to evidence such exercise or (ii) to comply with or satisfy the requirements of the Securities Act, applicable state or non‑U.S. securities laws or any other law.

Section 5. Change in Control.

(a) Unless otherwise determined by the Administrator, no cancellation, acceleration of vesting or other payment shall occur with respect to any stock option in connection with a Change in Control occurring prior to the first anniversary of the Grant Date, if the Administrator reasonably determines prior to the Change in Control that the Associate shall receive an “Alternative Award” meeting the requirements of the Plan; provided, however, that if within two years following a Change in Control, the Associate's employment is involuntarily (other than for Cause) terminated or the Associate resigns with Good Reason (as defined below), at a time when any portion of the Alternative Award is unvested, the unvested portion of such Alternative Award shall immediately vest in full and such Associate shall be provided with either cash or marketable stock equal to the fair market value of the stock subject to the Alternative Award on the date of termination (and, in the case of Alternative Awards that are stock options or stock appreciation rights, in excess of the exercise price or base price that the Associate would be required to pay in respect of such Alternative Award).

(i) Good Reason means, without the Associate’s written consent, the occurrence of any of the following events:

a. The reduction in any material respect in the Associate’s position(s), authorities or responsibilities that they had with the Company immediately prior to the time of the Change in Control;

b. A material reduction in Associate’s annual rate of base salary, annual target cash bonus opportunity or target annual long-term incentive opportunity, each in effect as of immediately prior to the date of the Change in Control; or

(b) If the Associate determines that Good Reason exists, the Associate must notify the Company in writing, within ninety (90) days following the initial existence of such grounds that the Associate determines constitutes Good Reason, or else such event shall not constitute Good Reason under the terms of the Associate’s employment. If the Company remedies such event within thirty (30) days following receipt of such notice, the Associate may not terminate employment for Good Reason as a result of such event (the “Cure Period”). In the event the Company does not timely remedy such event, the Associate must terminate his employment ninety (90) days following the end of the Cure Period.

Section 6. Miscellaneous.

(a) Withholding. The Company or one of its Subsidiaries may require the Associate to remit to the Company an amount in cash sufficient to satisfy any applicable U.S. federal, state and local and non-U.S. tax withholding or other similar charges or fees that may arise in connection with the grant, vesting, exercise, settlement or purchase of the Options.

(b) Incorporation of Forfeiture Provisions. The Associate acknowledges and agrees that, pursuant to the Plan, he or she shall be subject to the Company’s Clawback Policy and any generally applicable disgorgement or forfeiture provisions set forth in Article XIII of the Plan as of the date of this Agreement or as required by applicable law after the date of this Agreement.

(c) Restrictive Covenants. In consideration of the grant of the Options, during the Associate’s employment with the Company and its Subsidiaries (the “Company Group”) and for a period of twelve (12) months following the termination of the Associate’s employment (whether such termination is initiated by the Associate or the Associate’s employer), the Associate shall not (i) become employed by, operate or provide services to any business or other entity that competes with the Company Group; (ii) solicit or sell any product or service in competition with the Company Group to any person, business or other entity that is a customer of the Company Group; (iii) interfere with the Company Group’s relations with any of its customers, franchisees, subcontractors, consultants, vendors or business partners; or (iv) induce or encourage any Company Group employee to leave his/her position or to seek employment or association with any person or entity other than the Company Group. This Agreement is in addition to and does not supersede any other agreements between the Associate and the Company Group prohibiting competition with the Company Group. Nothing in this paragraph shall be construed to restrict the right of an attorney to practice law to the extent protected by statute, common law or applicable rules of professional conduct.

(e) Authorization to Share Personal Data. The Associate authorizes any Affiliate of the Company that employs the Associate or that otherwise has or lawfully obtains personal data relating to the Associate to divulge or transfer such personal data to the Company or to a third party, in each case in any jurisdiction, if and to the extent appropriate in connection with this Agreement or the administration of the Plan.

(f) No Rights as Stockholder; No Voting Rights. The Associate shall have no rights as a stockholder of the Company with respect to any shares covered by the Options until the exercise of the Options and delivery of the shares.

(h) Non-Transferability of Options. The Options may be exercised only by the Associate. The Options are not assignable or transferable, in whole or in part, and they may not, directly or indirectly, be offered, transferred, sold, pledged, assigned, alienated, hypothecated or otherwise disposed of or encumbered (including, but not limited to, by gift, operation of law or otherwise) other than by will or by the laws of descent and distribution to the estate of the Associate upon the Associate’s death or with the Company’s consent.

(i) Binding Effect; Benefits. This Agreement shall be binding upon and inure to the benefit of the parties to this Agreement and their respective successors and assigns. Nothing in this Agreement, express or implied, is intended or shall be construed to give any person other than the parties to this Agreement or their respective successors or assigns any legal or equitable right, remedy or claim under or in respect of any agreement or any provision contained herein.

(j) Waiver; Amendment.

(ii) Amendment. This Agreement may not be amended, modified or supplemented orally, but only by a written instrument executed by the Associate and the Company.

(k) Assignability. Neither this Agreement nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or the Associate without the prior written consent of the other party.

(l) Applicable Law and Forum. This Agreement shall be governed by and construed in accordance with the law of the State of Delaware regardless of the application of rules of conflict of law that would apply the laws of any other jurisdiction. Subject to the dispute resolution provision contained herein, any judicial action to enforce, interpret or challenge this Agreement shall be brought in the federal or state courts located in the State of Delaware, which shall be the exclusive forum for resolving such disputes. Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action.

(m) Waiver of Jury Trial. Each party hereby waives, to the fullest extent permitted by applicable law, any right it may have to a trial by jury in respect of any suit, action or proceeding arising out of this Agreement or any transaction contemplated hereby. Each party (i) certifies that no representative, agent or attorney of any other party has represented, expressly or otherwise, that such other party would not, in the event of litigation, seek to enforce the foregoing waiver and (ii) acknowledges that it and the other parties have been induced to enter into the Agreement by, among other things, the mutual waivers and certifications in this section.

(n) Section and Other Headings, etc. The section and other headings contained in this Agreement are for reference purposes only and shall not affect the meaning or interpretation of this Agreement.

(o) Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which together shall constitute one and the same instrument.

IN WITNESS WHEREOF, the Company and the Associate have executed this Agreement as of the date first above written.

	SERVICEMASTER GLOBAL HOLDINGS, INC.

	By:	/s/ John Corness
	Name:	John Corness
	Title:	Chair of the Compensation Committee of the Board of Directors

	THE ASSOCIATE:

		/s/ Naren K. Gursahaney
	Name:	Naren K. Gursahaney


Total Number of Shares for the Purchase of Which Options have been Granted	Option Price
167,625 Shares	$36.75


		Exhibit 10.5

January 30, 2020

Dion Persson
c/o ServiceMaster Global Holdings, Inc.

150 Peabody Place

Memphis, Tennessee 38103

Re:Stay Bonus Award

Dear Dion:

As you may know, ServiceMaster Global Holdings, Inc. (the “Company”) is exploring strategic options to divest its ServiceMaster Brands business (referred to here as the “Business”, and such potential disposition of the Business herein referred to as a “Transaction”).

Because your continued leadership is very important to the consummation of the Transaction, the Company is prepared to offer you a retention award to ensure the Company will have the benefit of your continued service. If you remain employed by the Company and its affiliates through either (a) the 30th day after closing of the Transaction or (b) the 30th day after a public announcement is made by the Company that the process regarding the sale of the Business is terminated (the “Announcement”) (either such earlier day, the “Milestone Date”), and subject to your satisfaction of the Release Conditions, you will be entitled to a retention bonus equal to fifty percent (50%) of your annual rate of base salary as in effect on the date of this letter agreement (the “Stay Bonus”). Such Stay Bonus will be paid to you within five (5) business days following the date that the Release Conditions are satisfied. The Stay Bonus shall be paid to you in cash, unless the Company determines to deliver Shares (as such term is defined in the Plan) having the same total Fair Market Value (as such term is defined in the Plan) as the amount of the Stay Bonus, with any such Shares to be delivered under the Plan.

If your employment terminates prior to any Milestone Date for any reason, you will not be entitled to receive the Stay Bonus.

For purposes of this letter agreement:

“Plan” means the Amended and Restated ServiceMaster Global Holdings Inc. 2014 Omnibus Incentive Plan, as the same may be amended and restated from time to time

“Purchaser” means the entity (including any parent entity) that acquires all or substantially all of the Business in the Transaction.

“Release Conditions” means your execution (and non-revocation during any applicable revocation period), of a release of claims against the Company and its affiliates (which may include Purchaser and its affiliates), within twenty-one (21) days following the Milestone Date, in substantially the same form as the Company’s standard form of release.

The Stay Bonus will not count toward or be considered in determining payments or benefits due under any other plan, program, or agreement. In addition, your employment is “at will”, and your employment with the Company and its affiliates may be terminated by either you or the Company or its affiliate (as applicable) at any time and for any reason. This letter may not be amended or modified except by an agreement in writing signed by you and the Company. This letter will be binding upon any successor of the Company (including, following any Transaction and to the extent assigned by the Company to, the Purchaser) in the same manner and to the same extent that the Company would be obligated under this letter if no succession had taken place.

This letter agreement will be governed by, and construed in accordance with, the laws of Delaware without reference to conflict of law rules. All payments hereunder are subject to withholding for applicable income and payroll taxes or otherwise as required by law.

Please be mindful of the fact that the Company has made this stay bonus opportunity available to a select group of employees of the Company. Please keep confidential the fact that you have received this letter agreement as well as the contents of this letter agreement.

In consideration for receipt of this Stay Bonus opportunity, you hereby agree and consent to the assignment of this letter agreement, any employment agreement to which you may be a party with the Company or any of its affiliates, and any agreement(s) containing any covenant not to disclose confidential information, not to solicit employees or customer, not to compete and any other similar restrictive covenants, in each case by the Company or its respective affiliate, to any Purchaser, in which case the Purchaser shall assume all rights and obligations of the Company and/or its affiliates thereunder. Please confirm your agreement to the foregoing by executing this letter as indicated below and returning a copy of such executed letter agreement to me (David Dart, Chief Human Resources Officer) by no later than February 6, 2020.

[Signature Page Follows]


		Sincerely,

	By:	/s/ David Dart
		Name: David Dart
		Title: Chief Human Resources Officer


Acknowledged and Agreed this 31st day of January, 2020:
/s/ Dion Persson
Dion Persson

Exhibit 10.6

February 26, 2020

Anthony D. DiLucente
[ADDRESS WITHHELD FOR PRIVACY]

Dear Tony:

ServiceMaster Global Holdings, Inc. (the “Company”) is in the process of searching for a new permanent Chief Executive Officer (“CEO”). Your continued leadership is very important to the Company and to the new CEO’s transition at the Company, and therefore the Company is prepared to offer you this retention Letter Agreement (this “Agreement”) to ensure the Company will have the benefit of your continued service. This Agreement memorializes our discussions and agreement concerning your continued employment as the Chief Financial Officer (the “CFO”) of the Company and if a new CEO elects to bring in a new CFO to the Company, your subsequent role as Executive Advisor and separation from service with ServiceMaster. For purposes of this Agreement, “ServiceMaster” or “Company” shall include ServiceMaster Global Holdings, Inc., and each of its subsidiaries.

We have agreed as follows:

1. Effective Date; Positions

The Company desires to retain your services through March 31, 2021, either in the capacity as CFO or as an Executive Advisor, unless such date is mutually extended by the parties. If the new CEO elects to bring in a new CFO prior to March 31, 2021, your service as the CFO will terminate on the date on which a new CFO of ServiceMaster is appointed by the Board of Directors of ServiceMaster (the “Board”) and such individual commences employment with ServiceMaster (the “Transition Date”), at which time you will serve in the role of Executive Advisor.

2. Advisory Period and Separation.

a. It is expected that you will serve as CFO of the Company until the Transition Date, at which point you will cease to serve as CFO of ServiceMaster and will no longer hold any other officer or, if applicable, subsidiary director positions within ServiceMaster unless mutually agreed between you and the Company in writing. So long as the Transition Date occurs prior to the termination of your employment with ServiceMaster which is expected to occur on March 31, 2021 (the “Separation Date”), for the period beginning on the Transition Date and ending on the Separation Date (such period, the “Advisory Period”), ServiceMaster shall appoint you to serve as an Executive Advisor. During the Advisory Period, you will provide such services as the then Chief Executive Officer of ServiceMaster shall reasonably request, including assisting with the transition of your duties to your successor. At all times on and after the Transition Date, you shall not act for, bind or represent ServiceMaster for any purpose, except as may be reasonably requested by the then Chief Executive Officer of ServiceMaster. During the Advisory Period, you will provide advisory services to ServiceMaster on an exclusive basis at mutually agreeable times, and shall not provide services to any other entity. Your separation from service as an employee of ServiceMaster will be effective upon the close of business on the Separation Date, unless your employment terminates earlier. In the event your employment is terminated by ServiceMaster for “cause” (as defined in that certain Non-Competition/Non-Solicitation/Confidentiality agreement between you and ServiceMaster executed on the date hereof and attached as Exhibit A hereto (the “Restrictive Covenant Agreement”)) or by you for any reason prior to the Separation Date, this Agreement will be null and void ab initio.

b. During the Advisory Period, subject to your execution without revocation of the Release and Waiver of Claims contained in Section 3 of this Agreement, you will remain a full-time employee of

ServiceMaster for purposes of ServiceMaster’s employment policies, plans and practices, in accordance with the following:

(i) You will receive an annual rate of base salary of equal to the level of your then base salary (your “Base Salary”) in accordance with ServiceMaster’s regular payroll practices. You will be paid any accrued, unpaid wages through your Separation Date (including any accrued, unused vacation time as reflected in ServiceMaster’s HRIS system) on the first regularly scheduled pay date following your Separation Date or within the time period required by applicable law.

(ii) You will continue to receive benefits under the ServiceMaster Health and Welfare Benefit Plan. You will become eligible for continuation of coverage under the Consolidated Omnibus Budget Reconciliation Act (“COBRA”) on the first day following the last day of your employment. You are solely responsible for the payment of any premiums for COBRA coverage.

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

(iv) If you participate in the ServiceMaster Deferred Compensation Plan (“DCP”), your eligibility to participate in the DCP will end on your Separation Date. Any balance in your DCP account will be distributed or held in accordance with your prior elections, subject to the terms of the DCP and applicable rules and regulations.

(v) If you participate in any ServiceMaster stock plans, including the ServiceMaster Employee Stock Purchase Plan, the Amended and Restated ServiceMaster Global Holdings, Inc. Stock Incentive Plan, as amended and restated as of October 25, 2012, the Amended and Restated ServiceMaster Global Holdings, Inc. 2014 Omnibus Incentive Plan, as amended and restated as of April 27, 2015, and/or the ServiceMaster Global Holdings, Inc. Employee Stock Purchase Plan, you will continue to participate in such plans, and vest in any outstanding stock options, restricted stock units or other equity awards held by you, in accordance with the terms of such plans, through your Separation Date. Upon your Separation Date, you shall cease to be eligible to be vested in, and shall forfeit any, then unvested awards under such plans, in accordance with the terms and conditions of the applicable plans. This Agreement does not change the terms of those plans.

c. Notwithstanding the terms and conditions of the ServiceMaster 2020 Annual Incentive Plan (the “2020 Bonus Plan”), and subject to your execution, not earlier than the Separation Date, without revocation of the Release of Claims attached as Exhibit B hereto, you will continue to be eligible to earn an annual bonus under such plan, in accordance with the terms and conditions (including performance metric achievement) of the 2020 Bonus Plan, as if you had remained employed as Chief Financial Officer of ServiceMaster through the date bonuses (if any) become payable under such plan to the other executive officers of ServiceMaster in respect of the 2020 fiscal year, with such amount to be prorated based on the number of days you are employed as CFO in the 2020 fiscal year relative to 365 days. Any such bonus payout will be paid to you when paid to such officers who participate in the 2020 Bonus Plan.

d. In exchange for your promises as set forth in this Agreement, your execution of the Restrictive Covenant Agreement and your execution, not earlier than the Separation Date, and non-revocation of the Release of Claims attached as Exhibit B hereto, and subject to your compliance with the terms and conditions hereof, upon your Separation Date, ServiceMaster agrees to provide you with severance pay in an amount which

equals the product of (x) one multiplied by (y) the sum of (i) your Base Salary plus (ii) your target annual bonus under the 2020 Bonus Plan (approximately $370,000 depending on base salary level). The amount of the target annual bonus under the 2020 Bonus Plan in the preceding sentence is in addition to any amount earned in Section 2(c) above. Thus, if Mr. DiLucente serves as CFO for all of 2020 and the Company earns a bonus award of 100% of target, his payout would be approximately $740,000, plus base salary. The severance pay will be paid in 12 equal monthly installments with the last installment being the final balance due. The severance payments will commence on the first practicable regularly scheduled pay date after the Separation Date in compliance with Section 409A of the Code (as defined below).

e. The compensation and benefits provided in this Section 2 above represents all of the amounts you will be entitled to receive from ServiceMaster and you will not be paid any other compensation or benefits. In addition to any other remedies which may be available at law, ServiceMaster may suspend, cancel and/or seek the refund of any payments contemplated by this Agreement upon any violation by you of any representation, warranty or covenant set forth herein.

f. You further acknowledge and agree that you are and will, following the Separation Date, continue to be subject to the covenants set forth in Sections 3, 4 and 5 of your Restrictive Covenant Agreement, and you will continue to be covered under the provisions of your Restrictive Covenant Agreement, in accordance with the terms thereof.

3. Release of Claims and Covenant Not to Sue. This Release of Claims is entered into by you, Anthony D. DiLucente, on behalf of yourself, your heirs, executors, administrators, successors, assigns and anyone else who may sue on your behalf (collectively, “you”) and ServiceMaster Global Holdings, Inc., on behalf of itself, past and present subsidiaries, parent companies, affiliated entities, predecessors, successors, assigns, and their respective past and present officers, directors, employees, insurers and agents (collectively, “Company” or “ServiceMaster”).

a. Release: In exchange for the consideration provided to you in this Agreement, you hereby release and forever discharge ServiceMaster, its past and present parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, successors and assigns, as well as their respective past and present directors, managers, officers, partners, agents, employees, insurers, attorneys, servants, and each of them, separately and collectively (“Releasees”), from any and all known and unknown claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, whether or not mature or ripe (“Claims”), that you ever had and now have against any of the Releasees, including, but not limited to, Claims arising out of or in any way related to your employment with or separation from ServiceMaster. This includes, but is not limited to, Claims based on statutes, torts, contracts and common law, Claims for discrimination, wrongful discharge, harassment, retaliation, and unpaid wages, Claims arising under Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act (“FLSA”), Family Medical Leave Act (“FMLA”), the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, and any applicable federal, state or local law or regulation governing the employment relationship. You understand that this Agreement includes a release of all known and unknown claims through the Effective Date.

b. Limitation of Release: Nothing in this Agreement will prohibit you from filing a charge of discrimination with the National Labor Relations Board, the Equal Employment Opportunity Commission (“EEOC”) or an equivalent state civil rights agency. Further, nothing in the Letter Agreement shall be construed to waive (i) any right that is not subject to waiver by private agreement under federal, state or local employment or other laws, such as claims for workers’ compensation or unemployment benefits, (ii) any claims related to the benefits described in Section 2 of this Agreement or your rights to vested benefits under any ServiceMaster plan, (iii) any claims related to your indemnification rights or your rights to recover under any D&O policy, or (iv) any claims that may arise after the Effective Date.

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

d. Representations: You represent that you (i) have been provided all benefits due under the Family and Medical Leave Act and any applicable state or local law; (ii) have received all wages due, including any overtime pay, bonus pay and commissions; (iii) that you have received all meals and rest breaks to which you were entitled under the Fair Labor Standards Act and any applicable state and local law; and (iv) that you have not had any work-related accidents or injuries that you have not previously reported in writing to ServiceMaster.

4. Confidential Information. You acknowledge and agree that (a) you have not used or disclosed any Confidential Information other than as necessary in the ordinary course of performing your duties as a ServiceMaster employee for the benefit of ServiceMaster, and (b) you will keep in confidence and trust all Confidential Information known to you, and will not use or disclose such Confidential Information without the prior written consent of ServiceMaster. As used in this Agreement, “Confidential Information” means (a) all trade secrets, proprietary information, business techniques and processes, technical know-how and other non-public information (including customer, supplier, marketing and financial information) used by ServiceMaster in connection with its business operations; (b) non-public business information obtained from customers, franchisees, suppliers, contractors and other business partners; and (c) private personnel information. Nothing in this Agreement precludes you from (a) making any report or disclosure to a government agency to the extent required or protected by statute, regulation or other applicable law (including for the avoidance of doubt under Rule 21F under the Securities Exchange Act of 1934); (b) cooperating with any government investigation; or (c) testifying truthfully in any legal proceedings to the extent compelled by a valid subpoena.

Pursuant to the Defend Trade Secrets Act, 18 USC §§ 1831-39, you are hereby noticed as follows: An individual may not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret: (a) made in confidence to a government official, either directly or indirectly, or to an attorney, solely for the purpose of reporting or investigating a suspected violation of law; and/or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual suing an employer for retaliation based on the reporting of a suspected violation of law may disclose a trade secret to his or her attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except pursuant to court order.

5. Non-Disparagement. At all times during the Advisory Period and for two years thereafter, you agrees that you will refrain from making public statements, written or oral, which criticize, disparage or defame the business, goodwill or reputation of ServiceMaster (including its products and services), its directors, officers, executives, subsidiaries, parent entities, and/or employees or making statements which could adversely affect the morale of other employees. At all times during the Advisory Period and for two years thereafter, ServiceMaster agrees that its active members of the Board and active named executive officers (each as in effect from time to time) will refrain from making public statements, written or oral, which criticize, disparage or defame you. Nothing in this Agreement, however, shall be construed to prevent you or ServiceMaster (including any of its representatives) from providing truthful testimony or information in response to any valid subpoena, court order, the request of any government agency or as otherwise required by law (including in connection with any whistleblower laws), from rebutting false or misleading statements about the party by others or making normal competitive-type statements not in violation of any restrictive covenants that you may be subject to. There shall be no third-party beneficiaries of this Section 5, other than applicable subsidiaries of ServiceMaster.

6. Code of Ethics and Business Conduct. You previously have been provided or have access through ServiceMaster intranet site to ServiceMaster Code of Ethics and Business Conduct (the “Code of Ethics”). The discovery of any failure by you to abide by the Code of Ethics, whenever discovered, shall entitle ServiceMaster to exercise any and all available legal remedies, including the suspension and recoupment of any payments made or due under this Agreement and any other agreements between the parties.

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

8. Assistance. You agree to provide information to ServiceMaster as requested to help transition your job duties and to cooperate fully with ServiceMaster and its counsel with respect to any claims, investigations, legal proceedings or other matters relating to your employment or about which you have knowledge.

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

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

11. Notices. All notices required or permitted pursuant to this Agreement shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Such notice shall be addressed as follows:

If to ServiceMaster:

ServiceMaster Global Holdings, Inc.
150 Peabody Place
Memphis, TN 38103-3270
Attn: General Counsel

If to you, at the most recent address listed in ServiceMaster’s human resources information system.

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

13. Taxes. Unless otherwise specified, all payments contemplated by this Agreement shall be subject to applicable payroll taxes and other required withholdings. This Agreement is intended to comply with the requirements of Section 409A of the Internal Revenue Code of 1986, as amended (the “Code”), and shall be interpreted and construed consistently with such intent. Payments provided herein are intended to be exempt from Section 409A of the Code to the maximum extent possible under either the separation pay exemption pursuant to Treasury regulation §1.409A-1(b)(9)(iii) or as short-term deferrals pursuant to Treasury regulation §1.409A-1(b)(4), and for such purposes, each payment under this Agreement shall constitute a “separately identified” amount within the meaning of Treasury regulation §1.409A-2(b)(2). In the event the terms of this Agreement would subject you to taxes or penalties under Section 409A of the Code (“409A Penalties”), you shall cooperate diligently with ServiceMaster to amend the terms of this Agreement to avoid such 409A Penalties, to the extent possible; provided, that in no event shall ServiceMaster be responsible for any 409A Penalties that arise in connection with any amounts payable under this Agreement. You understand that ServiceMaster has not provided any advice regarding the tax liability resulting from this Agreement and you shall not rely upon any representations or policies of ServiceMaster related to taxation. You are advised to seek the advice of your own personal tax advisor or counsel as to the tax treatment of any payments contemplated by this Agreement. The Company specifically disclaims that it has responsibility for the proper calculation or payment of any taxes which may be due other than for standard statutory withholding.

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

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

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

You are advised to consult with your personal attorney before signing this Agreement;

You have 21 days from your receipt of this Agreement to consider the Agreement (the “Review Period”);

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

You have seven days after you sign this Agreement to revoke the Agreement. If you want to revoke this Agreement, you must deliver a written revocation to ServiceMaster Global Holdings, Inc.; 150 Peabody Place, Memphis, TN 38103-3270; Attn: General Counsel.

16. Effective Date. This Agreement becomes effective on the 8th day after you sign, provided you do not revoke the Agreement as provided above (for purposes of clarity and the avoidance of doubt, the Company is not permitted to revoke this Agreement).

YOU ACKNOWLEDGE THAT YOU HAVE READ THIS AGREEMENT CAREFULLY, UNDERSTAND ALL OF ITS TERMS AND AGREE TO THOSE TERMS KNOWINGLY, FREELY, VOLUNTARILY, AND WITHOUT DURESS. YOU HAVE CONSULTED WITH YOUR PERSONAL ATTORNEY (OR HAVE HAD AN OPPORTUNITY TO DO SO) REGARDING THE TERMS AND LEGAL EFFECT OF THIS AGREEMENT.

/s/ Anthony D. DiLucente		/s/ Naren K. Gursahaney
Anthony D. DiLucente		Naren K. Gursahaney Chair of the the Board of Directors and interim CEO
		ServiceMaster Global Holdings, Inc.
Date: 2/26/2020		Date: 2/26/2020

Exhibit A

CONFIDENTIALITY/NON-COMPETE AGREEMENT

THIS AGREEMENT is made by and between The ServiceMaster Company L.L.C., a Delaware limited liability company with its principle place of business in Memphis, Tennessee, together with its general partners, limited partners, parents, subsidiaries, divisions, affiliated entities, successors and assigns, now owned or hereafter acquired, (collectively “ServiceMaster” or the “Company") and the undersigned employee (“Employee”).

WITNESSETH

ServiceMaster is engaged in highly competitive businesses that provide services and products to customers, in a form and manner acceptable to the specific customer which is unique to each property, the knowledge of which is a valuable proprietary asset of ServiceMaster;

Employee is employed by, or has been offered employment with, ServiceMaster in a capacity that will enable Employee to develop valuable relationships and goodwill with the Company’s customers and/or have access to ServiceMaster’s valuable Confidential Information, which ServiceMaster has invested (and will invest) substantial time, money and effort in developing and thus has a strong business interest in protecting. For purposes of this Agreement, “Confidential Information” means all non-public information relating to ServiceMaster’s business operations, including, without limitation, information relating to customers (including customer identity, relationships, preferences, needs and buying history), vendors, contractors/subcontractors, products, services, pricing, costs, profit margins, marketing and sales strategies, marketing and sales techniques, finances, business plans and strategies, business methods and technical know-how;

Through ServiceMaster’s efforts and the efforts of employees acting on its behalf, ServiceMaster’s customer relationships, goodwill and Confidential Information, together and independently, give ServiceMaster an economic and competitive advantage in the market and if provided to a competitor or used by a current or former ServiceMaster employee on his or her own behalf or on behalf of a competitor would give that employee, former employee or competitor an unfair economic and competitive advantage in the market; and

Employee recognizes that ServiceMaster’s need for the following covenants is based on the following: (a) ServiceMaster has or will expend substantial time, money and effort in developing Employee in the business of ServiceMaster; (b) Employee will, in the course of his/her employment, be personally entrusted with and exposed to ServiceMaster’s customers and/or Confidential Information; and (c) ServiceMaster will suffer irreparable harm if Employee voluntarily or involuntarily terminates his/her employment and thereafter directly or indirectly violates any of the following covenants;

Therefore, in consideration of ServiceMaster hiring Employee, continuing to employ Employee, entering into the Retention Letter Agreement, dated February 26, 2020 with Employee; training employee regarding the Company’s business operations, and entrusting Employee with access to ServiceMaster’s customers and/or Confidential Information, ServiceMaster and Employee agree as follows:

1. Prior Agreements.

(a) Employee warrants and represents that he/she is not subject to any provision of any prior Employment Agreement that would prevent him/her from entering into this Agreement or performing his/her duties and obligations hereunder. To the extent Employee has confidential information or materials of any former employer, Employee acknowledges that ServiceMaster has directed him/her not to disclose such confidential information or materials to ServiceMaster or any of its employees and that ServiceMaster prohibits Employee from using that confidential information or materials in any work performed for ServiceMaster. Employee will not bring to ServiceMaster, and will not use or disclose, any confidential, proprietary information or trade secrets acquired by Employee prior to employment with ServiceMaster.

(b) To the extent any provision of this Agreement conflicts with any prior Employment Agreement, however titled, between ServiceMaster and Employee, the terms of this Agreement shall prevail. All other provisions contained in any prior Employment Agreement will remain enforceable and will supplement this Agreement.

2. Advertising. Employee authorizes ServiceMaster, during his/her employment and for a reasonable time thereafter, to use any name or photograph relating or referring to Employee in literature or any other form of communication distributed by ServiceMaster for advertising or promotional purposes.

3. Inventions.

(a) Disclosure of Improvements or Inventions. Employee acknowledges and agrees that he/she will promptly notify ServiceMaster of all inventions, improvements, discoveries or methods relating to or useful in connection with any business conducted by ServiceMaster, now or in the future, which Employee makes or discovers while employed by ServiceMaster. Employee further agrees to assign to ServiceMaster all rights, title and interest in such inventions, improvements, discoveries, methods and any related patents or patent applications and copyrights which pertain to a business in which ServiceMaster is engaged, is reasonably expected to engage in, or which ServiceMaster has previously expressed an intention to enter. All rights, title and interest in and to all inventions, works of authorship, developments, concepts, discoveries, ideas, trademarks and trade secrets, whether or not patentable or registrable under copyright or similar laws (“Inventions”) which Employee may solely or jointly develop, conceive or reduce to practice, during the period of employment, except as provided in paragraph 3(b) below, are the sole property of ServiceMaster. Employee further agrees that all such Inventions, including works of authorship are “works for hire” for purposes of ServiceMaster’s rights under copyright laws. Employee agrees to keep and maintain adequate and current written records of all Inventions made by Employee (solely or jointly with others) during the term of employment with ServiceMaster. Employee further agrees to perform, during and after employment with ServiceMaster, all acts deemed necessary or desirable to permit and assist ServiceMaster, at its own expense, in obtaining and enforcing the full benefits, enjoyment, rights and title, throughout the world, of and to the Inventions hereby assigned to ServiceMaster as set forth above.

(b) Inventions Not Assigned. Employee understands and acknowledges that the assignment of inventions under this Agreement does not apply to an invention which Employee may have acquired in connection with an invention, discovery or improvement developed entirely on Employee’s own time for which no equipment, supplies, facilities or trade secret information of ServiceMaster was used and (i) does not relate directly or indirectly to the business of ServiceMaster or its actual or demonstrably anticipated research or development, or (ii) does not result from any work performed by Employee for ServiceMaster.

4. Restrictive Covenants.

(a) Non-Disclosure of Confidential Information. Both during Employee’s employment and at all times thereafter, Employee will safeguard ServiceMaster’s Confidential Information and will not disclose or use any Confidential Information for Employee’s own benefit or the benefit of any other person or entity.

(b) Defend Trade Secrets Act Notice. Pursuant to the Defend Trade Secrets Act, 18 USC §§ 1831-39, you are hereby notified as follows: An individual may not be held criminally or civilly liable under any federal or state trade secret law for disclosure of a trade secret: (a) made in confidence to a federal, state or local government official, either directly or indirectly, or to an attorney solely for the purpose of reporting or investigating a suspected violation of law; and/or (b) in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. Additionally, an individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose a trade secret to his or her attorney and use the trade secret information in the court proceeding, so long as any document containing the trade secret is filed under seal and the individual does not disclose the trade secret except pursuant to court order.

(c) Non-Competition/Non-Solicitation/Non-Interference. During Employee’s employment and for one (1) year following the separation of Employee’s employment for any reason, whether for cause or without cause, Employee shall not, directly or indirectly, individually or in concert with others:

(i) within any county/parish where Employee was assigned duties during the last twelve (12) months of Employee’s employment own (other than as a minority owner of less than 2% of a publicly traded company or owner of shares in a mutual fund), manage, finance, operate, engage in, become employed with or provide services or support to any business that markets or provides any service or product that is competitive with the products or services offered, marketed or provided by the business unit(s), subsidiary(ies) and/or affiliated entity(ies) with whom Employee was employed during the last twelve (12) months of employment;

(ii) within any county/parish where Employee was assigned duties during the last twelve (12) months of Employee’s employment solicit, contact, sell to or provide any service or product to any person or entity in competition with the business unit(s), subsidiary(ies) and/or affiliated entity(ies) with whom Employee was employed during the last twelve (12) months of employment;

(iii) solicit, contact, sell to or provide any service or product to any ServiceMaster customer with whom Employee had actual contact during the last twelve (12) months of employment for the purpose of providing any service or product in competition with a service or product offered, marketed, or provided, at the time of contact, by the business unit(s), subsidiary(ies) and/or affiliated entity(ies) with whom Employee was employed;

(iv) recruit, solicit, induce or encourage any employee to terminate his/her employment with ServiceMaster and/or seek employment or association with any other person, business or entity; or

(v) solicit, induce or encourage any ServiceMaster franchise, customer, contractor, vendor, supplier or other business partner to sever, terminate or not renew its relationship with ServiceMaster or otherwise interfere with ServiceMaster’s relationship with any franchise, customer, contractor, vendor, supplier or other business partner.

For Employees employed with ServiceMaster’s Business Service Center during the last twelve (12) months of their employment, or any portion thereof, the restrictions contained in paragraphs 4(c)(i) and (ii) shall apply to all of ServiceMaster’s operations across the United States and such other locations across the globe in which ServiceMaster operated during that period, as such employees have access to customer and Confidential Information for multiple, if not all, ServiceMaster business units, subsidiaries and affiliated entities in all locations in which ServiceMaster conducts business.

(d) No conflicts. During Employee’s employment, Employee will devote his/her best efforts to the interests of the Company and will not engage in other employment or activities that conflict with Employee’s job duties for the Company. Employee agrees to promptly disclose to the Company any outside activities that create an actual or potential conflict of interest as defined in the Company’s Conflicts of Interest policy.

(e) Disclosure of Obligations to New Employer. Prior to commencing employment with any subsequent employer, Employee shall disclose his/her obligations hereunder and furnish that employer with a copy of this Agreement. Employee also authorizes ServiceMaster to provide a copy of this Agreement to his/her subsequent employer(s).

5. Return of Company Property. Promptly after the separation of Employee’s employment or upon ServiceMaster’s request at any time (whichever occurs earlier), Employee will deliver to ServiceMaster all business related documents including, but not limited to, originals and copies of memoranda, customer lists, materials relating to procedures, samples, records, documents, contracts, formulas, computer programs, product information and all other Confidential Information which Employee has obtained while employed. Immediately upon separation of employment, Employee shall return all equipment, electronic communication resources, vehicles, keys, credit cards, identification cards, uniforms, employment accessories, and the like which were issued to Employee during Employee’s term of employment.

6. Exit Interview. Prior to the time Employee’s employment with ServiceMaster ceases for any reason, whether voluntary or involuntary, Employee agrees to meet with a designated representative of ServiceMaster to review Employee’s obligations under this Agreement.

7. Remedies. Employee acknowledges and agrees that the restrictions set forth in this Agreement are reasonable and necessary for the protection of ServiceMaster’s business and goodwill including its Confidential Information and trade secrets. Employee further agrees that if Employee breaches or threatens to breach any of Employee’s obligations hereunder, ServiceMaster will suffer irreparable harm and monetary damages will be insufficient to remedy such a breach. Therefore, ServiceMaster, in addition to any other remedies available to it under the law, may obtain specific performance and/or injunctive relief against Employee to prevent such continued or threatened breach. Employee acknowledges that ServiceMaster may elect or not elect to seek enforcement of this or any other Employee Confidentiality/Non-Compete Agreement and that such election shall in no way be construed as a waiver of ServiceMaster’s right to enforce the terms of this Agreement against Employee. Further, Employee acknowledges that ServiceMaster’s decision not to enforce another employee’s obligations under his/her Employee Confidentiality/Non-Compete Agreement shall not be considered an admission or waiver of any right regarding the confidential nature of the proprietary and trade secret information described herein. Employee also acknowledges and agrees that Employee shall reimburse ServiceMaster its reasonable attorneys’ fees and costs incurred by it in enforcing any of its rights or remedies under this section or any other provision of this Agreement.

8. Severability. Employee acknowledges and represents that the duration, geographical scope, activity and subject matter of the restrictive covenants set forth herein are fair, reasonable and not excessively broad and are necessary to protect ServiceMaster’s relationships with customers, goodwill and Confidential Information. Employee agrees that ServiceMaster is entitled to rely upon such representation. It is the desire and intent of ServiceMaster and Employee that the provisions of this Agreement shall be enforced to the fullest extent permissible. The invalidity or unenforceability of any provision of this Agreement shall not affect, impair or render unenforceable any other provision hereof. It is intended that any provision herein that is subsequently held by a court of competent jurisdiction to be invalid or unenforceable as written be construed as valid and enforceable to the fullest extent possible. If any restriction in this Agreement is determined by a court of competent jurisdiction to be unenforceable by reason of its geographic or business scope or duration, such provision shall be construed as if such scope or duration had been more narrowly drafted and defined so as not to be invalid or unenforceable.

9. Modification. This Agreement may be modified only in writing by ServiceMaster’s President. Employee acknowledges that no other manager or representative has any authority to enter into any agreement for employment for any specified period or to make any agreement contrary to the foregoing.

10. Governing Law. As ServiceMaster is headquartered in Tennessee and both parties will have substantial contacts with the State of Tennessee in the performance of this Agreement, the parties expressly agree that the interpretation and enforcement of this Agreement shall be governed by the laws of the State of Tennessee, without reference to its conflicts of law rules that may require application of the law of another jurisdiction. Any judicial action to enforce or challenge this Agreement shall be brought in the federal or state courts located in Shelby County, Tennessee, which shall be the exclusive forum for resolving such disputes. Both parties irrevocably consent to the personal jurisdiction of such courts for purposes of any such action. In any proceeding relating to the interpretation or enforcement of this Agreement, the parties stipulate that this Agreement shall be considered for all purposes to have been executed and delivered in the State of Tennessee.

11. Voluntary Agreement. Employee acknowledges and agrees that he/she reviewed all aspects of this Agreement, has carefully read and fully understands all the provisions of this Agreement, and voluntarily enters into this Agreement.

IN WITNESS WHEREOF, the undersigned has caused this Agreement to be duly executed as of the date below.

Employee:

/s/ Anthony D. DiLucente

Anthony D. DiLucente

Date: 2/26/2020

A-3

Exhibit B

Release of Claims

This Release of Claims (the “Release”) is entered into by you, Anthony D. DiLucente, on behalf of yourself, your heirs, executors, administrators, successors, assigns and anyone else who may sue on your behalf (collectively, “you”) and ServiceMaster Global Holdings, Inc., on behalf of itself, past and present subsidiaries, parent companies, affiliated entities, predecessors, successors, assigns, and their respective past and present officers, directors, employees, insurers and agents (collectively, “Company” or “ServiceMaster”).

1. Release. In exchange for the consideration provided to you in that certain Letter Agreement entered into between you and ServiceMaster as of February 26, 2020 (the “Letter Agreement”), you hereby release and forever discharge ServiceMaster, its past and present parent entities, subsidiaries, divisions, limited partnerships, affiliated corporations, successors and assigns, as well as their respective past and present directors, managers, officers, partners, agents, employees, insurers, attorneys, servants, and each of them, separately and collectively (“Releasees”), from any and all known and unknown claims, charges, complaints, liens, demands, causes of action, obligations, damages and liabilities, known or unknown, suspected or unsuspected, whether or not mature or ripe (“Claims”), that you ever had and now have against any of the Releasees, including, but not limited to, Claims arising out of or in any way related to your employment with or separation from ServiceMaster. This includes, but is not limited to, Claims based on statutes, torts, contracts and common law, Claims for discrimination, wrongful discharge, harassment, retaliation, and unpaid wages, Claims arising under Title VII of the Civil Rights Act of 1964, the Fair Labor Standards Act (“FLSA”), Family Medical Leave Act (“FMLA”), the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Worker Adjustment and Retraining Notification Act, the Employee Retirement Income Security Act, and any applicable federal, state or local law or regulation governing the employment relationship. You understand that this Release includes a release of all known and unknown claims through the Effective Date.

2. Limitation of Release. Nothing in this Agreement will prohibit you from filing a charge of discrimination with the National Labor Relations Board, the Equal Employment Opportunity Commission (“EEOC”) or an equivalent state civil rights agency. Further, nothing in this Release shall be construed to waive (i) any right that is not subject to waiver by private agreement under federal, state or local employment or other laws, such as claims for workers’ compensation or unemployment benefits , (ii) any claims related to the benefits described in Section 2 of the Letter Agreement or your rights to vested benefits under any ServiceMaster plan, (iii) any claims related to your indemnification rights or your rights to recover under any D&O policy, or (iv) any claims that may arise after the Effective Date.

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

4. Representations. You represent that you (i) have been provided all benefits due under the Family and Medical Leave Act and any applicable state or local law; (ii) have received all wages due, including any overtime pay, bonus pay and commissions; (iii) that you have received all meals and rest breaks to which you were entitled under the Fair Labor Standards Act and any applicable state and local law; and (iv) that you have not had any work-related accidents or injuries that you have not previously reported in writing to ServiceMaster.

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

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

7. Notices. All notices required or permitted pursuant to this Release shall be in writing and shall be deemed effectively given: (a) upon personal delivery to the party to be notified, (b) when sent by confirmed electronic mail or facsimile if sent during normal business hours of the recipient, and if not so confirmed, then on the next business day, (c) five days after having been sent by registered or certified mail, return receipt requested, postage prepaid, or (d) one day after deposit with a nationally recognized overnight courier, specifying next day delivery, with written verification of receipt. Such notice shall be addressed as follows:

If to ServiceMaster:

ServiceMaster Global Holdings, Inc.
150 Peabody Place
Memphis, TN 38103-3270
Attn: General Counsel

If to you, at the most recent address listed in ServiceMaster’s human resources information system.

8. Governing Law and Venue. The interpretation, construction and performance of this Release shall be governed by and construed and enforced in accordance with the internal laws of the State of Tennessee without regard to the principle of conflicts of laws. Subject to the dispute resolution provisions herein, any judicial proceeding arising from and relating to this Release shall be brought in courts having competent jurisdiction located in the State of Tennessee, which shall be the exclusive forum for resolving such disputes. Both parties consent to the personal jurisdiction of such courts for the purposes of this Release. The parties shall stipulate in any proceeding that this Release is considered for all purposes to have been executed and delivered in the State of Tennessee.

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

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

 You are advised to consult with your personal attorney before signing this Release;

 You have 21 days from your receipt of this Release to consider the Release (the “Review Period”);

 If your executed Release is not received by ServiceMaster within seven days from the end of the Review Period, the Release and any promises offered on behalf of Company contained in the Letter Agreement will be null and void;

 You have seven days after you sign this Release to revoke the Release. If you want to revoke this Release, you must deliver a written revocation to ServiceMaster Global Holdings, Inc.; 150 Peabody Place, Memphis, TN 38103-3270; Attn: General Counsel.

10. Effective Date. This Release becomes effective on the 8th day after you sign, provided you do not revoke the Agreement as provided above (for purposes of clarity and the avoidance of doubt, the Company is not permitted to revoke this Agreement).

YOU ACKNOWLEDGE THAT YOU HAVE READ THIS RELEASE CAREFULLY, UNDERSTAND ALL OF ITS TERMS AND AGREE TO THOSE TERMS KNOWINGLY, FREELY, VOLUNTARILY, AND WITHOUT DURESS. YOU HAVE CONSULTED WITH YOUR PERSONAL ATTORNEY (OR HAVE HAD AN OPPORTUNITY TO DO SO) REGARDING THE TERMS AND LEGAL EFFECT OF THIS RELEASE.


Anthony D. DiLucente
		ServiceMaster Global Holdings, Inc.
Date: ______________________________		Date:_____________________________

B-4

Exhibit 31.1

CERTIFICATIONS

I, Naren K. Gursahaney, certify that:

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

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

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

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

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

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

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

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

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

(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2020


	/s/ Naren K. Gursahaney
	Naren K. Gursahaney
	Interim Chief Executive Officer

Exhibit 31.2

CERTIFICATIONS

I, Anthony D. DiLucente, certify that:

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

(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date: May 8, 2020


	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	Senior Vice President and Chief Financial Officer

Exhibit 32.1

Certification of Chief Executive Officer

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

I, Naren K. Gursahaney, the Interim Chief Executive Officer of ServiceMaster Global Holdings, Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceMaster Global Holdings, Inc.

cto
	/s/ Naren K. Gursahaney
	Naren K. Gursahaney
	May 8, 2020

Exhibit 32.2

Certification of Chief Financial Officer

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

I, Anthony D. DiLucente, the Senior Vice President and Chief Financial Officer of ServiceMaster Global Holdings, Inc., certify that (i) the Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in such Quarterly Report on Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of ServiceMaster Global Holdings, Inc.

z
	/s/ Anthony D. DiLucente
	Anthony D. DiLucente
	May 8, 2020