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, 20212022

or

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

________________________________________________

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

The number of shares of the registrant’s common stock outstanding as of August 3, 2021: 124,687,0261, 2022: 121,544,698 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

2023

Item 3. Quantitative and Qualitative Disclosures About Market Risk

3238

Item 4. Controls and Procedures

3238

Part II. Other Information

3338

Item 1. Legal Proceedings

3338

Item 1A. Risk Factors

3338

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

3339

Item 6. Exhibits

3440

Signature

3541

 

2


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,

2021

2020

2021

2020

2022

2021

2022

2021

Revenue

$

560

$

534

$

1,032

$

990

$

585

$

560

$

1,081

1,032

Cost of services rendered and products sold

318

297

588

577

340

318

636

588

Selling and administrative expenses

143

143

280

283

148

143

287

280

Amortization expense

10

9

19

18

10

10

20

19

Acquisition-related costs

(1)

(1)

1

1

(1)

(1)

Mobile Bay Formosan termite settlement

4

4

4

4

Restructuring and other charges

2

8

9

12

15

2

33

9

Loss on sale of international subsidiaries

41

0

41

Interest expense

11

22

23

45

11

11

23

23

Interest and net investment income

(1)

(1)

(1)

(1)

1

(1)

2

(1)

Income from Continuing Operations before Income Taxes

73

57

110

56

Income before Income Taxes

19

73

39

110

Provision for income taxes

20

18

31

16

18

20

21

31

Equity in earnings of joint ventures

1

1

2

1

2

1

3

2

Income from Continuing Operations

54

40

81

41

Net earnings from discontinued operations

13

26

Net Income

$

54

$

53

$

81

$

67

$

2

$

54

$

21

81

Other Comprehensive Income (Loss), Net of Income Taxes:

Net unrealized gains (losses) on derivative instruments

6

(3)

30

11

Foreign currency translation gain (loss)

(5)

(3)

5

Other Comprehensive Income (Loss), Net of Income Taxes

1

(5)

29

17

Total Comprehensive Income

$

48

$

54

$

97

$

19

$

3

$

48

$

50

97

Weighted-average common shares outstanding - Basic

127.4

131.9

129.3

133.4

121.5

127.4

121.5

129.3

Weighted-average common shares outstanding - Diluted

127.8

132.0

129.8

133.5

121.7

127.8

121.7

129.8

Basic Earnings Per Share:

Income from Continuing Operations

$

0.42

$

0.30

$

0.63

$

0.31

Net earnings from discontinued operations

0.10

0.19

Net Income

0.42

0.40

0.62

0.50

0.02

0.42

0.17

0.62

Diluted Earnings Per Share:

Income from Continuing Operations

$

0.42

$

0.30

$

0.62

$

0.31

Net earnings from discontinued operations

0.10

0.19

Net Income

0.42

0.40

0.62

0.50

0.02

0.42

0.17

0.62

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

3


Table of Contents

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)

Unaudited

As of

As of

As of

As of

June 30,

December 31,

June 30,

December 31,

2021

2020

2022

2021

Assets:

Current Assets:

Cash and cash equivalents

$

313

$

615

$

277

$

116

Receivables, less allowances of $27 and $25, respectively

208

206

Receivables, less allowances of $29 and $32, respectively

213

206

Inventories

42

44

45

41

Prepaid expenses and other assets

167

145

163

151

Total Current Assets

730

1,010

698

514

Other Assets:

Property and equipment, net

177

182

183

196

Operating lease right-of-use assets

80

80

72

79

Goodwill

2,168

2,146

2,107

2,211

Intangible assets, primarily trade names, service marks and trademarks, net

1,104

1,111

1,051

1,097

Restricted cash

89

89

89

89

Notes receivable

32

31

38

36

Long-term marketable securities

15

14

12

15

Deferred customer acquisition costs

96

98

102

98

Other assets

76

75

134

77

Total Assets

$

4,567

$

4,837

$

4,486

$

4,410

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable

$

113

$

91

$

122

$

85

Accrued liabilities:

Payroll and related expenses

90

102

73

81

Self-insured claims and related expenses

70

76

73

72

Accrued interest payable

7

7

7

7

Other

100

99

107

95

Deferred revenue

110

102

99

103

Current portion of lease liability

17

17

17

18

Current portion of long-term debt

44

94

47

50

Total Current Liabilities

552

588

544

511

Long-Term Debt

834

826

846

849

Other Long-Term Liabilities:

Deferred taxes

363

346

396

387

Other long-term obligations, primarily self-insured claims

215

239

173

197

Long-term lease liability

95

96

91

92

Total Other Long-Term Liabilities

673

681

660

677

Commitments and Contingencies (Note 6)

 

 

Stockholders' Equity:

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

Common stock $0.01 par value (authorized 2,000,000,000 shares with 149,359,858 shares issued and 121,523,419 outstanding at June 30, 2022 and 149,095,168 shares issued and 121,258,729 outstanding shares outstanding at December 31, 2021)

2

2

Additional paid-in capital

2,379

2,359

2,403

2,391

Retained Earnings

922

841

988

967

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)

Accumulated other comprehensive income (loss)

8

(22)

Less common stock held in treasury, at cost (27,836,439 shares at June 30, 2022 and December 31, 2021)

(964)

(964)

Total Stockholders' Equity

2,508

2,741

2,436

2,375

Total Liabilities and Stockholders' Equity

$

4,567

$

4,837

$

4,486

$

4,410

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements


4


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

Shares

Stock

Capital

Deficit)

(Loss) Income

Shares

Amount

Equity

Balance December 31, 2019

148

$

2

$

2,334

$

291

$

9

(12)

$

(313)

$

2,322

Net income

14

14

Other comprehensive loss, net of tax

(50)

(50)

Total comprehensive income (loss)

14

(50)

(36)

Exercise of stock options

2

2

Stock-based employee compensation

5

5

Repurchase of common stock

(4)

(103)

(103)

Balance March 31, 2020

148

$

2

$

2,341

$

305

$

(41)

(16)

$

(417)

$

2,190

Balance December 31, 2020

148

$

2

$

2,359

$

841

$

(39)

(16)

$

(423)

$

2,741

Net income

53

53

27

27

Other comprehensive income, net of tax

1

1

22

22

Total comprehensive income (loss)

53

1

54

Stock-based employee compensation

6

6

Balance June 30, 2020

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

Total comprehensive income

27

22

49

Issuance of common stock

1

1

1

1

Exercise of stock options

4

4

4

4

Stock-based employee compensation

6

6

6

6

Repurchase of common stock

(4)

(169)

(169)

(4)

(169)

(169)

Balance March 31, 2021

149

$

2

$

2,370

$

868

$

(17)

(20)

$

(592)

$

2,631

149

$

2

$

2,370

$

868

$

(17)

(20)

$

(592)

$

2,631

Net income

54

54

54

54

Other comprehensive loss, net of tax

(5)

(5)

(5)

(5)

Total comprehensive income

54

(5)

48

54

(5)

48

Issuance of common stock

1

1

1

1

Exercise of stock options

3

3

3

3

Stock-based employee compensation

5

5

5

5

Repurchase of common stock

(4)

(181)

(181)

(4)

(181)

(181)

Balance June 30, 2021

149

$

2

$

2,379

$

922

$

(22)

(24)

$

(773)

$

2,508

149

$

2

$

2,379

$

922

$

(22)

(24)

$

(773)

$

2,508

Balance December 31, 2021

149

$

2

$

2,391

$

967

$

(22)

(28)

$

(964)

$

2,375

Net income

19

19

Other comprehensive income, net of tax

28

28

Total comprehensive income

19

28

47

Exercise of stock options

1

1

Stock-based employee compensation

6

6

Balance March 31, 2022

149

$

2

$

2,398

$

986

$

6

(28)

$

(964)

$

2,428

Net income

2

2

Other comprehensive income, net of tax

1

1

Total comprehensive income

2

1

3

Stock-based employee compensation

5

5

Balance June 30, 2022

149

$

2

$

2,403

$

988

$

8

(28)

$

(964)

$

2,436

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

5


Table of Contents

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

Six Months Ended

Six Months Ended

June 30,

June 30,

2021

2020

2022

2021

Cash and Cash Equivalents and Restricted Cash at Beginning of Period

$

704 

$

368 

$

205

$

704

Cash Flows from Operating Activities from Continuing Operations:

Cash Flows from Operating Activities

Net Income

81 

67

21

81

Adjustments to reconcile net income to net cash provided from operating activities:

Net earnings from discontinued operations

(26)

Equity in earnings of joint venture

(2)

(1)

(3)

(2)

Depreciation expense

35

37

34

35

Amortization expense

19

18

20

19

Amortization of debt issuance costs

1

2

1

1

Amortization of lease right-of-use assets

8

9

8

8

Payments on fumigation related matters

(3)

Mobile Bay Formosan termite settlement

4

4

Loss on sale of international subsidiaries

41

Deferred income tax provision

13

5

13

Stock-based compensation expense

11

10

11

11

Restructuring and other charges

9

12

33

9

Payments for restructuring and other charges

(5)

(6)

(15)

(5)

Acquisition-related costs

(1)

1

(1)

Payments for acquisition-related costs

(1)

(4)

(1)

(1)

Other

(12)

(9)

(17)

(12)

Change in working capital, net of acquisitions:

Receivables

(7)

(29)

(13)

(7)

Inventories and other current assets

(25)

(6)

(22)

(25)

Accounts payable

23

26

38

23

Deferred revenue

8

4

5

8

Accrued liabilities

(12)

31

3

(12)

Accrued interest payable

(4)

1

Current income taxes

2

40

11

2

Net Cash Provided from Operating Activities from Continuing Operations

151

172

Cash Flows from Investing Activities from Continuing Operations:

Net Cash Provided from Operating Activities

159

151

Cash Flows from Investing Activities

Property additions

(12)

(15)

(12)

(12)

Proceeds from sale of international subsidiaries, net of cash sold

73

Sale of equipment and other assets

1

1

1

Business acquisitions, net of cash acquired

(45)

(24)

(3)

(45)

Origination of notes receivable

(34)

(20)

(45)

(34)

Collections on notes receivable

33

22

37

33

Net Cash Used for Investing Activities from Continuing Operations

(56)

(36)

Cash Flows from Financing Activities from Continuing Operations:

Other investing (note 12)

(31)

Net Cash Used for Investing Activities

20

(56)

Cash Flows from Financing Activities

Borrowings of debt

80

Payments of debt

(67)

(40)

(107)

(67)

Repurchase of common stock

(350)

(103)

(350)

Issuance of common stock

8

3

Net Cash Used For Financing Activities from Continuing Operations

(409)

(140)

Issuance of common stock and exercise of stock options

1

8

Net Cash Provided from (Used for) Financing Activities

(26)

(409)

Cash Flows from Discontinued Operations:

Cash provided from operating activities

12

27

13

12

Net Cash Provided from Discontinued Operations

12

28

13

12

Effect of Exchange Rate Changes on Cash

(1)

(4)

Cash (Decrease) Increase During the Period

(302)

22

161

(302)

Cash and Cash Equivalents and Restricted Cash at End of Period

$

402

$

391

$

366

$

402

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements 

6


Table of Contents

TERMINIX GLOBAL HOLDINGS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

Note 1. Basis of Presentation

Terminix Global Holdings, Inc. and its majority-owned subsidiary partnerships, limited liability companies and corporations (collectively, “Terminix,” the “Company,” “we,” “us” and “our”) is a leading provider of essential services to residential and commercial customers in the termite and pest management markets. Our portfolio of well‑recognized brands includes Terminix, Copesan, Assured Environments, Gregory Pest Solutions, McCloud Services Nomor and Pelias.Nomor. 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 statementsCondensed 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 statementsCondensed 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, 2020,2021, as filed with the SEC (the “2020“2021 Form 10-K”). The unaudited condensed consolidated financial statementsCondensed 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 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.

Sale of ServiceMaster Brands

On January 21, 2020, we announced we were exploring strategic alternatives related to ServiceMaster Brands, including the potential sale of the business. The divestiture group included the assets and liabilities of the ServiceMaster Brands businesses, which was 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, and the ServiceMaster trade name (the “ServiceMaster Brands Divestiture Group”). 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 this Quarterly Report on Form 10-Q in discontinued operations.

COVID-19

SinceOn March 11, 2020, when the World Health Organization designated COVID-19 as a global pandemic. Early in the pandemic we have experienced increased demand in our residential pest management and termite and home services service lines as customers are spendingspent more time at home. We have also experienced disruptions in our 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 call center teammates working remotely and field support teammates working remotely where possible.

Proposed Acquisition by Rentokil

On December 13, 2021, we entered into an Agreement and Plan of Merger (as subsequently amended, the “Merger Agreement”) with Rentokil Initial plc, a public limited company incorporated under the laws of England and Wales (“Rentokil”), Rentokil Initial US Holdings, Inc., a Delaware corporation and a wholly owned subsidiary of Rentokil (“Bidco”), Leto Holdings I, Inc., a Delaware corporation and a direct, wholly owned subsidiary of Bidco (“Merger Sub I”), and Leto Holdings II, LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Bidco (“Merger Sub II”), pursuant to which, and subject to the satisfaction or waiver of the conditions set forth therein, (1) Merger Sub I will merge with and into the Company (the “First Merger”), with the Company surviving the First Merger as a wholly owned subsidiary of Bidco, and (2) immediately following the effective time of the First Merger (the “Effective Time”), the Company, as the surviving corporation in the First Merger, will merge with and into Merger Sub II (the “Second Merger” and, together with the First Merger, the “Mergers”), with Merger Sub II surviving the Second Merger as a wholly owned direct subsidiary of Bidco and an indirect wholly owned subsidiary of Rentokil.

Under the Merger Agreement, at the Effective Time, each share of our common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be converted into the right to receive either:

a number of American depositary shares (“ADSs”) of Rentokil (each representing a beneficial interest in 5 ordinary shares of Rentokil) equal to (A) 1.0619 (the “Exchange Ratio”) plus (B) the quotient of $11.00 (the “Per Share Cash Amount”) and the volume weighted average price (measured in U.S. dollars) of Rentokil ADSs (measured using the volume weighted average price of Rentokil ordinary shares as a proxy) for the trading day that is two trading days prior to the Effective Time (or such other date as may be mutually agreed to by Rentokil and the Company) (such price, the “Rentokil ADS Price,” and such number of Rentokil American depositary shares, the “Stock Consideration”); or

an amount in cash, without interest, and in USD equal to the sum of (A) the Per Share Cash Amount plus (B) the product of the Exchange Ratio and the Rentokil ADS Price (the “Cash Consideration,” and together with the “Stock Consideration,” the “Merger Consideration”),

in each case at the election of the holder of such share of our common stock, subject to certain allocation and proration provisions of the Merger Agreement. Immediately following such conversion, our shares of common stock will be automatically cancelled and cease to

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Table of Contents

exist. The aggregate Cash Consideration and the aggregate Stock Consideration that will be issued in the Mergers will not vary as a result of individual election preferences.

The respective obligations of the Company and Rentokil to consummate the Mergers are subject to the satisfaction or waiver of a number of conditions. As announced on March 15, 2022, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired, thereby completing the necessary antitrust process in the U.S. As announced on June 1, 2022, the Company completed the divestment of its pest management businesses in the UK and Norway. Completion of the divestment and the completion of the antitrust review process in the U.S. satisfy two of the closing conditions. A number of other conditions remain to be satisfied, including obtaining approval by the Company’s and Rentokil’s shareholders, and the registration of the Rentokil ADSs with the U.S. Securities and Exchange Commission and their listing on the New York Stock Exchange. The preliminary registration statement on Form F-4 with respect to the ordinary shares of Rentokil underlying the Rentokil ADSs to be issued to Terminix shareholders in connection with the Mergers was filed by Rentokil on June 7, 2022, and the first amendment thereto was filed by Rentokil on July 22, 2022. Accordingly, the parties continue to be on track to complete the transaction in the second half of 2022, with a target completion date at or around the end of the third quarter.

In conjunction with the proposed Mergers, the parties have agreed that the Company may provide up to $20 million of cash retention awards (the “Retention Pool”) to Terminix teammates. The retention awards are designed to retain and incentivize the Terminix team as it executes the 2022 operating plan, achieves the consummation of the merger and assists with the integration of the combined company after closing of the transaction. Half of the Retention Pool has been allocated specifically to customer-facing, field operations teammates, and the remainder has been allocated to key back-office teammates.

Note 2. Significant Accounting Policies

Our significant accounting policies are described in Note 2 to the audited consolidated financial statements included in our 20202021 Form 10-K. There have been no material changes to the significant accounting policies for the six months ended June 30, 2021,2022, other than those described below.

Adoption of New Accounting Standards Issued But Not Yet Effective

In December 2019,October 2021, the FASB issued ASU No. 2019-12,2021-08,Income TaxesBusiness Combinations (Topic 740)805): Simplifying the Accounting for Income TaxesContract Assets and Contract Liabilities from Contracts with Customers,” which simplifies the accountingrequires that an entity (acquirer) recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with Topic 606. The ASU is effective for income taxes by removing certain exceptions.fiscal years beginning after December 15, 2022, including interim periods within those fiscal years, and early adoption is permitted. We adoptedwill adopt this ASU oneffective January 1, 2021, including2023. We do not expect the applicable retrospective and prospective provisions therein. The adoption of this ASU did notto have a material impact on our consolidated financial statements as of June 30, 2021.statements.

In November 2020,2021, the SECFASB issued Rule 33-10890, “ASU 2021-10, Management’s DiscussionGovernment Assistance (Topic 832)Disclosures by Business Entities About Government Assistance, which requires entities to provide disclosures on material government assistance transactions for annual reporting periods. The disclosures include information around the nature of the assistance, the related accounting policies used to account for government assistance, the effect of government assistance on the entity’s financial statements, and Analysis, Selected Financial Data,any significant terms and Supplementary Financial Information.” This rule could be early adopted in its entirety asconditions of February 10, 2021.the agreements, including commitments and contingencies. The rule modernized, simplifiedASU is effective for fiscal years beginning after December 15, 2021 and enhancedonly impacts annual financial statement disclosures required by Regulation S-K.footnote disclosures. We early adopted alldo not expect 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.adoption to have a material effect on our consolidated financial statements.

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

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Note 3. Revenues

The following tables present our reportable segment revenues, from continuing operations, disaggregated by revenue source and geographic area. We disaggregate revenue from contracts with customers into major product lines. We 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.European pest management revenue is now presented within Commercial Pest Management below, and prior periods have been reclassified to conform to the current period presentation.

Revenue by major service line was as follows:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(In millions)

2021

2020

2021

2020

2022

2021

2022

2021

Major service line

Residential Pest Management

$

192

$

182

$

358

$

341

$

207

$

192

$

382

358

Commercial Pest Management

141

124

270

248

141

141

273

270

Termite and Home Services

193

196

354

351

204

193

376

354

Sales of Products and Other

34

32

50

50

33

34

51

50

Total

$

560

$

534

$

1,032

$

990

$

585

$

560

$

1,081

$

1,032

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Revenue by geographic area was as follows:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(In millions)

2021

2020

2021

2020

2022

2021

2022

2021

United States

$

526

$

510

$

967

$

941

$

555

$

526

$

1,019

$

967

International

34

24

64

49

31

34

62

64

Total

$

560

$

534

$

1,032

$

990

$

585

$

560

$

1,081

$

1,032

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 unaudited Condensed Consolidated Statements of Financial Position. The current portion of Notes receivable, which represents amounts financed for customers, are included within Receivables, less allowances, on the unaudited Condensed Consolidated Statement of Financial Position and totaled $26$31 million and $27$26 million as of June 30, 20212022 and December 31, 2020,2021, respectively.

At contract inception, we assess the goods and services promised in our contracts with customers and identify a performance obligation for each promise to transfer to the customer a good or service (or a bundle of goods and services) that is distinct. To identify the performance obligation, we consider all of the goods and services promised in the contract regardless of whether they are explicitly stated or are implied by customary business practices.

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.services. Amounts are recognized as revenue upon completion of services.

Changes in deferred revenue for the six months ended June 30, 20212022 and 20202021 were as follows:

(In millions)

Deferred revenue

Balance as of December 31, 2021

$

103

Deferral of revenue

86

Recognition of deferred revenue(1)

(90)

Balance as of June 30, 2022

$

99

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

(1)Includes a $7 million decrease to deferred revenue related to the divestiture of the Company’s international pest management businesses as discussed in Note 12.

There was approximately $21 million and $51 million of revenue

63

Recognition of deferred revenue

(59)

Balance as of June 30, 2020

$

95

Additionally, approximately $17 million and $15 million of deferred revenue was recognized in the Condensed Consolidated Statements of Financial Positionthree and six months ended June 30, 2022, that was included in the deferred revenue balance as of June 30, 2020 and December 31, 2019, respectively, primarily related to our acquisition of Nomor.

2021. There was approximately $18 million and $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.

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Note 4. Restructuring and Other Charges

We incurred restructuring and other charges of $2$15 million ($213 million, net of tax) and $8$2 million ($62 million, net of tax) in the three months ended June 30, 20212022 and 2020,2021, respectively. We incurred restructuring and other charges of $9$33 million ($728 million, net of tax) and $12$9 million ($97 million, net of tax) in the six months ended June 30, 20212022 and 2020,2021, respectively. Restructuring and 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.

Restructuringother charges were comprised of the following:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(In millions)

2021

2020

2021

2020

2022

2021

2022

2021

Severance(1)

$

2

$

4

$

5

$

5

$

1

$

2

$

1

5

Other(1)

1

4

3

7

Costs related to our proposed acquisition by Rentokil(2)

13

22

Other(3)

1

1

10

3

Total restructuring charges

$

2

$

8

$

9

$

12

$

15

$

2

$

33

$

9

___________________________________

(1)Includes severance and related charges to align functions after the sale of the ServiceMaster Brands Divestiture Group, enhance field operations and corporate capabilities, and reduce costs in our corporate functions that provide administrative services to support operations.

(2)Primarily professional and consultant fees and accrual of employee retention bonuses.

(3)Primarily owned building and operating lease right-of-use asset impairment charges, and costs to simplify our back-office and align as a singularly focused pest management company.company and other exit costs. Charges for the six months ended June 30, 2022, include a $9 million impairment of the Memphis headquarters building operating lease right-of-use asset and leasehold improvements. The impairment was the result of the sublease of approximately 24% of the building.

A reconciliation of the beginning and ending balances of accrued restructuring charges by major cost type, which are included in Accrued liabilities—Payroll and related expenses and Other on the unaudited Condensed Consolidated Statements of Financial Position, is presented as follows:

Accrued

Accrued

Total Accrued

Accrued

Accrued

Accrued

Total Accrued

Severance

Other

Restructuring

Severance

Merger Related

Other

Restructuring

(In millions)

Charges

Charges

Charges

Charges

Charges

Charges

Charges

Balance as of December 31, 2021

$

2

$

7

$

$

9

Costs incurred

1

22

10

33

Costs paid or otherwise settled

(3)

(12)

(10)

(24)

Balance as of June 30, 2022

$

$

18

$

$

18

Balance as of December 31, 2020

$

2

$

$

2

$

2

$

$

$

2

Costs incurred

5

3

9

5

3

9

Costs paid or otherwise settled

(3)

(3)

(7)

(3)

(3)

(7)

Balance as of June 30, 2021

$

4

$

$

4

$

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

On October 1, 2020, we completed the sale of the ServiceMaster Brands Divestiture Group for $1,541 million, resulting in a gain of approximately $494 million, net of taxes. The historical results of the ServiceMaster Brands Divestiture Group are reported as discontinued operations forWe expect substantially 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 pursuantaccrued restructuring charges 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 Financial Position.be paid within one year.

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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

Six Months Ended

(In millions)

June 30, 2020

June 30, 2020

Revenue

$

63

$

128

Cost of services rendered and products sold

31

60

Operating expenses(1)

15

32

Income before income taxes

18

35

Provision for income taxes

5

9

Net earnings from discontinued operations

$

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.

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:

Six Months Ended

(In millions)

June 30, 2020

Depreciation

$

Amortization

Capital expenditures

(1)

Note 6.5. Commitments and Contingencies

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.

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 course10


Table 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.Contents

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

Accrued

Self-insured

(In millions)

Claims, Net

Balance as of December 31, 2021

$

130

Provision for self-insured claims

20

Cash payments

(21)

Balance as of June 30, 2022

$

129

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

Our 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 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.

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 unaudited Condensed Consolidated Statements of Financial Position, and Non-Litigated Claims, which are included in Accrued liabilities—Self-insured claims and related expenses on the unaudited Condensed Consolidated Statements of Financial Position, is presented as follows:

Accrued

Termite Damage

(In millions)

Claims

Balance as of December 31, 2021

$

72

Provision for termite damage claims

36

Cash payments

(30)

Balance as of June 30, 2022

$

78

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

Mobile Bay Formosan Termite Settlement

In November 2020, the 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 Agriculture and Industries; and a 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 state of Alabama $19 million.

Pursuant to the Settlement, we have also agreed to provide the 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

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certain specified response and remediation timeframes for future termite damage claims. We do not expect the financial impact of these additional 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 assets and with an offsetting liability recorded within Accrued liabilities – Other on the unaudited Condensed Consolidated Statements of Financial Position. The fund’s receiver has paid a total of $5 million from the fund through the second quarter of 2021. In the second quarter of 2021, the Company recorded an increase in expense related to the settlement of $4 million due to a higher than anticipated customer participation rate. NaN adjustments were made in the second quarter of 2022. The fund’s receiver has paid a total of $11 million from the fund through the second quarter of 2022.

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 vigorously. However, given the uncertainty of litigation, the preliminary stage of the case, and the legal standards that must be met for success on the merits, the Company cannot predict with certainty the outcome of the Mississippi litigation.

Fumigation Related Matters

On December 16, 2016, the U.S. Virgin Islands Department of Justice filed a civil complaint in the Superior Court of the Virgin Islands related to the aforementioned fumigation incident in a matter styled Government of the United States Virgin Islands v. The ServiceMaster Company, LLC, The Terminix International Company Limited Partnership, and Terminix International USVI, LLC (collectively, “the Parties”). On November 15, 2021, the Parties reached a settlement agreement whereby the Company agreed to pay $3 million to the Government of the U.S. Virgin Islands and the settlement was paid in the three months ended March 31, 2022.

On January 20, 2017, TMX USVI and TMX LP, each an indirect, wholly-owned subsidiary of the Company, entered into a revised Plea Agreement in connection with the investigation initiated by the DOJ into allegations that a local Terminix branch used methyl bromide as a fumigant at a resort in St. John, U.S. Virgin Islands. Under the terms of sentencing handed down on November 20, 2017, (i) TMX USVI and TMX LP each paid a fine of $4.6 million (total of $9.2 million); (ii) TMX USVI and TMX LP paid a total of $1.2 million to the EPA for costs incurred by the EPA for the response and clean-up of the affected units at the resort in St. John; and (iii) both TMX USVI and TMX LP will serve a five year probation period. In lieu of the $1 million community service payment that was proposed in the Plea Agreement, the court required TMX USVI and TMX LP to provide for training certification courses with respect to pesticide application and safety in the U.S. Virgin Islands until November 2022.

Other Litigation

On March 25, 2022, in connection with its previously filed complaint on October 20, 2020, Bruce-Terminix Company, a licensee of the Company (“Bruce” or the “Licensee”), filed a supplemental complaint against the Company and The Terminix International Company Limited Partnership, a subsidiary of the Company, under the caption Bruce-Terminix Company v. The Terminix International Company Limited Partnership, and Terminix Global Holdings, Inc., Civil Action No: 1:20-CV-962 (M.D.N.C.) (the “Bruce Lawsuit”). The original complaint generally alleged, among other things, that certain subsidiaries of the Company violated the non-compete restriction under the Licensee’s license agreement and the North Carolina Unfair and Deceptive Trade Practices Act. As supplemented, the Bruce Lawsuit further generally alleges, among other things, that a Rentokil subsidiary currently competes in the Licensee’s territory and that the Mergers would violate the non-compete restriction under the Licensee’s license agreement. The Bruce Lawsuit also alleges, among other things, that Bruce would suffer irreparable harm from purported competition with Rentokil should the Mergers be consummated, and seeks, among other things, injunctive relief enjoining the defendants from merging with Rentokil so long as Rentokil owns pest control companies with locations within Bruce’s service area and from disclosing to Rentokil certain confidential or proprietary information of the Company. On August 1, 2022, the court denied Bruce’s motion for a preliminary injunction to enjoin the Rentokil-Terminix merger. The Company believes that the claims asserted in the Bruce Lawsuit are without merit.

In connection with the Mergers, three complaints have been filed by purported Terminix stockholders against the Company and its directors, and one draft complaint has been sent to the Company. The complaints are captioned Ferreiro v. Terminix Global Holdings, Inc., et al., No. 1:22-cv-04987 (S.D.N.Y); Justice v. Terminix Global Holdings, Inc., et al., No. 1:22-cv-05519 (S.D.N.Y.); and Baker v. Terminix Global Holdings, Inc., et al., No. 1:22-cv-05524 (S.D.N.Y.). The draft complaint is captioned Paxton v. Terminix Global Holdings, Inc., et al. and does not specify any court. The complaints and draft complaint generally allege that the preliminary registration statement filed by Rentokil with the SEC on June 7, 2022 omitted certain allegedly material information in connection with the transaction in violation of federal proxy laws, and one of the complaints further alleges that the Company’s directors further breached their fiduciary duties in connection with the transaction and that the Company aided and abetted that breach. The lawsuits seek various remedies, including: enjoining the consummation of the transaction; rescission of the transaction, or rescissory damages in the event the transaction is consummated without the allegedly material disclosures; declaring the Merger Agreement unenforceable; directing dissemination of additional allegedly material disclosures; declaring that the Company and its directors violated federal proxy laws; awarding plaintiffs costs and an allowance for attorneys’ and experts fees; and an accounting to the plaintiffs for any damages allegedly suffered. Given the early stage of the proceedings, it is impossible to predict the outcome or to

12


Table of Contents

estimate possible loss or range of loss. The Company believes that the claims asserted in the complaints and draft complaint are without merit.

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. We accrue for these liabilities when it is probable the 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. 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, including with respect to putative collective and class actions, which are subject to court or other approvals, and which require compliance with the terms of the agreements. If one or more of our settlements

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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 7.6. 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, 20212022 and 2020. There were 0 accumulated impairment losses recorded as of June 30, 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:

(In millions)

Balance as of December 31, 20202021

$

2,1462,211

Acquisitions

253

Disposals(1)

(91)

Impact of foreign exchange rates

(3)(16)

Balance as of June 30, 20212022

$

2,1682,107

___________________________________

(1)Includes divestment of the pest management businesses in the UK and Norway, which was completed as of June 1, 2022 as described in Note 12.

The table below summarizes the other intangible asset balances:

As of June 30, 2021

As of December 31, 2020

As of June 30, 2022

As of December 31, 2021

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(2)

661

(469)

191

650

(454)

196

641

(493)

148

670

(484)

187

Other(2)

71

(47)

24

70

(43)

27

65

(51)

15

71

(50)

22

Total

$

1,620

$

(516)

$

1,104

$

1,608

$

(497)

$

1,111

$

1,595

$

(544)

$

1,051

$

1,630

$

(533)

$

1,097

___________________________________

(1)Not subject to amortization.

(2)Includes divestment of the pest management businesses in the UK and Norway, which was completed as of June 1, 2022 as described in Note 12.

For the existing intangible assets, we anticipate amortization expense for the remainder of 20212022 and each of the next five years as follows:

(In millions)

2021

2022

2023

2024

2025

2026

2022

2023

2024

2025

2026

2027

Amortization expense

$

19

$

39

$

35

$

26

$

21

$

15

$

19

$

33

$

24

$

19

$

14

$

10

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Note 8.7. Stock-Based Compensation

For each of the three months ended June 30, 20212022 and 2020,2021, we recognized stock-based compensation expense of $6$5 million ($4 million, net of tax) and $5$6 million ($4 million, net of tax), respectively. For the six months ended June 30, 20212022 and 2020,2021, we recognized stock-based compensation expense of $11 million ($98 million, net of tax) and $10$11 million ($79 million, net of tax), respectively. These charges are recorded within Selling and administrative expenses in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income.

As of June 30, 2021,2022, there were $38$36 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 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 1.991.96 years.

On February 24, 2015, our board of directors approved and recommended for approval by our stockholders the Terminix Global Holdings, Inc. Employee Stock Purchase Plan (“Employee Stock Purchase Plan”), which became effective for offering periods commencing July 1, 2015. 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 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, 2021,2022, there were 762,190741,120 shares available for issuance under the Employee Stock Purchase Plan.In connection with the announcement of the proposed acquisition of the Company by Rentokil, the Employee Stock Purchase Plan was indefinitelysuspended as of January 1, 2022.

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Table of Contents

Note 9.8. Comprehensive Income (Loss) Income

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

During 2019, we terminated our then-existing $650 million interest rate swap, receiving $12 million from the counterparty. The fair value of the terminated agreement is recorded within accumulated other comprehensive income (loss) income on the unaudited 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, 20212022 was $5$3 million.

On June 1, 2022, in connection with the sale of our Norway pest management business, we terminated our fixed-to-fixed cross-currency interest rate swap to hedge foreign currency risk associated with the fixed-rate Swedish krona denominated intercompany debt at Nomor. The five year interest rate swap was scheduled to mature March 31, 2025 and had 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 contract was designated as a cash flow hedge of a fixed-rate borrowing and we recognized a loss of approximately $1 million related to the termination of the swap agreement for the three and six months ended June 30, 2022 in loss on sale of international subsidiaries.

We also terminated the cross-currency swap agreement hedging 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 had a fixed notional amount of 1.275 billion Swedish krona, or approximately $131 million, at an annual rate of 0 percent and a maturity date of March 31, 2025. At inception, the cross-currency swap was designated as a net investment hedge. As the sale of our Norway pest management business did not result in a substantially complete liquidation of the Company’s investment in Nomor, the accumulated other comprehensive loss of $1 million on the date of termination of the agreement is recorded within accumulated other comprehensive income (loss) on the unaudited Condensed Consolidated Statements of Financial Position as of June 30, 2022.


14


Table of Contents

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

Unrealized

Unrealized

Gains

Foreign

Gains

Foreign

(Losses) on

Currency

(Losses) on

Currency

(In millions)

Derivatives

Translation

Total

Derivatives

Translation

Total

Balance as of December 31, 2020

$

(16)

$

(23)

$

(39)

Other comprehensive (loss) income before reclassifications:

Balance as of December 31, 2021

$

(5)

$

(16)

$

(22)

Other comprehensive income (loss) before reclassifications:

Pre-tax amount

26

(1)

25

58

(2)

56

Tax provision

(5)

(5)

(13)

(13)

After-tax amount

21

(1)

20

45

(2)

43

Amounts reclassified from accumulated other comprehensive (loss) income(1)

(4)

(4)

Amounts reclassified within accumulated other comprehensive (loss) income(2)

(6)

6

Amounts reclassified from accumulated other comprehensive income (loss)(1)

(6)

(6)

Amounts reclassified due to the sale of international subsidiaries(2)

(8)

(8)

Total amounts reclassified from accumulated other comprehensive income (loss)

(6)

(8)

(14)

Amounts reclassified within accumulated other comprehensive income (loss)(3)

(10)

10

Net current period other comprehensive income

11

5

17

30

29

Balance as of June 30, 2021

$

(4)

$

(18)

$

(22)

Balance as of June 30, 2022

$

24

$

(17)

$

8

Balance as of December 31, 2019

$

13

$

(5)

$

9

Other comprehensive (loss) income before reclassifications:

Balance as of December 31, 2020

$

(16)

$

(23)

$

(39)

Other comprehensive income (loss) before reclassifications:

Pre-tax amount

(55)

(6)

(61)

26

(1)

25

Tax provision

12

12

(5)

(5)

After-tax amount

(44)

(6)

(50)

21

(1)

20

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)

Amounts reclassified from accumulated other comprehensive income (loss)(1)

(4)

(4)

Amounts reclassified within accumulated other comprehensive income (loss)(3)

(6)

6

Net current period other comprehensive income

11

5

17

Balance as of June 30, 2021

$

(4)

$

(18)

$

(22)

___________________________________

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

(2)Includes divestment of the pest management businesses in the UK and Norway, which was completed as of June 1, 2022 as described in Note 12.

(3)Represents reclassifications from our net investment hedge related to foreign currency exchange rate fluctuations.

Reclassifications out of accumulated other comprehensive income included the following components for the periods indicated:

Amounts Reclassified from Accumulated

Amounts Reclassified from Accumulated

Other Comprehensive (Loss) Income

Other Comprehensive Income (Loss)

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(In millions)

2021

2020

2021

2020

2022

2021

2022

2021

Gains (losses) on derivatives:

Fuel swap contracts

$

2

$

(2)

$

3

$

(2)

$

3

$

2

$

5

3

Interest rate swap contracts

(2)

(3)

(1)

(2)

(2)

(3)

Cross-currency interest rate swap

(2)

(1)

3

3

(2)

5

3

Net gains (losses) on derivatives

(1)

(2)

4

(2)

6

(1)

8

4

Sale of international subsidiaries(1)

8

8

Impact of income taxes

1

1

(2)

(2)

Total reclassifications for the period

$

(1)

$

(2)

$

4

$

(1)

$

11

$

(1)

$

14

$

4

(1)Includes divestment of the pest management businesses in the UK and Norway, which was completed as of June 1, 2022, as described in Note 12.

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Note 10.9. Supplemental Cash Flow Information

Supplemental information relating to the unaudited Condensed Consolidated Statements of Cash Flows is presented in the following table. The non-cash lease transactions are described in Note 12.11.

Six Months Ended

Six Months Ended

June 30,

June 30,

(In millions)

2021

2020

2022

2021

Cash paid for or (received from):

Interest expense

$

27

$

42

$

20

$

27

Interest and dividend income

(1)

Income taxes, net of refunds

3

(15)

(4)

3

For the six months ended June 30, 2021,2022, cash paidreceived for income taxes net of $4 million includes refunds of $3 million includes the utilization of $12$13 million of tax overpayments made related to the sale of the ServiceMaster Brands Divestiture Group, which is reported in Cash flows from discontinued operations on the unaudited Condensed Consolidated Statements of Cash Flows.

Cash and Cash Equivalents and Restricted Cash at End of Period on the unaudited Condensed Consolidated Statements of Cash Flows consists of the following:

As of June 30,

As of June 30,

(In millions)

2021

2020

2022

2021

Cash and cash equivalents

$

313

$

302

$

277

$

313

Restricted cash

89

89

89

89

Total Cash and cash equivalents and Restricted cash

$

402

$

391

$

366

$

402

 

Note 11.10. 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)

2021

2020

2022

2021

Senior secured term loan facility maturing in 2026(1)

$

539

$

539

$

541

$

540

Revolving credit facility maturing 2024

7.45% notes maturing in 2027(2)

171

169

173

172

7.25% notes maturing in 2038(3)

41

41

41

41

Vehicle finance leases(4)

98

95

116

119

Other(5)

29

77

22

26

Less current portion(6)

(44)

(94)

Less current portion

(47)

(50)

Total long-term debt

$

834

$

826

$

846

$

849

__________________________________

(1)As of June 30, 20212022 and December 31, 2020,2021, presented net of $6$5 million and $7$6 million in unamortized debt issuance costs, respectively, andrespectively. As of December 31, 2021, presented net of $1 million of unamortized original issue discount in each period.discount.

(2)As of June 30, 20212022 and December 31, 2020,2021, presented net of $16$13 million and $17$14 million, respectively of unamortized fair value adjustments related to purchase accounting, which increases the effective interest rate from the coupon rates above.

(3)As of both June 30, 20212022 and December 31, 2020,2021, presented net of $8 million 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 ranging from 1.33%1.25% to 2.45%.

(5)Primarily represents future payments in connection with acquisitions.

(6)We paid approximately $50 million for deferred purchase price and an earnout related to the 2018 purchase of Copesan in the three months ended June 30, 2021.

Interest Rate Swap

The interest rate swap agreement in effect as of June 30, 20212022 is as follows:

Trade Date

Effective Date

Expiration Date

Notional Amount

Fixed Rate(1)

Floating Rate

Effective Date

Expiration Date

Notional Amount

Fixed Rate - Pay(1)

Floating Rate - Receive

November 5, 2019

November 5, 2019

November 5, 2026

$546 million

1.615%

1.731%

November 5, 2019

November 5, 2026

$546 million

1.615%

0.450%

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

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Table of Contents

Revolving Credit Facility

On January 6, 2022, we borrowed an aggregate principal amount of $80 million under the Revolving Credit Facility maturing November 4, 2024 (the “Revolving Credit Facility”). On March 31, 2022, we repaid $50 million of the outstanding balance. The remaining $30 million was repaid in April 2022.

Note 12.11. 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 unaudited 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 unaudited Condensed Consolidated Statements of Financial Position. As of June 30, 20212022 and December 31, 2020,2021, assets recorded under finance leases were $261$281 million and $249$277 million, respectively, and accumulated depreciation was $165$166 million and $155$159 million, respectively.

The components of lease expense were as follows:follows:

Three Months Ended

Six Months Ended

Three months ended June 30,

Six months ended June 30,

June 30,

June 30,

(In millions)

2021

2020

2021

2020

2022

2021

2022

2021

Finance lease cost

Depreciation of finance lease ROU assets

$

10

$

10

$

21

$

20

$

10

$

10

$

20

21

Interest on finance lease liabilities

1

1

1

2

1

1

1

1

Operating lease cost

5

6

11

13

6

5

11

11

Variable lease cost

1

1

1

1

1

1

Sublease income

(1)

(1)

(2)

(1)

(1)

(1)

(2)

(2)

Total lease cost

$

16

$

17

$

32

$

33

$

16

$

16

$

32

$

32

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

As of June 30,

As of June 30,

(In millions)

2021

2020

2022

2021

Cash paid for amounts included in the measurement of lease liabilities:

Operating cash flows for operating leases

$

12

$

14

$

12

$

12

Operating cash flows for finance leases

1

2

1

1

Financing cash flows for finance leases

20

20

20

20

ROU assets obtained in exchange for lease obligations:

Operating leases

8

3

8

8

Finance leases

23

16

20

23

Weighted Average Remaining Lease Term (in years):

Operating leases

10.10

10.57

9.37

10.10

Finance leases

3.62

3.33

3.93

3.62

Weighted Average Discount Rate:

Operating leases

5.25

%

5.60

%

5.20

%

5.25

%

Finance leases

4.90

%

4.46

%

7.08

%

4.90

%

As of June 30, 20212022 and December 31, 20202021, there were $33$36 million and $35$37 million respectively, of finance leases included within Current portion of long-term debt and $64$80 million and $60$82 million respectively, of finance leases included within Long-term debt respectively, on the unaudited Condensed Consolidated Statements of Financial Position. Future minimum lease payments under non-cancellable leases as of June 30, 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

___________________________________

(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.

Position, respectively.

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Table of Contents

Future minimum lease payments under non-cancellable leases as of June 30, 2022 were as follows:

(In millions)

Operating Leases(1)

Finance Leases

Year ended December 31,

2022 (excluding the Six months ended June 30, 2022)

$

12

$

20

2023

20

36

2024

16

27

2025

15

21

2026

11

16

Thereafter

65

5

Total future minimum lease payments

140

125

Less imputed interest

(32)

(9)

Total

$

108

$

116

(1)Each year is presented net of approximately $4-$5 million of projected annual sublease income.   

Note 13.12. Acquisitions and Dispositions

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 unaudited condensed consolidated financial statements since their dates of acquisition. The assets and liabilities of these businesses were recorded in the financial statements at their estimated fair values as of the acquisition dates.

During the six months ended June 30, 2022, we used available cash on hand to fund a $3 million investment for 1 acquisition. Another $1 million of deferred purchase price is due to the sellers one year from the acquisition date. We recorded preliminary goodwill of $3 million, and we are evaluating other intangibles, working capital balances, tangible assets acquired and appropriate useful lives to assign to all assets, including intangibles. The purchase price allocations for this acquisition will be finalized no later than one year from the respective acquisition date. Additionally, we reversed $1 million of contingent consideration related to an acquisition that closed in 2021 as the contingency was not met. The reversal was recorded within Acquisition-related costs in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income, and partially offset by acquisition costs.

In the six months ended June 30, 2022, the Company initiated a series of transactions to restructure its joint ventures in China. The Company contributed $31 million of cash to effect the restructuring during the six months ended June 30, 2022, which is reflected in other investing in the unaudited Condensed Consolidated Statements of Cash Flows. Upon completion of subsequent transactions in 2022, the Company expects to record a gain on sale of a portion of its interest in the joint ventures.

During the six months ended June 30, 2021, we used available cash on hand to fund a $45 million investment in acquisitions, which included $36 million for 5 tuck-in acquisitions. AnotherAs of June 30, 2021, 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 included in Accrued liabilities‒Other on the Consolidated Statements of Financial position as of December 31, 2020. We recorded preliminary goodwill of $25 million 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 acquisitions, as well as $18 million for final funding for 2 pest 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. As of June 30, 2021, we had recorded $3goodwill of $25 million and other intangibles, primarily customer relationships, of $14 million related to these acquisitions. As of June 30, 2022, all purchase price allocations for 2021 acquisitions were completed, resulting in no changes to goodwill or intangibles. We also completed approximately $9 million of goodwillfunding for the 2020 acquisitions. We also made a minority interest investment in a pest management company for approximately $7 million, whichthat was unfunded and is included in Accrued liabilities—liabilities‒Other inon the Condensed Consolidated Statements of Financial 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.position as of December 31, 2020.

Supplemental cash flow information regarding the acquisitions was as follows:

Six Months Ended

June 30,

(In millions)

2022

2021

Assets acquired

$

3

$

40

Liabilities assumed

Net assets acquired

$

3

$

40

Net cash paid

$

3

$

36

Seller financed debt

1

5

Purchase price

$

3

$

40

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Table of Contents

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

On June 1, 2022, in order to satisfy closing conditions of the proposed acquisition by Rentokil, the Company divested its international pest management businesses in the UK and Norway. In connection with the sale of the UK and Norway businesses, the Company received $73 million net of cash disposed in the second quarter of 2022. Additionally, the Company recognized a loss on sale of these international subsidiaries of $41 million for the three and six months ended June 30, 2022, including a $3 million foreign currency loss related to the termination of the cross-currency swap and repayment of note receivable related to the Norway business.

Note 14.13. 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 net income from continuing operations was 27.997.9 percent and 31.027.9 percent for the three months ended June 30, 20212022 and 2020,2021, respectively. The effective tax rate on net income from continuing operations was 28.153.8 percent and 28.528.1 percent for the six months ended June 30, 20212022 and 2020,2021, respectively.

As of June 30, 2021 and December 31, 2020, weWe had $14$10 million and $14$13 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”). as of June 30, 2022 and December 31, 2021, respectively. Based on information currently available, it is reasonably possible that over the next 12 month period unrecognized tax benefits may decrease by $2$1 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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Table of Contents

Note 15.14. Fair Value Measurements

The period-end carrying amounts of cash and cash equivalents, receivables, restricted cash, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The period-end carrying amounts of long-term notes receivable approximate fair value as the effective interest rates for these instruments are comparable to period-end market rates. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value, with unrealized gains and losses reported in interest and net investment income in the unaudited Condensed Consolidated Statements of Operations and Comprehensive Income. The carrying amount of total debt excluding vehicle financing leases was $878$777 million and $920$779 million, and the estimated fair value was $951$835 million and $989$866 million as of June 30, 20212022 and December 31, 2020,2021, 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, 20212022 and December 31, 2020.2021.

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.

Cross-currency interest rate swaps arewere 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 arewere 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 contracts. On June 1, 2022, in connection with the sale of the Company’s pest management business in Norway, the cross-currency interest rate swap was terminated (See Note 8).

Changes in the fair value of the interest rate swap contracts, fuel swap contracts and cross-currency interest rate swap designated as a net investment hedge are recorded within OtherAccumulated other comprehensive income (loss) income on the unaudited Condensed Consolidated Statements of Financial Position. Changes in the fair value of the cross-currency interest rate swap

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Table of Contents

designated as a cash flow hedge are recorded within Selling and administrative expenses on the unaudited 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 theThe net investment hedge was terminated on June 1, 2022 (See Note 8). The hedged net investment was not substantially liquidated, therefore, 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 threesix month periods ended June 30, 20212022 and 2020.2021

17


Table of Contents

.

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, 2021:

As of June 30, 2022:

Financial Assets:

Deferred compensation trust

Long-term marketable securities

$

15

$

15

$

$

Long-term marketable securities

$

12

$

12

$

$

Fuel swap contracts

Prepaid expenses and other assets and Other assets

6

6

Prepaid expenses

5

5

Interest rate swap contract

Prepaid expenses and other assets and Other assets

29

29

Total financial assets

$

21

$

15

$

$

6

$

46

$

12

$

29

$

5

Financial Liabilities:

Cross-currency interest rate swap

Other long-term obligations, primarily self-insured claims

$

11

$

$

11

$

Net investment hedge

Other long-term obligations, primarily self-insured claims

18

18

Interest rate swap contract

Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims

19

19

Total financial liabilities

$

48

$

$

48

$

As of December 31, 2020:

As of December 31, 2021:

Financial Assets:

Deferred compensation trust assets

Long-term marketable securities

$

14

$

14

$

$

Long-term marketable securities

$

15

$

15

$

$

Fuel swap contracts

Prepaid expenses and other assets and Other assets

3

3

Prepaid expenses and other assets and Other assets

2

2

Total financial assets

$

18

$

14

$

$

3

$

17

$

15

$

$

2

Financial Liabilities:

Cross-currency interest rate swap

Other long-term obligations, primarily self-insured claims

$

15

$

$

15

$

Other long-term obligations, primarily self-insured claims

$

7

$

$

7

$

Net investment hedge

Other long-term obligations, primarily self-insured claims

23

23

Other long-term obligations, primarily self-insured claims

11

11

Interest rate swap contract

Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims

34

34

Accrued liabilities—Other and Other long-term obligations, primarily self-insured claims

8

8

Total financial liabilities

$

72

$

$

72

$

$

26

$

$

26

$

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Table of Contents

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, 2021

$

2

Total gains (losses) (realized and unrealized)

Included in earnings

5

Cost of services rendered and products sold

Included in other comprehensive income

3

Settlements

(5)

Balance as of June 30, 2022

$

5

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)

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Table of Contents

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, 2021:

As of June 30, 2022:

Fuel swap contracts

$

6

Discounted Cash Flows

Forward Unleaded Price per Gallon(1)

$2.96 - $3.34

$

3.14

$

5

Discounted Cash Flows

Forward Unleaded Price per Gallon(1)

$3.73 - $4.78

$

4.20

As of December 31, 2020:

As of December 31, 2021:

Fuel swap contracts

$

3

Discounted Cash Flows

Forward Unleaded Price per Gallon(1)

$2.20 - $2.58

$

2.44

$

2

Discounted Cash Flows

Forward Unleaded Price per Gallon(1)

$3.02 - $3.42

$

3.23

___________________________________

(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, 2021,2022, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $18$13 million, maturing through 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, 2021,2022, 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 98 to the condensed consolidated financial statementsunaudited Condensed Consolidated Financial Statements for the effective portion of the gain or loss on derivative instruments recorded in accumulated other comprehensive income and for the amounts reclassified out of accumulated other comprehensive income and into earnings. The amount expected to be reclassified into earnings during the next 12 months includes unrealized gains and losses related to open fuel hedges and interest rate swaps. Specifically, as the underlying forecasted transactions occur during the next 12 months, the hedging gains and losses in accumulated other comprehensive income expected to be recognized in earnings is a gain of less than $1$11 million, net of tax, as of June 30, 2021.2022. 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.

Note 16.15. Earnings Per Share

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

21


Table of Contents

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)

2021

2020

2021

2020

2022

2021

2022

2021

Income from continuing operations

$

54

$

40

$

81

$

41

Net income

$

2

$

54

$

21

$

81

Weighted-average common shares outstanding

127.4

131.9

129.3

133.4

121.5

127.4

121.5

129.3

Effect of dilutive securities:

RSUs

0.3

0.1

0.3

0.1

0.1

0.3

0.1

0.3

Stock options(1)

0.2

0.0

0.2

0.0

0.1

0.2

0.1

0.2

Weighted-average common shares outstanding—assuming dilution

127.8

132.0

129.8

133.5

121.7

127.8

121.7

129.8

Basic earnings per share from continuing operations

$

0.42

$

0.30

$

0.63

$

0.31

Diluted earnings per share from continuing operations

$

0.42

$

0.30

$

0.62

$

0.31

Basic earnings per share

$

0.02

$

0.42

$

0.17

$

0.62

Diluted earnings per share

$

0.02

$

0.42

$

0.17

$

0.62

___________________________________

(1)Options to purchase 0.10.4 million and 1.60.1 million shares for the three months ended June 30, 2021,2022 and 2020,2021, respectively and 0.10.4 million and 1.40.1 million shares for the six months ended June 30, 2021,2022, and 2020,2021, respectively were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive.

  

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Table of Contents

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

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

Overview

Our core services include residential and commercial termite and pest management under the following brands: Terminix, Copesan, Assured Environments, Gregory, McCloud Nomor and Pelias.Nomor. Our operations for the periods presented in this report are organized into one reportable segment, our pest management and termite business.

COVID-19

SinceOn March 11, 2020, when the World Health Organization designated COVID-19 as a global pandemic. Early in the pandemic we have experienced increased demand in our residential pest management and termite and home services service lines as customers are spendingspent more time at home. We have also experienced disruptions in our 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 expect the commercial pest market to continue to stabilize to more normalized growth levels throughoutinto 2022.

Over the remaindercourse of 2021.2021, we experienced an increase in medical expenses and short-term disability claims related to COVID-19 infections in our workforce, which we expect to continue in the short-term, and we have experienced increased turnover and labor shortages as a result of the pandemic. 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 callcustomer care center teammates workingcontinuing to work remotely and field support teammates working remotely where possible. We will continue to evaluate the benefits, opportunities and risks identified from our remote working experiences to sustain and identify ways to reduce ongoing operating costs while balancing operational performance. It is reasonably possible that we 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 ChangesProposed Acquisition by Rentokil

On May 18,December 13, 2021, Mark Tomkins retiredwe entered into the Merger Agreement with Rentokil, Bidco, Merger Sub I and Merger Sub II. Under the Merger Agreement, at the Effective Time, each share of our common stock, par value $0.01 per share, issued and outstanding immediately prior to the Effective Time (other than certain excluded shares as described in the Merger Agreement) will be converted into the right to receive either:

a number of ADSs of Rentokil (each representing a beneficial interest in five ordinary shares of Rentokil) equal to (A) 1.0619 plus (B) the quotient of $11.00 and the volume weighted average price (measured in U.S. dollars) of Rentokil ADSs (measured using the volume weighted average price of Rentokil ordinary shares as a memberproxy) for the trading day that is two trading days prior to the Effective Time (or such other date as may be mutually agreed to by Rentokil and the Company); or

an amount in cash, without interest, and in USD equal to the sum of (A) the Per Share Cash Amount plus (B) the product of the Exchange Ratio and the Rentokil ADS Price,

in each case at the election of the holder of such share of our board of directors. On June 29, 2021, the board expanded its directorships by twocommon stock, subject to certain allocation and appointed Teresa M. Sebastian and Chris S. Terrill as independent membersproration provisions of the boardMerger Agreement. Immediately following such conversion, our shares of directorscommon stock will be automatically cancelled and cease to fillexist. The aggregate Cash Consideration and the vacancies createdaggregate Stock Consideration that will be issued in the Mergers will not vary as a result of individual election preferences.

The respective obligations of the Company and Rentokil to consummate the Mergers are subject to the satisfaction or waiver of a number of conditions. As announced on March 15, 2022, the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 expired, thereby completing the necessary antitrust process in the U.S. As announced on June 1, 2022, the Company completed the divestment of its pest management businesses in the UK and Norway. Completion of the divestment and the completion of the antitrust review process in the U.S. satisfy two of the closing conditions. A number of other conditions remain to be satisfied, including obtaining approval by the expansion.Company’s and Rentokil’s shareholders, and the registration of the Rentokil ADSs with the U.S. Securities and Exchange Commission and their listing on the New York Stock Exchange. The preliminary registration statement on Form F-4 with respect to the ordinary shares of Rentokil underlying the Rentokil ADSs to be issued to Terminix shareholders in connection with the Mergers was filed by Rentokil on June 7, 2022, and the first amendment thereto was filed by Rentokil on July 22, 2022. Accordingly, the parties continue to be on track to complete the transaction in the second half of 2022, with a target completion date at or around the end of the third quarter.

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Table of Contents

In conjunction with the proposed Mergers, the parties have agreed that the Company may provide up to $20 million of cash retention awards (the “Retention Pool”) to Terminix teammates. The retention awards are designed to retain and incentivize the Terminix team as it executes the 2022 operating plan, achieves the consummation of the merger and assists with the integration of the combined company after closing of the transaction. Half of the Retention Pool has been allocated specifically to customer-facing, field operations teammates, and the remainder has been allocated to key back-office teammates.

As the Company prepares for the proposed acquisition, it will incur additional expenses unrelated to ongoing operations, including professional fees for legal and banking services and retention awards among other items.  These will be classified as restructuring expenses and excluded from ongoing operations in order to aid period to period comparability. 

On July 6, 2021, Deidre Richardson joinedJune 1, 2022, in order to satisfy closing conditions of the proposed acquisition by Rentokil, the Company as Senior Vice President, General Counseldivested its international pest management businesses in the UK and Corporate Secretary,Norway. The Company recognized approximately $8 million and Joy Wald joined as Senior Vice President$13 million in commercial pest revenue in the second quarter of 2022 and Chief Information Officer.2021 and $21 million and $26 million in commercial pest revenue year to date 2022 and 2021 respectively related to these divested businesses.

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,

free cash flow

organic revenue 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 across our business. The volume of our revenue is impacted by new unit sales, the retention of our existing customers and acquisitions. We serve both residential and commercial customers, principally in the U.S. We expect to continue our tuck-in acquisition program and to periodically evaluate other strategic acquisitions. As of June 30, 2021,2022, approximately 9495 percent of our revenue was generated by sales in the United States.

Operating Expenses. In addition to the impact of changes in our revenue results, our operating results are affected by, among other things, the level of our operating expenses. A number of our operating expenses are subject to inflationary pressures, such as fuel, chemicals, wages and salaries, 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 (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding. Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-

20


Table of Contents

averageweighted-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 incomeearnings 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 (loss) before: depreciation and amortization expense; acquisition-related costs;costs (adjustments); fumigation related matters; Mobile Bay Formosan termite settlement; non-cash stock-based compensation expense; restructuring and other charges; loss on sale of international subsidiaries; amortization of cloud-based software; goodwill impairment charges; net earnings (loss) from discontinued operations; provision (benefit) for income taxes; loss on extinguishment of debt; and interest 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, consulting agreements, acquisition activities and equity-based, long-term incentive plans.Our definition of Adjusted EBITDA may not be calculated or comparable to similarly titled measures of other companies. 

24


Table of Contents

A reconciliation of Net income to Adjusted EBITDA for the three and six months ended June 30, 20212022 and 20202021 was as follows:

Three Months Ended

Six Months Ended

Three Months Ended

Six Months Ended

June 30,

June 30,

June 30,

June 30,

(In millions)

2021

2020

2021

2020

2022

2021

2022

2021

Net Income

$

54

$

53

$

81

$

67

$

2

$

54

$

21

81

Depreciation and amortization expense

26

27

54

55

27

26

54

54

Acquisition-related costs

(1)

(1)

1

1

(1)

(1)

Mobile Bay Formosan termite settlement

4

4

4

4

Non-cash stock-based compensation expense

5

5

11

10

5

5

11

11

Restructuring and other charges

2

8

9

12

15

2

33

9

Net earnings from discontinued operations

(13)

(26)

Loss on sale of international subsidiaries

41

41

Amortization of cloud based software

1

Provision for income taxes

20

18

31

16

18

20

21

31

Interest expense

11

22

23

45

11

11

23

23

Adjusted EBITDA

$

123

$

119

$

213

$

179

$

120

$

123

$

206

$

213

Free Cash Flow.Free Cash Flow means net cash provided from operating activities from continuing operations, less property additions. We believe Free Cash Flow is useful as a supplemental measure of our liquidity. We use Free Cash Flow to facilitate company-to-company cash flow comparisons by removing payments for property additions, which may vary from company-to-company for reasons unrelated to operating performance.

Organic Revenue Growth. We use organic revenue growth to track performance, 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. 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 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 2020,2021, revenue and Adjusted EBITDA by quarter was recognized as follows:

Q1

Q2

Q3

Q4

Q1

Q2

Q3

Q4

Revenue

23

%

27

%

26

%

23

%

23

%

27

%

26

%

24

%

Adjusted EBITDA

17

%

34

%

28

%

20

%

23

%

32

%

26

%

19

%

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 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 management services.

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Table of Contents

Results of Operations

The following tables shows the results of operations from continuing operations for the three and six months ended June 30, 20212022 and 2020,2021, which reflects the results of acquired businesses from the relevant acquisition dates.

Three Months Ended

Increase

Three Months Ended

Increase

June 30,

(Decrease)

% of Revenue

June 30,

(Decrease)

% of Revenue

(In millions)

2021

2020

2021 vs. 2020

2021

2020

2022

2021

2022 vs. 2021

2022

2021

Revenue

$

560

$

534

5

%

100

%

100

%

$

585

$

560

4

%

100

%

100

%

Cost of services rendered and products sold

318

297

7

57

56

340

318

7

58

57

Selling and administrative expenses

143

143

26

27

148

143

3

25

26

Amortization expense

10

9

7

2

2

10

10

3

2

2

Acquisition-related costs

(1)

*

1

(1)

*

Mobile Bay Formosan termite settlement

4

*

1

4

*

1

Restructuring and other charges

2

8

*

1

15

2

*

2

Loss on sale of international subsidiaries

41

*

7

Interest expense

11

22

(49)

2

4

11

11

2

2

2

Interest and net investment income

(1)

(1)

*

1

(1)

*

Income from Continuing Operations before Income Taxes

73

57

*

13

11

Income before Income Taxes

19

73

*

3

13

Provision for income taxes

20

18

*

4

3

18

20

*

3

4

Equity in earnings of joint venture

1

1

*

Income from Continuing Operations

$

54

$

40

*

10

%

7

%

Equity in earnings of joint ventures

2

1

*

Net Income

$

2

$

54

*

0

%

10

%

________________________________

* not meaningful

Six Months Ended

Increase

Six Months Ended

Increase

June 30,

(Decrease)

% of Revenue

June 30,

(Decrease)

% of Revenue

(In millions)

2021

2020

2021 vs. 2020

2021

2020

2022

2021

2022 vs. 2021

2022

2021

Revenue

$

1,032

$

990

4

%

100

%

100

%

$

1,081

$

1,032

5

%

100

%

100

%

Cost of services rendered and products sold

588

577

2

57

58

636

588

8

59

57

Selling and administrative expenses

280

283

(1)

27

29

287

280

2

27

27

Amortization expense

19

18

8

2

2

20

19

4

2

2

Acquisition-related costs

(1)

1

*

(1)

*

Mobile Bay Formosan termite settlement

4

*

4

*

Restructuring and other charges

9

12

*

1

1

33

9

*

3

1

Loss on sale of international subsidiaries

41

*

4

Interest expense

23

45

(49)

2

5

23

23

(1)

2

2

Interest and net investment income

(1)

(1)

*

2

(1)

*

0

Income from Continuing Operations before Income Taxes

110

56

*

11

6

39

110

*

4

11

Provision for income taxes

31

16

*

3

2

21

31

*

2

3

Equity in earnings of joint venture

2

1

*

3

2

*

Income from Continuing Operations

$

81

$

41

*

8

%

4

%

$

21

$

81

*

2

%

8

%

________________________________

* not meaningful


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Table of Contents

Revenue

Three Months Endedmonths ended June 30, 20212022 Compared to Three Months Endedmonths ended June 30, 20202021

We reported revenue of $560$585 million and $534$560 million for the three months ended June 30, 20212022 and 2020,2021, respectively. Revenue by service line was as follows:

Three Months Ended

Three Months Ended

June 30,

June 30,

(In millions)

2021

2020

Growth

Organic

Acquired

2022

2021

Growth

Organic

Acquired

Residential Pest Management

$

192

$

182

$

10

5

%

$

7

4

%

$

3

1

%

$

207

$

192

$

15

8

%

$

12

6

%

$

3

1

%

Commercial Pest Management

141

124

17

14

%

13

10

%

4

3

%

141

141

%

(5)

(4)

%

5

4

%

Termite and Home Services

193

196

(3)

(2)

%

(4)

(2)

%

%

204

193

12

6

%

11

6

%

1

%

Sales of Products and Other

34

32

3

8

%

3

8

%

%

33

34

(2)

(5)

%

(2)

(5)

%

%

Total revenue

$

560

$

534

$

26

5

%

$

19

4

%

$

7

1

%

$

585

$

560

$

25

4

%

$

16

3

%

$

9

2

%

Revenue growth was $26$25 million year over year,year-over-year, or five percent. Foreign currency fluctuations contributed $4 million, or approximately onefour percent, of total organic revenue growth.including two percent from acquisitions.

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

Commercial pest management revenue growth was 14 percent. Organicflat. The organic revenue growthdecline of 10four percent was mainly driven by the continued steady improvement in temporary cancellationsdivestiture of the Norway and improved price realizationUK pest management businesses, which occurred in the domestic commercial business inquarter. International pest revenue was negatively impacted by approximately $3 million of foreign currency. Excluding the wakeimpact of foreign currency and the divestiture of the COVID-19 pandemic as well as double-digit international growth. Foreign currency fluctuations contributed $4 million, or three percent, of theNorway and UK pest management businesses, commercial pest management organic revenue growth.growth would have been approximately two percent. Commercial pest management revenue also increased threefour percent from acquisitions completed in the last 12 months.

Termite organic revenue growth was six percent. Termite completions decreased two percent.percent, driven by lower sales volume. Home services, which are managed as a component of our termite line of business and include wildlife exclusion, crawl space encapsulation and attic insulation, revenue growth was three21 percent, primarily as a result of improved cross selling opportunities to existing customers. A one percent decline in core termite completions year over year was primarily driven by double-digit growth in core termite completions in the same quarter of 2020. Termite renewals decreased fiveincreased four percent, primarilymainly due to an approximately $5 million impact from the change in the timing of revenue recognition in our new monthly subscription-based termite offering.improved price realization.

In the three months ended June 30, 2021,2022, termite renewal revenue comprised 41 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 eightdecreased five percent primarily from an increase in order backlog due to the COVID-19 impacts on threesupply chain challenges.

Six months ended June 30, 2020 revenue.

2022 Compared to Six Months Endedmonths ended June 30, 2021 Compared to Six Months Ended June 30, 2020

We reported revenue of $1,032$1,081 million and $990$1,032 million for the six months ended June 30, 20212022 and 2020,2021, respectively. Revenue by service line was as follows:

Six Months Ended

June 30,

(In millions)

2022

2021

Growth

Organic

Acquired

Residential Pest Management

$

382

$

358

$

24

7

%

$

19

5

%

$

4

1

%

Commercial Pest Management

273

270

4

1

%

(6)

(2)

%

10

4

%

Termite and Home Services

376

354

21

6

%

21

6

%

1

%

Sales of Products and Other

51

50

1

2

%

1

2

%

%

Total revenue

$

1,081

$

1,032

$

50

5

%

$

35

3

%

$

15

1

%

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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$50 million year over year,year-over-year, or four percent. Foreign currency fluctuations contributed $7 million, or approximatelyfive percent, including one percent of total organic revenue growth.from acquisitions.

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

Commercial pest management revenue growth was nineone percent. OrganicThe organic revenue growthdecline of seventwo percent was mainly driven by the continued steady improvement in temporary cancellationsdivestiture of the Norway and improved price realizationUK pest management businesses, which occurred in the domestic commercial business insecond quarter. International pest revenue was negatively impacted by approximately $4 million of foreign currency. Excluding the

23


Table impact of Contents

wake of the COVID-19 pandemic as well as strong double-digit international growth. Foreignforeign currency fluctuations contributed $7 million, or three percent, of theand Norway and UK pest management businesses, commercial pest management organic revenue growth.growth would have been approximately one percent. Commercial pest management revenue also increased twofour percent from acquisitions completed in the last 12 months.

Termite organic revenue growth was onesix percent. Termite completions increased three percent, driven by sales of our new monthly pay tiered termite product.were flat. 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 eight20 percent, primarily as a result of improved cross selling opportunities to existing customers. Termite renewals decreased fourincreased two percent, primarilymainly due to an approximately $10 million impact from the change in the timing of revenue recognition in our new monthly subscription-based termite offering.improved price realization.

Sales of Product and Other remained flat as therevenue growth experienced in the second quarter of 2021 was offsettwo percent, driven 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.higher sales volume.

Cost of Services Rendered and Products Sold

We reported cost of services rendered and products sold of $318$340 million and $297$318 million for the three months ended June 30, 20212022 and 2020,2021, respectively and $588$636 million and $577$588 million for the six months ended June 30,20, 2022 and 2021, and 2020, respectively.

For the three months ended June 30, 20212022 compared to June 30, 2020, costs2021, cost of services rendered and products sold increased seven percent, or one percent as a percentage of revenue primarilyincreased one percent. The increase is largely attributable to the flowthroughflow through from $25 million of higher revenue. ProductionInvestments in labor increased $6$7 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 shiftprimarily due to stronghigher trainee headcount as we right-size our technician headcount in order to drive growth in commercial pest management. This was offset, in part, by a $4future periods. Vehicle fuel increased $3 million decrease in chemicals and materials and vehicle costs,year-over-year, driven by lower chemical andhigher 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 fuelhedge prices and improvements in our fleet management.year-over-year. Termite damage claims increased $3 million year over year, drivenexpenses were flat year-over-year with reduced litigated claims counts offset by higher costscost per Non-Litigated ClaimClaims due, in part, to inflationary pressure on building materials and contractor costs. IndirectInvestments in service staffing levels and training in the call center to drive improved customer satisfaction and retention also increased.

For the six months ended June 30, 2022 compared to June 30, 2021, cost of services rendered and products sold as a percentage of revenue increased two percent. The increase is largely attributable to the flow through from $50 million of higher revenue. Investments in labor increased $12 million, primarily due to higher trainee costs to serve our customers, primarily at our contact centers, increased over prior year as we align administrative functionsright size our workforce to drive growth in future periods. Vehicle fuel increased $5 million year-over-year, driven by higher fuel hedge prices year-over-year. Termite damage claims expenses increased $3 million with reduced litigated claims counts partially offset by higher cost per claim due to reduced litigated claims counts in the Mobile Bay Areas as a singularly focused pest management company, offsetting a decreasewell as higher cost per Non-Litigated Claims due, in generalpart, to inflationary pressure on building materials and administrativecontractor costs. Investments in service staffing levels and training in the call center to drive improved customer satisfaction and retention also increased.

Selling and Administrative Expenses

The following table provides a summary of selling and administrative expenses for the three months ended June 30, 2022 and 2021:

Three Months Ended

Six Months Ended

June 30,

June 30,

(In millions)

2022

2021

2022

2021

Selling and marketing expenses

$

74

$

72

$

132

131

General and administrative expenses

75

71

154

149

Total Selling and administrative expenses

$

148

$

143

$

287

$

280

Selling and marketing expenses increased $2 million and $1 million, respectively in the three months and six months ended June 30, 2022 compared to the three months and six months ended June 30, 2021, and 2020:due to higher sales labor investments.

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

SellingGeneral and marketing expenses increasedadministrative costs were up $4 million and $5 million, respectively in both the three months and six months ended June 30, 2022 compared to the three months and six months ended June 30, 2021, compared to June 30, 2020, primarily relateddue to increased commission payments and flat marketingtravel costs due to the implementation of Terminix Way across the branch network as a percent of revenue. General and administrative costs decreasedwell as investments in sales headcount in both the threefield and six months ended June 30, 2021 comparedcall center 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”)drive customer penetration 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.growth.

Amortization Expense

Amortization expense was $10 million and $9 million infor the three months ended June 30, 2022 and 2021, and 2020, respectively,$20 million and $19 million and $18 million infor the six months ended June 30, 2022 and 2021, and 2020. The increase in amortization expense primarily reflects the effect of recent acquisitions.

24


Table of Contents

respectively.

Acquisition-Related Costs

For the three months ended June 30, 2022, Acquisition-related costs were $1 million. 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

28


Table of Contents

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 and other charges of approximately $2$15 million and $8$2 million in the three months ended June 30, 20212022 and 2020,2021, respectively and $9$33 million and $12$9 million in the six months ended June 30, 20212022 and 2020,2021, respectively. Restructuring Charges for the three and Othersix months ended June 30, 2022 primarily included costs related to our proposed acquisition by Rentokil. Restructuring Charges primarilyfor the six months ended June 30, 2022, also included a $9 million impairment of our Memphis headquarters lease. Restructuring charges for the three and six months ended June 30, 2021 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.

Loss on sale of international subsidiaries

We recognized a loss on sale of our international pest management businesses in the UK and Norway subsidiaries of $41 million for the three and six months ended June 30, 2022, including a $3 million foreign currency loss related to the termination of the cross-currency swap and repayment of note receivable related to the Norway business.

Interest Expense

Interest expense was $11 million and $22 million infor both the three months ended June 30, 20212022 and 2020, respectively,2021 and $23 million and $45 million infor both the six months ended June 30, 20212022 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.2021.

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. Interest and net investment expense was $1 million for the three months ended June 30, 2022 and Interest and net investment income was $1 million for the three months ended June 30, 2021. Interest and net investment expense was $2 million for the six months ended June 30, 2022, and Interest and net investment income was $1 million for the six months ended June 30, 2021.

Income from Continuing Operations before Income Taxes

Income from continuing operations before income taxes was $19 million for the three months ended June 30, 2022 compared to $73 million for the three months ended June, 30, 2021 compared to $572021. Income before income taxes was $39 million for the threesix months ended June 30, 2020. Income from continuing operations2022 as compared to income before income taxes wasof $110 million for the six months ended June 30, 2021 compared to $56 million for the three months ended June 30, 2020.2021. The change in income from continuing operations before income taxes in both periods primarily reflects the realizationincreased Restructuring and Other Charges and loss on sale of cost savings and efficiency initiatives, as well as reduced interest driven by less long-term debt outstanding.international subsidiaries.

Provision for Income Taxes

The effective tax rate on net income from continuing operations was 27.997.9 percent and 31.027.9 percent for the three months ended June 30, 20212022 and 2020,2021, respectively and 28.153.8 percent and 28.528.1 percent for the six months ended June 30, 2022 and 2021, and 2020, respectively.

Net Earnings from Discontinued Operations

Net earnings from discontinued operations were $13 million and $26 million The effective tax rate on net income for the three and six months ended June 30, 2020, reflecting2022 was unfavorably impacted by the resultsnon-deductibility of the ServiceMaster Brands Divestiture Group forloss on sale of foreign subsidiaries, as well as a portion of the period.restructuring and other charges.

Net Income

Net income was $54$2 million and $53for the three months ended June 30, 2022, compared to net income of $54 million for the three months ended June 30, 2021, and 2020, respectively, which was primarily driven by a $14$55 million increasedecrease in Income before Income Taxes offset by a decrease in Provision for Income Taxes of $2 million. Net income from continuing operations and $13was $21 million lower net earnings from discontinued operations infor the threesix months ended June 30, 2021. Net income was2022 as compared to $81 million and $67 million for the six months ended June 30, 2021, and 2020, respectively, which was primarily driven by the $71 million decrease in Income before Income Taxes, offset by a $40$10 million increasedecrease in income from continuing operations and $26 million lower net earnings from discontinued operations in the three months ended June 30, 2021.

Income Taxes.

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Table of Contents

Adjusted EBITDA

Three Months Ended June 30, 20212022 Compared to Three Months Ended June 30, 20202021

The following table provides a summary of changes in Adjusted EBITDA for the three months ended June 30, 20212022 compared to the three months ended June 30, 2020:2021:

(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

(In millions)

Three Months Ended June 30, 2021

$

123

Revenue conversion

12

Investments in labor

(7)

Vehicle fuel

(3)

Termite damage claims

Sales and Marketing

(2)

Terminix Way investments

Investments in call center/sales/service

(2)

Travel

(1)

Other

1

Three Months Ended June 30, 2022

$

120

ProductionInvestments in labor increased $6$7 million, related to increased turnover from historic lows in 2020 which resulted in increased overtime pay in 2021, and a revenue mix shiftprimarily due to stronghigher trainee headcount as we right-size our technician headcount in order to drive growth in commercial pest management. Other direct cost productivity, which included chemicals and materials and vehicle costs, decreased $4future periods. Vehicle fuel increased $3 million year over year, primarilyyear-over-year, driven by lower chemical costs, improvements in fleet management and lowerhigher fuel hedge prices. Termite damage claims expenses increased $1 million drivenwere flat year-over-year with reduced litigated claims offset by higher costscost per Non-Litigated ClaimClaims due, in part, to inflationary pressure on building materials and contractor costs, primarily in the Mobile Bay Area.costs. Investments in CxPstaffing levels and Terminix Waytraining in both sales and service in our call center increased $2 million. Sales and marketing expense increased $2 million as we launchdue to investments in sales headcount in both the field and call center to drive customer penetration and growth. Travel expenses increased $1 million due to the implementation of 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 inacross the second quarter of 2021 compared to the second quarter of 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.branch network.

Six Months Ended June 30, 20212022 Compared to Six Months Ended June 30, 20202021

The following table provides a summary of changes in Adjusted EBITDA for the six months ended June 30, 20212022 compared to the six months ended June 30, 2020:2021:

(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

(In millions)

Six Months Ended June 30, 2021

$

213

Revenue conversion

24

Investments in labor

(12)

Termite damage claims

(3)

Terminix Way Investment

(1)

Vehicle fuel

(5)

Investments in call center/sales/service

(5)

Sales and marketing

(2)

Travel

(2)

Other

(1)

Six Months Ended June 30, 2022

$

206

Other direct cost productivity decreased $10

Investments in labor increased $12 million, primarily due to higher trainee headcount and talent acquisition expense. Vehicle fuel increased $5 million year-over-year, driven by lower chemical costs, improvements in fleet management and lowerhigher fuel hedge prices. Termite damage claims expenses increased $3 million drivenwith reduced litigated claims counts partially offset by higher cost per claim due to reduced litigated claims counts in the Mobile Bay Areas as well as higher cost per Non-Litigated ClaimClaims due, in part, to inflationary pressure on building materials and contractor costs, primarily in the Mobile Bay Area.costs. Investments in CxP and Terminix Way increased $2$1 million as we launch the Terminix Way initiativecontinue to roll-out enhanced onboarding, training and begintechnology to roll out CxP. Generalour technicians. Investments in staffing levels 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 servetraining in both sales and service in our customers, primarily at our contact centers.call center increased $5 million. Sales and marketing expense increased $1$2 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 $4higher sales labor investment. Travel expenses increased $2 million due to the implementation 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.Terminix Way across the branch network.

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Table of Contents

Termite Damage Claims

A summary of Litigated Claims and Non-Litigated Claims for the three and six months ended June 30, 20212022 and 20202021 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, 2019

56

11

67

376

618

994

New claims filed

6

2

8

127

505

632

Claims resolved

(6)

(6)

(183)

(546)

(729)

Outstanding claims as of March 31, 2020

56

13

69

320

577

897

New claims filed

8

5

13

147

669

816

Claims resolved

(1)

(2)

(3)

(168)

(501)

(669)

Outstanding claims as of June 30, 2020

63

16

79

299

745

1,044

Area

Regions

Total

Area

Regions

Total

Outstanding claims as of December 31, 2020

49

16

65

258

846

1,104

49

16

65

258

846

1,104

New claims filed

7

5

12

89

529

618

7

5

12

89

529

618

Claims resolved

(9)

(2)

(11)

(144)

(630)

(774)

(9)

(2)

(11)

(144)

(630)

(774)

Outstanding claims as of March 31, 2021

47

19

66

203

745

948

47

19

66

203

745

948

New claims filed

12

7

19

112

687

799

12

7

19

112

687

799

Claims resolved

(11)

(11)

(131)

(560)

(691)

(11)

(11)

(131)

(560)

(691)

Outstanding claims as of June 30, 2021

48

26

74

184

872

1,056

48

26

74

184

872

1,056

Outstanding claims as of December 31, 2021

58

26

84

169

737

906

New claims filed

10

5

15

80

436

516

Claims resolved

(7)

(3)

(10)

(120)

(551)

(671)

Outstanding claims as of March 31, 2022

61

28

89

129

622

751

New claims filed

8

4

12

100

513

613

Claims resolved

(4)

(3)

(7)

(84)

(544)

(628)

Outstanding claims as of June 30, 2022

65

29

94

145

591

736

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”). 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.

A summary of Litigated Claims and Non-Litigated Claims reserve activity for the three months and six months ended June 30, 20212022 and 20202021 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

Reserve as of December 31, 2019

$

40

$

12

$

52

$

15

$

13

$

28

Expense

3

3

5

2

4

6

Payments

(3)

(1)

(3)

(3)

(5)

(8)

Reserves as of March 31, 2020

40

14

54

15

12

27

Expense

7

2

9

2

4

6

Payments

(4)

(1)

(5)

(3)

(5)

(8)

Reserve as of June 30, 2020

$

43

$

15

$

58

$

14

$

11

$

25

Reserve as of December 31, 2020

$

35

$

13

$

47

$

14

$

11

$

25

$

35

$

13

$

47

$

14

$

11

$

25

Expense

3

2

5

3

6

10

3

2

5

3

6

10

Payments

(6)

(1)

(7)

(5)

(6)

(11)

(6)

(1)

(7)

(5)

(6)

(11)

Reserves as of March 31, 2021

32

13

45

12

11

24

32

13

45

12

11

24

Expense

4

4

8

4

8

12

4

4

8

4

8

12

Payments

(6)

(6)

(5)

(6)

(11)

(6)

(6)

(5)

(6)

(11)

Reserve as of June 30, 2021

$

30

$

17

$

47

$

11

$

13

$

24

$

30

$

17

$

47

$

11

$

13

$

24

Reserve as of December 31, 2021

$

36

$

14

$

50

$

8

$

14

$

22

Expense

5

3

8

3

7

10

Payments

(4)

(2)

(6)

(4)

(7)

(11)

Reserves as of March 31, 2022

36

16

52

8

13

21

Expense

4

2

6

4

8

12

Payments

(1)

(2)

(2)

(3)

(8)

(11)

Reserve as of June 30, 2022

$

39

$

17

$

56

$

9

$

14

$

22

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Table of Contents

In addition, our results of operations for the three and six months ended June 30, 2022 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, 2021 include charges for legal fees associated with Litigated Claims of $1 million and $3 million, respectively. Our

Free Cash Flow

Free Cash Flow is not a measurement of our financial performance or liquidity under GAAP and does not purport to be an alternative to net cash provided from operating activities from continuing operations or any other performance or liquidity measures derived in accordance with GAAP. Free Cash Flow means net cash provided from operating activities, less property additions. Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP. Other companies in our industries may calculate Free Cash Flow or similarly titled non-GAAP financial measures differently, limiting its usefulness as a comparative measure.

We believe Free Cash Flow is useful as a supplemental measure of operationsour liquidity. We use Free Cash Flow to facilitate company-to-company cash flow comparisons by removing payments for property additions, which may vary from company-to-company for reasons unrelated to operating performance.

The following table reconciles net cash provided from operating activities, which we consider to be the most directly comparable GAAP measure, to Free Cash Flow using data derived from our unaudited condensed consolidated financial statements 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, periods indicated:

Three Months Ended

Six Months Ended

June 30,

June 30,

(In millions)

2022

2021

2022

2021

Net Cash Provided from Operating Activities from Continuing Operations

$

90

$

76

$

159

151

Property additions

(5)

(6)

(12)

(12)

Free Cash Flow

$

85

$

71

$

147

$

139

and costs related to mitigation efforts in the Mobile Bay Area of $2 million and $3 million, respectively

.

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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, 2021,2022, 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, 2021,2022, we had $691$656 million of immediate liquidity, which consisted of available cash and cash equivalents and available borrowings under our Existing Revolving Credit Facility.

At June 30, 2021,2022, there were $22 million of letters of credit outstanding and $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 unaudited Condensed Consolidated Statements of Financial Position as of June 30 2021., 2022. 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 September 25, 2020, our board of directors approved a three-year $400 million share repurchase program, which funds were exhausted in the third quarter of 2021. On September 21, 2021, our board of directors approved a new three-year $400 million share repurchase 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, 2021,2022, we had $43$253 million of authority remaining under this program.Given the proposed acquisition by Rentokil, we do not intend to repurchase any shares of our common stock for the foreseeable future.

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, 2021,2022 the estimated fair value of our fuel swap contracts was a net asset of $6$5 million, and we had posted $2 million in letters of credit as collateral under our fuel hedging 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 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.

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, 2021,2022, we acquired $22$20 million of vehicles through the leasing program under the Fleet Agreement. All leases under the Fleet Agreement are finance leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual adjustments and a borrowing margin ranging from 1.331.25 percent to 2.45 percent. We have no minimum commitment for the number of vehicles to be obtained under the Fleet Agreement.

We anticipate Given the increased lead times and other impacts in the new vehicle supply chain delaying delivery of ordered vehicles, it is difficult to predict the amount of new lease financings includingin the Fleet Agreement and incremental leasing programs, for the full year 2021 will range from $60 million to $70 million.year. We expect to fulfill all our ongoing vehicle fleet needs through vehicle finance leases.

Other Capital Requirements

We anticipateincurred $12 million of capital expenditures forin the full year 2021 will range from $30 million to $40 million,six months ended June 30, 2022, reflecting ongoing technology projects and recurring capital needs. We incurred $12 million

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Table of such costs in the six months ended June 30, 2021.Contents

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 consider the earnings in our non-U.S. subsidiaries to be indefinitely reinvested and, accordingly, recorded no deferred income taxes. While undistributed foreign earnings are no longer taxable under U.S. tax principles, 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 unaudited Condensed Consolidated Statements of Cash Flows, are summarized in the following table.

Six Months Ended

Six Months Ended

June 30,

June 30,

(In millions)

2021

2020

2022

2021

Net cash provided from (used for):

Operating activities

$

151

$

172

$

159

$

151

Investing activities

(56)

(36)

20

(56)

Financing activities

(409)

(140)

(26)

(409)

Discontinued operations

12

28

13

12

Effect of exchange rate changes on cash

(1)

Cash (decrease) increase during the period

$

(302)

$

22

Cash increase (decrease) during the period

$

161

$

(302)

Operating Activities

Net cash provided from operating activities from continuing operations decreased $21increased $8 million to $159 million for the six months ended June 30, 2022 compared to $151 million for the six months ended June 30, 2021 compared to $172 million2021.

Net cash provided from operating activities for the six months ended June 30, 2020.2022 comprised $155 million in earnings adjusted for non-cash charges and a $23 million decrease in cash required for working capital (a $12 million decrease excluding the working capital impact of accrued interest and taxes), offset, in part, by $19 million in payments related to restructuring and other charges, fumigation related matters, and acquisition related costs. For the six months ended June 30, 2022, working capital requirements were favorably impacted by seasonal activity and the timing of interest payments. Additionally, we incurred $10 million of costs to implement our new customer experience platform in the six months ended June 30, 2022, which are included within Prepaid expenses and other assets on the unaudited Condensed Consolidated Statements of Financial Position and Inventories and other current assets on the unaudited Condensed Consolidated Statements of Cash Flows.

Net cash provided from operating activities for the six months ended June 30, 2021 comprised $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 paypaid 50 percent of the payroll deferral in the fourth quarter of 2021 and expect to pay the remainder in the fourth quarter of 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 unaudited Condensed Consolidated Statements of Financial Position and Inventories and other current assets on the unaudited 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 $10 million in payments related to 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.

Investing Activities

Net cash used forprovided by investing activities from continuing operations was $56$20 million for the six months ended June 30, 2021,2022, compared to $36net cash used for investing activities $56 million for the six months ended June 30, 2021.

Proceeds from sale of international subsidiaries, net of cash disposed was $73 million for the six months ended June 30, 2020.2022.

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Cash$3 million was paid for business acquisitions was $45 million for the six months ended June 30, 2021,2022, compared to $24$45 million in cash paid for business acquisitions for the six months ended June 30, 2020.2021. We expect to continue our tuck-in acquisition program and to periodically evaluate other strategic acquisitions.

Capital expenditures were $12 million and $15 million forIn the six months ended June 30, 20212022, the Company initiated a series of transactions to restructure its joint ventures in China. The Company contributed $31 million of cash to effect the restructuring during the six months ended June 30, 2022, which is reflected in other investing in the Condensed Consolidated Statements of Cash Flows. Upon completion of subsequent transactions in 2022, the Company expects to record a gain on sale of a portion of its interest in the joint ventures.

Capital expenditures were $12 million for both the six months ended June 30, 2022 and 20202021, respectively, and included recurring capital needs, and information technology projects.

Cash flows used for notes receivable, net, for the six months ended June 30, 2022 and 2021 were negligible. Cash flows received for notes receivable, net, for the six months ended June 30, 2020 totaled $3 million.$8 million and $1 million, respectively.

Financing Activities

Net cash used for financing activities from continuing operations was $26 million and $409 million for the six months ended June 30, 2022 and 2021, compared to $140 million for the six months ended June 30, 2020.

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respectively.

During the six months ended June 30, 20212022, we received $1 million from the issuance of common stock through the exercise of stock options. In addition, we borrowed $80 million on our Revolving Credit Facility and repaid $107 million of debt. 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 on 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.Copesan.

Mobile Bay Formosan Termite Settlement

In November 2020, the 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 Agriculture and Industries; and a 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 state of Alabama $19 million.

Pursuant to the Settlement, we have also agreed to provide the 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 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 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 escrow through the second quarter of 2021. In the second quarter of 2021, the Company recorded an increase in expense related to the settlement of $4 million due to a higher than anticipated customer participation rate. No adjustments were made in the second quarter of 2022. The fund’s receiver paid a total of $11 million from escrow through the second quarter of 2022.

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; the proposed acquisition by Rentokil; 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 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 20202021 Form 10-K and in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” above could cause actual results and outcomes to differ from those reflected in the forward-looking statements. Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

risks and uncertainties related to the proposed acquisition of the Company by Rentokil, including stockholder approvals, challenges to the proposed acquisition, business operational uncertainties, potential loss of key teammates, and litigation;

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 teammates or the health and operations of our customers;

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

the 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, 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 and teammates;

our ability to attract and retain key 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.

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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.

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, 2021,2022, 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 10 million to 12 million gallons of fuel in 2021.2022. As of June 30, 2021,2022, a 10 percent change in fuel prices would result in a change of approximately $4$2 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, 2021,2022, we had fuel swap contracts to pay fixed prices for fuel with an aggregate notional amount of $18$13 million, maturing through 2022. The estimated fair value of these contracts as of June 30, 20212022 was a net asset of $6$5 million. These fuel swap contracts provide a fixed price for approximately 9380 percent of our estimated fuel usage for the remainder of 2021.

Subsequent to June 30, 2021, 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 exposed to foreign currency exchange risk in Swedish krona, Norwegian krone, 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.

We have entered into a cross currency interest rate swapOn June 1, 2022, in order to satisfy closing conditions of the proposed acquisition by Rentokil, the Company divested its international pest management businesses in the UK and a net investment hedgeNorway eliminating our previous exposure to mitigate the financial impactrisks of fluctuations in foreign currency exchange rates between the U.S. dollarNorwegian krone, and Swedish krona,significantly reducing our largest foreign currency exposure. These instruments provide a fixed translation rate on our approximately $200 million investment in Nomor. A hypothetical 10 percent adverse movement in foreign currency exchange rates comparedexposure to the U.S. dollar relative to exchange rates on June 30, 2021, would have resulted in a change in 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 be substantially offset by the impact such changes would have on the related cross currency swap and net investment hedge contracts, respectively, which are in place for the related foreign currency denominated investment.British pound.

 

ITEM 4. CONTROLS AND PROCEDURES

Evaluation of disclosure controls and procedures

Our Chief Executive Officer, Brett T. Ponton, and Executive Vice President and Chief Financial Officer, 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. Ponton and Riesbeck have concluded that both the design and operation of our disclosure controls and procedures were effective as of June 30 2021., 2022.

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 threesix months ended June 30 2021, 2022 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

Information with respect to certain legal proceedings is set forth in Note 65 to the unaudited condensed consolidated financial 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 20202021 Form 10-K and our other filings with the SEC various risks that may materially affect our business. There have been no material changes to the risk factors disclosed in the 20202021 Form 10-K. The materialization of any risks and uncertainties identified in Forward-Looking Statements contained in this report, together with those previously disclosed in the 20202021 Form 10-K and our other filings with the SEC or those that are presently unforeseen could result in significant adverse effects on our

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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

__________________________________None.

(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. EXHIBIEXHIBITSTS

Exhibit
Number

Description

10.1*

Schedule of Signatories to a Director Indemnification Agreement

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)

___________________________________

* 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 6, 20215, 2022

TERMINIX GLOBAL HOLDINGS, INC.

(Registrant)

By:

/s/ Robert J. Riesbeck

Robert J. Riesbeck

Executive Vice President and Chief Financial Officer

(Principal Financial Officer)

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