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 June 30, ~~2020~~2021


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~~Terminix 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)

________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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	TMX	NYSE

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 August 3, ~~2020:131,991,945~~2021: 124,687,026 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	2720

Item 3. Quantitative and Qualitative Disclosures About Market Risk	4532

Item 4. Controls and Procedures	4532

Part II. Other Information	4633

Item 1. Legal Proceedings	4633

Item 1A. Risk Factors	4633

Item 2. Unregistered Sales of Registered Securities and Use of Proceeds	33

Item 6. Exhibits	4734

Signature	4835

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				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,
	2020		2019		2020		2019		2021		2020		2021		2020
Revenue	$	534	$	494	$	990	$	913	$	560	$	534	$	1,032	$	990
Cost of services rendered and products sold		297		276		577		512		318		297		588		577
Selling and administrative expenses		143		138		283		261		143		143		280		283
Amortization expense		9		5		18		10		10		9		19		18
Acquisition-related costs		—		3		1		4		(1)		—		(1)		1
Fumigation related matters		—		(1)		—		—
Mobile Bay Formosan termite settlement										4		—		4		—
Restructuring and other charges		8		2		12		8		2		8		9		12
Realized (gain) on investment in frontdoor, inc.		—		—		—		(40)
Interest expense		22		18		45		45		11		22		23		45
Interest and net investment income		(1)		(3)		(1)		(4)		(1)		(1)		(1)		(1)
Loss on extinguishment of debt		—		—		—		6
Income from Continuing Operations before Income Taxes		57		56		56		112		73		57		110		56
Provision for income taxes		18		14		16		17		20		18		31		16
Equity in earnings of joint venture		1		—		1		—
Equity in earnings of joint ventures										1		1		2		1
Income from Continuing Operations		40		42		41		95		54		40		81		41
Net earnings from discontinued operations		13		17		26		34		—		13		—		26
Net Income	$	53	$	59	$	67	$	129	$	54	$	53	$	81	$	67
Total Comprehensive Income	$	54	$	55	$	19	$	123	$	48	$	54	$	97	$	19
Weighted-average common shares outstanding - Basic		131.9		136.0		133.4		135.9		127.4		131.9		129.3		133.4
Weighted-average common shares outstanding - Diluted		132.0		136.5		133.5		136.3		127.8		132.0		129.8		133.5
Basic Earnings Per Share:
Income from Continuing Operations	$	0.30	$	0.31	$	0.31	$	0.70	$	0.42	$	0.30	$	0.63	$	0.31
Net earnings from discontinued operations		0.10		0.13		0.19		0.25		—		0.10		—		0.19
Net Income		0.40		0.43		0.50		0.95		0.42		0.40		0.62		0.50
Diluted Earnings Per Share:
Income from Continuing Operations	$	0.30	$	0.30	$	0.31	$	0.70	$	0.42	$	0.30	$	0.62	$	0.31
Net earnings from discontinued operations		0.10		0.13		0.19		0.25		—		0.10		—		0.19
Net Income		0.40		0.43		0.50		0.94		0.42		0.40		0.62		0.50

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

Table of Contents

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)



	As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,
	2020		2019		2021		2020
Assets:
Current Assets:
Cash and cash equivalents	$	302	$	280	$	313	$	615
Receivables, less allowances of $22 and $21, respectively		205		178
Receivables, less allowances of $27 and $25, respectively						208		206
Inventories		45		46		42		44
Prepaid expenses and other assets		68		81		167		145
Current assets held for sale		884		45
Total Current Assets		1,505		629		730		1,010
Other Assets:
Property and equipment, net		189		205		177		182
Operating lease right-of-use assets		86		95		80		80
Goodwill		2,103		2,096		2,168		2,146
Intangible assets, primarily trade names, service marks and trademarks, net		1,146		1,169		1,104		1,111
Restricted cash		89		89		89		89
Notes receivable		33		32		32		31
Long-term marketable securities		13		13		15		14
Deferred customer acquisition costs		96		94		96		98
Other assets		78		72		76		75
Long-term assets held for sale		—		829
Total Assets	$	5,339	$	5,322	$	4,567	$	4,837
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	115	$	96	$	113	$	91
Accrued liabilities:
Payroll and related expenses		75		54		90		102
Self-insured claims and related expenses		84		72		70		76
Accrued interest payable		12		16		7		7
Other		108		82		100		99
Deferred revenue		112		107		110		102
Current portion of lease liability		18		19		17		17
Current portion of long-term debt		104		70		44		94
Current liabilities held for sale		54		40
Total Current Liabilities		683		557		552		588
Long-Term Debt		1,620		1,667		834		826
Other Long-Term Liabilities:
Deferred taxes		486		499		363		346
Other long-term obligations, primarily self-insured claims		196		158		215		239
Long-term lease liability		103		110		95		96
Long-term liabilities held for sale		—		9
Total Other Long-Term Liabilities		786		776		673		681
Commitments and Contingencies (Note 6)
Stockholders' Equity:
Common stock $0.01 par value (authorized 2,000,000,000 shares with 148,193,311 shares issued and 131,981,085 outstanding at June 30, 2020 and 147,872,959 shares issued and 135,408,054 outstanding at December 31, 2019)		2		2
Common stock $0.01 par value (authorized 2,000,000,000 shares with 148,838,068 shares issued and 125,271,848 outstanding at June 30, 2021 and 148,400,384 shares issued and 132,080,845 shares outstanding at December 31, 2020)						2		2
Additional paid-in capital		2,348		2,334		2,379		2,359
Retained Earnings		358		291		922		841
Accumulated other comprehensive (loss) income		(40)		9
Less common stock held in treasury, at cost (16,212,226 shares at June 30, 2020 and 12,464,905 shares at December 31, 2019)		(417)		(313)
Accumulated other comprehensive loss						(22)		(39)
Less common stock held in treasury, at cost (23,566,220 shares at June 30, 2021 and 16,319,539 shares at December 31, 2020)						(773)		(423)
Total Stockholders' Equity		2,251		2,322		2,508		2,741
Total Liabilities and Stockholders' Equity	$	5,339	$	5,322	$	4,567	$	4,837

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

‎

Table of Contents

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In millions)


																							Retained		Accumulated
							Retained		Accumulated												Additional		Earnings		Other
					Additional		Earnings		Other										Common		Paid-in		(Accumulated		Comprehensive		Treasury				Total
			Common		Paid-in		(Accumulated		Comprehensive		Treasury				Total
	Shares		Stock		Capital		Deficit)		(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
Net income		—		—		—		59		—		—		—		59
Other comprehensive income, net of tax		—		—		—		—		(4)		—		—		(4)
Total comprehensive income (loss)		—		—		—		59		(4)		—		—		55
Exercise of stock options		—		—		4		—		—		—		—		4
Stock-based employee compensation		—		—		4		—		��		—		—		4
Repurchase of common stock		—		—		—		—		—		—		(15)		(15)
Balance June 30, 2019		148	$	2	$	2,326	$	285	$	(1)		(12)	$	(283)	$	2,329
																	Shares		Stock		Capital		Deficit)		(Loss) Income		Shares		Amount		Equity
Balance December 31, 2019		148	$	2	$	2,334	$	291	$	9		(12)	$	(313)	$	2,322		148	$	2	$	2,334	$	291	$	9		(12)	$	(313)	$	2,322
Net income		—		—		—		14		—		—		—		14		—		—		—		14		—		—		—		14
Other comprehensive loss, net of tax		—		—		—		—		(50)		—		—		(50)		—		—		—		—		(50)		—		—		(50)
Total comprehensive income (loss)		—		—		—		14		(50)		—		—		(36)		—		—		—		14		(50)		—		—		(36)
Exercise of stock options		—		—		2		—		—		—		—		2		—		—		2		—		—		—		—		2
Stock-based employee compensation		—		—		5		—		—		—		—		5		—		—		5		—		—		—		—		5
Repurchase of common stock		—		—		—		—		—		(4)		(103)		(103)		—		—		—		—		—		(4)		(103)		(103)
Balance March 31, 2020		148	$	2	$	2,341	$	305	$	(41)		(16)	$	(417)	$	2,190		148	$	2	$	2,341	$	305	$	(41)		(16)	$	(417)	$	2,190
Net income		—		—		—		53		—		—		—		53		—		—		—		53		—		—		—		53
Other comprehensive loss, net of tax		—		—		—		—		1		—		—		1
Total comprehensive income		—		—		—		53		1		—		—		54
Other comprehensive income, net of tax																		—		—		—		—		1		—		—		1
Total comprehensive income (loss)																		—		—		—		53		1		—		—		54
Stock-based employee compensation		—		—		6		—		—		—		—		6		—		—		6		—		—		—		—		6
Balance June 30, 2020		148	$	2	$	2,348	$	358	$	(40)		(16)	$	(417)	$	2,251		148	$	2	$	2,348	$	358	$	(40)		(16)	$	(417)	$	2,251

Balance December 31, 2020																		148	$	2	$	2,359	$	841	$	(39)		(16)	$	(423)	$	2,741
Net income																		—		—		—		27		—		—		—		27
Other comprehensive loss, net of tax																		—		—		—		—		22		—		—		22
Total comprehensive income (loss)																		—		—		—		27		22		—		—		49
Issuance of common stock																		—		—		1		—		—		—		—		1
Exercise of stock options																		—		—		4		—		—		—		—		4
Stock-based employee compensation																		—		—		6		—		—		—		—		6
Repurchase of common stock																		—		—		—		—		—		(4)		(169)		(169)
Balance March 31, 2021																		149	$	2	$	2,370	$	868	$	(17)		(20)	$	(592)	$	2,631
Net income																		—		—		—		54		—		—		—		54
Other comprehensive loss, net of tax																		—		—		—		—		(5)		—		—		(5)
Total comprehensive income																		—		—		—		54		(5)		—		—		48
Issuance of common stock																		—		—		1		—		—		—		—		1
Exercise of stock options																		—		—		3		—		—		—		—		3
Stock-based employee compensation																		—		—		5		—		—		—		—		5
Repurchase of common stock																		—		—		—		—		—		(4)		(181)		(181)
Balance June 30, 2021																		149	$	2	$	2,379	$	922	$	(22)		(24)	$	(773)	$	2,508

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

Table of Contents

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)



	Six Months Ended				Six Months Ended
	June 30,				June 30,
	2020		2019		2021		2020
Cash and Cash Equivalents and Restricted Cash at Beginning of Period	$	368	$	313	$	704	$	368
Cash Flows from Operating Activities from Continuing Operations:
Net Income		67		129		81		67
Adjustments to reconcile net income to net cash provided from operating activities:
Net earnings from discontinued operations		(26)		(34)		—		(26)
Equity in earnings of joint venture						(2)		(1)
Depreciation expense		37		35		35		37
Amortization expense		18		10		19		18
Amortization of debt issuance costs		2		2		1		2
Amortization of lease right-of-use assets		9		9		8		9
Payments on fumigation related matters		—		(1)
Realized (gain) on investment in frontdoor, inc.		—		(40)
Loss on extinguishment of debt		—		6
Mobile Bay Formosan termite settlement						4		—
Deferred income tax provision		—		8		13		—
Stock-based compensation expense		10		8		11		10
Gain on sale of marketable securities		—		(1)
Restructuring and other charges		12		8		9		12
Payments for restructuring and other charges		(6)		(9)		(5)		(6)
Acquisition-related costs		1		4		(1)		1
Payments for acquisition-related costs		(4)		(3)		(1)		(4)
Other		(10)		(9)		(12)		(9)
Change in working capital, net of acquisitions:
Receivables		(29)		(12)		(7)		(29)
Inventories and other current assets		(6)		(12)		(25)		(6)
Accounts payable		26		27		23		26
Deferred revenue		4		6		8		4
Accrued liabilities		31		(9)		(12)		31
Accrued interest payable		(4)		1		—		(4)
Current income taxes		40		5		2		40
Net Cash Provided from Operating Activities from Continuing Operations		172		124		151		172
Cash Flows from Investing Activities from Continuing Operations:
Property additions		(15)		(13)		(12)		(15)
Sale of equipment and other assets						1		—
Business acquisitions, net of cash acquired		(24)		(115)		(45)		(24)
Origination of notes receivable		(20)		(56)		(34)		(20)
Collections on notes receivable		22		64		33		22
Net Cash Used for Investing Activities from Continuing Operations		(36)		(119)		(56)		(36)
Cash Flows from Financing Activities from Continuing Operations:
Borrowings of debt		—		600
Payments of debt		(40)		(624)		(67)		(40)
Repurchase of common stock		(103)		(17)		(350)		(103)
Issuance of common stock		3		9		8		3
Net Cash Used For Financing Activities from Continuing Operations		(140)		(32)		(409)		(140)
Cash Flows from Discontinued Operations:
Cash provided from operating activities		27		32		12		27
Cash provided from investing activities		—		(2)
Cash used for financing activities		—		—
Net Cash Provided from Discontinued Operations		28		30		12		28
Effect of Exchange Rate Changes on Cash		(1)		—		—		(1)
Cash Increase During the Period		22		3
Cash (Decrease) Increase During the Period						(302)		22
Cash and Cash Equivalents and Restricted Cash at End of Period	$	391	$	316	$	402	$	391

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

Table of Contents

~~SERVICEMASTER~~TERMINIX GLOBAL HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

~~ServiceMaster~~Terminix Global Holdings, Inc. and its majority-owned subsidiary partnerships, limited liability companies and corporations (collectively, ~~“ServiceMaster,~~“Terminix,” the “Company,” “we,” “us” and “our”) is a leading provider of essential services to residential and commercial customers in the termite and pest ~~control~~management 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)~~Nomor and ~~Nomor (European pest control).~~Pelias. All consolidated Company subsidiaries are wholly-owned. Intercompany transactions and balances have been eliminated. Our operations are organized into 1 reportable segment, our pest management and termite business.

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,~~2020, as filed with the SEC (the ~~“2019~~“2020 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.~~year due to the seasonality of our business, the impact of the COVID-19 pandemic (“COVID-19”) and the possibility of changes in general economic conditions. Prior period amounts have been reclassified to conform to the current period presentation within the Condensed Consolidated Statements of Cash Flows.

~~Exploration~~Sale of ~~Strategic Alternatives for~~ ServiceMaster Brands

On January 21, 2020, we announced we ~~are~~were exploring strategic alternatives related to ServiceMaster Brands, including the potential sale of the business. The divestiture group ~~includes~~included the assets and liabilities of the ServiceMaster Brands businesses, which iswas comprised of the Amerispec, Furniture Medic, Merry Maids, ServiceMaster Clean and ServiceMaster Restore brands, certain assets and liabilities of ServiceMaster Acceptance Corporation, our financing subsidiary, ~~that was historically reported as part of~~ ~~European Pest Control and Other~~, and the ServiceMaster trade name (the “ServiceMaster Brands Divestiture Group”). ~~These operations were~~On October 1, 2020, we completed the sale of the ServiceMaster Brands Divestiture Group to RW Purchaser LLC, an affiliate of investment funds managed by Roark Capital Management LLC (“Roark”). The ServiceMaster Brands Divestiture Group is reported in ~~our Annual~~this Quarterly Report on Form ~~10-K as part of continuing operations. Beginning with the 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.~~operations.

~~Recent Events~~COVID-19

~~The effects of COVID-19 and related actions to attempt to control its spread negatively impacted our business beginning in the last few weeks of March 2020. On~~Since March 11, 2020 when the World Health Organization designated COVID-19 as a global pandemic, ~~and governments around the world mandated, orders to slow the transmission of the virus. States in the United States, including Tennessee, where~~ we are headquartered, declared states of emergency, and countries around the world, including the United States, took steps to restrict travel, instituted work from home policies, enacted temporary closures of businesses, issued quarantine orders and took 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. The exact timing and pace of recovery are uncertain. Certain markets have reopened while others remain closed or have closed again in an effort to control the spread of the virus. Althoughexperienced increased demand ~~for our services improved through the second quarter, it remains marginally below prior year demand, particularly~~ in our ~~Terminix Commercial~~residential pest management and termite and home services service ~~line.~~

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 has allowed us to continue to serve ourlines as customers ~~while ensuring the health and safety of our employees and our customers.~~are spending more time at home. We have also ~~continued serving~~experienced disruptions in our ~~customers~~business, primarily in the commercial pest management service line, driven by temporary business closures and service postponements, and in our product sales and other service line. We continue to focus on initiatives to ensure the safety and productivity of our teammates, including personal protective equipment and safety policies and measures for field teammates, and technology to facilitate remote working, with most back-office and all ~~of the international markets in which we operate.~~call center teammates working remotely and field support teammates working remotely where possible.

Note 2. Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in our ~~2019~~2020 Form 10-K. There have been no material changes to the significant accounting policies for the six months ended June 30, ~~2020,~~2021, 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

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~~significant estimates and judgments used in estimating credit losses, as well as the credit quality.~~ ~~We adopted this ASU on January 1, 2020, and this adoption did not have a material impact on our financial condition or the results of our operations.~~

~~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 of 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 ~~this adoption~~ ~~had no impact to our disclosures. See Note 16 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, as applicable, in 2020, and this adoption did not have a material impact on our financial condition or the results of our operations.

~~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~~We adopted this ASU ~~is effective for fiscal years beginning after December 15, 2020,~~on January 1, 2021, including ~~interim periods within those fiscal years,~~the applicable retrospective and ~~early adoption is permitted. We are currently evaluating the impact the~~prospective provisions therein. The adoption of this ASU ~~will~~did not have a material impact on our consolidated financial ~~statements.~~statements as of June 30, 2021.

In November 2020, the SEC issued Rule 33-10890, “Management’s Discussion and Analysis, Selected Financial Data, and Supplementary Financial Information.” This rule could be early adopted in its entirety as of February 10, 2021. The rule modernized, simplified and enhanced financial statement disclosures required by Regulation S-K. We early adopted all the provisions in the rule as of February 10, 2021, which primarily resulted in the elimination of duplicative disclosure of legal matters and improved discussions within management’s discussion and analysis.

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.

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Note 3. Revenues

The following tables present our reportable segment revenues from continuing operations, disaggregated by revenue ~~source.~~source and geographic area. 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 15, our reportable segment~~European pest management revenue is ~~Terminix.~~

~~Revenue related to fumigation completion services and the related renewals (the “Fumigation Services”) is shown in Termite and Home Services~~now presented within Commercial Pest Management below, and prior ~~period amounts related to the Fumigation Services~~periods have been reclassified from Fumigation to Termite and Home Services 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
June 30,
June 30,
June 30,
(In millions)
2020
2019
2020
2019
2020
2019
Major service line
Residential Pest Control
$
182
$
182
$
—
$
—
$
182
$
182
Commercial Pest Control
107
105
—
—
107
105
Termite and Home Services
196
183
—
—
196
183
Sales of Products and Other
32
25
—
—
32
25
European Pest Control
—
—
17
—
17
—
Total
$
517
$
495
$
17
$
—
$
534
$
494

Revenue by major service line was as follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2021		2020		2021		2020
Major service line
Residential Pest Management	$	192	$	182	$	358	$	341
Commercial Pest Management		141		124		270		248
Termite and Home Services		193		196		354		351
Sales of Products and Other		34		32		50		50
Total	$	560	$	534	$	1,032	$	990

8Revenue by geographic area was as follows:

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European Pest Control
Terminix
and Other
Total
Six months ended
Six months ended
Six months ended
June 30,
June 30,
June 30,
(In millions)
2020
2019
2020
2019
2020
2019
Major service line
Residential Pest Control
$
341
$
335
$
—
$
—
$
341
$
335
Commercial Pest Control
213
199
—
—
213
199
Termite and Home Services
351
339
—
—
351
339
Sales of Products and Other
50
41
—
—
50
41
European Pest Control
—
—
35
—
35
—
Total
$
955
$
914
$
35
$
—
$
990
$
913


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2021		2020		2021		2020
United States	$	526	$	510	$	967	$	941
International		34		24		64		49
Total	$	560	$	534	$	1,032	$	990

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~~Condensed Consolidated Statement of ~~financial position~~Financial Position and totaled ~~$31~~$26 million and ~~$38~~$27 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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~~Amounts are recognized as revenue upon completion of services. ~~Terminix had deferred revenue of $95 million and $92 million as of June 30, 2020 and December 31, 2019, respectively.~~

Changes in deferred revenue for the six months ended June 30, ~~2020~~2021 and ~~2019~~2020 were as follows:


(In millions)	Deferred revenue
Balance as of December 31, 2020	$	102
Deferral of revenue		82
Recognition of deferred revenue		(75)
Balance as of June 30, 2021	$	110

Balance as of December 31, 2019	$	92
Deferral of revenue		63
Recognition of deferred revenue		(59)
Balance as of June 30, 2020	$	95

~~Balance, December 31, 2018~~	$	91
~~Deferral of revenue~~		75
~~Recognition of deferred revenue~~		~~(68)~~
~~Balance, June 30, 2019~~	$	97

~~Approximately~~Additionally, approximately $17 million and $15 million of deferred revenue iswas recognized in the Condensed Consolidated Statements of Financial Position ~~in European Pest Control and Other~~ as of June 30, 2020 and December 31, 2019, respectively, 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 13 for further discussion.~~

There was approximately $16$18 million and $40$49 million of revenue recognized in the three and six months ended June 30, 2021, respectively, that was included in the deferred revenue balance as of December 31, 2020. There was approximately $16 million and $40 million of revenue recognized in the three and six months ended June 30, 2020, respectively, that was included in the deferred revenue balance as of December 31, 2019. ~~There was approximately $~~19 ~~million and $~~44 ~~million of revenue recognized in the three and six months ended June 30, 2019, that was included in the deferred revenue balance as of December 31, 2018.~~

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Note 4. Restructuring and Other Charges

We incurred restructuring charges of ~~$8 million ($6 million, net of tax) and~~ $2 million ($~~1 million, net of tax) in the three months ended June 30, 2020 and 2019, respectively. We incurred restructuring charges of $12 million ($9~~2 million, net of tax) and $8 million ($6 million, net of tax) in the three months ended June 30, 2021 and 2020, respectively. We incurred restructuring charges of $9 million ($7 million, net of tax) and $12 million ($9 million, net of tax) in the six months ended June 30, 2021 and 2020, respectively. Restructuring and ~~2019, respectively.~~ Other Charges included costs to simplify our back-office and align administrative functions as a singularly focused pest management company following the sale of the ServiceMaster Brands Divestiture Group. We expect substantially all of our accrued restructuring charges to be paid within the next 12 months.

Restructuring charges were comprised of the following:

Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Terminix⁽¹⁾
$
4
$
1
$
5
$
3
European Pest Control and Other⁽²⁾
4
1
7
4
Global Service Center relocation⁽³⁾
—
—
—
1
Total restructuring charges
$
8
$
2
$
12
$
8



	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2021		2020		2021		2020
Severance	$	2	$	4	$	5	$	5
Other⁽¹⁾		1		4		3		7
Total restructuring charges	$	2	$	8	$	9	$	12

___________________________________

(1)~~For the three~~Primarily owned building and ~~six months ended June 30, 2020, these charges included $2 million of severance and other costs and $2 million of~~operating lease right-of-use asset impairment charges, onand costs to simplify our ~~call center right of use assets, which we exited during the second quarter. Severance~~back-office and ~~other costs of $2 million were unpaid and accrued~~align as ~~of June 30, 2020.~~ ~~For the three and six months ended June 30, 2019,~~ ~~these charges included $1 million and $3 million, respectively, of severance and other costs.~~a singularly focused pest management company.

~~(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, which represents 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. Of the restructuring charges incurred by European Pest Control and Other, $3 million was unpaid and accrued as of June 30, 2020. For the three and six months ended June 30, 2020 and 2019, these charges were comprised of the following:

Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Severance
$
2
$
—
$
3
$
1
Other costs^(a)
2
1
4
4
Total European Pest Control and Other
$
4
$
1
$
7
$
4

~~___________________________________~~

~~(a)~~Represents costs incurred in connection with our CEO transition, charges associated with the marketing of our corporate aircraft for sale and accelerated depreciation on systems we are replacing with the implementation of our new customer experience platform.

~~(3)For the six months ended June 30, 2019, these charges included lease termination and other charges of $1 million related to our headquarter~~ ~~relocation.~~

~~The pretax charges discussed above are reported in Restructuring and other charges in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.~~

A reconciliation of the beginning and ending balances of accrued restructuring charges by major cost type, 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~~		12
~~Costs paid or otherwise settled~~		~~(8)~~
~~Balance as of June 30, 2020~~	$	5

~~Balance as of December 31, 2018~~	$	7
~~Costs incurred~~		8
~~Costs paid or otherwise settled~~		~~(12)~~
~~Balance as of June 30, 2019~~	$	3

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

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	Accrued		Accrued		Total Accrued
	Severance		Other		Restructuring
(In millions)	Charges		Charges		Charges
Balance as of December 31, 2020	$	2	$	—	$	2
Costs incurred		5		3		9
Costs paid or otherwise settled		(3)		(3)		(7)
Balance as of June 30, 2021	$	4	$	—	$	4

Balance as of December 31, 2019	$	1	$	1	$	1
Costs incurred		5		7		12
Costs paid or otherwise settled		(3)		(5)		(8)
Balance as of June 30, 2020	$	3	$	2	$	5

Note 5. Discontinued Operations

~~In January~~On October 1, 2020, we announced we are exploring strategic alternatives related to ServiceMaster Brands 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 includecompleted the sale of the ~~business, during the current fiscal year.~~

~~The~~ ServiceMaster Brands Divestiture Group ~~is classified as held~~ for ~~sale on~~$1,541 million, resulting in a gain of approximately $494 million, net of taxes. The historical results of the ~~Condensed Consolidated Statements of Financial Position and~~ServiceMaster Brands Divestiture Group are reported as discontinued operations for all periods presented herein. For all periods after the sale, discontinued operations includes the gain on sale and incidental costs to complete the sale.

In connection with the sale of the ServiceMaster Brands Divestiture Group, the Company and Roark entered into a transition services agreement (“TSA”) pursuant to which the Company provides certain post-closing services to Roark and ServiceMaster Brands related to the business of ServiceMaster Brands. The charges for the transition services are designed to allow us to fully recover the direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The Company and Roark also entered into a sublease agreement pursuant to which ServiceMaster Brands subleases a portion of our corporate headquarters in Memphis, Tennessee. We recognized $2 million and $3 million of TSA fees, rental income and other cost reimbursements in Selling and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) in the three and six months ended June 30, 2021, respectively. Payments received for TSA fees, for other cost reimbursements and pursuant to the sublease agreement were $2 million and $6 million in the three and six months ended June 30, 2021, respectively. At June 30, 2021, we had a receivable from Roark of $1 million included in Receivables on the Condensed Consolidated Statements of ~~Cash Flows for all periods presented. The net amount~~Financial Position.

Table 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.~~Contents

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 June 30,				Six Months Ended June 30,				Three Months Ended		Six Months Ended
(In millions)	2020		2019		2020		2019		June 30, 2020		June 30, 2020
Revenue	$	63	$	66	$	128	$	128	$	63	$	128
Cost of services rendered and products sold		31		27		60		52		31		60
Selling and administrative expenses		10		12		22		26
Amortization expense		—		1		1		2
Restructuring and other charges⁽¹⁾		5		1		9		2
Operating expenses⁽¹⁾										15		32
Income before income taxes		18		24		35		47		18		35
Provision for income taxes		5		7		9		12		5		9
Net earnings from discontinued operations	$	13	$	17	$	26	$	34	$	13	$	26

___________________________________

(1)Includes $5 million and $9 million of professional fees and other costs incurred in connection with the strategic evaluation and ultimate sale in the three and six months ended June 30, ~~2020, respectively.~~2020.

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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)
June 30, 2020
December 31, 2019
Assets:
Current Assets:
Receivables, less allowances of $4 and $3, respectively
$
44
$
40
Inventories
4
2
Prepaid expenses and other assets
3
3
Total Current Assets
51
45
Other Assets:
Property and equipment, net
9
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
11
13
Deferred customer acquisition costs
1
1
Other assets
1
1
Total Assets
$
879
$
875
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable
$
11
$
8
Accrued liabilities:
Payroll and related expenses
2
5
Other
27
23
Deferred revenue
4
4
Current portion of lease liability
1
1
Total Current Liabilities
44
40
Other Long-Term Liabilities:
Deferred taxes
2
1
Other long-term obligations
6
6
Long-term lease liability
1
2
Total Liabilities
$
54
$
50

All assets and liabilities held for sale were classified as Current assets held for sale and Current liabilities held for sale as of June 30, 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 the ServiceMaster Brands Divestiture Group is included in the Condensed Consolidated Statements of Cash Flows as cash flows from discontinued operations:

Three Months Ended June 30,
(In millions)
2020
2019
Depreciation
$
—
$
1
Amortization
—
1
Capital expenditures
(1)
(1)

In addition, during the six months ended June 30, 2020, the Company began marketing its corporate aircraft for sale and reclassified its book value of $5 million to Current assets held for sale on the Condensed Consolidated Statements of Financial Position.

‎


	Six Months Ended
(In millions)	June 30, 2020
Depreciation	$	—
Amortization		—
Capital expenditures		(1)

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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.

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 :~~follows:



	Accrued
	Self-insured
(In millions)	Claims, Net
Balance as of December 31, 2020	$	126
Provision for self-insured claims		18
Cash payments		(15)
Balance as of June 30, 2021	$	129

Balance as of December 31, 2019	$	111
Provision for self-insured claims		24
Cash payments		(16)
Balance as of June 30, 2020	$	119

~~Balance as of December 31, 2018~~	$	~~111~~
~~Provision for self-insured claims~~		18
~~Cash payments~~		~~(14)~~
~~Balance as of June 30, 2019~~	$	~~115~~

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 a market leader of this product line. 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~~“Non-Litigated Claim”); and circumstances when we do not reach an agreement with a customer to remediate the damage and that

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customer initiates litigation or arbitration proceedings (a “Litigated Claim”). We accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Current activity can differ, causing a change in estimates which could be material.

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, 2020	$	72
Provision for termite damage claims		34
Cash payments		(34)
Balance as of June 30, 2021	$	71

Balance as of December 31, 2019	$	80
Provision for termite damage claims		27
Cash payments		(24)
Balance as of June 30, 2020	$	83

~~Balance as of December 31, 2018~~	$	28
~~Provision for termite damage claims~~		16
~~Cash payments~~		~~(23)~~
~~Balance as of June 30, 2019~~	$	21

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Mobile Bay Formosan Termite Settlement

~~On December 16, 2016,~~In November 2020, the ~~U.S. Virgin Islands~~Company entered into the Consent Judgment and Settlement Agreement (the “Settlement”) with the Office of the Attorney General of the State of Alabama (the “AL AG”) and other Alabama state regulators, primarily related to termite renewal pricing changes we made in our branches in Mobile, Alabama and Gulf Shores, Alabama, which comprise all of our customers in the area, (collectively, the “Mobile Bay Area”) in 2019 and certain other termite inspection and treatment practices regarding the control of Formosan termites in that area that allegedly violated the Alabama Deceptive Trade Practices Act (the “ADTPA”). The Settlement provides for: immediate remediation measures to be provided directly to current and former customers in the Mobile Bay Area, including refunds of certain price increases, rebates to certain former customers, the establishment of a $25 million consumer fund and a related receiver to oversee our compliance with these commitments and to act as an arbitrator for certain Non-litigated Claims; the reimbursement of certain investigative and monitoring costs incurred by the AL AG’s office and the Department of ~~Justice filed~~Agriculture and Industries; and a ~~civil complaint in~~university endowment intended to support termite and pest management research with an emphasis on Formosan termite research. The Company has also agreed to pay the ~~Superior Court~~state of Alabama $19 million.

Pursuant to the ~~Virgin Islands related~~Settlement, we have also agreed to ~~a fumigation incident in a matter styled Government of~~provide 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,opportunity to reinstate service for certain customers who canceled their services during specified timeframes as well as the retreatment of certain customer premises and a commitment to certain specified response and remediation timeframes for future termite damage claims. We do not expect the financial impact of ~~any~~these additional ~~civil, criminal~~remedies to have a material impact on our prospective results of operations or cash flows.

In the fourth quarter of 2020, the Company funded the $25 million consumer fund, from which certain monetary liabilities from settlements of, or judgments in, the covered Settlement are paid by the fund’s receiver. The amount in the consumer fund is held in escrow by the receiver and is classified as a deposit within Prepaid expenses and other ~~claims or judicial, administrative or regulatory proceedings resulting~~assets and with an offsetting liability recorded within Accrued liabilities – Other on the Consolidated Statements of Financial Position. The fund’s receiver has paid a total of $5 million from orthe fund through the second quarter of 2021. In the second quarter of 2021, the Company recorded an increase in expense related to the ~~U.S. Virgin Islands fumigation~~settlement of $4 million due to a higher than anticipated customer participation rate.

State of Mississippi Formosan Termite Litigation

On April 22, 2021, the State of Mississippi brought litigation against us related to our termite inspection and treatment practices. The Company disputes the claims made in the litigation and intends to defend the matter ~~which could~~vigorously. However, given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be ~~material, is not currently known or estimable, and any such further penalties, fines, sanctions, costs or damages would not be covered under our general liability insurance policies.~~met for success on the merits, the Company cannot predict with certainty the outcome of the Mississippi litigation.

Other Litigation

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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. There were 0 impairment charges recorded in the three and six months ended June 30, ~~2020~~2021 and ~~2019.~~2020. There were 0 accumulated impairment losses recorded as of June 30, ~~2020.~~2021. Customer relationships and Other intangible assets, which primarily includes trade names subject to amortization, are amortized over their respective useful lives.

The table below summarizes the goodwill ~~balances for continuing operations by reportable segment and~~ ~~European Pest Control and Other~~:balances:

European Pest
(In millions)
Terminix
Control and Other⁽¹⁾
Total
Balance as of December 31, 2019
$
1,946
$
150
$
2,096
Acquisitions
8
1
9
Impact of foreign exchange rates
(1)
—
(2)
Balance as of June 30, 2020
$
1,953
$
150
$
2,103



(In millions)
Balance as of December 31, 2020	$	2,146
Acquisitions		25
Impact of foreign exchange rates		(3)
Balance as of June 30, 2021	$	2,168

~~___________________________________~~

~~(1)European Pest Control and Other~~ ~~includes goodwill related to pest control operations in Europe. See Note 13 for further discussion of these acquisitions and purchase price allocations.~~

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

balances:



	As of June 30, 2020						As of December 31, 2019						As of June 30, 2021						As of December 31, 2020
			Accumulated						Accumulated						Accumulated						Accumulated
(In millions)	Gross		Amortization		Net		Gross		Amortization		Net		Gross		Amortization		Net		Gross		Amortization		Net
Trade names⁽¹⁾	$	888	$	—	$	888	$	888	$	—	$	888	$	888	$	—	$	888	$	888	$	—	$	888
Customer relationships		654		(437)		217		659		(423)		236		661		(469)		191		650		(454)		196
Other		78		(37)		41		79		(34)		45		71		(47)		24		70		(43)		27
Total	$	1,621	$	(474)	$	1,146	$	1,626	$	(457)	$	1,169	$	1,620	$	(516)	$	1,104	$	1,608	$	(497)	$	1,111

___________________________________

(1)Not subject to amortization.

For the existing intangible assets, we anticipate amortization expense for the remainder of ~~2020~~2021 and each of the next five years as follows:


(In millions)	2020		2021		2022		2023		2024		2025		2021		2022		2023		2024		2025		2026
Amortization expense	$	18	$	37	$	35	$	31	$	23	$	19	$	19	$	39	$	35	$	26	$	21	$	15

~~Table of Contents~~

Note 8. Stock-Based Compensation

For each of the three months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized stock-based compensation expense of $5$6 million ($4 million, net of tax) and $4$5 million ($34 million, net of tax), respectively. For the six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, we recognized stock-based compensation expense of ~~$10~~$11 million ($79 million, net of tax) and $8$10 million ($67 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 June 30, ~~2020,~~2021, there were ~~$42~~$38 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~~Terminix 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 ~~2.14~~1.99 years.

On February 24, 2015, our board of directors approved and recommended for approval by our stockholders the ~~ServiceMaster~~Terminix 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 1 million shares of common stock authorized for sale under the plan. On November 3, 2015, we filed a registration statement on Form S-8 under the Securities Act to register the ~~one~~1 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 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 June 30, ~~2020~~2021, there were ~~800,967~~762,190 shares available for issuance under the Employee Stock Purchase Plan.

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Note 9. Comprehensive (Loss) Income

Comprehensive (loss) income, which primarily includes net income, unrealized ~~gain (loss)~~gains and losses on derivative instruments and the effect of foreign currency translation, is included in the Condensed Consolidated Statements of Operations and Comprehensive Income.

During ~~the six months ended June 30,~~ 2019, we terminated ~~$479 million of~~ our then-existing $650 million interest rate swap, receiving $12 million from the counterparty. ~~We terminated the remaining $171~~ ~~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 $12 million as of June 30, 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 June 30, ~~2020 is $8~~2021 was $5 million.

~~Table of Contents~~

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
(55)
(6)
(61)
Tax provision
12
—
12
After-tax amount
(44)
(6)
(50)
Amounts reclassified within accumulated other comprehensive (loss) income⁽¹⁾
10
(10)
—
Amounts reclassified from accumulated other comprehensive (loss) income⁽²⁾
1
—
1
Net current period other comprehensive (loss) income
(33)
(16)
(48)
Balance as of June 30, 2020
$
(19)
$
(20)
$
(40)
Balance as of December 31, 2018
$
20
$
(15)
$
5
Other comprehensive income before reclassifications:
Pre-tax amount
(11)
2
(9)
Tax benefit
6
—
6
After-tax amount
(5)
2
(3)
Amounts reclassified from accumulated other comprehensive (loss) income⁽²⁾
(2)
—
(2)
Net current period other comprehensive (loss) income
(7)
2
(5)
Balance as of June 30, 2019
$
13
$
(13)
$
(1)



	Unrealized
	Gains		Foreign
	(Losses) on		Currency
(In millions)	Derivatives		Translation		Total
Balance as of December 31, 2020	$	(16)	$	(23)	$	(39)
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		26		(1)		25
Tax provision		(5)		—		(5)
After-tax amount		21		(1)		20
Amounts reclassified from accumulated other comprehensive (loss) income⁽¹⁾		(4)		—		(4)
Amounts reclassified within accumulated other comprehensive (loss) income⁽²⁾		(6)		6		—
Net current period other comprehensive income		11		5		17
Balance as of June 30, 2021	$	(4)	$	(18)	$	(22)

Balance as of December 31, 2019	$	13	$	(5)	$	9
Other comprehensive (loss) income before reclassifications:
Pre-tax amount		(55)		(6)		(61)
Tax provision		12		—		12
After-tax amount		(44)		(6)		(50)
Amounts reclassified from accumulated other comprehensive (loss) income⁽¹⁾		1		—		1
Amounts reclassified within accumulated other comprehensive (loss) income⁽²⁾		10		(10)		—
Net current period other comprehensive loss		(33)		(16)		(48)
Balance as of June 30, 2020	$	(19)	$	(20)	$	(40)

___________________________________

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

(2)Represents ~~unrealized gains (losses) on~~reclassifications from our ~~cross currency swap and~~ net investment hedge related to foreign currency exchange rate fluctuations.

~~(2)Amounts are net of tax.~~ Reclassifications out of accumulated other comprehensive ~~(loss)~~ income included the following components for the periods ~~indicated.~~indicated:


	Amounts Reclassified from Accumulated
	Other Comprehensive (Loss) Income
	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2021		2020		2021		2020
Gains (losses) on derivatives:
Fuel swap contracts	$	2	$	(2)	$	3	$	(2)
Interest rate swap contracts		(2)		—		(3)		—
Cross-currency interest rate swap		(2)		(1)		3		—
Net gains (losses) on derivatives		(1)		(2)		4		(2)
Impact of income taxes		—		1		—		1
Total reclassifications for the period	$	(1)	$	(2)	$	4	$	(1)

Amounts Reclassified from Accumulated
Other Comprehensive (Loss) Income
Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Gains (losses) on derivatives:
Fuel swap contracts
$
(2)
$
—
$
(2)
$
—
Cross currency swap and net investment hedge
(1)
2
—
3
Net gains (losses) on derivatives
(2)
2
(2)
3
Impact of income taxes
1
—
1
—
Total reclassifications for the period
$
(2)
$
2
$
(1)
$
2

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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:~~

Six Months Ended
June 30,
(In millions)
2020
2019
Cash paid for or (received from):
Interest expense⁽¹⁾
$
42
$
42
Interest and dividend income
(1)
(2)
Income taxes, net of refunds
(15)
17

~~___________________________________~~

~~(1)For the six months ended June 30, 2019, excludes $12 million received in connection with our partial terminations of the then-existing interest rate swap.~~

As of June 30, 2020 and December 31, 2019, Cash and cash equivalents of $302 million and $280 million, respectively, and Restricted cash of $89 million and $89 million, respectively, as presented on the condensed consolidated statements of financial

~~Table of Contents~~

~~position represent the amounts comprising Cash and cash equivalents and Restricted cash of $391 million and $368 million, respectively, on the Condensed Consolidated Statement of Cash Flows.~~

As of June 30, 2019 and December 31, 2018, Cash and cash equivalents of $228 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 $316 million and $313 million, respectively, on the Condensed Consolidated Statement of Cash Flows.

table. The non-cash lease transactions are described in Note 12. ~~The proceeds from~~



	Six Months Ended
	June 30,
(In millions)	2021		2020
Cash paid for or (received from):
Interest expense	$	27	$	42
Interest and dividend income		—		(1)
Income taxes, net of refunds		3		(15)

For the ~~frontdoor, inc. (“Frontdoor”) debt issuances described in Note 11 were retained by~~six months ended June 30, 2021, cash paid for income taxes, net of refunds, of $3 million includes the ~~lender in satisfaction~~utilization of $12 million of tax overpayments made related to the sale of the ~~short-term credit facility~~ServiceMaster Brands Divestiture Group, which is reported in Cash flows from discontinued operations on the Condensed Consolidated Statements of Cash Flows.

Cash and ~~have been excluded from~~Cash Equivalents and Restricted Cash at End of Period on the Condensed Consolidated Statements of Cash Flows ~~as non-cash financing activities.~~consists of the following:


	As of June 30,
(In millions)	2021		2020
Cash and cash equivalents	$	313	$	302
Restricted cash		89		89
Total Cash and cash equivalents and Restricted cash	$	402	$	391

Note 11. Long-Term Debt

Long-term debt is summarized in the following table:



	As of		As of		As of		As of
	June 30,		December 31,		June 30,		December 31,
(In millions)	2020		2019		2021		2020
Senior secured term loan facility maturing in 2026⁽¹⁾	$	591	$	593	$	539	$	539
Revolving credit facility maturing 2024		—		—		—		—
5.125% notes maturing in 2024⁽²⁾		743		742
7.45% notes maturing in 2027⁽³⁾		168		167
7.45% notes maturing in 2027⁽²⁾						171		169
7.25% notes maturing in 2038⁽³⁾		40		40		41		41
Vehicle finance leases⁽⁴⁾		95		95		98		95
Other⁽⁵⁾		87		100		29		77
Less current portion⁽⁶⁾		(104)		(70)		(44)		(94)
Total long-term debt	$	1,620	$	1,667	$	834	$	826

__________________________________

(1)As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, presented net of $6 million and $7 million in unamortized debt issuance costs, ~~in each period~~respectively, and $1 million of unamortized original issue discount in each period.

(2)As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, presented net of $7$16 million and 8$17 million, respectively of unamortized ~~debt issuance costs.~~fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates above.

(3)As of both June 30, ~~2020~~2021 and December 31, ~~2019, collectively~~2020, presented net of ~~$27~~$8 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.~~ranging from 1.33% to 2.45%.

(5)~~As of June 30, 2020 and December 31, 2019, includes approximately $86 million and $91 million, respectively, of~~Primarily represents future payments in connection with acquisitions.

(6)~~The increase in the current portion of long-term debt consists of~~We paid approximately $50 million for deferred purchase price and an earnout ~~payments on acquisitions due within 12 months.~~related to the 2018 purchase of Copesan in the three months ended June 30, 2021.

~~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”).~~Interest Rate Swap

The interest ~~rates applicable to the loans under the Amended Term Loan Facility are based on a fluctuating~~ rate swap agreement in effect as 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.~~June 30, 2021 is as follows:

~~The Term Loan Facility and~~


Trade Date	Effective Date	Expiration Date	Notional Amount	Fixed Rate⁽¹⁾	Floating Rate
November 5, 2019	November 5, 2019	November 5, 2026	$546 million	1.615%	1.731%

(1)Before the ~~guarantees thereof are secured by substantially all~~application 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 inapplicable borrowing margin.

1714

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~~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 our $400 million revolving credit facility due 2024 (“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 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 six months ended ~~June 30, 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 six months ended ~~June 30, 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 six months ended June 30, 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 0 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, we terminated $479 million of our then existing $650 million interest rate swap agreement, receiving $12 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 0 proceeds from the counterparty. The fair value of the terminated agreement of $12 million was recorded within accumulated other comprehensive income on the Condensed Consolidated Statements of Financial Position and is being amortized into interest expense over the original term of the agreement.

~~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
(479)
Entered into effect
—
Interest rate swap agreement in effect as of June 30, 2019
$
171
1.493
%
Terminated
(171)
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 June 30, 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 16, our interest rate swap agreement is classified as a cash flow hedge, and, as such, is recorded on the Condensed Consolidated

~~Table of Contents~~

~~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.~~

Note 12. 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 June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, assets recorded under finance leases were ~~$231~~$261 million and ~~$220~~$249 million, respectively, and accumulated depreciation ~~associated with finance leases~~ was ~~$141~~$165 million and ~~$127~~$155 million, respectively.

The components of lease expense were as follows:


	Three months ended June 30,				Six months ended June 30,
(In millions)	2021		2020		2021		2020
Finance lease cost
Depreciation of finance lease ROU assets	$	10	$	10	$	21	$	20
Interest on finance lease liabilities		1		1		1		2
Operating lease cost		5		6		11		13
Variable lease cost		—		1		1		1
Sublease income		(1)		(1)		(2)		(1)
Total lease cost	$	16	$	17	$	32	$	33

Three months ended June 30,
Six months ended June 30,
(In millions)
2020
2019
2020
2019
Finance lease cost
Depreciation of finance lease ROU assets
$
10
$
8
$
20
$
16
Interest on finance lease liabilities
1
1
2
2
Operating lease cost
6
6
13
13
Variable lease cost
1
1
1
1
Sublease income
(1)
(1)
(1)
(1)
Total lease cost
$
17
$
16
$
33
$
31

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


	Six months ended June 30,				As of June 30,
(In millions)	2020		2019		2021			2020
Cash paid for amounts included in the measurement of lease liabilities:
Operating cash flows for operating leases	$	14	$	12	$	12		$	14
Operating cash flows for finance leases		2		2		1			2
Financing cash flows for finance leases		20		16		20			20
ROU assets obtained in exchange for lease obligations:
Operating leases		3		5		8			3
Finance leases		16		22		23			16
Weighted Average Remaining Lease Term (in years):
Operating leases						10.10			10.57
Finance leases						3.62			3.33
Weighted Average Discount Rate:
Operating leases						5.25	%		5.60	%
Finance leases						4.90	%		4.46	%

As of June 30, 2021 and December 31, 2020, there were ~~$35~~$33 million and $6035 million, respectively, of finance leases included within Current portion of long-term debt and$64 million and $60 million, respectively, of finance leases included within Long-term debt, respectively, on the Condensed Consolidated Statements of Financial Position. Future minimum lease payments under non-cancellable leases as of June 30, ~~2020~~2021 were as follows:


(In millions)	Operating Leases⁽¹⁾		Finance Leases
Year ended December 31,
2021 (excluding the six months ended June 30, 2021)	$	11	$	19
2022		21		31
2023		17		22
2024		13		15
2025		12		10
Thereafter		73		5
Total future minimum lease payments		148		103
Less imputed interest		(36)		(5)
Total	$	112	$	98

___________________________________

(In millions)
Operating Leases
Finance Leases
Year ended December 31,
2020 (excluding the six months ended June 30, 2020)
$
13
$
17
2021
22
28
2022
19
18
2023
15
12
2024
11
5
Thereafter
85
1
Total future minimum lease payments
165
81

(1)Each year through 2033 is presented net of approximately $3 million of projected annual sublease income from formerly owned frontdoor, inc. and ServiceMaster Brands for their subleases of our headquarters.

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Note 13. 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 six months ended June 30,~~, 2020, our~~ 2021, we used available cash on hand to fund a $45 million investment in acquisitions, which included $36 million for 5 tuck-in acquisitions. Another $5 million of deferred purchase price is due to the sellers between one year and three years from the acquisition dates. We also completed approximately $9 million of funding for a minority interest investment, approximately $8 million of which was ~~$24~~included in Accrued liabilities‒Other on the Consolidated Statements of Financial position as of December 31, 2020. We recorded preliminary goodwill of $25 million ~~using~~and other intangibles, primarily customer relationships, of $14 million. The purchase price allocations for these acquisitions will be finalized no later than one year from the respective acquisition dates. For incomplete purchase price allocations, we are evaluating working capital balances, the intangible and tangible assets acquired and appropriate useful lives to assign to all assets, including intangibles.

During the six months ended June 30, 2020, we used available cash on hand to fund a $24 million investment in acquisitions, which included $7 million for 7 tuck-in ~~pest control~~ acquisitions, ~~which have been accounted for as business combinations,~~ as well as ~~$18~~$18 million for final funding for 2 pest ~~control~~management 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. WeAs of June 30, 2021, we had recorded ~~a preliminary value of $8~~$3 million of goodwill for the 2020 acquisitions. We also made a minority investment in a pest ~~control~~management company for approximately $7 million, which was unfunded and is included in Accrued liabilities—Other in the Condensed

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Consolidated Statements of Financial ~~Position as of June 30, 2020.~~ Position. During the six months ended June 30, 2020, we also received $3 million from post-closing working capital adjustments related to acquisitions completed in 2019.

During the six months ended June 30, 2019, our investment in acquisitions was $115 million, using available cash on hand, for 19 pest control acquisitions which have been accounted for as business combinations. We recorded $76 million of goodwill, $4 million of trade names and $44 million of other intangibles, primarily customer lists, related to these acquisitions.

~~We continue to finalize the valuations of intangible and tangible assets acquired in the last 12 months and plan to finalize all purchase accounting within 12 months from the date of each acquisition.~~ ~~The following sets forth the adjustments made to purchase price allocations during the six months ended June 30, 2020:~~

Other
(In millions)
Goodwill
Trade Names⁽¹⁾
Intangible Assets⁽²⁾
Balance as of December 31, 2019
$
309
$
31
$
197
Measurement period adjustments
—
—
(4)
Balance as of June 30, 2020
$
310
$
31
$
192

~~___________________________________~~

~~(1)Subject to amortization.~~

~~(2)Primarily customer lists.~~

Supplemental cash flow information regarding the acquisitions was as follows:

Six Months Ended
June 30,
(In millions)
2020
2019
Assets acquired
$
9
$
133
Liabilities assumed
—
(6)
Net assets acquired
$
9
$
127
Net cash paid
$
7
$
115
Seller financed debt
2
9
Contingent earnout
—
3
Purchase price
$
9
$
127

~~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 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.

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~~A preliminary purchase price allocation was as follows (in millions):~~


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

~~___________________________________~~

~~(1)Primarily trade receivables and net of 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.~~

The following pro forma consolidated financial information presents the combined operations of ServiceMaster and Nomor for the three and six months ended June 30, 2019 (in millions, except per share data):

(Unaudited)
Three months ended
Six months ended
June 30, 2019
June 30, 2019
Consolidated revenue
$
509
$
942
Consolidated net income
$
60
$
131
Basic earnings per share
$
0.44
$
0.96
Diluted earnings per share
$
0.44
$
0.96



	Six Months Ended
	June 30,
(In millions)	2021		2020
Assets acquired	$	40	$	9
Liabilities assumed		—		—
Net assets acquired	$	40	$	9

Net cash paid	$	36	$	7
Seller financed debt		5		2
Purchase price	$	40	$	9

~~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.

Note 14. 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 ~~31.0~~27.9 percent and ~~25.8~~31.0 percent for the three months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively.

The effective tax rate on income from continuing operations was ~~28.5~~28.1 percent and ~~15.5~~28.5 percent for the six months ended June 30, 2021 and 2020, ~~and 2019,~~ respectively. The effective tax rate on income from continuing operations for the six months ended June 30, 2019, was primarily affected by the disposition of the Frontdoor retained shares in a non-taxable debt-for-equity exchange that was recorded discretely in the three months ended March 31, 2019.

As of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, we had ~~$13~~$14 million and $14 million, respectively, of tax benefits primarily reflected in U.S. 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.

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~~Note 15. 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 2 reportable segments: Terminix and ServiceMaster Brands. We now have 1 reportable segment, Terminix.

In accordance with accounting standards for segments, we identified Terminix as our reportable 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 “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 5 percent generated in foreign markets as of June 30, 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; 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
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Revenue:
Terminix
$
517
$
495
$
955
$
914
European Pest Control and Other
17
—
35
—
Total Revenue
$
534
$
494
$
990
$
913
Reportable Segment Adjusted EBITDA:⁽¹⁾
Terminix
$
120
$
106
$
184
$
189

~~___________________________________~~

~~(1)~~

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

Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Net Income
$
53
$
59
$
67
$
129
Unallocated corporate expenses
—
(1)
1
(4)
Costs historically allocated to ServiceMaster Brands
3
3
6
6
European pest control
(2)
—
(3)
—
Depreciation and amortization expense
27
22
55
45
Acquisition-related costs
—
3
1
4
Fumigation related matters
—
(1)
—
—
Non-cash stock-based compensation expense
5
4
10
8
Restructuring and other charges
8
2
12
8
Realized (gain) on investment in frontdoor, inc.
—
—
—
(40)
Net earnings from discontinued operations
(13)
(17)
(26)
(34)
Provision for income taxes
18
14
16
17
Loss on extinguishment of debt
—
—
—
6
Interest expense
22
18
45
45
Reportable Segment Adjusted EBITDA
$
120
$
106
$
184
$
189

Note ~~16.~~15. 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 ~~$1,723~~$878 million and ~~$1,737~~$920 million, and the estimated fair value was ~~$1,776~~$951 million and ~~$1,841~~$989 million as of June 30, ~~2020~~2021 and December 31, ~~2019,~~2020, 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 June 30, ~~2020~~2021 and December 31, ~~2019.~~2020.

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 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 swaps are valued using forward foreign currency exchange rates 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 foreign exchange rate between the U.S. dollar and Swedish krona as of each settlement date and applying the difference between the two rates to the notional amount of the investment in the 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

~~Table of Contents~~

amount of 1.275 billion Swedish krona, or approximately $131 million, at an annual rate of 0 percent and a maturity date of March 31, 2025. At inception, the cross-currency swap was designated as a net investment hedge and is recorded at fair value.contracts.

Changes in the fair value of ~~these~~the interest rate swap contracts, fuel swap contracts and cross-currency interest rate swap designated as a net investment hedge are recorded within Other comprehensive (loss) income on the Condensed Consolidated Statements of Financial Position. Changes in the fair value of the cross-currency interest rate swap designated as a cash flow hedge are recorded within Selling and administrative expenses on the Condensed Consolidated Statements of Operations and Comprehensive Income, offsetting foreign currency fluctuations on the hedged instrument. Interest accruals and coupon payments are recognized directly in interest expense, thus reflecting a Swedish krona fixed rate. Upon discontinuation of the net investment 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 ~~six~~three month periods ended June 30, ~~2020~~2021 and ~~2019.~~2020.

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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 were as follows:



				Estimated Fair Value Measurements									Estimated Fair Value Measurements
				Quoted		Significant							Quoted		Significant
				Prices In		Other		Significant					Prices In		Other		Significant
				Active		Observable		Unobservable					Active		Observable		Unobservable
	Statement of Financial	Carrying		Markets		Inputs		Inputs		Statement of Financial	Carrying		Markets		Inputs		Inputs
(In millions)	Position Location	Value		(Level 1)		(Level 2)		(Level 3)		Position Location	Value		(Level 1)		(Level 2)		(Level 3)
As of June 30, 2020:
As of June 30, 2021:
Financial Assets:
Deferred compensation trust	Long-term marketable securities	$	13	$	13	$	—	$	—	Long-term marketable securities	$	15	$	15	$	—	$	—
Fuel swap contracts										Prepaid expenses and other assets and Other assets		6		—		—		6
Total financial assets		$	13	$	13	$	—	$	—		$	21	$	15	$	—	$	6
Financial Liabilities:
Cross-currency interest rate swap	Other long-term obligations	$	3	$	—	$	3	$	—	Other long-term obligations, primarily self-insured claims	$	11	$	—	$	11	$	—
Net investment hedge	Other long-term obligations		5		—		5		—	Other long-term obligations, primarily self-insured claims		18		—		18		—
Fuel swap contracts	Accrued liabilities—Other and Other long-term obligations		2		—		—		2
Interest rate swap contract	Accrued liabilities—Other and Other long-term obligations		38		—		38		—	Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims		19		—		19		—
Total financial liabilities		$	47	$	—	$	46	$	2		$	48	$	—	$	48	$	—

As of December 31, 2019:
As of December 31, 2020:
Financial Assets:
Deferred compensation trust assets	Long-term marketable securities	$	13	$	13	$	—	$	—	Long-term marketable securities	$	14	$	14	$	—	$	—
Fuel swap contracts	Prepaid expenses and other assets and Other assets		1		—		—		1	Prepaid expenses and other assets and Other assets		3		—		—		3
Interest rate swap contracts	Other assets		5		—		5		—
Total financial assets		$	19	$	13	$	5	$	1		$	18	$	14	$	—	$	3
Financial Liabilities:
Interest rate swap contracts	Accrued liabilities—Other and Other long-term obligations	$	1	$	—	$	1	$	—
Cross-currency interest rate swap										Other long-term obligations, primarily self-insured claims	$	15	$	—	$	15	$	—
Net investment hedge										Other long-term obligations, primarily self-insured claims		23		—		23		—
Interest rate swap contract										Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims		34		—		34		—
Total financial liabilities		$	1	$	—	$	1	$	—		$	72	$	—	$	72	$	—

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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, 2020	$	3
Total gains (losses) (realized and unrealized)
Included in earnings		3	Cost of services rendered and products sold
Included in other comprehensive income		3
Settlements		(3)
Balance as of June 30, 2021	$	6

Balance as of December 31, 2019	$	1
Total gains (losses) (realized and unrealized)
Included in earnings		2	Cost of services rendered and products sold
Included in other comprehensive income		(4)
Settlements		—
Balance as of June 30, 2020	$	(2)

~~Balance as of December 31, 2018~~	$	~~(4)~~
~~Total gains (losses) (realized and unrealized)~~
~~Included in earnings~~		—	~~Cost of services rendered and products sold~~
~~Included in other comprehensive income~~		3
~~Settlements~~		—
~~Balance as of June 30, 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		Fair Value		Valuation			Weighted
	(in millions)		Technique	Unobservable Input	Range	Average		(in millions)		Technique	Unobservable Input	Range	Average
As of June 30, 2020:
As of June 30, 2021:
Fuel swap contracts	$	(2)	Discounted Cash Flows	Forward Unleaded Price per Gallon⁽¹⁾	$2.02 - $2.32	$	2.16	$	6	Discounted Cash Flows	Forward Unleaded Price per Gallon⁽¹⁾	$2.96 - $3.34	$	3.14
As of December 31, 2019:
As of December 31, 2020:
Fuel swap contracts	$	1	Discounted Cash Flows	Forward Unleaded Price per Gallon⁽¹⁾	$2.37 - $2.80	$	2.61	$	3	Discounted Cash Flows	Forward Unleaded Price per Gallon⁽¹⁾	$2.20 - $2.58	$	2.44

___________________________________

(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.

As of June 30, ~~2020,~~2021, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of ~~$35~~$18 million, maturing through ~~2021.~~2022. 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 June 30, ~~2020,~~2021, 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~~gain of $6less than $1 million, net of tax, as of June 30, ~~2020~~2021. 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.

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, with ~~adjustments to arrive at 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 June 30, 2020, the carrying amount of these investments was $4 million.~~

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Note ~~17.~~16. 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				Six Months Ended				Three Months Ended				Six Months Ended
	June 30,				June 30,				June 30,				June 30,

(In millions, except per share data)	2020		2019		2020		2019		2021		2020		2021		2020
Income from continuing operations	$	40	$	42	$	41	$	95	$	54	$	40	$	81	$	41
Weighted-average common shares outstanding		131.9		136.0		133.4		135.9		127.4		131.9		129.3		133.4
Effect of dilutive securities:
RSUs⁽¹⁾		0.1		0.2		0.1		0.2
RSUs										0.3		0.1		0.3		0.1
Stock options⁽²⁾⁽¹⁾		—		0.3		—		0.2		0.2		0.0		0.2		0.0
Weighted-average common shares outstanding—assuming dilution		132.0		136.5		133.5		136.3		127.8		132.0		129.8		133.5
Basic earnings per share from continuing operations	$	0.30	$	0.31	$	0.31	$	0.70	$	0.42	$	0.30	$	0.63	$	0.31
Diluted earnings per share from continuing operations	$	0.30	$	0.30	$	0.31	$	0.70	$	0.42	$	0.30	$	0.62	$	0.31

___________________________________

(1)~~RSUs~~Options to purchase 0.1 million ~~shares for the three~~ and ~~six months ended June 30, 2020 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.~~

~~(2)Options to purchase~~ 1.6 million shares for the three months ended June 30, 2021, and 2020, respectively, and 0.1 million and 1.4 ~~million and 0.4~~ million shares for the six months ended June 30, ~~2020,~~2021, and ~~2019,~~2020, 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 June 30, 2020, and for all periods prior to June 30, 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~~core services include residential and commercial termite and pest ~~control~~management 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 and ~~Terminix brands, 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 Terminix and our headquarters operations (substantially all of which costs are allocated to Terminix), which provide various technology, finance, legal and other support services to Terminix.

Pelias. 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 are primarily related to third-party consulting and other incremental costs directly associated with the strategic alternatives exploration process. Net earnings from discontinued operations for the ~~three months~~periods presented in this report are organized into one reportable segment, our pest management and six months ended June 30, 2020 included charges of $5 million and $9 million, respectively, related to the initiative. We expect to incur charges of $15 million to $20 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.termite business.

~~New CEO Appointment~~COVID-19

On August 6, 2020, we announced the appointment of Brett T. Ponton as Chief Executive Officer of the Company and as a member of the board of directors of the Company, in each case, effective as of a date to be agreed upon between the Company and Mr. Ponton, with such date being on or around September 15, 2020 and no later than October 1, 2020.

~~Recent Events and 2020 Outlook~~

During the three and six months ended June 30, 2020, the effects of COVID-19 and related actions to attempt to control its spread negatively impacted our business, beginning in the last few weeks of March. OnSince March 11, 2020 when the World Health Organization designated COVID-19 as a global pandemic, ~~and governments around the world mandated orders to slow the transmission of the virus. States in the United States, including Tennessee, where~~ we are headquartered, declared states of emergency, and countries around the world, including the United States, took steps to restrict travel, instituted work from home policies, enacted temporary closures of businesses, issued quarantine orders and took 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. The exact timing and pace of the recovery are uncertain as certain markets have reopened, while others remain closed or have closed again in an effort to control the spread of the virus. Althoughexperienced increased demand ~~for our services improved through the second quarter, it remains marginally below prior year, particularly~~ in our ~~Terminix Commercial~~residential pest management and termite and home services service ~~line.~~

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, has allowed us to continue to serve ourlines as customers ~~while ensuring the health and safety of our employees and our customers. As the States have re-opened for business during the second quarter, all of our brands have been fully operational.~~are spending more time at home. We have also ~~continued serving~~experienced disruptions in our ~~customers~~business, primarily in ~~all~~the commercial pest management service line, driven by temporary business closures and service postponements, and in our product sales and other service line. We expect the commercial pest market to stabilize to more normalized growth levels throughout the remainder of ~~the international markets in which we operate.~~

~~In response~~2021. We continue to ~~these developments, beginning in March and continuing through the second quarter of 2020, we implemented contingency planning designed~~focus on initiatives to ensure the safety and productivity of our ~~workforce. We have implemented~~teammates, including personal protective equipment and safety policies and measures for field teammates, and technology to facilitate remote working, with most back-office and all call center ~~employees~~teammates working remotely and field support ~~personnel~~teammates working remotely where possible. We ~~plan~~will continue to ~~leverage these new~~evaluate the benefits, opportunities and risks identified from our remote working ~~capabilities~~experiences to sustain and identify ways 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~~while balancing operational performance. It is reasonably possible that we ~~have already implemented, including instituting travel restrictions~~could recognize additional lease impairment charges within the next 12 months, which could be material, if, for example, any subleases entered into are for less than our fixed rent. Refer to Results of Operations below for further discussion of the impact of COVID-19 on our business.

Leadership Changes

On May 18, 2021, Mark Tomkins retired as ~~well as visitor protocols and developing and maintaining social distancing practices. We have assessed and are implementing continuity plans to provide customers~~

~~Table of Contents~~

~~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~~a member of our ~~sourced materials~~board of directors. On June 29, 2021, the board expanded its directorships by two and ~~for those sourced materials that have been impacted~~appointed Teresa M. Sebastian and Chris S. Terrill as independent members of the board of directors 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.~~fill the vacancies created by the expansion.

~~In reaction to customer demands, Terminix~~On July 6, 2021, Deidre Richardson joined the Company as Senior Vice President, General Counsel and ~~ServiceMaster Brands have launched one-time~~Corporate Secretary, and ~~recurring sanitization~~Joy Wald joined as Senior Vice President and ~~disinfection services, which will help all businesses, including those deemed essential, maintain clean work areas while staying in compliance with federal, state, and local public health protocols.~~Chief Information Officer.

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

 and earnings per share,

Adjusted EBITDA, ~~and~~

organic revenue ~~growth.~~growth, and

customer retention.

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.~~provided across our business. 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.~~U.S. We expect to continue our tuck-in acquisition program and to periodically evaluate other strategic acquisitions. As of June 30, ~~2020,~~2021, approximately 9594 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 and six months ended June 30, 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~~teammate 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~~weighted-

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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. Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP. We define Adjusted EBITDA as net income before: depreciation and amortization expense; acquisition-related costs; Mobile Bay Formosan termite settlement; non-cash stock-based compensation expense; restructuring and other charges; net earnings from discontinued operations; provision for income taxes; and 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.expense. 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, acquisition activity, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives and equity-based, long-term incentive plans.

~~We evaluate performance~~ Our definition of ~~the ServiceMaster Brands Divestiture Group based on ServiceMaster Brands Divestiture Group~~ Adjusted EBITDA ~~which is defined~~may not be calculated or comparable to similarly titled measures of other companies.

A reconciliation of Net income to Adjusted EBITDA for the three and six months ended June 30, 2021 and 2020 was 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.follows:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2021		2020		2021		2020
Net Income	$	54	$	53	$	81	$	67
Depreciation and amortization expense		26		27		54		55
Acquisition-related costs		(1)		—		(1)		1
Mobile Bay Formosan termite settlement		4		—		4		—
Non-cash stock-based compensation expense		5		5		11		10
Restructuring and other charges		2		8		9		12
Net earnings from discontinued operations		—		(13)		—		(26)
Provision for income taxes		20		18		31		16
Interest expense		11		22		23		45
Adjusted EBITDA	$	123	$	119	$	213	$	179

Organic Revenue Growth. We ~~evaluate~~use 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.

~~Table~~ We believe organic revenue growth is useful for investors, analysts and other invested parties as it facilitates company-to-company performance comparisons by excluding the impact of ~~Contents~~acquisitions on revenue growth. See Revenue below for a reconciliation of revenue growth to organic revenue growth.

Customer Retention.

Customer retention is used to track the retention of our renewable customers and is calculated on a rolling, 12-month basis in order to avoid seasonal anomalies.

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~~2020, revenue and ~~approximately 26 percent, 32 percent, 23 percent and 19 percent of our~~ Adjusted EBITDA by quarter was recognized ~~in the first, second, third and fourth quarters, respectively.~~as follows:


	Q1		Q2		Q3		Q4
Revenue	23	%	27	%	26	%	23	%
Adjusted EBITDA	17	%	34	%	28	%	20	%

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~~management 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~~management services.

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Results of Operations

The following ~~table~~tables shows the results of operations from continuing operations for the three and six months ended June 30, ~~2020~~2021 and ~~2019,~~2020, 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
	June 30,				(Decrease)		% of Revenue				Three Months Ended				Increase
											June 30,				(Decrease)		% of Revenue
(In millions)	2020		2019		2020 vs. 2019		2020		2019		2021		2020		2021 vs. 2020		2021		2020
Revenue	$	534	$	494	8	%	100	%	100	%	$	560	$	534	5	%	100	%	100	%
Cost of services rendered and products sold		297		276	8		56		56			318		297	7		57		56
Selling and administrative expenses		143		138	3		27		28			143		143	—		26		27
Amortization expense		9		5	77		2		1			10		9	7		2		2
Acquisition-related costs		—		3	*		—		1			(1)		—	*		—		—
Fumigation related matters		—		(1)	*		—		—
Mobile Bay Formosan termite settlement												4		—	*		1		—
Restructuring and other charges		8		2	*		1		—			2		8	*		—		1
Interest expense		22		18	18		4		4			11		22	(49)		2		4
Interest and net investment income		(1)		(3)	*		—		(1)			(1)		(1)	*		—		—
Income from Continuing Operations before Income Taxes		57		56	*		11		11			73		57	*		13		11
Provision for income taxes		18		14	*		3		3			20		18	*		4		3
Equity in earnings of joint venture		1		—	*		—		—			1		1	*		—		—
Income from Continuing Operations	$	40	$	42	*		7	%	8	%	$	54	$	40	*		10	%	7	%

________________________________

* not meaningful


	Six Months Ended				Increase
	June 30,				(Decrease)		% of Revenue
(In millions)	2021		2020		2021 vs. 2020		2021		2020
Revenue	$	1,032	$	990	4	%	100	%	100	%
Cost of services rendered and products sold		588		577	2		57		58
Selling and administrative expenses		280		283	(1)		27		29
Amortization expense		19		18	8		2		2
Acquisition-related costs		(1)		1	*		—		—
Mobile Bay Formosan termite settlement		4		—	*		—		—
Restructuring and other charges		9		12	*		1		1
Interest expense		23		45	(49)		2		5
Interest and net investment income		(1)		(1)	*		—		—
Income from Continuing Operations before Income Taxes		110		56	*		11		6
Provision for income taxes		31		16	*		3		2
Equity in earnings of joint venture		2		1	*		—		—
Income from Continuing Operations	$	81	$	41	*		8	%	4	%

________________________________

* not meaningful

Six Months Ended
Increase
June 30,
(Decrease)
% of Revenue
(In millions)
2020
2019
2020 vs. 2019
2020
2019
Revenue
990
913
8
%
100
%
100
%
Cost of services rendered and products sold
577
512
13
58
56
Selling and administrative expenses
283
261
8
29
29
Amortization expense
18
10
83
2
1
Acquisition-related costs
1
4
*
—
—
Realized (gain) on investment in frontdoor, inc.
—
(40)
*
—
(4)
Restructuring and other charges
12
8
*
1
1
Interest expense
45
45
(1)
5
5
Interest and net investment income
(1)
(4)
*
—
—
Loss on extinguishment of debt
—
6
*
—
1
Income from Continuing Operations before Income Taxes
56
112
*
6
12
Provision for income taxes
16
17
*
2
2
Equity in earnings of joint venture
1
—
*
—
—
Income from Continuing Operations
41
95
*
4
%
10
%

~~________________________________~~

* not meaningful

‎

~~Table of Contents~~

~~Revenue~~

We reported revenue of $534 million and $494 million for the three months ended June 30, 2020 and 2019, respectively and revenue of $990 million and $913 million for the six months ended June 30, 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 June 30, 2019
$
495
$
—
$
494
Residential Pest Control⁽¹⁾
—
—
—
Commercial Pest Control⁽²⁾
2
—
2
Termite and Home Services⁽³⁾
13
—
13
Sale of Products and Other⁽⁴⁾
7
—
7
European Pest Control
—
17
17
Three Months Ended June 30, 2020
$
517
$
17
$
534

~~_________________________________~~

~~(1)Includes growth from acquisitions of approximately $2 million for the three months ended June 30, 2020.~~

~~(2)Includes growth from acquisitions of approximately $11 million for the three months ended June 30, 2020.~~

~~(3)Includes growth from acquisitions of approximately $1 million for the three months ended June 30, 2020.~~

~~(4)Includes growth from acquisitions of approximately $9 million for the three months ended June 30, 2020.~~

European Pest
(In millions)
Terminix
Control and Other
Total
Six Months Ended June 30, 2019
$
914
$
—
$
913
Residential Pest Control ⁽¹⁾
6
—
6
Commercial Pest Control ⁽²⁾
15
—
15
Termite and Home Services⁽³⁾
12
—
12
Sale of Products and Other⁽⁴⁾
9
—
9
European Pest Control
—
35
35
Six Months Ended June 30, 2020
$
955
$
35
$
990

~~(1)Includes growth from acquisitions of approximately $4 million for the six months ended June 30, 2020.~~

~~(2)Includes growth from acquisitions of approximately $21 million for the six months ended June 30, 2020.~~

~~(3)Includes growth from acquisitions of approximately $3 million for the six months ended June 30, 2020.~~

~~(4)Includes growth from acquisitions of approximately $13 million for the six months ended June 30, 2020.~~

~~Cost of Services Rendered and Products Sold~~

We reported cost of services rendered and products sold of $297 million and $276 million for the three months ended June 30, 2020 and 2019, respectively, and $577 million and $512 million for the six months ended June 30, 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 June 30, 2019
$
277
$
(1)
$
276
Impact of change in revenue⁽¹⁾
15
12
27
Damage claims
8
—
8
Production labor
(5)
—
(5)
Chemicals and materials
(2)
—
(2)
Vehicle and fuel
(4)
—
(4)
Other
(4)
1
(3)
Three Months Ended June 30, 2020
$
286
$
12
$
297

~~_________________________________~~

~~(1)For Terminix, includes approximately $16 million for the three months ended June 30, 2020 from acquisitions. For~~ ~~European Pest Control and Other, includes approximately $12 million for the three months ended June 30, 2020 from acquisitions.~~

3022

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For Terminix, the increase in damage claims was driven by increased Non-Litigated Claims and Litigated Claims, primarily in the Mobile Bay Area, as well as the costs related to mitigation efforts in the Mobile Bay Area intended to reduce future damage claims. The decrease in production labor was driven by improved employee retention and labor management. The decrease in chemicals and materials was driven by a favorable shift in the mix of services performed. The decrease in vehicle and fuel was driven by improvements in fleet management and lower fuel prices.Revenue

European Pest
(In millions)
Terminix
Control and Other
Total
Six Months Ended June 30, 2019
$
516
$
(3)
$
512
Impact of change in revenue⁽¹⁾
28
25
53
Damage claims
14
—
14
Production labor
(1)
—
(1)
Chemicals and materials
1
—
1
Vehicle and fuel
(3)
—
(3)
Insurance program
—
5
5
Other
(4)
—
(4)
Six Months Ended June 30, 2020
$
551
$
26
$
577

~~_________________________________~~

~~(1)For Terminix, includes approximately $28 million for the six months ended~~Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020 ~~from acquisitions. For~~ ~~European Pest Control and Other, includes approximately $25 million for the six months ended June 30, 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, as well as the costs related to mitigation efforts in the Mobile Bay Area intended to reduce future damage claims. ~~The decrease in production labor was driven, in part, by improved employee retention and labor management. The increase in chemicals and materials was driven by~~ ~~increased personal protective equipment and sanitization purchases in response to COVID-19, offset by~~ ~~a decrease driven by a favorable shift in the mix of services performed. The decrease in vehicle and fuel was driven by improvements in fleet management and lower fuel prices.~~

~~For~~ ~~European Pest Control and Other~~, the six months ended June 30, 2020 were unfavorably impacted by $1 million of adjustments in our automobile, general liability and workers’ compensation program, as compared to favorable adjustments of $3 million in the six months ended June 30, 2019.

~~Selling and Administrative Expenses~~

We reported ~~selling and administrative expenses~~revenue of ~~$143~~$560 million and ~~$138~~$534 million for the three months ended June 30, 2021 and 2020, ~~and 2019, respectively, and $283 million and $261 million for the six months ended June 30, 2020, and 2019,~~ respectively. For the three months ended June 30, 2020 and 2019, selling and administrative expenses comprised general and administrative expenses of $73 million and $71 million, respectively, and selling and marketing expenses of $70 million and $68 million, respectively. For the six months ended June 30, 2020 and 2019, selling and administrative expenses comprised general and administrative expenses of $153 million and $139 million, respectively, and selling and marketing expenses of $130 million and $122 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 June 30, 2019
$
124
$
14
$
138
Sales and marketing
(1)
—
(1)
Acquisition selling and administrative expenses
3
5
8
Corporate administrative expenses
(4)
—
(4)
Other
3
(1)
2
Three Months Ended June 30, 2020
$
124
$
19
$
143

Terminix and European Pest Control and Other reflect higher selling and administrative expenses as a result of acquisitions. The decrease in corporate administrative expenses was driven by actions taken to reduce the cost of our corporate headquarters operations.

~~Table of Contents~~

European Pest
(In millions)
Terminix
Control and Other
Total
Six Months Ended June 30, 2019
$
234
$
27
$
261
Sales and marketing costs
1
—
1
Acquisition selling and administrative expenses
7
10
17
Investments in growth
4
—
4
Other
2
(1)
1
Six Months Ended June 30, 2020
$
248
$
36
$
283

~~Terminix and European Pest Control and Other reflect higher selling and administrative expenses as a result of acquisitions. The increase in investments in growth was~~ ~~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 June 30, 2020 and 2019, respectively, and $18 million and $10 million in the six months ended June 30, 2020 and 2019, respectively. The increase in amortization expense primarily reflects the effect of recent acquisitions.

~~Acquisition-Related Costs~~

There were no acquisition-related costs in the three months ended June 30, 2020. Acquisition-related costs were $3 million in the three months ended June 30, 2019, and $1 million and $4 million in the six months end June 30, 2020 and 2019, respectively.

~~Fumigation Related Matters~~

There were no charges accrued for fumigation related matters in the three and six months ended June 30, 2020. We reversed a previously accrued $1 million charge for fumigation related matters due to favorable activity in the three months ended June 30, 2019, and there was no charge for fumigation related matters in the six months ended June 30, 2019.

~~Restructuring and Other Charges~~

We incurred restructuring charges of approximately $8 million and $2 million in the three months ended June 30, 2020 and 2019, respectively, and $12 million and $8 million in the six months ended June 30, 2020 and 2019, respectively. Restructuring charges were comprised of the following:

~~_________________________________~~

~~(1)~~For the three and six months ended June 30, 2020, these charges included $2 million of severance and other costs and $2 million of impairment charges on our call center right of use assets which we exited during the second quarter. ~~For the three and six months ended June 30, 2019,~~ ~~these charges included $1 million and $3 million, respectively, of severance and other costs.~~

Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Severance
$
2
$
—
$
3
$
1
Other costs^(a)
2
1
4
4
Total European Pest Control and Other
$
4
$
1
$
7
$
4

~~___________________________________~~

~~(3)For the six months ended June 30, 2019, these charges included lease termination and other charges of $1 million related to our headquarter~~ ~~relocation.~~

~~Table of Contents~~

~~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 six months ended June 30, 2019, with no similar gain recorded in the other periods presented.~~

~~Interest Expense~~

Interest expense was $22 million and $18 million in the three months ended June 30, 2020 and 2019, respectively, and $45 million and $45 million in the six months ended June 30, 2020 and 2019, respectively. The increase in interest expense was due to an increase in our average long-term debt balance to fund acquisitions completed in the fourth quarter of 2019.

~~Interest and Net Investment Income~~

~~Interest and net investment income was $1 million and $3 million for the three months ended June 30, 2020 and 2019, respectively, and $1 million and $4 million in the six months ended June 30, 2020 and 2019, respectively. 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 six months ended June 30, 2019. No similar loss was recognized in the three months ended June 30, 2020 and 2019 or the six months ended June 30, 2020. See Note 11 to the condensed consolidated financial statements for more details.

~~Income from Continuing Operations before Income Taxes~~

Income from continuing operations before income taxes was $57 million and $56 million income for the three months ended June 30, 2020 and 2019, respectively, and $56 million and $112 million for the six months ended June 30, 2020 and 2019, respectively. The change in income from continuing operations before income taxes primarily reflects the net effect of year-over-year changes in the following items:

Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020 vs. 2019
2020 vs. 2019
Income from continuing operations before income taxes, June 30, 2019
$
56
$
112
Reportable segment and European Pest Control and Other⁽¹⁾
15
(8)
Depreciation expense⁽²⁾
(1)
(2)
Amortization expense⁽³⁾
(4)
(8)
Acquisition-related costs⁽⁴⁾
3
3
Restructuring and other charges⁽⁵⁾
(6)
(4)
Loss on extinguishment of debt⁽⁶⁾
—
6
Realized (gain) on investment in frontdoor, inc.⁽⁷⁾
—
(40)
Interest expense⁽⁸⁾
(3)
—
Other⁽⁹⁾
(3)
(3)
Income from continuing operations before income taxes, June 30, 2020
$
57
$
56

~~___________________________________~~

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

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

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

~~(4)Represents the net change in acquisition-related costs as described in “—Acquisition Related Charges.”~~

~~(5)Represents the net change in restructuring and other charges as described in “—Restructuring and Other Charges.”~~

~~(6)Represents the net change in the loss on extinguishment of debt as described in “—Loss on Extinguishment of Debt.”~~

~~(7)Represents the net change in the investment in frontdoor, inc. as described in “—Realized (Gain) on Investment in frontdoor, inc.”~~

~~(8)Primarily represents the net change in interest expense, as described in “—Interest Expense.”~~

~~(9)Primarily represents the net change in stock-based compensation and interest and net investment income.~~

~~Provision for Income Taxes~~

The effective tax rate on income from continuing operations was 31.0 percent and 25.8 percent for the three months ended June 30, 2020 and 2019, respectively, and 28.5 percent and 15.5 percent for the six months ended June 30, 2020 and 2019, respectively. The effective tax rates on income from continuing operations for the six months ended June 30, 2019 was primarily

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~~affected by the disposition of the Frontdoor retained shares in a non-taxable debt-for-equity exchange that was recorded discretely in the three months ended March 31, 2019.~~

~~Net Earnings from Discontinued Operations~~

In January 2020, we announced we are exploring strategic alternatives related to ServiceMaster Brands, including a potential sale of the business. Net earnings from discontinued operations were $13 million and $17 million for the three months ended ~~June 30, 2020 and 2019, respectively, and $26 million and $34 million for the six months ended June 30, 2020 and 2019, respectively, and reflect the results of the ServiceMaster Brands~~ ~~Divestiture Group~~. Net earnings from discontinued operations for the three and six months ended June 30, 2020 include costs related to third-party consulting and other incremental costs directly associated with the strategic alternatives exploration process of $5 million and $9 million, respectively.

~~Net Income~~

Net income was $53 million and $59 million for the three months ended June 30, 2020 and 2019, respectively, which was primarily driven by a $1 million increase in income from continuing operations before income taxes offset by $4 million lower net earnings from discontinued operations in the three months ended June 30, 2020. Net income was $67 million and $129 million in the six months ended June 30, 2020 and 2019, respectively, which was primarily driven by a $56 million decrease in income from continuing operations before income taxes and $8 million lower net earnings from discontinued operations in the six months ended June 30, 2020.

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~~Segment Review~~

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

~~Revenue and Adjusted EBITDA were as follows:~~

Three Months Ended
Six Months Ended
June 30,
Increase
June 30,
Increase
(In millions)
2020
2019
(Decrease)
2020
2019
(Decrease)
Revenue:
Terminix
$
517
$
495
5
%
$
955
$
914
5
%
European Pest Control and Other
17
—
*
35
—
*
Total Revenue:
$
534
$
494
8
%
$
990
$
913
8
%
Adjusted EBITDA:⁽¹⁾
Terminix Reportable Segment Adjusted EBITDA
$
120
$
106
14
%
$
184
$
189
(3)
%
European Pest Control and Other⁽²⁾
2
1
16
1
4
(65)
Costs historically allocated to ServiceMaster Brands⁽³⁾
(3)
(3)
*
(6)
(6)
*
Total Adjusted EBITDA
$
119
$
104
15
%
$
179
$
187
(4)
%

~~___________________________________~~

* not meaningful

~~(1)See Note 15 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 June 30, 2020 Compared to Three Months Ended June 30, 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 14 percent increase in Adjusted EBITDA for the three months ended June 30, 2020 compared to the three months ended June 30, 2019.

~~Revenue~~

Revenue by service line was as follows:



	Three Months Ended
	June 30,
(In millions)	2021		2020		Growth				Organic				Acquired
Residential Pest Management	$	192	$	182	$	10	5	%	$	7	4	%	$	3	1	%
Commercial Pest Management		141		124		17	14	%		13	10	%		4	3	%
Termite and Home Services		193		196		(3)	(2)	%		(4)	(2)	%		—	—	%
Sales of Products and Other		34		32		3	8	%		3	8	%		—	—	%
Total revenue	$	560	$	534	$	26	5	%	$	19	4	%	$	7	1	%

Revenue growth was $26 million year over year, or five percent. Foreign currency fluctuations contributed $4 million, or approximately one percent, of total organic revenue growth.

Three Months Ended
June 30,
(In millions)
2020
2019
Growth
Acquired
Organic
Residential Pest Control
$
182
$
182
$
—
—
%
$
2
1
%
$
(1)
(1)
%
Commercial Pest Control
107
105
2
2
%
11
11
%
(10)
(9)
%
Termite and Home Services
196
183
13
7
%
1
1
%
12
7
%
Other
32
25
7
29
%
9
38
%
(2)
(9)
%
Total revenue
$
517
$
495
$
22
5
%
$
23
5
%
$
(1)
—
%

Residential pest ~~control~~management revenue growth was ~~flat. The~~five percent, reflecting organic revenue ~~decline~~growth of ~~one percent~~four percent. Organic revenue growth was driven by lower summer sales units, bed bug and other one-time sales and service postponements in recurring pest, all driven by COVID-19. Service postponements peaked in April, but moderated throughout the rest of the second quarter as customers became comfortable with the safety protocols we implemented in response to COVID-19, but remain higher than the second quarter of 2019. New one-time sales, such as bed bug services, declined by approximately $3 million in the quarter due to COVID-19. The delayed start and reduction in scope of our summer sales program also resulted in an approximately $3 million revenue decline in the quarter. These declines were offset by improved price ~~realization.~~realization and improved trailing 12-month customer retention rates, offset, in part, by lower one-time sales. Residential pest ~~control~~management revenue ~~in the quarter~~ also increased one percent from acquisitions completed ~~during~~in the last 12 months.

Commercial pest ~~control~~management growth was 14 percent. Organic revenue growth ~~was two~~of 10 percent ~~reflecting growth from acquisitions of 11 percent, offset by organic revenue declines of nine percent. The commercial pest control organic revenue decline~~ was driven by ~~lower sales of non-recurring services~~the continued steady improvement in temporary cancellations and service postponements due to business closures from COVID-19. Our new sanitization and disinfection services, which may be one-time or recurring services, did not have a meaningful impact on the second quarter of 2020. Commercial

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~~pest control revenue~~improved price realization in the ~~quarter~~domestic commercial business in the wake of the COVID-19 pandemic as well as double-digit international growth. Foreign currency fluctuations contributed $4 million, or three percent, of the commercial pest management organic revenue growth. Commercial pest management revenue also increased 11three percent from acquisitions completed ~~during~~in the last 12 ~~months, including Gregory Pest Solutions and McCloud Services which were completed during the fourth quarter of 2019.~~months.

Termite revenue ~~including wildlife exclusion, crawl space encapsulation and attic insulation,~~decreased two percent. Home services, which are managed as a component of our termite line of business ~~growth was seven percent. The growth in this service line reflects an increase in core termite new unit sales driven by the launch of a new monthly pay tiered product offering~~ and ~~a strong termite swarm season in certain markets.~~

~~In the~~ ~~three months ended June 30, 2020, termite renewal revenue comprised 43 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 Terminix’s Adjusted EBITDA:~~

(In millions)
Three Months Ended June 30, 2019
$
106
Impact of organic revenue growth
1
Damage claims
(8)
Production labor
5
Chemicals and materials
2
Vehicle and fuel
4
Sales and marketing
1
Corporate administrative expenses
4
Other
2
Impact of acquisitions
4
Three Months Ended June 30, 2020
$
120

The increase in termite damage claims was driven by increased Non-Litigated Claims and Litigated Claims, primarily in the Mobile Bay Area, as well as the costs of the termite damage claim mitigation program in the Mobile Bay Area. The decrease in production labor was driven, in part, by improved employee retention and improved labor management. The decrease in chemicals and materials was driven by a favorable shift in the mix of services performed. The decrease in vehicle and fuel was driven by improvements in fleet management and lower fuel prices. ~~The decrease in corporate administrative expenses was driven by actions taken to reduce the cost of our corporate headquarters operations.~~

~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019~~

~~The Terminix segment reported a five percent increase in revenue and a three percent decrease in Adjusted EBITDA for the six months ended June 30, 2020 compared to the six months ended June 30, 2019.~~

~~Revenue~~

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

Six Months Ended
June 30,
(In millions)
2020
2019
Growth
Acquired
Organic
Residential Pest Control
$
341
$
335
$
6
2
%
$
4
1
%
$
1
—
%
Commercial Pest Control
213
199
15
7
%
21
11
%
(6)
(3)
%
Termite and Home Services
351
339
12
4
%
3
1
%
9
3
%
Other
50
41
9
23
%
13
31
%
(3)
(8)
%
Total revenue
$
955
$
914
$
42
5
%
$
41
4
%
$
1
—
%

Residential pest control revenue increased two percent reflecting flat organic growth. Residential pest control revenue also increased one percent from acquisitions completed during the last 12 months. Organic revenue was flat, driven by lower new summer sales units, bed bug and other one-time sales and temporary service postponements in recurring pest, principally driven by the impact of COVID-19 on second quarter results.

Commercial pest control revenue increased seven percent. The commercial pest control organic revenue decline of three percent was driven by lower sales of non-recurring services and service postponements due to business closures from ~~COVID-19~~. Commercial pest control revenue 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.

~~Termite revenue, including~~ wildlife exclusion, crawl space encapsulation and attic insulation, ~~which are managed~~growth was three percent, primarily as a ~~component~~result of ~~our termite line of business, increased four~~improved cross selling opportunities to existing customers. A one percent ~~compared to prior year, primarily reflecting an increase~~decline in core

~~Table~~ termite completions year over year was primarily driven by double-digit growth in core termite completions in the same quarter of ~~Contents~~2020. Termite renewals decreased five percent, primarily due to an approximately $5 million impact from the change in the timing of revenue recognition in our new monthly subscription-based termite offering.

~~termite new unit sales and improved price realization.~~ In the ~~six~~three months ended June 30, ~~2020,~~2021, termite renewal revenue comprised 4841 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.

Sales of products and other revenue growth was eight percent due to the COVID-19 impacts on three months ended June 30, 2020 revenue.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

We reported revenue of $1,032 million and $990 million for the six months ended June 30, 2021 and 2020, respectively. Revenue by service line was as follows:



	Six Months Ended
	June 30,

(In millions)	2021		2020		Growth				Organic				Acquired
Residential Pest Management	$	358	$	341	$	17	5	%	$	14	4	%	$	3	1	%
Commercial Pest Management		270		248		21	9	%		16	7	%		5	2	%
Termite and Home Services		354		351		3	1	%		3	1	%		—	—	%
Sales of Products and Other		50		50		—	—	%		—	—	%		—	—	%
Total revenue	$	1,032	$	990	$	42	4	%	$	33	3	%	$	9	1	%

Revenue growth was $42 million year over year, or four percent. Foreign currency fluctuations contributed $7 million, or approximately one percent, of total organic revenue growth.

Residential pest management revenue growth was five percent, reflecting organic growth of four percent. Organic revenue growth was driven by improved price realization and improved trailing 12-month retention rates, offset, in part, by lower one-time sales. Residential pest management revenue also increased one percent from acquisitions completed in the last 12 months.

Commercial pest management revenue growth was nine percent. Organic revenue growth of seven percent was driven by the continued steady improvement in temporary cancellations and improved price realization in the domestic commercial business in the

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wake of the COVID-19 pandemic as well as strong double-digit international growth. Foreign currency fluctuations contributed $7 million, or three percent, of the commercial pest management organic revenue growth. Commercial pest management revenue also increased two percent from acquisitions completed in the last 12 months.

Termite revenue growth was one percent. Termite completions increased three percent, driven by sales of our new monthly pay tiered termite product. Home services, which are managed as a component of our termite line of business and include wildlife exclusion, crawl space encapsulation and attic insulation, growth was eight percent, primarily as a result of improved cross selling opportunities to existing customers. Termite renewals decreased four percent, primarily due to an approximately $10 million impact from the change in the timing of revenue recognition in our new monthly subscription-based termite offering.

Sales of Product and Other remained flat as the growth experienced in the second quarter of 2021 was offset by the impact of tighter inventory management by larger distributors and increased transit times on shipments of products to customers in response to COVID-19 in the first quarter of 2021.

Cost of Services Rendered and Products Sold

We reported cost of services rendered and products sold of $318 million and $297 million for the three months ended June 30, 2021 and 2020, respectively, and $588 and $577 million for the six months ended June 30, 2021 and 2020, respectively.

For the three months ended June 30, 2021 compared to June 30, 2020, costs of services rendered and products sold increased seven percent, or one percent as a percentage of revenue, primarily attributable to the flowthrough from higher revenue. Production labor increased $6 million as a result of increased turnover from the historic lows in 2020 which resulted in increased overtime pay in 2021, as well as a revenue mix shift due to strong growth in commercial pest management. This was offset, in part, by a $4 million decrease in chemicals and materials and vehicle costs, driven by lower chemical and fuel costs and improvements in our fleet management. Indirect costs to serve our customers, primarily at our contact centers, increased over prior year as we align administrative functions as a singularly focused pest management company, offsetting a decrease in general and administrative costs.

For the six months ended June 30, 2021 compared to June 30, 2020, costs of services rendered and products sold increased two percent, or decreased one percent as a percentage of revenue, primarily attributable to the flowthrough from higher revenue. Production labor was flat for the year to date period, driven, in part, by improved labor management in the first quarter of 2021 and COVID-19-related inefficiencies which negatively impacted the first quarter of 2020, offset by increased turnover and overtime pay and the impact of a revenue mix shift due to strong growth in commercial pest management in the second quarter of 2021. Other direct cost productivity decreased $10 million, driven by lower chemical costs and fuel prices and improvements in our fleet management. Termite damage claims increased $3 million year over year, driven by higher costs per Non-Litigated Claim due, in part, to inflationary pressure on building materials and contractor costs. Indirect costs to serve our customers, primarily at our contact centers, increased over prior year as we align administrative functions as a singularly focused pest management company, offsetting a decrease in general and administrative costs.

Selling and Administrative Expenses

The following table provides a summary of selling and administrative expenses for the three and six months ended June 30, 2021 and 2020:


	Three Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2021		2020		2021		2020
Selling and marketing expenses	$	72	$	70	$	131	$	130
General and administrative expenses		71		73		149		153
Total Selling and administrative expenses	$	143	$	143	$	280	$	283

Selling and marketing expenses increased in both the three and six months ended June 30, 2021 compared to June 30, 2020, primarily related to increased commission payments and flat marketing costs as a percent of revenue. General and administrative costs decreased in both the three and six months ended June 30, 2021 compared to June 30, 2020, primarily due to back-office reductions as the company aligns itself as a singularly focused pest management business. This decrease was offset by investments in the Customer Experience Platform (“CxP”) and Terminix Way, which increased $2 million in the second quarter of 2021 compared to 2020 as we launched the Terminix Way initiative and begin to roll out CxP. We believe the Terminix Way initiative will enhance standard operating procedures, develop robust training curriculums and establish career paths for our teammates, while CxP will improve our marketing capabilities and service delivery through an easy-to-use, best-in-class operating system. We expect selling and administrative expenses to increase slightly in 2021 as we implement the Terminix Way initiative and roll out CxP.

Amortization Expense

Amortization expense was $10 million and $9 million in the three months ended June 30, 2021 and 2020, respectively, and $19 million and $18 million in the six months ended June 30, 2021 and 2020. The increase in amortization expense primarily reflects the effect of recent acquisitions.

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Acquisition-Related Costs

In the three and six months ended June 30, 2021, we reversed a previously accrued contingent consideration related to an acquisition for approximately $2 million as the contingency was not met. This offset approximately $1 million of acquisition-related costs incurred in the three and six months ended June 30, 2021. There were no acquisition related costs in the three months ended June 30, 2020. Acquisition-related costs were $1 million in the six months ended June 30, 2020.

Mobile Bay Formosan Termite Settlement

We incurred $4 million of additional costs related to the Mobile Bay Formosan termite settlement (as defined below) in the three and six months ended June 30, 2021, related to an increase in the projected customer response regarding certain remedies mandated by the Settlement, as described in Note 6 to the unaudited condensed consolidated financial statements.

Restructuring and Other Charges

We incurred restructuring charges of approximately $2 million and $8 million in the three months ended June 30, 2021 and 2020, respectively, and $9 million and $12 million in the six months ended June 30, 2021 and 2020, respectively. Restructuring and Other Charges primarily included severance and costs to simplify our back-office and align administrative functions as a singularly focused pest management company following the sale of the ServiceMaster Brands Divestiture Group.

Interest Expense

Interest expense was $11 million and $22 million in the three months ended June 30, 2021 and 2020, respectively, and $23 million and $45 million in the six months ended June 30, 2021 and 2020, respectively. The decrease in interest expense was principally driven by the retirement of all $750 million of our 5.125% Notes on November 15, 2020, using proceeds from the sale of the ServiceMaster Brands Divestiture Group.

Interest and Net Investment Income

Interest and net investment income was $1 million in the each of the three and six months ended June 30, 2021 and 2020. Interest and net investment income is comprised primarily of net investment gains from equity investments and interest income on other cash balances.

Income from Continuing Operations before Income Taxes

Income from continuing operations before income taxes was $73 million for the three months ended June 30, 2021 compared to $57 million for the three months ended June 30, 2020. Income from continuing operations before income taxes was $110 million for the six months ended June 30, 2021 compared to $56 million for the three months ended June 30, 2020. The change in income from continuing operations before income taxes in both periods primarily reflects the realization of cost savings and efficiency initiatives, as well as reduced interest driven by less long-term debt outstanding.

Provision for Income Taxes

The effective tax rate on income from continuing operations was 27.9 percent and 31.0 percent for the three months ended June 30, 2021 and 2020, respectively, and 28.1 percent and 28.5 percent for the six months ended June 30, 2021 and 2020, respectively.

Net Earnings from Discontinued Operations

Net earnings from discontinued operations were $13 million and $26 million for the three and six months ended June 30, 2020, reflecting the results of the ServiceMaster Brands Divestiture Group for the period.

Net Income

Net income was $54 million and $53 million for the three months ended June 30, 2021 and 2020, respectively, which was primarily driven by a $14 million increase in income from continuing operations and $13 million lower net earnings from discontinued operations in the three months ended June 30, 2021. Net income was $81 million and $67 million for the six months ended June 30, 2021 and 2020, respectively, which was primarily driven by a $40 million increase in income from continuing operations and $26 million lower net earnings from discontinued operations in the three months ended June 30, 2021.

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Adjusted EBITDA

Three Months Ended June 30, 2021 Compared to Three Months Ended June 30, 2020

The following table provides a summary of changes in ~~Terminix’s~~ Adjusted ~~EBITDA:~~EBITDA for the three months ended June 30, 2021 compared to the three months ended June 30, 2020:

(In millions)
Six Months Ended June 30, 2019
$
189
Impact of change in revenue
3
Damage claims
(14)
Production labor
1
Chemicals and materials
(1)
Vehicle and fuel
3
Sales and marketing
(1)
Investments in growth
(4)
Other
3
Impact of acquisitions
5
Six Months Ended June 30, 2020
$
184




(In millions)
Three Months Ended June 30, 2020	$	119
Impact of change in revenue		13
Production labor		(6)
Other direct productivity		4
Termite damage claims		(1)
Investments in CxP and Terminix Way		(2)
Sales and marketing		(3)
Insurance program		1
Other		(2)
Three Months Ended June 30, 2021	$	123

~~The increase~~Production labor increased $6 million, related to increased turnover from historic lows in ~~termite damage claims was driven by~~2020 which resulted in increased ~~Non-Litigated Claims~~overtime pay in 2021, and Litigated Claims, primarily in the Mobile Bay Area, as well as the costs of the termite damage claim mitigation program in the Mobile Bay Area. The decrease in production labor was driven, in part, by improved employee retention and labor management, partially offset by labor inefficiencies incurred in the first quarter of 2020a revenue mix shift due to ~~the impact of COVID-19. The increase~~strong growth in commercial pest management. Other direct cost productivity, which included chemicals and materials ~~was~~and vehicle costs, decreased $4 million year over year, primarily driven by ~~increased personal protective equipment and sanitization purchases in response to COVID-19, offset, in part, by a favorable shift in the mix of services performed. The decrease in vehicle and fuel was driven by~~lower chemical costs, improvements in fleet management and lower fuel prices. ~~The increase~~Termite damage claims expenses increased $1 million driven by higher costs per Non-Litigated Claim due, in ~~investments~~part, to inflationary pressure on building materials and contractor costs, primarily in ~~growth was primarily~~the Mobile Bay Area. Investments in CxP and Terminix Way increased $2 million as we launch the Terminix Way initiative and begin to roll out CxP. Sales and marketing increased $3 million related to increased commission payments and flat marketing costs as a percent of revenue. Insurance reserves decreased $1 million year over year due to higher favorable adjustments in the second quarter of 2021 compared to the second quarter of 2020. Other includes, among other things, indirect costs to serve our ~~investment~~customers, primarily at our contact centers, which increased over prior year as we align administrative functions as a singularly focused pest management company. This increase was offset, in part, by a ~~new customer experience platform.~~decrease in general and administrative costs from back-office reductions.

Six Months Ended June 30, 2021 Compared to Six Months Ended June 30, 2020

The following table provides a summary of changes in Adjusted EBITDA for the six months ended June 30, 2021 compared to the six months ended June 30, 2020:



(In millions)
Six Months Ended June 30, 2020	$	179
Impact of change in revenue		20
Other direct productivity		10
Termite damage claims		(3)
Investments in CxP and Terminix Way		(2)
General and administrative, including back-office simplification		3
Sales and marketing costs		(1)
Travel		4
Insurance program		5
Other		(3)
Six Months Ended June 30, 2021	$	213

Other direct cost productivity decreased $10 million, primarily driven by lower chemical costs, improvements in fleet management and lower fuel prices. Termite damage claims expenses increased $3 million, driven by higher cost per Non-Litigated Claim due, in part, to inflationary pressure on building materials and contractor costs, primarily in the Mobile Bay Area. Investments in CxP and Terminix Way increased $2 million as we launch the Terminix Way initiative and begin to roll out CxP. General and administrative costs decreased primarily due to back-office reductions as the company aligns itself as a singularly focused pest management company, offset by indirect costs to serve our customers, primarily at our contact centers. Sales and marketing increased $1 million related to increased commission payments and flat marketing costs as a percent of revenue. Travel costs decreased as a result of COVID-19. Insurance reserves decreased $5 million year over year, driven by $4 million of favorable adjustments year to date in 2021 compared to a $1 million unfavorable adjustment year to date in 2020. Other includes, among other things, indirect costs to serve our customers, primarily at our contact centers, which increased over prior year as we align administrative functions as a singularly focused pest management company. This increase was offset, in part, by a decrease in general and administrative costs from back-office reductions.

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Termite Damage Claims

A summary of Litigated Claims and Non-Litigated Claims for the three and six months ended June 30, 2021 and 2020 ~~and 2019 is~~was as follows:


	Litigated Claims						Non-Litigated Claims						Litigated Claims						Non-Litigated Claims
	Mobile Bay		All Other				Mobile Bay		All Other				Mobile Bay		All Other				Mobile Bay		All Other
	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		1,005
New claims filed		9		—		9		269		869		1,138
Claims resolved		(2)		(2)		(4)		(180)		(685)		(865)
Outstanding claims as of June 30, 2019		48		14		62		366		912		1,278
													Area		Regions		Total		Area		Regions		Total
Outstanding claims as of December 31, 2019		56		11		67		376		618		994		56		11		67		376		618		994
New claims filed		6		2		8		127		505		632		6		2		8		127		505		632
Claims resolved		(6)		—		(6)		(183)		(546)		(729)		(6)		—		(6)		(183)		(546)		(729)
Outstanding claims as of March 31, 2020		56		13		69		320		577		897		56		13		69		320		577		897
New claims filed		8		5		13		147		669		816		8		5		13		147		669		816
Claims resolved		(1)		(2)		(3)		(168)		(501)		(669)		(1)		(2)		(3)		(168)		(501)		(669)
Outstanding claims as of June 30, 2020		63		16		79		299		745		1,044		63		16		79		299		745		1,044

Outstanding claims as of December 31, 2020														49		16		65		258		846		1,104
New claims filed														7		5		12		89		529		618
Claims resolved														(9)		(2)		(11)		(144)		(630)		(774)
Outstanding claims as of March 31, 2021														47		19		66		203		745		948
New claims filed														12		7		19		112		687		799
Claims resolved														(11)		—		(11)		(131)		(560)		(691)
Outstanding claims as of June 30, 2021														48		26		74		184		872		1,056

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 and six months ended June 30, 2020 in the Mobile Bay Area, and none in the three months ended June 30, 2020 and eight in the six months ended June 30, 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.

~~Table of Contents~~

A summary of Litigated Claims and Non-Litigated Claims reserve activity for the three and six months ended June 30, ~~2020~~2021 and ~~2019~~2020 is as follows:


	Litigated Claims						Non-Litigated Claims						Litigated Claims						Non-Litigated Claims
	Mobile Bay		All Other				Mobile Bay		All Other				Mobile Bay		All Other				Mobile Bay		All Other
(In millions)	Area		Regions		Total		Area		Regions		Total		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
Expense		3		—		3		2		4		7
Payments		(1)		(3)		(4)		(3)		(6)		(8)
Reserves as of June 30, 2019	$	3	$	1	$	4	$	6	$	11	$	17

Reserves as of December 31, 2019	$	40	$	12	$	52	$	15	$	13	$	28
Reserve as of December 31, 2019													$	40	$	12	$	52	$	15	$	13	$	28
Expense		3		3		5		2		4		6		3		3		5		2		4		6
Payments		(3)		(1)		(3)		(3)		(5)		(8)		(3)		(1)		(3)		(3)		(5)		(8)
Reserves as of March 31, 2020	$	40	$	14	$	54	$	15	$	12	$	27		40		14		54		15		12		27
Expense		7		2		9		2		4		6		7		2		9		2		4		6
Payments		(4)		(1)		(5)		(3)		(5)		(8)		(4)		(1)		(5)		(3)		(5)		(8)
Reserves as of June 30, 2020	$	43	$	15	$	58	$	14	$	11	$	25
Reserve as of June 30, 2020													$	43	$	15	$	58	$	14	$	11	$	25

Reserve as of December 31, 2020													$	35	$	13	$	47	$	14	$	11	$	25
Expense														3		2		5		3		6		10
Payments														(6)		(1)		(7)		(5)		(6)		(11)
Reserves as of March 31, 2021														32		13		45		12		11		24
Expense														4		4		8		4		8		12
Payments														(6)		—		(6)		(5)		(6)		(11)
Reserve as of June 30, 2021													$	30	$	17	$	47	$	11	$	13	$	24

In addition, our results of operations for the three and six months ended June 30, 2021 include charges for legal fees associated with Litigated Claims of $1 million and $3 million, respectively. Our results of operations for the three and six months ended June 30, 2020 include charges for legal fees associated with Litigated Claims of $2 million and $4 million, respectively, and costs related to mitigation efforts in the Mobile Bay Area of $2 million and $3 million, ~~respectively. Our results of operations for the three and six months ended June 30, 2019 include charges for legal fees associated with Litigated Claims of $1 million and $3 million, respectively.~~

~~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 June 30, 2020 Compared to Three Months Ended June 30, 2019~~

~~Revenue~~

Our European pest control operations reported revenue of $17 million for the three months ended June 30, 2020. Revenue from European pest control operations was impacted by COVID-19 related business closures, including severe disruptions in the UK.

~~Adjusted EBITDA~~

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

(In millions)
Three Months Ended June 30, 2019
$
1
European pest control
2
Other
(1)
Three Months Ended June 30, 2020
$
2

~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019~~

~~Revenue~~

~~Our European pest control operations reported revenue of $35 million for the six months ended June 30, 2020.~~

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~~Table of Contents~~

~~Adjusted EBITDA~~

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

(In millions)
Six Months Ended June 30, 2019
$
4
European pest control
3
Insurance program
(5)
Other
(1)
Six Months Ended June 30, 2020
$
1

The increase in Adjusted EBITDA from European Pest Control and Other was driven by the acquisition of 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 six months ended June 30, 2020 were also impacted by an unfavorable adjustment of $1 million in our automobile, general liability and workers’ compensation program, as compared to a favorable $3 million adjustment in our automobile, general liability and workers’ compensation program in the six months ended June 30, 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 and $6 million in each of the three months and six months ended June 30, 2020 and 2019 respectively ~~and are included in~~ ~~European Pest Control and Other~~.

~~Discontinued Operations – ServiceMaster Brands Divestiture Group~~

~~Three Months Ended June 30, 2020 Compared to Three Months Ended June 30, 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, was classified as held for sale as of June 30, 2020.~~

~~Revenue~~

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

Three Months Ended
% of
% of
June 30,
Revenue
Revenue
(In millions)
2020
2019
2020
2019
Royalty Fees
$
30
$
35
47
%
53
%
Commercial Cleaning and other National Accounts
21
19
32
29
Sales of Products
3
3
6
5
Other
9
9
15
14
Total revenue
$
63
$
66
100
%
100
%

The ServiceMaster Brands Divestiture Group reported $63 million in revenue, a decrease of four percent over the prior year. A mild winter and decline in area-wide events year-over-year in ServiceMaster Restore, as well as the COVID-19 related shutdown of Merry Maids locations at the beginning of the second quarter, 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 June 30, 2019
$
27
Impact of change in revenue
(3)
Three Months Ended June 30, 2020
$
24

The ServiceMaster Brands Divestiture Group generated Adjusted EBITDA of $24 million reflects a decrease of $3 million year over year. The flow through impact of COVID-19 related royalty revenue reductions at Merry Maids accounted for approximately $2 million of the decline, while the impact of a mild winter and fewer area-wide events at ServiceMaster Restore contributed the remaining decline.

~~Table of Contents~~

~~Six Months Ended June 30, 2020 Compared to Six Months Ended June 30, 2019~~

~~Revenue~~

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

Six Months Ended
% of
% of
June 30,
Revenue
Revenue
(In millions)
2020
2019
2020
2019
Royalty Fees
$
62
$
69
48
%
54
%
Commercial Cleaning and other National Accounts
40
36
31
28
Sales of Products
6
6
5
5
Other
20
17
16
13
Total revenue
$
128
$
128
100
%
100
%

The ServiceMaster Brands Divestiture Group reported $128 million in revenue, which was consistent with prior year. A mild winter and decline in area-wide events year over year in ServiceMaster Restore, as well as the COVID-19 related shutdown of Merry Maids locations through the beginning of the second quarter, 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)
Six Months Ended June 30, 2019
$
53
Impact of change in revenue
(3)
Other
(3)
Six Months Ended June 30, 2020
$
47

The ServiceMaster Brands Divestiture Group generated Adjusted EBITDA of $47 million reflects a decrease of $5 million year over year. The flow through impact of COVID-19 related royalty revenue reductions at Merry Maids accounted for approximately half of the decline, while the impact of a mild winter and fewer area-wide events at ServiceMaster Restore contributed the remaining decline.

~~Presented below is a reconciliation of Net earnings from discontinued operations to the ServiceMaster Brands Divestiture Group’s Adjusted EBITDA:~~

Three Months Ended
Six Months Ended
June 30,
June 30,
(In millions)
2020
2019
2020
2019
Net earnings from discontinued operations
$
13
$
17
$
26
$
34
Depreciation and amortization expense
—
2
1
4
Non-cash stock-based compensation expense
1
—
1
1
Restructuring and other charges
5
1
9
2
Provision for income taxes
5
7
9
12
ServiceMaster Brands Divestiture Group Adjusted EBITDA
$
24
$
27
$
47
$
53

‎

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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 June 30, ~~2020,~~2021, 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 June 30, ~~2020,~~2021, we had ~~$677~~$691 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 took 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.

We have 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. We currently have 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 our credit agreement, for the most recently completed four-quarter period. With the inclusion of EBITDA from discontinued operations, our first lien net debt leverage ratio was approximately 1.0x Adjusted EBITDA at quarter end, with total net debt leverage at approximately 3.6x Adjusted EBITDA.

At June 30, ~~2020,~~2021, there were ~~$25~~$22 million of letters of credit outstanding and ~~$375~~$378 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 June 30, ~~2020.~~2021. 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,~~September 25, 2020, our board of directors approved a three-year ~~extension of a previously authorized~~$400 million share repurchase ~~plan allowing for $150~~program. Under the share repurchase program, the Company may repurchase shares in accordance with all applicable securities laws and regulations, including Rule 10b-18 of the Securities Exchange Act of 1934, as amended. As of June 30, 2021, we had $43 million of ~~repurchases of our common stock through February 19, 2022. We utilized all~~authority remaining ~~authority~~ under this ~~program and repurchased $103 million of shares in the first quarter of 2020, at an average share price of $27.64, using cash from operations.~~program.

~~Additionally, under~~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 June 30, ~~2020,~~2021, the estimated fair value of our fuel swap contracts was $2a net asset of $6 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.~~program. 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.Capital Resources

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 six months ended June 30, ~~2020,~~2021, we acquired ~~$16~~$22 million of vehicles through the leasing program under the Fleet Agreement. All leases under the Fleet

~~Table of Contents~~

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~~ranging from 1.33 percent to 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 six months ended June 30, 2020,~~ ~~an immaterial amount of property and equipment 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~~2021 will range from $60 million to $70 million. We expect to fulfill all our ongoing vehicle fleet needs through vehicle finance leases.

Other Capital Requirements

We anticipate capital expenditures for the full year 2021 will range from $30 million to $40 million, ~~to $50 million.~~reflecting ongoing technology projects and recurring capital needs. We incurred $12 million of such costs in the six months ended June 30, 2021.

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.

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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~~consider the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. T~~he 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~~are no longer taxable under U.S. tax anprinciples, 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.



	Six Months Ended				Six Months Ended
	June 30,				June 30,
(In millions)	2020		2019		2021		2020
Net cash provided from (used for):
Operating activities	$	172	$	124	$	151	$	172
Investing activities		(36)		(119)		(56)		(36)
Financing activities		(140)		(32)		(409)		(140)
Discontinued operations		28		30		12		28
Effect of exchange rate changes on cash		(1)		—		—		(1)
Cash increase during the period	$	22	$	3
Cash (decrease) increase during the period					$	(302)	$	22

Operating Activities

Net cash provided from operating activities from continuing operations ~~increased $48~~decreased $21 million to ~~$172~~$151 million for the six months ended June 30,~~, 2020~~ 2021 compared to ~~$124~~$172 million for six months ended June 30,~~, 2019~~. 2020.

Net cash provided from operating activities for the six months ended June 30,~~, 2020~~ 2021 comprised ~~$115~~$168 million in earnings adjusted for non-cash charges and $21 million increase in cash required for working capital (a $23 million increase excluding the working capital impact of accrued interest and taxes), offset, in part, by $7 million in payments related to restructuring and other charges and acquisition-related costs. For the six months ended June 30, 2021, working capital requirements were favorably impacted by seasonal activity and the timing of interest and income tax payments. We deferred approximately $30 million of payroll taxes under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act in 2020. We expect to pay 50 percent of the payroll deferral in 2021 and the remainder in 2022.

Additionally, we incurred $9 million of costs to implement our new customer experience platform in the six months ended June 30, 2021, which are included within Prepaid expenses and other assets on the Condensed Consolidated Statements of Financial Position and Inventories and other current assets on the Condensed Consolidated Statements of Cash Flows.

Net cash provided from operating activities for the six months ended June 30, 2020 comprised $119 million in earnings adjusted for non-cash charges and a $62 million decrease in cash required for working capital (a $26 million decrease excluding the working capital impact of accrued interest and taxes), offset, in part, by $6$10 million in payments related to ~~restructuring.~~restructuring and other charges and acquisition related cost. For the six months ended June 30,, 2020,, working capital requirements were favorably impacted by the deferral of payroll and income tax payments under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act and the collection of a federal income tax refund.

~~Net cash provided from operating activities for the six months ended June 30, 2019~~ comprised $129 million in earnings adjusted for non-cash charges and a $5 million decrease in cash required for working capital (a $1 million increase excluding the working capital impact of accrued interest and taxes), offset, in part, by $11 million in payments related to restructuring and other and fumigation matters. For the six months ended June 30~~, 2019, working capital requirements were favorably impacted by seasonal activity and the timing of interest and income tax payments.~~

Investing Activities

Net cash used for investing activities from continuing operations was $56 million for the six months ended June 30, 2021, compared to $36 million for the six months ended June 30, 2020.

~~, 2020, compared to $119~~Cash paid for business acquisitions was $45 million for the six months ended June 30,~~, 2019~~.

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~~Cash paid for business acquisitions was~~ 2021, compared to $24 million for the six months ended June 30,~~, 2020, compared to $115 million for the six months ended June 30, 2019~~. 2020. We expect to continue our tuck-in acquisition program ~~at Terminix~~ and to periodically evaluate other strategic acquisitions.

Capital expenditures were ~~$15~~$12 million and ~~$13~~$15 million for the six months ended June 30, 2021 and 2020, ~~2020 and 2019,~~ respectively, and included recurring capital needs, and information technology projects. ~~We anticipate capital expenditures~~

Cash flows used for notes receivable, net, 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.

six months ended June 30, 2021 were negligible. Cash flows received for notes receivable, net, for the six months ended June 30,, 2020 totaled $3 million. ~~Cash flows received for notes receivable, net, for the six months ended June 30, 2019~~ totaled $8 million. Reductions in the volume of notes receivable originated in the 2020 period were driven by the launch of a new monthly pay tiered product offering in our termite line of business and declines in new one-time sales, such as bed bug and bird services, in our pest control line of business.

Financing Activities

Net cash used for financing activities from continuing operations was $409 million for the six months ended June 30, 2021 compared to $140 million for the six months ended June 30, 2020.

~~, 2020~~29

~~compared to $32 million for the six months ended June 30~~Table of Contents

~~, 2019~~

During the six months ended June 30, 2021, we repurchased $350 million of common stock and received $8 million from the issuance of common stock through the exercise of stock options. In addition, we repaid $67 million of debt, which included approximately $40 million, net of accreted interest, primarily related to deferred purchase price and an earnout the 2018 purchase of Copesan. During the six months ended June 30,2020, 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 $40 million of debt. ~~During the six months ended~~ ~~June 30, 2019, we repurchased $17 million of common stock and received $9 million from the issuance of common stock through the exercise of stock options.~~ During the first quarter of 2019, we also completed a debt-for-equity exchange which resulted in $600 million of borrowings of debt under a short-term credit facility, $472 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 $38 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 June 30, 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~~Mobile Bay Formosan Termite Settlement

~~On December 16, 2016,~~In November 2020, the ~~U.S. Virgin Islands~~Company entered into the Settlement with the Office of the AL AG and other Alabama state regulators, primarily related to our termite renewal pricing changes we made in our branches in the Mobile Bay Area in 2019 and certain other termite inspection and treatment practices regarding the control of Formosan termites in that area that allegedly violated the ADTPA. The Settlement provides for: immediate remediation measures to be provided directly to current and former customers in the Mobile Bay Area, including refunds of certain price increases, rebates to certain former customers, the establishment of a $25 million consumer fund and a related receiver to oversee our compliance with these commitments and to act as an arbitrator for certain Non-litigated Claims; the reimbursement of certain investigative and monitoring costs incurred by the AL AG’s office and the Department of ~~Justice filed~~Agriculture and Industries; and a ~~civil complaint in~~university endowment intended to support termite and pest management research with an emphasis on Formosan termite research. The Company has also agreed to pay the ~~Superior Court~~state of Alabama $19 million.

Pursuant to the ~~Virgin Islands related~~Settlement, we have also agreed to ~~a fumigation incident in a matter styled Government of~~provide 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,opportunity to reinstate service for certain customers who canceled their services during specified timeframes as well as the retreatment of certain customer premises and a commitment to certain specified response and remediation timeframes for future termite damage claims. We do not expect the financial impact of ~~any additional civil, criminal~~these remedies to have a material impact on our prospective results of operations or cash flows.

In the fourth quarter of 2020, the Company funded the $25 million consumer fund, from which certain monetary liabilities from settlements of, or judgments in, the covered Settlement are paid by the fund’s receiver. The amount in the consumer fund is held in escrow by the receiver and is classified as a deposit within Prepaid expenses and other ~~claims or judicial, administrative or regulatory proceedings resulting~~assets and with an offsetting liability recorded within Accrued liabilities – Other on the Consolidated Statements of Financial Position. The fund’s receiver paid a total of $5 million from orescrow through the second quarter of 2021. In the second quarter of 2021, the Company recorded an increase in expense 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 policies.settlement of $4 million due to a higher than anticipated customer participation rate.

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;~~teammates; 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 settlement) and costs of legal or administrative proceedings, including, without limitation, collective, representative or class action litigation; and the impact of prevailing economic conditions.

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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~~2020 Form 10-K ~~in our quarterly report on Form 10-Q for the quarter ended March 31, 2020 (the “2020 Q1 10-Q”)~~ 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~~implementation of Mobile Bay termite Settlement remediation measures to current and former customers, including refunds of certain price increases and the establishment of the consumer fund intended to settle future Non-Litigated Claims for termite damage;

the validity of the Mobile Bay termite Settlement’s preclusivity provision related to future litigated termite damage claims of fraud, misrepresentation, deceit, suppression of material facts or fraudulent concealment arising out of any act, occurrence or transaction related to our Formosan termite business practices in the Mobile Bay Area;

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~~teammates or the health and operations ~~and~~of our customers;

~~Weakening~~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;~~authorities, including the lawsuit brought by the State of Mississippi related to our termite inspection and treatment practices;

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;~~customers and teammates;

our ability to attract and retain key ~~personnel,~~teammates, 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 June 30, ~~2020,~~2021, 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 1312 million gallons of fuel in ~~2020.~~2021. As of June 30, ~~2020,~~2021, a 10 percent change in fuel prices would result in a change of approximately $2$4 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 June 30, ~~2020,~~2021, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of ~~$35~~$18 million, maturing through ~~2021.~~2022. The estimated fair value of these contracts as of June 30, ~~2020~~2021 was a net ~~liability~~asset of $2$6 million. These fuel swap contracts provide a fixed price for approximately ~~75 percent and 84~~93 percent of our estimated fuel usage for the remainder of ~~2020 and~~2021.

Subsequent to June 30, 2021, ~~respectively.~~ we entered into fuel swap contracts that provide a fixed price for approximately 48 percent of our estimated fuel usage for 2022.

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~~ We have 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,~~krona, our largest foreign currency exposure. ~~The estimated fair value of these contracts as of June 30, 2020 was a net liability of $8 million.~~ These instruments provide a fixed translation rate on our approximately $200 million investment in Nomor. ~~As of~~ A hypothetical 10 percent adverse movement in foreign currency exchange rates compared to the U.S. dollar relative to exchange rates on June 30, ~~2020,~~2021, would have resulted in a ~~10 percent~~ change in ~~average~~the fair value of this investment of approximately $20 million. The impact on income and other comprehensive income from these hypothetical changes in foreign currency exchange rates would ~~not~~be substantially offset by the impact such changes would have ~~a material impact~~ on ~~our results of operations.~~

the related cross currency swap and net investment hedge contracts, respectively, which are in place for the related foreign currency denominated investment.

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our ~~Interim~~ Chief Executive Officer, ~~Naren K. Gursahaney,~~Brett T. Ponton, and ~~Senior~~Executive Vice President and Chief Financial Officer, ~~Anthony D. DiLucente,~~Robert J. Riesbeck, 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~~Ponton and ~~DiLucente~~Riesbeck have concluded that both the design and operation of our disclosure controls and procedures were effective as of June 30, ~~2020.~~2021.

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 ~~and six~~ months ended June 30, ~~2020~~2021 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.

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.

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, shareholder and other matters. We have entered into settlement agreements in certain cases, includingInformation 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 thesecertain legal 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. Seeis set forth in Note 6 to the condensed consolidated financial ~~statement for more details.~~statements (included in Part I of this Quarterly Report on Form 10-Q) and is incorporated herein by reference.

ITEM 1A. RISK FACTORS

We discuss in our ~~2019~~2020 Form 10-K ~~and our 2020 Q1 10-Q~~ and our other filings with the SEC various risks that may materially affect our business. There have been no material changes to the risk factors disclosed in the ~~2019~~2020 Form ~~10-K and the 2020 Q1 10-Q.~~10-K. The materialization of any risks and uncertainties identified in Forward-Looking Statements contained in this report, together with those previously disclosed in the ~~2019~~2020 Form 10-K ~~and the 2020 Q1 10-Q~~ and our other filings with the SEC or those that are presently unforeseen could result in significant adverse effects on our financial condition, results of operations and cash flows. See “Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Information Regarding Forward-Looking Statements” above.

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, 2021 through March 31, 2021	3,514,693	$	48.12	3,514,693	$	225
Q2 2021:
April 1, 2021 through April 30, 2021	356,657		47.95	356,657		208
May 1, 2021 through May 31, 2021	1,768,718		48.57	1,768,718		122
June 1, 2021 through June 30, 2021	1,593,536		49.17	1,593,536		43
April 1, 2021 through June 30, 2021	3,718,911	$	48.77	3,718,911	$	43
Total	7,233,604	$	48.48	7,233,604	$	43

__________________________________

(1)On September 25, 2020, our board of directors authorized a three-year share repurchase program, under which we are authorized to repurchase up to $400 million of outstanding shares of our common stock through September 25, 2023.
‎

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ITEM 6. EXHIBITS



Exhibit ‎Number		Description
10.1#10.1		~~Separation~~Schedule of Signatories to a Director Indemnification Agreement ~~and General Release entered into with Pratip Dastidar, dated June 30, 2020.~~
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: August ~~7, 2020~~6, 2021


	~~SERVICEMASTER~~TERMINIX GLOBAL HOLDINGS, INC.
	(Registrant)

	By:	/s/ ~~Anthony D. DiLucente~~Robert J. Riesbeck
		~~Anthony D. DiLucente~~Robert J. Riesbeck
		~~Senior~~Executive Vice President and Chief Financial Officer (Principal Financial Officer)

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