Document and Entity Information
Document and Entity Information - USD ($) | 12 Months Ended | ||
Dec. 31, 2018 | Feb. 22, 2019 | Jun. 29, 2018 | |
Document and Entity Information [Abstract] | |||
Entity Registrant Name | frontdoor, inc. | ||
Entity Central Index Key | 1,727,263 | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2018 | ||
Amendment Flag | false | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Filer Category | Non-accelerated Filer | ||
Entity Common Stock, Shares Outstanding | 84,614,884 | ||
Document Fiscal Year Focus | 2,018 | ||
Document Fiscal Period Focus | FY | ||
Entity Public Float | $ 0 | ||
Entity Well-known Seasoned Issuer | No | ||
Trading Symbol | ftdr | ||
Entity Small Business | false | ||
Entity Emerging Growth Company | false | ||
Entity Shell Company | false |
Consolidated and Combined State
Consolidated and Combined Statements of Operations and Comprehensive Income - USD ($) shares in Millions, $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Consolidated and Combined Statements of Operations and Comprehensive Income [Abstract] | ||||
Revenue | $ 1,258 | $ 1,157 | $ 1,020 | |
Cost of services rendered | 686 | 589 | 526 | |
Gross Profit | 572 | 567 | 494 | |
Selling and administrative expenses | 338 | 312 | 286 | |
Depreciation expense | 12 | 9 | 8 | |
Amortization expense | 8 | 8 | 6 | |
Restructuring charges | 3 | 7 | 3 | |
Spin-off charges | 24 | 13 | ||
Affiliate royalty expense | 1 | 2 | 2 | |
Interest expense | 23 | 1 | ||
Interest income from affiliate | (2) | (3) | (2) | |
Interest and net investment income | (2) | (2) | (5) | |
Other | 1 | |||
Income before Income Taxes | 166 | 220 | 196 | |
Provision for income taxes | 42 | 60 | 71 | |
Net Income | 125 | 160 | 124 | |
Other Comprehensive Income (Loss), Net of Income Taxes: | ||||
Net unrealized loss on securities | (2) | |||
Net unrealized loss on derivative instruments | (9) | |||
Total Other Comprehensive Loss, Net of Income Taxes: | (9) | (2) | ||
Total Comprehensive Income | $ 116 | $ 160 | $ 123 | |
Earnings per Share: | ||||
Basic | $ 1.47 | $ 1.90 | $ 1.47 | |
Diluted | $ 1.47 | $ 1.90 | $ 1.47 | |
Weighted-average Common Shares Outstanding: | ||||
Basic | [1] | 84.5 | 84.5 | 84.5 |
Diluted | 84.7 | 84.5 | 84.5 | |
[1] | For periods prior to the Spin-off, earnings per share was calculated based on the 84,515,619 shares of Frontdoor stock that were outstanding at the date of distribution. |
Consolidated and Combined Sta_2
Consolidated and Combined Statements of Financial Position - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Current Assets: | ||
Cash and cash equivalents | $ 296 | $ 282 |
Marketable securities | 9 | 25 |
Receivables, less allowances of $2 and $1, respectively | 12 | 406 |
Prepaid expenses and other assets | 13 | 10 |
Deferred customer acquisition costs | 18 | |
Total Current Assets | 330 | 741 |
Other Assets: | ||
Property and equipment, net | 47 | 31 |
Goodwill | 476 | 476 |
Intangible assets, net | 158 | 165 |
Long-term marketable securities | 2 | |
Deferred customer acquisition costs | 21 | |
Other assets | 10 | 1 |
Total Assets | 1,041 | 1,416 |
Current Liabilities: | ||
Accounts payable | 41 | 33 |
Accrued liabilities: | ||
Payroll and related expenses | 10 | 15 |
Home service plan claims | 67 | 57 |
Interest payable | 9 | |
Other | 26 | 19 |
Deferred revenue | 185 | 573 |
Current portion of long-term debt | 7 | 9 |
Total Current Liabilities | 345 | 705 |
Long-Term Debt | 977 | |
Other Long-Term Liabilities: | ||
Deferred taxes | 39 | 38 |
Other long-term obligations | 24 | 11 |
Total Other Long-Term Liabilities | 63 | 49 |
Equity: | ||
Net Parent Investment | 661 | |
Common stock, $.01 par value; 2,000,000,000 shares authorized; 84,545,152 shares issued and outstanding at December 31, 2018 | 1 | |
Additional paid-in capital | 1 | |
Accumulated deficit | (336) | |
Accumulated other comprehensive loss | (9) | |
Total (Deficit) Equity | (344) | 661 |
Total Liabilities and Equity | $ 1,041 | $ 1,416 |
Consolidated and Combined Sta_3
Consolidated and Combined Statements of Financial Position (Parenthetical) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Consolidated and Combined Statements of Financial Position [Abstract] | ||
Allowance for receivables (in dollars) | $ 2 | $ 1 |
Common stock, par value (in dollars per share) | $ 0.01 | |
Common stock, shares authorized (in shares) | 2,000,000,000 | |
Common stock, shares issued (in shares) | 84,545,152 | |
Common stock, shares outstanding (in shares) | 84,545,152 |
Consolidated and Combined Sta_4
Consolidated and Combined Statements of Changes in Equity - USD ($) shares in Millions, $ in Millions | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Net Parent Investment [Member] | Accumulated Other Comprehensive Income (Loss) [Member] | Total |
Balance, beginning of period at Dec. 31, 2015 | $ 516 | $ 2 | $ 518 | |||
Net income | 124 | 124 | ||||
Stock-based employee compensation | 4 | 4 | ||||
Net transfers to Parent | (84) | (84) | ||||
Other comprehensive loss, net of tax | (2) | (2) | ||||
Balance, end of period at Dec. 31, 2016 | 560 | 560 | ||||
Net income | 160 | 160 | ||||
Stock-based employee compensation | 4 | 4 | ||||
Net transfers to Parent | (63) | (63) | ||||
Balance, end of period at Dec. 31, 2017 | 661 | 661 | ||||
Net income | $ 17 | 108 | 125 | |||
Stock-based employee compensation | $ 1 | 3 | 4 | |||
Adoption of ASC 606 | 2 | 2 | ||||
Net transfers to Parent | (127) | (127) | ||||
Non-cash distribution to Parent | (1,000) | (1,000) | ||||
Reclassification of Net Parent Investment | (352) | $ 352 | ||||
Issuance of common stock at Spin-off, value | $ 1 | (1) | ||||
Issuance of common stock at Spin-off, shares | 85 | |||||
Other comprehensive loss, net of tax | (9) | (9) | ||||
Balance, end of period at Dec. 31, 2018 | $ 1 | $ 1 | $ (336) | $ (9) | $ (344) | |
Balance, shares at Dec. 31, 2018 | 85 |
Consolidated and Combined Sta_5
Consolidated and Combined Statements of Cash Flows - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Consolidated and Combined Statements of Cash Flows [Abstract] | |||
Cash and Cash Equivalents at Beginning of Period | $ 282 | $ 168 | $ 156 |
Cash Flows from Operating Activities: | |||
Net Income | 125 | 160 | 124 |
Adjustments to reconcile net income to net cash provided from operating activities: | |||
Depreciation expense | 12 | 9 | 8 |
Amortization expense | 8 | 8 | 6 |
Deferred income tax provision | 7 | (19) | 1 |
Stock-based compensation expense | 4 | 4 | 4 |
Gain on sale of marketable securities | (3) | ||
Restructuring charges | 3 | 7 | 3 |
Cash payments related to restructuring charges | (5) | (5) | (3) |
Spin-off charges | 24 | 13 | |
Payments for spin-off charges | (23) | (13) | |
Other | 1 | 2 | |
Change in working capital, net of acquisitions: | |||
Receivables | 4 | (33) | (40) |
Other current assets | (1) | 5 | 6 |
Accounts payable | 8 | 5 | |
Deferred revenue | 1 | 44 | 43 |
Accrued liabilities | 7 | 9 | 3 |
Accrued interest payable | 9 | ||
Current income taxes | 4 | ||
Net Cash Provided from Operating Activities | 189 | 194 | 155 |
Cash Flows from Investing Activities: | |||
Purchases of property and equipment | (27) | (15) | (11) |
Other business acquisitions, net of cash acquired | (87) | ||
Purchases of available-for-sale securities | (15) | (44) | (6) |
Sales and maturities of available-for-sale securities | 32 | 48 | 49 |
Net Cash Used for Investing Activities | (10) | (11) | (55) |
Cash Flows from Financing Activities: | |||
Payments of debt and capital lease obligations | (10) | (5) | (1) |
Net transfers to Parent | (137) | (63) | (87) |
Discount paid on issuance of debt | (2) | ||
Debt issuance costs paid | (16) | ||
Net Cash Used for Financing Activities | (165) | (68) | (88) |
Cash Increase During the Period | 14 | 114 | 12 |
Cash and Cash Equivalents at End of Period | $ 296 | $ 282 | $ 168 |
Basis of Presentation
Basis of Presentation | 12 Months Ended |
Dec. 31, 2018 | |
Basis of Presentation [Abstract] | |
Basis of Presentation | frontdoor, inc NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS Note 1. Basis of Presentation We are the largest provider of home service plans in the United States, as measured by revenue, and operate under the American Home Shield, HSA, OneGuard and Landmark brands. Our customizable home service plans help customers protect and maintain their homes, typically their most valuable asset, from costly and unplanned breakdowns of essential home systems and appliances. Our home service plans cover the repair or replacement of major components of up to 21 household systems and appliances, including electrical, plumbing, central HVAC systems, water heaters, refrigerators, dishwashers and ranges/ovens/cooktops. We serve customers across all 50 states and the District of Columbia. On July 26, 2017, ServiceMaster announced its intention to spin off the ownership and operations of its businesses operated under the American Home Shield, HSA, OneGuard and Landmark brand names (the “Separated Business”) into a stand-alone publicly traded company (the “Spin-off”). Frontdoor was formed as a wholly-owned subsidiary of ServiceMaster on January 2, 2018 for the purpose of holding the Separated Business in connection with the Spin-off. During 2018, ServiceMaster contributed the Separated Business to Frontdoor. On October 1, 2018, the Spin-off was completed by a pro rata distribution to ServiceMaster’s stockholders of approximately 80.2% of our common stock. Each holder of ServiceMaster common stock received one share of our common stock for every two shares of ServiceMaster common stock held at the close of business on September 14, 2018, the r ecord date of the distribution. The S pin-off was completed pursuant to a separation and distribution agreement and other agreements with ServiceMaster relat ed to the Spin-off, including a transition services agreement, a tax matters agreement, an employee matters agreement and a stockholders and registration rights agreement. See Note 10 to the accompanying consolidated and combined financial statements for information related to these agreements. Prior to the Spin-off, we did not operate as a separate company, and stand-alone financial statements were not historically prepared. The accompanying consolidated and combined financial statements reflect the combined operations of the separated business for periods prior to the completion of the Spin-off and reflect our consolidated operations for the period after the completion of the Spin-off . These consolidated and combined financial statements reflect our financial position, results of operations and cash flows in conformity with U.S. GAAP. Our financial position, results of operations and cash flows may not be indicative of our condition had we been a separate stand-alone entity during the periods presented, nor are the results stated herein necessarily indicative of our financial position, results of operations and cash flows had we operated as a separate, independent company during the periods presented. The accompanying consolidated and combined financial statements include all revenues, costs, assets and liabilities directly attributable to us. ServiceMaster’s debt and corresponding interest expense have not been allocated to us for periods prior to the Spin -off since we were not the obligor of the debt. The accompanying consolidated and combined statements of operations and comprehensive income include allocations of certain costs from ServiceMaster incurred on our beha lf. Such corporate-level costs were allocated to us using methods based on proportionate formulas such as revenue, headcount and others. Such corporate costs include costs pertaining to: accounting and finance, legal, human resources, information technology, insurance, marketing, tax services, procurement services and other costs. We consider the expense allocation methodology and results to be reasonable for all periods presented. However, these allocations may not be indicative of the actual level of expense that we would have incurred if we had operated as a separate stand-alone, publicly traded company during the periods presented nor are these costs necessarily indicative of costs we may incur in the future. See Note 1 0 to the accompanying consolidated and combined financial statements for information r egarding allocations from ServiceMaster . Prior to the Spin-off, current and deferred income taxes and related tax expense have been determined based on our stand-alone results by applying ASC 740 as if we were a separate taxpayer, following the separate return methodology. Our portion of current income taxes payable was deemed to have been remitted to ServiceMaster in the period the related tax expense was recorded. Our portion of current income taxes receivable was deemed to have been remitted to us by ServiceMaster in the period to which the receivable applies only to the extent that we could have recognized a refund of such taxes on a stand-alone basis under the law of the relevant taxing jurisdiction. See Note 5 to the accompanying consolidated and combined financial statements for additional information. |
Significant Accounting Policies
Significant Accounting Policies | 12 Months Ended |
Dec. 31, 2018 | |
Significant Accounting Policies [Abstract] | |
Significant Accounting Policies | Note 2. Significant Accounting Policies Basis of Consolidation and Combination Our financial statements include amounts and disclosures related to the stand-alone financial statements and accounting records of Frontdoor after the Spin-off (“consolidated”) in combination with amounts and disclosu res that have been derived for our business from the consolidated financial statements and accounting records of ServiceMaster for the periods prior to the completion of the Spin-off (“combined”). Any references to our financial statements, financial data and operating data refer to our accompanying consolidated and combined financial statements unless otherwise noted. All intercompany transactions have been eliminated. Use of Estimates The preparation of the combined financial statements requires management to make certain estimates and assumptions required under U.S. GAAP that may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for uncollectible receivables; accruals for home service plans; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; stock-based compensation; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. Revenue Home service plan contracts are typically one year in duration. Home service plan claims costs are expensed as incurred. We recognize revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to the customer (measurement of progress towards completion method). We regularly review our estimates of claims costs and adjust the estimates when appropriate. Revenues are presented net of sales taxes collected and remitted to government taxing authorities on the consolidated and combined statements of operations and comprehensive income. 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. When revenue is recognized on monthly-pay customers before being billed, a contract asset is created. 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. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. Allowance for Uncollectible Receivables The allowance for uncollectible receivables is developed based on several factors, including overall customer credit quality, historical write-off experience and specific account analyses that project the ultimate collectability of the outstanding balances. As such, these factors may change over time causing the reserve level to vary. Deferred Customer Acquisition Costs Customer acquisition costs, which are incremental and direct costs of obtaining a customer, are deferred and amortized over the expected customer relationship period in proportion to revenue recognized. These costs include sales commissions and direct selling costs which can be shown to have resulted in a successful sale. Deferred customer acquisition costs were $21 million and $18 million as of December 31, 2018 and 2017, respectively. Advertising Advertising costs are expensed when the advertising occurs. Advertising expense is included in Selling and administrative expenses on the combined statement s of comprehensive income. Advertising expense for the years ended December 31, 201 8 , 201 7 and 201 6 was $61 million, $51 million and $44 million respectively. Property and Equipment, Intangible Assets and Goodwill Property and equipment consist of the following: As of Estimated December 31, Useful Lives (In millions) 2018 2017 (Years) Buildings and improvements $ 20 $ 19 10 - 40 Technology and communications 78 51 3 - 7 Office equipment, furniture and fixtures, and vehicles 8 6 5 - 7 107 77 Less accumulated depreciation (59) (46) Net property and equipment $ 47 $ 31 Depreciation of property and equipment, including depreciation of assets held under capital leases was $12 million, $9 million and $8 million for the years ended December 31, 2018, 2017 and 2016, respectively. Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data. As required by accounting standards for the impairment or disposal of long-lived assets, our fixed assets and finite-lived intangible assets are tested for recoverability whenever events or changes in circumstances indicate their carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and the fair value of the asset. Changes in the estimated useful lives or in the asset values could cause us to adjust its book value or future expense accordingly. As required under accounting standards for goodwill and other intangibles, goodwill is not subject to amortization, and intangible assets with indefinite useful lives are not amortized until their useful lives are determined to no longer be indefinite. Goodwill and intangible assets that are not subject to amortization 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. Goodwill and indefinite-lived intangible assets, primarily our trade names, are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. Our 2018, 2017, and 2016 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill or trade name impairments. Restricted Net Assets There are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These restrictions are related to our regulatory requirements. The payments of ordinary and extraordinary dividends by our subsidiaries are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can mak e to us. As of December 31, 2018 , the total net assets subject to these third-party restrictions was $1 87 million. Financial Instruments and Credit Risk We hedge the interest payments on a portion of our variable rate debt through the use of interest rate swap agreements. We have classified our interest rate swap contract as a cash flow hedge, and, as such, the hedging instruments are recorded on the consolidated and combined statements of financial position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in AOCI. The effect of derivative financial instrument transactions could have a material impact on our financial statements. We do not hold or issue derivative financial instruments for trading or speculative purposes. Financial instruments, which potentially subject us to financial and credit risk, consist principally of investments and receivables. Investments consist primarily of publicly traded debt and certificates of deposit. We periodically review our portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes. The majority of our receivables have little concentration of credit risk due to the large number of customers with relatively small balances and their dispersion across geographical areas. We maintain an allowance for losses based upon the expected collectability of receivables. See Note 18 to the accompanying consolidated and combined financial statements for information relating to the fair value of financial instruments. Stock-Based Compensation Stock-based compensation expense for stock options is estimated at the grant date based on an award’s fair value as calculated by the Black-Scholes option-pricing model and is recognized as expense over the requisite service period. The Black-Scholes model requires various highly judgmental assumptions including expected volatility and option life. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for future grants may differ materially from that recorded in the current period related to options granted to date. In addition, we estimate the expected forfeiture rate and only recognizes expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience. To the extent the actual forfeiture rate is different from the estimate, stock-based compensation expense is adjusted accordingly. See Note 11 to the accompanying consolidated and combined financial statements for more details. Income Taxes Frontdoor and its subsidiaries file consolidated U.S. federal income tax returns. State and local returns are filed both on a separate company basis and on a combined unitary basis with Frontdoor. Current and deferred income taxes are provided for on a separate company basis. We account for income taxes using an asset and liability approach for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be realized. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax return. We recognize potential interest and penalties related to its uncertain tax positions in income tax expense. Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and RSUs are reflected in diluted earnings per share by applying the treasury stock method. For periods prior to the Spin-off, earnings per share was calculated based on the 84,515,619 shares of Frontdoor stock that were outstanding at the date of distribution. There were no Frontdoor equity awards ou tstanding prior to the Spin-off. Segment Reporting A public company is required to report annual and interim financial and descriptive information about its reportable operating segments. We operate our business under four brands, who each engage in the similar activity of providing home service plans to our customers. Our chief operating decision maker, who is our Chief Executive Officer, regularly evaluates financial information on a consolidated basis in deciding how to allocate resources and in assessing performance. As such, we operate as one operating segment, which is comprised of our four brands, and we have one reportable segment. Newly Issued Accounting Standards In May 2014, the FASB issued ASU 2014-09 to provide a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Frontdoor adopted ASC 606, effective as of January 1, 2018, using the modified retrospective method to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605. We implemented internal controls and system functionality where necessary to enable the preparation of financial information on adoption. See Note 2 to the accompanying consolidated and combined financial statements for more details. In January 2016, the FASB issued ASU 2016-01 to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of financial liabilities measured under the fair value option that are attributable to a company's own credit, and to change certain other disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity securities be recognized in net income. In March 2018, the FASB issued ASU 2018-03, which amends ASU 2016-01 and provides further clarification re garding this standard. We adopted ASU 2018-03 effective as of January 1, 2018. There was an immaterial impact to the accompanying condensed combined financial statements as a result of our adoption of this standard. In February 2016, the FASB issued ASU 2016-02, which is the final standard on accounting for leases. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, which amend ASU 2016-02 to provide companies an alternative transition method whereby it may elect to recognize and measure leases by applying the cumulative impact of adopting ASU 2016-02 to the opening retained earnings balance in the period of adoption, thereby removing the requirement that the financial statements of prior periods be restated. We plan to utilize this alternative transition method. While both lessees and lessors are affected by the new guidance, the effects on lessees are much more significant. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. The lease liability represents the lessee’s obligation to make lease payments arising from a lease and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs. The guidance is effective for our fiscal year beginning January 1, 2019. We will elect the package of practical expedients permitted under the transition guidance, which allows us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. Based on our lease portfolio, which consists of real estate leases, we currently anticipate recognizing a right-of-use asset and a lease liability of approximately $24 million. Other than disclosed, we do not expect the new standard to have an impact on our consolidated and combined financial statements or our debt covenants. We are currently evaluating the impact of this standard on our internal controls. In May 2017, the FASB issued ASU 2017-09 , which clarifies the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and af ter the modification. We adopted ASU 2017-09 effective as of January 1, 2018 with no impact to the consolidated and combined financial stateme nts as a result of our adoption of this standard and will apply the guidance prospectively to awards modified on or after the adoption date. In August 2017, the FASB issued ASU 2017-12, which simplifies certain aspects of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. The ASU generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item in order to align financial reporting of hedge relationships with economic results. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. We elected to early adopt ASU 2017-12 in the fourth quarter of 2018, and there was no impact to the accompanying consolidated and combined financial statements as a result of our adoption of this standard. In February 2018, the FASB issued ASU 2018-02, allowing a reclassification from AOCI to retained earnings for stranded tax effects resulting from the corporate income tax rate change adopted as part of U.S. Tax Reform. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. As allowed by ASU 2018-02, we elected to early adopt the amendments of ASU 2018-02 in the first quarter of 2018, and there was an immaterial impact to the accompanying consolidated and combined financial statements as a result of our adoption of this standard. In October 2018, the FASB issued ASU 2018-16, which expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting to include the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”). SOFR is a new index calculated by reference to short-term repurchase agreements backed by Treasury securities. It was selected as a preferred replacement for U.S. dollar LIBOR, which will be phase d out by the end of 2021. As required by ASU 2018-16, we early adopted this standard in the fourth quarter of 2018 concurrently with ASU 2017-12 , and there was no impact to the accompanying consolidated and combined financial statements as a result of our adoption of this standard. |
Revenue
Revenue | 12 Months Ended |
Dec. 31, 2018 | |
Revenue [Abstract] | |
Revenue | Note 3. Revenue We recognize revenue at the agreed upon contractual amount over time using the input method in proportion to the costs expected to be incurred in performing services under the contracts. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to the customer. As the costs to fulfill the obligations of the home service plans are incurred on an other than straight-line basis, we utilize historical evidence to estimate the expected claims expense and related timing of such costs. This adjustment to the straight-line revenue creates a contract asset or contract liability. We regularly review our estimates of claims costs and adjust the estimates when appropriate. Our contracts include only one performance obligation and are typically one year in duration. We derive all of our revenue from customers in the United States. We disaggregate revenue from contracts with customers into major customer acquisition channels. 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. Revenue by major customer acquisition channel is as follows: ___ Year Ended December 31, (In millions) 2018 2017 2016 Renewals $ 835 $ 759 $ 671 Real estate (1) 262 249 207 Direct-to-consumer (1) 156 144 142 Other 6 5 — Total $ 1,258 $ 1,157 $ 1,020 _____________________________ (1) First year revenue only. Renewals Revenue from all customer renewals, whether initiated via the real estate or direct-to-consumer channel, are classified as renewals above. Customer payments for renewals are received either at the commencement of the renewal period or in installments over the contract period, which generates a contract liability. Real estate Real estate home service plans are sold through annual contracts in connection with a real estate sale, and payments are typically paid in full at closing, which generates a contract liability. First year revenue from the real estate channel is classified as real estate above. Direct- to-consumer Direct-to-consumer home service plans are sold through annual contracts when customers request a service plan in response to marketing efforts or when third-party resellers make a sale. Customer payments are received either at the commencement of the contract or in installments over the contract period, which generates a contract liability. First year revenue from the direct-to-consumer channel is classified as direct-to-consumer above. Costs to obtain a contract with a customer We capitalize the incremental costs of obtaining a contract with a customer, primarily commissions, and recognize the expense on a straight-line basis, as adjusted to match the timing of revenue recognition, over the expected customer relationship period. As of December 31, 2018 and January 1, 2018, the effective date of our adoption of ASC 606, deferred customer acquisition costs were $21 million. For the year ended December 31, 2018, amortization of these deferred acquisition costs was $22 million. There was no impairment loss in relation to these capitalized costs. Contract balances Timing of revenue recognition may differ from the timing of invoicing to customers. Contracts with customers, including contracts resulting from customer renewals, are generally for a period of one year. 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, in the accompanying consolidated and combined statements of financial position. When revenue is recognized on monthly-pay customers before being billed, a contract asset is created. 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. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. Deferred revenue was $185 million and $573 million as of December 31, 2018 and December 31, 2017, respectively. Changes in deferred revenue for the year ended December 31, 2018, were as follows: (In millions) Deferred revenue Balance as of January 1, 2018 $ 183 Deferral of revenue 408 Recognition of deferred revenue (406) Balance as of December 31, 2018 $ 185 There was approximately $179 million of revenue recognized in the year ended December 31, 2018 that was included in the deferred revenue balance as of January 1, 2018. Practical Expedients and Exemptions We offer certain interest-free contracts to customers where payments are received over a period not exceeding one year. Additionally, customers have the option to pay for an annual home service plan in advance. We do not adjust the promised amount of consideration for the effects of these financing components. At contract inception, the period of time between the performance of services and the customer payment is generally one year or less. Revenue is recognized net of any taxes collected from customers, which are subsequently remitted to taxing authorities. We do not disclose the value of unsatisfied performance obligations for contracts with an original expected length of one year or less. Certain non-commission related incremental costs to obtain a contract with a customer are expensed as incurred because the amortization period would have been one year or less. These costs are included in Selling and administrative expenses in the accompanying consolidated and combined statements of operations and comprehensive income. We utilize the portfolio approach to recognize revenue in situations where a portfolio of contracts have similar characteristics. The revenue recognized under the portfolio approach is not materially different than if every individual contract in the portfolio was accounted for separately. Impact of ASC 606 on the Consolidated and Combined Financial Statements We recorded a net increase to opening net parent investment of $2 million, net of tax, as of January 1, 2018, due to the cumulative impact of adopting ASC 606. Under ASC 606, commission costs incremental to a successful sale are deferred and recognized in the consolidated and combined statements of operations and comprehensive income over the expected customer relationship period. Previously, commissions and other sales-related costs were deferred and recognized over the initial contract period. Changes to the accompanying consolidated and combined statements of financial position due to the adoption of ASC 606 include: (i) the reclassification of receivables to contract assets which are presented net of contract liabilities within deferred revenue and (ii) the reclassification of deferred customer acquisition costs to long-term assets as costs are recognized over the expected customer relationship period, which is in excess of one year. Prior to the adoption of ASC 606, when a customer elected to pay for their home service plan on a monthly basis, receivables and deferred revenue were recorded based on the total amount due from the customer. Receivables were reduced as amounts were paid, and deferred revenue was amortized over the life of the contract. Following the adoption of ASC 606, only the portion of the contract that is due in the current month will be recorded within receivables. The following tables compare affected lines of the accompanying consolidated and combined financial statements as prepared under the provisions of ASC 606 to a presentation of these consolidated and combined financial statements under the prior revenue recognition guidance: As of December 31, 2018 Consolidated and Combined Statement of Financial Position As reported Under Prior Revenue Recognition Guidance Current Assets: Receivables $ 12 $ 454 Deferred customer acquisition costs — 18 Other Assets: Deferred customer acquisition costs 21 — Total Assets $ 1,041 $ 1,482 Current Liabilities: Deferred revenue $ 185 627 Other Long-Term Liabilities: Deferred taxes 39 39 Total Liabilities 1,385 1,828 Total Deficit (344) (346) Liabilities and Equity $ 1,041 1,482 Year Ended December 31, 2018 Consolidated and Combined Statement of Operations and Comprehensive Income As reported Under Prior Revenue Recognition Guidance Selling and administrative expenses $ 338 $ 338 Provision for income taxes 42 42 Net Income $ 125 $ 125 The adoption of ASC 606 had no significant impact on our cash flows. The aforementioned impacts resulted in offsetting shifts within cash flows from operations. |
Goodwill and Intangible Assets
Goodwill and Intangible Assets | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets [Abstract] | |
Goodwill and Intangible Assets | Note 4. Goodwill and Intangible Assets G oodwill and indefinite-lived intangible assets are not amortized and are subject to assessment for impairment by applying a fair-value based test on an annual basis or more frequently if circumstances indicate a potential impairment. An assessment for impairment is performed on October 1 of every year. There were no goodwill or trade name impairment charges recorded during the years ended December 31, 201 8, 2017 and 2016. There were no accumulated impairment losses recorded as of December 31, 201 8 and 201 7 . The table below summarizes the changes in our goodwill balance for the years ended December 31, 201 8 and 201 7: (In millions) Total Balance as of December 31, 2016 $ 471 Acquisitions 4 Balance as of December 31, 2017 476 Acquisitions — Balance as of December 31, 2018 $ 476 The table below summarizes the other intangible asset balances: 0 As of December 31, 2018 2017 Accumulated Accumulated (In millions) Gross Amortization Net Gross Amortization Net Trade names (1) $ 140 $ — $ 140 $ 140 $ — $ 140 Customer relationships 173 (165) 7 172 (160) 12 Other 32 (22) 10 32 (19) 13 Total $ 345 $ (187) $ 158 $ 344 $ (179) $ 165 ___________________________________ (1) Not subject to amortization. Amortization expense of $8 million , $ 8 million and $ 6 million was recorded in the years ended December 31, 2018, 2017 and 2016, respectively. For existing intangible assets, we expect amortization expense of $ 6 million, $5 million, $4 million, $1 million and $1 million in 2019, 2020, 2021, 2022, and 2023, respectively. |
Income Taxes
Income Taxes | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes [Abstract] | |
Income Taxes | Note 5. Income Taxes On December 22, 2017 , U.S. Tax Reform was signed into law. U.S. Tax Reform include d numerous changes to existing tax law, including a reduction in the federal corporate income tax rate from 35 percent to 21 perce nt, effective January 1, 2018. Staff Accounting Bulletin No. 118 (“SAB 118”) was issued to address the application of U.S. GAAP in situations where a registrant does not have the necessary information available, prepared, or analyzed in reasonable detail to complete the accounting for cert ain income tax effects of U.S. Tax Reform . December 22, 2018 marked the end of the measurement period for purposes of SA B 118. As such, we have completed our analysis based on legi slative updates relating to U.S. Tax Reform currently available . We recorded an initial income tax benefit of $20 million at December 31, 2017 due to a net reduction in deferred tax liabilities resulting from the effect of remeasurement of certain deferred tax assets and liabiliti es based on enacted tax rates. Our accounting for U.S. Tax Reform was finalized during the fourth quarter of 2018, resulting in an immaterial adjustment to the initial income tax benefit recorded. As previously discussed, although we were historically included in consolidated income tax returns of ServiceMaster, our income taxes prior to the Spin-off are computed and reported herein under the “separate return meth od.” Use of the separate return method may result in differences when the sum of the amounts allocated to stand-alone provisions are compared with amounts pres ented in financial statements. In that event, the related deferred tax assets and liabilities could be significantly differen t from those presented herein. Certain tax attributes, e.g. net operating loss carryforwards, which were reflected in ServiceMaster’s consolidated financial statements may or may not exist at the stand-alone Frontdoor level. As of December 31, 2017 , we had $4 million of tax benefits primarily reflected in federal and state tax returns that have not been recognized for financial reporting purposes (“unrecognized tax benefits”). Based on the terms of the Tax Matters A greement between ServiceMaster and Frontdoor, the liability for these unrecognized tax benefits is not attributed to Frontdoor after the Spin-off. As of December 31, 2017 , we had $2 million of unrecognized tax benefits that would impact the effective tax rate if recognized. The table below summarizes the changes in gross unrecognized tax benefits for the years ended December 31, 2018 and 2017 : (In millions) Total Balance as of December 31, 2016 $ 2 Increases in tax positions for current year 2 Balance as of December 31, 2017 4 Increases in tax positions for current year 2 Decrease due to Spin-off (6) Balance as of December 31, 2018 $ — We are subject to taxation in the United States and various states. Pursuant to the terms of the Tax Matters Agreement , we are not subject to federal examination by the Internal Revenue Service or examination by state taxing authorities where a unitary or combined state income tax return is filed for the years prior to 2018. We are not subject to state and local income tax examinations by tax authorities in jurisdictions where separate income tax returns are filed for the years prior to 2008. All of our income before income taxes for the years ended December 31, 2018, 2017 and 2016 was generated in the United States. The reconciliation of income tax computed at the U.S. federal statutory tax rate to our effective income tax rate is as follows: Year Ended December 31, 2018 2017 2016 Tax at U.S. federal statutory rate 21.0 % 35.0 % 35.0 % State and local income taxes, net of U.S. federal benefit 2.5 1.5 2.1 Other permanent items 0.5 2.1 0.6 Excess tax benefits from stock-based compensation (0.1) (2.5) (1.1) Transaction costs 1.2 — — U.S. Tax Reform rate change (1) — (8.9) — Effective rate 25.1 % 27.2 % 36.6 % ___________________________________ (1) Deferred income taxes on our balance sheet at December 31, 2017 were remeasured for the change in the U.S. income tax rate through income tax expense (see discussion on U.S. Tax Reform). This one-time beneficial rate change adjustment for $20 million includes $1 million in state income tax expense. Income tax expense is as follows: Year Ended December 31, (In millions ) 2018 2017 2016 Current: U.S. federal $ 29 $ 71 $ 63 State and local 6 7 7 35 78 70 Deferred: U.S. federal 7 (20) 1 State and local — 1 — 7 (19) 1 Provision for income taxes $ 42 $ 60 $ 71 Deferred income tax expense results from timing differences in the recognition of income and expense for income tax and financial reporting purposes. Deferred income tax balances reflect the net tax effects of temporary differences between the carrying amount s of assets and liabilities for financial reporting and income tax purposes. Valuation allowances are recorded to reduce deferred tax assets when it is more likely than not that a tax benefit will not be realized. The valuation allowance for deferred tax assets as of December 31, 2018 and 2017 was $1 million and less than $ 1 million , respectively. The net change in the total valuation allowance for the year ended December 31, 2018 was an increase of $1 million. Significant components of our deferred tax balances are as follows: As of December 31, (In millions) 2018 2017 Long-term deferred tax assets (liabilities): Intangible assets (1) $ (34) $ (37) Property and equipment (6) (2) Prepaid expenses and deferred customer acquisition costs (6) (5) Claims and related expenses — 1 Accrued liabilities 2 2 Other long-term obligations 1 3 Tenant improvements 1 — Deferred interest expense 4 — Net operating loss and tax credit carryforwards (2) — 1 Less valuation allowance (1) — Net Long-term deferred tax liability $ (39) $ (38) ___________________________________ (1) The deferred tax liability relates primarily to the difference in the tax versus book basis of intangible assets. We had $42 million and $4 0 million of deferred tax liability included in this net deferred tax liability as of December 31, 2018 and 2017, respectively, that will not actually be paid unless certain of our business units are sold. (2) Primarily represents state credit carryforwards. We have no remaining state credit carryforwards as of December 31, 2018. |
Acquisitions
Acquisitions | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions [Abstract] | |
Acquisitions | Note 6. Acquisitions Acquisitions have been accounted for using the acquisition method, and, accordingly, the results of operations of the acquired businesses have been included in the accompanying consolidated and combined 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. No acquisitions occurred during the years ended December 31, 2018 or 2017. On June 27, 2016, we acquired OneGuard for a total purchase price of $61 million. We recorded goodwill of $57 million and other intangibles, primarily customer relationships, of $15 million related to this acquisition. On November 30, 2016, we acquired Landmark for a total purchase price of $39 million. We recorded goodwill of $37 million and other intangibles, primarily customer relationships, of $13 million related to this acquisition. The weighted-average useful life for each class of definite-lived intangible asset recorded for both the OneGuard and Landmark acquisitions was five years. Supplemental cash flow information regarding our acquisitions is as follows: Year Ended December 31, (In millions) 2016 Assets acquired $ 140 Liabilities assumed (40) Net assets acquired $ 101 Net cash paid $ 87 Seller financed debt 14 Purchase price $ 101 |
Restructuring Charges
Restructuring Charges | 12 Months Ended |
Dec. 31, 2018 | |
Restructuring Charges [Abstract] | |
Restructuring Charges | Note 7. Restructuring Charges We incurred restructuring charges of $3 million ( $2 million, net of tax), $7 million ( $4 million, net of tax) and $3 million ( $2 million, net of tax) for the years ended December 31, 2018, 2017 and 2016, respectively. In 2018, restructuring charges comprised $2 million of non-personnel charges primarily related to the relocation to our corporate headquarters and $1 million of severance costs, which primarily represent an allocation of severance costs related to actions taken to enhance capabilities and reduce costs in ServiceMaster’s corporate functions that provided company-wide administrative services to support operations. In 2017, restructuring charges comprised $5 million of severance costs which primarily represent an allocation of severance costs and stock-based compensation expense as part of the severance agreement with ServiceMaster's former CEO and CFO, and allocations of $1 million of lease termination costs and $1 million of asset write-off and other costs related to the relocation to our corporate headquarters. In 2016, restructuring charges comprised $1 million of severance and other costs related to an initiative to enhance capabilities and reduce costs in ServiceMaster’s headquarters functions that provide administrative services for our operations, $1 million of lease termination and other costs related to the decision to consolidate the stand-alone operations of HSA, acquired in February 2014, with those of the American Home Shield business and $1 million of charges related to the disposal of certain HSA property and equipment. The pre-tax charges discussed above are reported in “Restructuring charges” in the accompanying consolidated and combined statements of operations and comprehensive income. A reconciliation of the beginning and ending balances of accrued restructuring charges, which are included in "Accrued liabilities—other" on the accompanying consolidated and combined statements of financial position, is presented as follows: (In millions) Accrued Restructuring Charges Balance as of December 31, 2016 $ — Costs incurred 7 Costs paid or otherwise settled (5) Balance as of December 31, 2017 $ 2 Costs incurred 3 Costs paid or otherwise settled (5) Balance as of December 31, 2018 $ — |
Spin-Off Charges
Spin-Off Charges | 12 Months Ended |
Dec. 31, 2018 | |
Spin-Off Charges [Abstract] | |
Spin-Off Charges | Note 8. Spin-off Charges We incurred Spin-off charges of $24 million ( $19 million, net of tax) and $13 million ( $9 million, net of tax) the years ended December 31, 2018 and 2017, respectively. These charges include nonrecurring costs incurred to evaluate, plan and execute the Spin-off. In 2018, Spin-off charges primarily comprised $19 million of third-party consulting fees and $ 5 million of other incremental costs directly related to the Spin-off process. In 2017, Spin-off charges primarily comprised $12 million of third-party consulting fees and $1 million of other incremental costs directly related to the Spin-off process. The pre - tax charges discussed above are reported in “Spin-off charges” in the accompanying consolidated and combined statements of operations and comprehensive income. A reconciliation of the beginning and ending balances of accrued Spin-off charges , which are included in "Accrued liabilities—other" on the accompanying consolidated and combined statement s of financial position, is presented as follows: (In millions) Accrued Spin-off Charges Balance as of December 31, 2016 $ — Costs incurred 13 Costs paid or otherwise settled (1) (12) Balance as of December 31, 2017 $ 1 Costs incurred (1) 22 Costs paid or otherwise settled (23) Balance as of December 31, 2018 $ — ___________________________________ (1) An additional $2 million of Spin-off charges were pre-paid in 2017 and subsequently expensed in 2018, which is included in Prepaid expenses and other assets on the accompanying consolidated and combined statement s of financial position as of December 31, 2017. During 2018, we incurred incremental capital expenditures required to effect the Spin-off of $1 5 million, principally reflecting costs to replicate information technology systems historically shared by ServiceMaster. |
Commitments and Contingencies
Commitments and Contingencies | 12 Months Ended |
Dec. 31, 2018 | |
Commitments and Contingencies [Abstract] | |
Commitments and Contingencies | Note 9. Commitments and Contingencies We lease certain property under various operating lease arrangements. Most of the property leases provide that we pay taxes, insurance and maintenance applicable to the leased premises. As leases for existing locations expire, we expect to renew the leases or substitute another location and lease. We currently sublease our headquarters from ServiceMaster. Amounts paid under this sublease during 2018 were less than $1 million. Rental expense, including allocated corporate rent, for the years ended December 31, 2018, 2017 and 2016, was $4 million, $5 million and $4 million, respectively. Based on leases in place as of December 31, 2018, future long-term noncancelable operating lease payments will be approximately $4 million in 2019 , $4 million in 2020 , $4 million in 2021 , $3 million in 2022 , $3 million in 2023 and $12 million in 2024 and thereafter. Accruals for home service plan claims are made based on claims experience and actuarial projections. Accruals are established based on estimates of the ultimate cost to settle claims. Home service plan claims take about three months to settle, on average, and substantially all claims are settled within six months of incurrence. The amount of time required to settle a claim can vary based on a number of factors, including whether a replacement is ultimately r equired. Our actuary performs an accrual analysis utilizing generally accepted actuarial methods that incorporate cumulative historical claims experience and information provided by us. We regularly review our estimates of claims costs and adjust the estimates when appropriate. We believe the use of actuarial methods to account for these liabilities provides a consistent and effective way to measure these highly judgmental accruals. We have certain liabilities with respect to existing or potential claims, lawsuits and other proceedings. We accrue for these liabilities when it is probable that future costs will be incurred and such costs can be reasonably estimated. Any resulting adjustments, which could be material, are recorded in the period the adjustments are identified. Due to the nature of our business activities, we are at times subject to pending and threatened legal and regulatory actions that arise out of the ordinary course of business. In the opinion of management, based in part upon advice of legal counsel, the disposition of any such matters is not expected, individually or in the aggregate, to have a material adverse effect on our results of operations, financial condition or cash flows. However, the results of legal actions cannot be predicted with certainty. Therefore, it is possible that our results of operations, financial condition or cash flows could be materially adversely affected in any particular period by the unfavorable resolution of one or more legal actions. |
Related Party Transactions
Related Party Transactions | 12 Months Ended |
Dec. 31, 2018 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 10. Related Party Transactions ServiceMaster was a related party to Frontdoor prior to the Spin-off. The significant transactions and balances with ServiceMaster prior to the Spin-off and the agreements between Frontdoor and ServiceMaster as of and subsequent to the Spin-off are described below. Separation from ServiceMaster Prior to the Spin-off, we were managed and operated in the normal course of business by ServiceMaster along with other businesses . Accordingly, certain shared costs were allocated to us and are reflected as expenses in the accompanying consolidated and combined financial statements. Our management considers the expenses included and the allocation methodologies used to be reasonable and appropriate reflections of the historical ServiceMaster expenses attributable to us for purposes of the accompanying consolidated and combined financial statements; however, the expenses reflected in the accompanying consolidated and combined financial statements may not be indicative of the actual expenses that would have been incurred during the periods presented if we historically operated as a separate, stand-alone entity. In addition, the expenses reflected in the accompanying consolidated and combined financial statements may not be indicative of related expenses that we could incur in the future. Corporate expenses The accompanying consolidated and combined financial statements include transactions with ServiceMaster for services (such as executive functions, information systems, accounting and finance, human resources, legal and general corporate expenses) that were provided to us by the centralized ServiceMaster organization. Corporate-level items also include personnel-related expenses of corporate employees (such as salaries, insurance coverage, stock-based compensation costs, etc.). Throughout the period covered by the accompanying consolidated and combined financial statements, the costs of such functions, services and items have been directly charged or allocated to us using methods management believes are reasonable. The methods for allocating functions, services and items to us were based on proportional allocation bases which include revenue, headcount and others. All such costs have been deemed to have been incurred and settled in the period in which the costs were recorded. Directly charged corporate expenses are included in Selling and administrative expenses in the accompanying consolidated and combined statements of operations and comprehensive income in the amounts of $14 million, $13 million and $12 million for the years ended December 31, 201 8 , 201 7 and 201 6 , respectively . Allocated corporate expenses are also included in Selling and administrative expenses in the accompanying consolidated and combined statements of operations and comprehensive income in the amounts of $35 million, $47 million and $45 million for the years ended December 31, 201 8 , 201 7 and 201 6, respectively. ServiceMaster trade and service marks We had a trademark license agreement with ServiceMaster in which we were charged a royalty fee for the use of ServiceMaster-owned trade and service marks. The royalty fee was 0.175 percent of our customer revenues for the period. The royalty fee is included within Affiliate royalty expense in the accompanying consolidated and combined statements of operations and comprehensive income in the amounts $1 million, $2 million and $2 million for the years ended December 31, 2018, 2017 and 2016, respectively. The trademark license agreement with ServiceMaster was terminated in connection with the Spin-off. Health insurance coverage ServiceMaster administers a self-insured health insurance program for its employees, including, through June 30, 2018, our employees. We paid premiums to ServiceMaster for this coverage, which were based on the number of our employees in the medical plan. These premiums are reflected in the accompanying consolidated and combined statements of operations and comprehensive income in the amounts of $6 million, $8 million and $6 million for the years ended December 31, 201 8 , 201 7 and 201 6 , respectively. In addition to these costs, a portion of medical insurance costs for corporate employees have been allocated to us through the corporate expense allocation discussed under the heading “Corporate expenses” above. Risk management Prior to the Spin-off, ServiceMaster carried insurance policies on insurable risks related to our business at levels which it believed to be appropriate, including workers’ compensation, automobile and general liability risks. These insurance policies were purchased from third-party insurance carriers, which typically incorporated significant deductibles or self-insured retentions. We paid a premium to ServiceMaster in exchange for the coverage provided. Expenses related to coverage provided by ServiceMaster and changes in ultimate losses relating to self-insured programs are reflected in the accompanying consolidated and combined statements of operations and comprehensive income in the amounts of $2 million, $3 million and $4 million for the years ended December 31, 2018, 2017 and 2016, respectively. Our coverage under these self-insured programs was terminated in connection with the Spin-off. Agreements with ServiceMaster In connection with the Spin-off, we entered into various agreements with ServiceMaster to provide a framework for our relationship with ServiceMaster after the Spin-off, including the following agreements: · Separation and Distribution Agreement. This agreement identifies the assets to be transferred, the liabilities to be assumed and the contracts to be assigned to each of Frontdoor and ServiceMaster as part of the Spin-off and provides for when and how these transfers, assumptions and assignments will occur. · Transition Services Agreement. Pursuant to this agreement, ServiceMaster and Frontdoor will provide certain services to one another on an interim, transitional basis. The services to be provided include certain information technology services, finance and accounting services and human resource and employee benefits services. The agreed-upon charges for such services are generally intended to allow the providing company to recover all costs and expenses of providing such services. · Tax Matters Agreement. This agreement governs the respective rights, responsibilities and obligations of ServiceMaster and Frontdoor after the Spin-off with respect to taxes (including taxes arising in the ordinary course of business and taxes, if any, incurred as a result of any failure of the Spin-off and certain related transactions to qualify as tax-free for U.S. federal income tax purposes), tax attributes, the preparation and filing of tax returns, tax elections, the control of audits and other tax proceedings and assistance and cooperation in respect of tax matters. · Employee Matters Agreement. This agreement allocates liabilities and responsibilities relating to employment matters, employee compensation and benefits plans and programs and other related matters. The agreement governs certain compensation and employee benefit obligations with respect to the current and former employees and non-employee directors of each company. · Stockholders and Registration Rights Agreement. Pursuant to this agreement, Frontdoor agrees that, upon the request of ServiceMaster , Frontdoor will use its reasonable best efforts to effect the registration under applicable federal and state securities laws of any shares of Frontdoor common stock retained by ServiceMaster. The total amount of expenses incurred by Frontdoor under the transition services agreement with ServiceMaster following the Spin-off was $1 million for the year ended December 31, 2018. At December 31, 2018, $1 million was due to ServiceMaster for services performed under the transition services agreement. |
Stock-Based Compensation
Stock-Based Compensation | 12 Months Ended |
Dec. 31, 2018 | |
Stock-Based Compensation [Abstract] | |
Stock-Based Compensation | Note 11. Stock-Based Compensation Stock-based compensation expense in prior y ears and until separation on October 1, 201 8 was allocated to Frontdoor based on the awards and terms previously granted to our employees and included an allocation of ServiceMaster's corporate and shared functional employee expenses . Adopted at separation, the Omnibus Plan grants certain employees, consultants , or non-e mployee directors of Frontdoor different forms of awards, including stock options , RSUs and Deferred Share Equivalents . The equity and incentive plan has a maximum sh ares reserve for the grant of 14,500,000 , including awards converted at the Spin-off (described below). Our Compensation Committee determines the long-term incentive mix of our employees , including stock options and RSU s , and may authorize new grants annually. As of December 31, 2018, 13,837,877 shares remain available for future grants. In accordance with the employee matters agreement between Frontdoor and ServiceMaster , certain or our executives and employees were entitled to receive equity compensation awards of Frontdoor in replacement of previously outstanding awa rds granted under various ServiceMaster stock incentive plans prior to the separation. In connection with the S pin-off, these awards were converted into new Frontdoor equity awards using a formula designed to preserve the intrinsic value of the awards immediately prior to the S pin-off. At the date of conversion, total intrinsic value of the converted options was $4 million . In addition, Frontdoor and ServiceMaster employees who held ServiceMaster restricted stock awards on the r ecord rate had the option to elect to receive both Frontdoor and ServiceMaster restricted stock awards for the number of wh ole shares, rounded down, of Frontdoor common stock that they would have received as a shareholder of ServiceMaster at the date of separation. The terms and conditions of the Frontdoor awards were replicated and , as necessary, adjusted to ensure that the vesting schedule and economic value of the awards was unchanged by the conversion. A summary of the activity related to unvested Frontdoor restricted stock awards held by Frontdoor and ServiceMaster employees from the Spin-o ff date through December 31, 2018 follows: Frontdoor Awards Distributed in Spin-Off Frontdoor Employees ServiceMaster Employees Total Unvested restricted stock awards at Spin-off date 143,697 106,317 250,014 Vested (7,200) (17,188) (24,388) Forfeited (4,136) — (4,136) Unvested restricted stock awards at December 31, 2018 132,361 89,129 221,490 Stock Options We did not issue any stock options under the Omnibus Plan during the year other than the options converted at the Spin-off. A summary of option activity under the Omnibus Plan as of December 31, 2018 and changes during the year then ended is presented below: Weighted Avg. Aggregate Remaining Weighted Avg. Intrinsic Contractual Stock Exercise Value Term Options Price (in millions) (in years) Outstanding at December 31, 2017 — $ — $ Converted on October 1, 2018 391,728 $ 30.04 4 8.31 Granted to employees — $ — Exercised — $ — Forfeited (18,341) $ 29.61 Expired — $ — Outstanding at December 31, 2018 373,387 $ 30.06 $ 1 8.04 Exercisable at December 31, 2018 98,323 $ 19.96 $ 1 6.15 RSUs Following the Spin-off, we granted our executives, officers and employees 29,178 RSUs in 2018 with weighted-average grant date fair values of $29.13 per unit, which was equivalent to the then current fair value of our common stock at the grant date. All RSUs outstanding as of December 31, 2018 will vest in three equal annual installments, subject to an employee’s continued employment. Upon vesting, each RSU will be converted into one share of our common stock. The total fair value of RSUs vested during the year ended December 31, 2018 was less than $1 million. A summary of RSU activity for our employees under the Omnibus Plan for Frontdoor employees as of December 31, 2018, and changes during the year then ended is presented below: Weighted Avg. Grant Date RSUs Fair Value Outstanding at December 31, 2017 — $ — Converted on October 1, 2018 143,697 $ 41.50 Granted to employees 29,178 $ 29.13 Vested (7,200) $ 41.50 Forfeited (4,136) $ 41.50 Outstanding at December 31, 2018 161,539 $ 39.27 Stock-based compensation expense We recognized stock-b ased compensation expense of $4 million ( $3 million, net of tax) for each of the years ended December 31, 2018, 2017 and 2016 . These charges are recorded within Selling and administrative expenses in the accompanying consolidated and combined statements of operations and comprehensive income. As of December 31, 201 8, there was $6 million of total unrecognized compensation costs related to non-vested stock options and RSUs granted under the Omnibus Plan . These remaining costs are expected to be recognized over a weighted-average period of 2.36 years. |
Employee Benefit Plans
Employee Benefit Plans | 12 Months Ended |
Dec. 31, 2018 | |
Employee Benefit Plans [Abstract] | |
Employee Benefit Plans | Note 12. Employee Benefit Plans We currently maintain a defined contribution pla n for the benefit of our employees, the American Home Shield 401k Plan. Prior to the Spin-off, o ur employees participate d in ServiceMaster's Profit Sharing and Retirement Plan (“PSRP”). Following the Spin-off, the rights and obligations of these plans were transferred from ServiceMaster pursuant to the employee matters agreement . Discretionary contributions made on behalf of our employees , including those made to the ServiceMaster PSRP, were $3 million, $2 million and $2 million for the years ended December 31, 201 8 , 201 7 and 201 6 , respectively . In addition to these costs, a portion of ServiceMaster's discretionary contributions to the ServiceMaste r PSRP for corporate employees were allocated to us through the allocation of corpor ate expenses. These charges are recorded within S elling and administrative expenses in the accompanying consolidated and combined statements of operations and comprehensive income . |
Long-Term Debt
Long-Term Debt | 12 Months Ended |
Dec. 31, 2018 | |
Long-Term Debt [Abstract] | |
Long-Term Debt | Note 13. Long-Term Debt Long-term debt is summarized in the following table: As of December 31, (In millions) 2018 2017 Term Loan Facility maturing in 2025 (1) $ 639 $ — Revolving Credit Facility maturing in 2023 — — 2026 Notes (2) 344 — Other 1 9 Less current portion (7) (9) Total long-term debt $ 977 — ___________________________________ (1) As of December 31, 2018, presented net of $8 million in unamortized debt issuance costs and $2 million in unamortized original issue discount paid. (2) As of December 31, 2018, presented net of $6 million in unamortized debt issuance costs. On August 16, 2018, in connection with the Spin-off, we engaged in a series of financing transactions pursuant to which we incurred long-term debt consisting of the $650 million Term Loan Facility and $350 million of 2026 Notes. The proceeds of the debt were attributed directly to SVM and as such is reflected as a non-cash distribution in these financial statements. Credit Facilities On August 16, 2018, we entered into the Credit Agreement, providing for the $650 million Term Loan Facility maturing August 16, 2025 and the $250 million Revolving Credit Facility, which terminates on August 16, 2023 . The interest rates applicable to the Term Loan Facility and the Revolving Credit Facility are based on a fluctuating rate of interest measured by reference to either, at our option, (i) an adjusted LIBOR plus a margin of 2.50% per annum or (ii) an alternate base rate plus a margin of 1.50% per annum. The obligations under the Credit Agreement are guaranteed by certain subsidiaries (collectively, the “Guarantors”) and are secured by substantially all of the tangible and intangible assets of Frontdoor and the Guarantors, subject to certain customary exceptions. The Revolving Credit Facility provides for senior secured revolving loans and stand-by and other letters of credit. The Revolving Credit Facility limits outstanding letters of credit to $25 million. As of December 31, 2018, there were no letters of credit outstanding, and there was $250 million of available borrowing capacity under the Revolving Credit Facility. The Credit Agreement contains customary affirmative and negative covenants, including limitations on the incurrence of indebtedness, liens, ability to engage in certain fundamental transactions, make certain dispositions, make certain restricted payments and engage in transactions with affiliates. The Credit Agreement also contains a financial covenant requiring the maintenance of a Consolidated First Lien Leverage Ratio, as defined in the Credit Agreement, of not greater than 3.50 to 1.00 at the end of each fiscal quarter for which the amount of obligations outstanding under the Revolving Credit Facility (subject to certain exceptions, as set forth in the Credit Agreement) exceeds 30% of the aggregate amount of Revolving Commitments, as defined in the Credit Agreement. We believe this covenant is the only significant restrictive covenant in the Credit Agreement. As of December 31, 2018, we were in compliance with the financial covenants under the Credit Agreement that were in effect on such date. On October 24, 2018, we entered into an interest rate swap agreement effective October 31, 2018 that expires on August 16, 2025. The notional amount of the agreement was $350 million. Under the terms of the agreement, we will pay a fixed rate of interest of 3.0865% on the $350 million notional amount, and we will receive a floating rate of interest (based on one-month LIBOR, subject to a floor of zero percent) on the notional amount. Therefore, during the term of the agreement, the effective interest rate on $350 million of the Term Loan Facility is fixed at a rate of 3.0865%, plus the incremental borrowing margin of 2.50% . See Note 17 to the accompanying consolidated and combined financial statements for additional information. 2026 Notes On August 16, 2018, Frontdoor issued $350 million of 2026 Notes in a transaction that was exempt from registration under the Securities Act. The 2026 N ote s will mature on August 15, 2026 and bear interest at a rate of 6.750 percent per annum. The 2026 Notes are jointly and severally guaranteed on a senior unsecured basis by the Guarantors. The 2026 Notes are governed by the Indenture. Pursuant to the Indenture, we are able to redeem the 2026 Notes, in whole or in part, at any time and from time to time prior to August 15, 2021 at a redemption price equal to 100% of the principal amount thereof plus the applicable “make whole” premium, plus accrued and unpaid interest, if any, to, but not including, the redemption date. Also pursuant to the Indenture, we are able to redeem the 2026 Notes, in whole or in part, at any time and from time to time on and after August 15, 2021 at the redemption prices set forth in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the relevant date of redemption. In addition, we are able to redeem up to 40% of the 2026 Notes, at any time and from time to time prior to August 15, 2021, in an amount not to exceed the net cash proceeds of one or more equity offerings, at a redemption price set forth in the Indenture, plus accrued and unpaid interest, if any, to, but not including, the redemption date. If we experience a Change of Control Triggering Event, as defined in the Indenture, we must offer to purchase all of the 2026 Notes (unless otherwise redeemed) at a price equal to 101% of their principal amount, plus accrued and unpaid interest, if any, to, but not including, the purchase date. The Indenture contains covenants that, among other things, limit the ability of Frontdoor and its restricted subsidiaries, as described in the Indenture, to: issue, assume, guarantee or incur additional indebtedness; pay dividends or make distributions or purchase or otherwise acquire or retire for value capital stock or subordinated obligations; issue certain preferred stock or similar equity securities; make loans and investments; create restrictions on the ability of Frontdoor’s restricted subsidiaries to make payments or distributions to Frontdoor; enter into certain transactions with affiliates; sell or otherwise dispose of assets, including capital stock of subsidiaries; incur liens; and, in the case of Frontdoor, merge, consolidate or convey, transfer or lease all of substantially all of the assets of Frontdoor and its restricted subsidiaries taken as a whole. Most of these covenants will be suspended during any period in which the 2026 Notes have investment grade ratings from both Moody’s Investors Service, Inc. (or its successors) and Standard & Poor’s Ratings Services (or its successors). As of December 31, 2018, we were in compliance with the covenants under the Indenture that were in effect on such date . The 2026 Notes are unsecured obligations and rank equally in right of payment with all of our other existing and future senior unsecured indebtedness. The subsidiary guarantees of the 2026 Notes are senior unsecured obligations of the Guarantors and rank equally in right of payment with all of the existing and future senior unsecured indebtedness of our non-guarantor subsidiaries. The 2026 Notes are effectively junior to all of our existing and future secured indebtedness to the extent of the value of the assets securing such indebtedness. Scheduled Long-term Debt Payments As of December 31, 201 8 , future scheduled long‑term debt payments are $7 million for each of the years ended December 31, 201 9 , 2020 , 2021 , 2022 and 2023 , respectively. |
Supplemental Cash Flow Informat
Supplemental Cash Flow Information | 12 Months Ended |
Dec. 31, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Supplemental Cash Flow Information | Note 14. Supplemental Cash Flow Information Supplemental information relating to the accompanying consolidated and combined statements of cash flows is presented in the following table: As of December 31, (In millions) 2018 2017 2016 Cash paid for or (received from): Interest expense $ 13 $ — $ — Income tax payments, net of refunds (1) — — — Interest and dividend income (1) — (2) ___________________________________ (1) Prior to the Spin-off, all income tax payments and refunds were paid and received by ServiceMaster on our behalf. We acquired $1 million, less than $1 million and less than $1 million of property and equipment through capital leases and other non - cash financing transactions in the years ended December 31, 2018, 2017, and 2016, respectively, which have been excluded from the accompanying consolidated and combined statements of cash flows as non-cash investing and financing activities. On August 16, 2018, in connection with the Spin-off, we incurred long-term debt consisting of the $650 million Term Loan Facility and $350 million of 2026 Notes as partial consideration for the contribution of the Separate d Business to us. We did not receive any cash proceeds as a result of these transactions, and they are not reflected in the accompanying consolidated and combined statements of cash flows. |
Cash and Marketable Securities
Cash and Marketable Securities | 12 Months Ended |
Dec. 31, 2018 | |
Cash and Marketable Securities [Abstract] | |
Cash and Marketable Securities | Note 15. Cash and Marketable Securities Cash, money market funds and certificates of deposits with maturities of three months or less when purchased are included in Cash and cash equivalents in the accompanying consolidated and combined statements of financial position. As of December 31, 2018 and 2017, marketable securities primarily consisted of treasury bills with maturities of less than one year and are classified as available-for-sale securities. Long-term marketable securities at December 31, 2017 consisted primarily of common equity securities allocated to us from ServiceMaster’s DCP, which were not transferred to us as part of the Spin-off. The amortized cost, fair value and gross unrealized gains and losses of our short- and long-term investments in Debt and Equity securities are as follows: Gross Gross Amortized Unrealized Unrealized Fair (In millions) Cost Gains Losses Value Available-for-sale securities, December 31, 2018 Debt securities $ 9 $ — $ — $ 9 Equity securities — — — — Total securities $ 9 $ — $ — $ 9 Available-for-sale securities, December 31, 2017 Debt securities $ 25 $ — $ — $ 25 Equity securities 2 — — 2 Total securities $ 27 $ — $ — $ 27 There were no unrealized losses which had been in a loss position for more than one year as of December 31, 2018 and 2017. Gains and losses on sales of investments, as determined on a specific identification basis, are included in investment income in the period they are realized. We periodically review our portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes. The table below summarizes proceeds, maturities, gross realized gains and gross realized losses resulting from sales of available-for-sale securities. There were no impairment charges due to other than temporary declines in the value of certain investments for the years ended December 31, 2018, 2017, and 2016. Year Ended December 31, (In millions) 2018 2017 2016 Proceeds from sale of securities $ 17 $ 12 $ 42 Maturities of securities 15 36 7 Gross realized gains, pre-tax — — 4 Gross realized gains, net of tax — — 2 Gross realized losses, pre-tax — — — Gross realized losses, net of tax — — — |
Comprehensive Income (Loss)
Comprehensive Income (Loss) | 12 Months Ended |
Dec. 31, 2018 | |
Comprehensive Income (Loss) [Abstract] | |
Comprehensive Income (Loss) | Note 16. Comprehensive Income (Loss) Comprehensive income (loss), which primarily includes net income (loss), unrealized gain on marketable securities and unrealized gain (loss) on derivative instruments is disclosed in the accompanying consolidated and combined statements of operations and comprehensive income and consolidated and combined statements of equity. The following tables summarize the activity in accumulated other comprehensive income (loss), net of the related tax effects. Unrealized Gains (Losses) Unrealized on Available Loss -for-Sale (In millions) on Derivatives Securities Total Balance as of December 31, 2016 $ — $ — $ — Other comprehensive income (loss) before reclassifications: Pre-tax amount — — — Tax provision (benefit) — — — After-tax amount — — — Amounts reclassified from accumulated other comprehensive income (loss ) (1) — — — Net current period other comprehensive income (loss) — — — Balance as of December 31, 2017 $ — $ — $ — Other comprehensive income (loss) before reclassifications: Pre-tax amount (12) — (12) Tax provision (benefit) (3) — (3) After-tax amount (10) — (10) Amounts reclassified from accumulated other comprehensive income (loss) (1) — — — Net current period other comprehensive loss (9) — (9) Balance as of December 31, 2018 $ (9) $ — $ (9) ___________________________________ (1) Amounts are net of tax. See reclassifications out of AOCI below for further details. Reclassifications out of AOCI included the following components for the periods indicated. Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) As of December 31, Consolidated and Combined Statements of (In millions) 2018 2017 2016 Operations and Comprehensive Income Location Loss on interest rate swap contracts $ — $ — $ — Interest expense Impact of income taxes — — — Provision for income taxes Total reclassifications related to derivatives $ — $ — $ — Gains (losses) on available-for-sale securities $ — $ — $ 3 Interest and net investment income Impact of income taxes — — (1) Provision for income taxes Total reclassifications related to securities $ — $ — $ 2 Total reclassifications for the period $ — $ — $ 2 |
Derivative Financial Instrument
Derivative Financial Instruments | 12 Months Ended |
Dec. 31, 2018 | |
Derivative Financial Instruments [Abstract] | |
Derivative Financial Instruments | Note 17. Derivative Financial Instruments We currently use a derivative financial instrument to manage risks associated with changes in interest rates. We do not hold or issue derivative financial instruments for trading or speculative purposes. In designating derivative financial instruments as hedging instruments under accounting standards for derivative instruments, we formally document the relationship between the hedging instrument and the hedged item, as well as the risk management objective and strategy for the use of the hedging instrument. This documentation includes linking the derivatives to forecasted transactions. We assess at the time a derivative contract is entered into, and at least quarterly thereafter, whether the derivative item is effective in offsetting the projected cash flows of the associated forecasted transaction. We hedge the interest payments on a portion of our variable rate debt through the use of an interest rate swap agreement. Our interest rate swap contract is classified as a cash flow hedge, and, as such, it is recorded on the accompanying consolidated and combined statements of financial position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in AOCI . Any change in the fair value of the hedging instrument resulting from ineffectiveness, as defined by accounting standards, is recognized in current period earnings. Cash flows related to the interest rate swap contract are classified as operating activities in the accompanying consolidated and combined statements of cash flows. The effective portion of the gain or loss on our interest rate swap contract is recorded in AOCI . These amounts are reclassified into earnings in the same period or periods during which the hedged forecasted debt interest settlement affects earnings. See Note 16 to the accompanying consolidated and combined financial statements for the effective portion of the gain or loss on derivative instruments recorded in AOCI and for the amounts reclassified out of AOCI and into earnings. A s the underlying forecasted transactions occur during the next 12 months, the unrealized hedging loss in AOCI expected to be recognized in earnings is $1 million, net of tax, as of December 31 , 2018. The amounts that are ultimately reclassified into earnings will be based on actual interest rates at the time the positions are settled and may differ materially from the amount noted above. |
Fair Value Measurement
Fair Value Measurement | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurement [Abstract] | |
Fair Value Measurement | Note 18. Fair Value Measurements We estimate fair value at a price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants in the principal market for the asset or liability. The valuation techniques require inputs that the business categorizes using a three-level hierarchy, from highest to lowest level of observable inputs, as follows: (1) unadjusted quoted prices for identical assets or liabilities in active markets ("Level 1"), (2) direct or indirect observable inputs, including quoted prices or other market data, for similar assets or liabilities in active markets or identical assets or liabilities in less active markets ("Level 2") and (3) unobservable inputs that require significant judgment for which there is little or no market data ("Level 3"). When multiple input levels are required for a valuation, we categorize the entire fair value measurement according to the lowest level of input that is significant to the measurement, even though we may have also utilized significant inputs that are more readily observable. The period-end carrying amounts of cash and cash equivalents, receivables, accounts payable and accrued liabilities approximate fair value because of the short maturity of these instruments. The period-end carrying amounts of short- and long-term marketable securities also approximate fair value and primarily consists of available-for-sale debt securities. Unrealized gains and losses are reported net of tax as a component of AOCI in the accompanying consolidated and combined statements of financial position. Any unrealized losses where the decline in value is other than temporary are reported in Interest and net investment income in the accompanying consolidated and combined statements of operations and comprehensive income. There were no other than temporary declines in value for the periods ended December 31, 2018 and 2017. The carrying amount of total debt was $984 million and $9 million, and the estimated fair value was $958 million and $9 million as of December 31, 2018 and 2017, respectively. The fair value of our debt is estimated based on available market prices for the same or similar instruments that 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 December 31, 2018 and 2017. We value our interest rate swap contract using forward interest rate curves obtained from third-party market data providers. The fair value of the 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. We did not change 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 years ended December 31, 2018 and 2017. The carrying amount and estimated fair value of our financial instruments that are recorded at fair value on a recurring basis for the periods presented are as follows: Estimated Fair Value Measurements (In millions) Statement of Financial Position Location Carrying Value Quoted Prices In Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Observable Inputs (Level 3) As of December 31, 2018 Financial Assets: Investments in marketable securities Marketable securities 9 9 — — Total financial assets $ 9 $ 9 $ — $ — Financial Liabilities: Interest rate swap contract Other accrued liabilities 2 — 2 — Other long-term obligations 10 10 Total financial liabilities $ 12 $ — $ 12 $ — As of December 31, 2017 Financial Assets: Deferred compensation trust assets Long-term marketable securities $ 1 $ 1 $ — $ — Investments in marketable securities Marketable securities and Long-term marketable securities 26 25 1 — Total financial assets $ 27 $ 26 $ 1 $ — |
Capital Stock
Capital Stock | 12 Months Ended |
Dec. 31, 2018 | |
Capital Stock [Abstract] | |
Capital Stock | Note 19. Capital Stock We are authorized to issue 2,000,000,000 shares of common stock. As of December 31, 2018, there were 84,545,152 shares of common stock issued and outstanding . We have no other classes of equity securities issued or outstanding. |
Earnings Per Share
Earnings Per Share | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Note 20. Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and RSUs are reflected in diluted net income per share by applying the treasury stock method. There were no Frontdoor equity awards outstanding prior to the Spin-off. Basic and diluted earnings per share are calculated as follows: Year Ended December 31, (In millions, except per share data) 2018 2017 2016 Net Income $ 125 $ 160 $ 124 Weighted-average common shares outstanding (1) 84.5 84.5 84.5 Effect of dilutive securities: RSUs 0.1 — — Stock options (2) — — — Weighted-average common shares outstanding - assuming dilution 84.7 84.5 84.5 Basic earnings per share $ 1.47 $ 1.90 $ 1.47 Diluted earnings per share $ 1.47 $ 1.90 $ 1.47 ___________________________________ (1) For periods prior to the Spin-off, earnings per share was calculated based on the 84,515,619 shares of Frontdoor stock that were outstanding at the date of distribution. (2) Options to purchase 0.1 million shares for the years ended December 31, 2018 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. |
Schedule I frontdoor, inc (Pare
Schedule I frontdoor, inc (Parent Company Only) | 12 Months Ended |
Dec. 31, 2018 | |
Schedule I frontdoor, inc. (Parent Company Only) [Abstract] | |
Schedule I frontdoor, inc. (Parent Company Only) | SCHEDULE I frontdoor, inc (Parent Company Only) Condensed Statements of Comprehensive Income (In millions) Year Ended December 31, 2018 Revenue $ — Interest expense 22 Loss before Income Taxes (22) Income tax benefit (5) Net Loss from Operations (18) Equity in earnings of subsidiaries (net of tax) 34 Net Income $ 17 Total Comprehensive Income $ 8 frontdoor, inc (Parent Company Only) Condensed Balance Sheets (In millions) As of December 31, 2018 Assets: Current Assets: Cash and cash equivalents $ 55 Other current assets 3 Total Current Assets 58 Other Assets: Investments in subsidiaries 601 Deferred taxes 3 Other assets 1 Total Assets $ 663 Liabilities and Equity: Current Liabilities: Accrued liabilities: Interest payable 9 Other 2 Current portion of long-term debt 7 Total Current Liabilities 18 Long-Term Debt 977 Due to Subsidiaries 2 Other Long-Term Liabilities: Other long-term obligations 10 Total Other Long-Term Liabilities 10 Equity (344) Total Liabilities and Equity $ 663 frontdoor, inc (Parent Company Only) Condensed Statements of Cash Flows (In millions) Year Ended December 31, 2018 Cash and Cash Equivalents at Beginning of Period $ — Net Cash Provided from Operating Activities 159 Cash Flows from Financing Activities Payments of debt (2) Net transfers to Parent Company 4 Contribution from ServiceMaster 81 Dividend paid to ServiceMaster (169) Discount paid on issuance of debt (2) Debt issuance costs paid (16) Net Cash Used for Financing Activities (104) Cash Increase During the Period 55 Cash and Cash Equivalents at End of Period $ 55 Notes to Condensed Parent Company Only Financial Statements Note 1. Basis of Presentation The condensed financial statements of frontdoor , i nc. (“Parent Company”) , are required as a result of the restricted net assets of the Parent Company’s consolidated subsidiaries exceeding 25% of the Parent Company’s consolidated net assets as of December 31, 201 8 . All consolidated subsidiaries of the Parent Company are wholly owned. The primary source of income for the Parent Company is equity in its subsidiaries’ earnings. Pursuant to rules and regulations of the SEC, the unconsolidated condensed financial statements of the Parent Company do not reflect all of the information and notes normally included with financial statements prepared in accordance with GAAP. Therefore, these condensed financial statements should be read in conjunction with the consolidated financial statements and related notes thereto included in this Annual Report on Form 10-K. The Parent Company has accounted for its subsidiaries under the equity method in the unconsolidated condensed financial statements. Note 2. Long-Term Debt On August 16, 2018, in connection with the Spin-off, the Parent Company engaged in a series of financing transactions pursuant to which we incurred long-term debt consisting of the $650 million Term Loan Facility and $350 million of 2026 Notes. The proceeds of the debt was attributed directly to SVM and as such is reflected as a non-cash distribution in these financial statements. On October 24, 2018, the Parent Company entered into an interest rate swap agreement effective October 31, 2018 that expires on August 16, 2025. The notional amount of the agreement was $350 million. For further information on the Parent Company’s August 2018 financing transactions, see Note 13 to the consolid ated and combined financial statements of frontdoor, inc. included in Item 8 of this Annual Report on Form 10-K. |
Schedule II Valuation And Quali
Schedule II Valuation And Qualifying Accounts | 12 Months Ended |
Dec. 31, 2018 | |
Schedule II Valuation And Qualifying Accounts [Abstract] | |
Schedule II Valuation And Qualifying Accounts | SCHEDULE II frontdoor, inc Valuation and Qualifying Accounts (In millions) Additions Balance at Charged to Balance at Beginning of Costs and End of Period Expenses Deductions (1) Period As of and for the year ending December 31, 2018 Allowance for doubtful accounts Accounts receivable $ 1 $ 12 $ 12 $ 2 Income tax valuation allowance — 1 — 1 As of and for the year ending December 31, 2017 Allowance for doubtful accounts Accounts receivable $ 2 $ 11 $ 11 $ 1 Income tax valuation allowance — — — — As of and for the year ending December 31, 2016 Allowance for doubtful accounts Accounts receivable $ 2 $ 11 $ 11 $ 2 Income tax valuation allowance — — — — ___________________________________ (1) Deductions in the allowance for doubtful accounts for accounts and notes receivable reflect write-offs of uncollectible accounts. Deductions for the income tax valuation allowance in 2018, 2017 and 2016 are primarily attributable to the reduction of net operating loss carryforwards and other deferred tax assets related to the uncertainty of future taxable income in certain jurisdictions. |
Significant Accounting Polici_2
Significant Accounting Policies (Policy) | 12 Months Ended |
Dec. 31, 2018 | |
Significant Accounting Policies [Abstract] | |
Basis Of Consolidation And Combination | Basis of Consolidation and Combination Our financial statements include amounts and disclosures related to the stand-alone financial statements and accounting records of Frontdoor after the Spin-off (“consolidated”) in combination with amounts and disclosu res that have been derived for our business from the consolidated financial statements and accounting records of ServiceMaster for the periods prior to the completion of the Spin-off (“combined”). Any references to our financial statements, financial data and operating data refer to our accompanying consolidated and combined financial statements unless otherwise noted. All intercompany transactions have been eliminated. |
Use Of Estimates | Use of Estimates The preparation of the combined financial statements requires management to make certain estimates and assumptions required under U.S. GAAP that may differ from actual results. The more significant areas requiring the use of management estimates relate to revenue recognition; the allowance for uncollectible receivables; accruals for home service plans; accruals for income tax liabilities as well as deferred tax accounts; the deferral and amortization of customer acquisition costs; stock-based compensation; useful lives for depreciation and amortization expense; the valuation of marketable securities; and the valuation of tangible and intangible assets. |
Revenue | Revenue Home service plan contracts are typically one year in duration. Home service plan claims costs are expensed as incurred. We recognize revenue over the life of these contracts in proportion to the expected direct costs. Those costs bear a direct relationship to the fulfillment of our obligations under the contracts and are representative of the relative value provided to the customer (measurement of progress towards completion method). We regularly review our estimates of claims costs and adjust the estimates when appropriate. Revenues are presented net of sales taxes collected and remitted to government taxing authorities on the consolidated and combined statements of operations and comprehensive income. 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. When revenue is recognized on monthly-pay customers before being billed, a contract asset is created. 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. Amounts are recognized as revenue in proportion to the costs expected to be incurred in performing services under our contracts. |
Allowance for Uncollectible Receivables | Allowance for Uncollectible Receivables The allowance for uncollectible receivables is developed based on several factors, including overall customer credit quality, historical write-off experience and specific account analyses that project the ultimate collectability of the outstanding balances. As such, these factors may change over time causing the reserve level to vary. |
Deferred Customer Acquisition Costs | Deferred Customer Acquisition Costs Customer acquisition costs, which are incremental and direct costs of obtaining a customer, are deferred and amortized over the expected customer relationship period in proportion to revenue recognized. These costs include sales commissions and direct selling costs which can be shown to have resulted in a successful sale. Deferred customer acquisition costs were $21 million and $18 million as of December 31, 2018 and 2017, respectively. |
Advertising | Advertising Advertising costs are expensed when the advertising occurs. Advertising expense is included in Selling and administrative expenses on the combined statement s of comprehensive income. Advertising expense for the years ended December 31, 201 8 , 201 7 and 201 6 was $61 million, $51 million and $44 million respectively. |
Property And Equipment, Intangible Assets And Goodwill | Property and Equipment, Intangible Assets and Goodwill Property and equipment consist of the following: As of Estimated December 31, Useful Lives (In millions) 2018 2017 (Years) Buildings and improvements $ 20 $ 19 10 - 40 Technology and communications 78 51 3 - 7 Office equipment, furniture and fixtures, and vehicles 8 6 5 - 7 107 77 Less accumulated depreciation (59) (46) Net property and equipment $ 47 $ 31 Depreciation of property and equipment, including depreciation of assets held under capital leases was $12 million, $9 million and $8 million for the years ended December 31, 2018, 2017 and 2016, respectively. Fixed assets and intangible assets with finite lives are depreciated and amortized on a straight-line basis over their estimated useful lives. These lives are based on our previous experience for similar assets, potential market obsolescence and other industry and business data. As required by accounting standards for the impairment or disposal of long-lived assets, our fixed assets and finite-lived intangible assets are tested for recoverability whenever events or changes in circumstances indicate their carrying amounts may not be recoverable. If the carrying value is no longer recoverable based upon the undiscounted future cash flows of the asset, an impairment loss would be recognized equal to the difference between the carrying amount and the fair value of the asset. Changes in the estimated useful lives or in the asset values could cause us to adjust its book value or future expense accordingly. As required under accounting standards for goodwill and other intangibles, goodwill is not subject to amortization, and intangible assets with indefinite useful lives are not amortized until their useful lives are determined to no longer be indefinite. Goodwill and intangible assets that are not subject to amortization 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. Goodwill and indefinite-lived intangible assets, primarily our trade names, are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. Our 2018, 2017, and 2016 annual impairment analyses, which were performed as of October 1 of each year, did not result in any goodwill or trade name impairments. |
Restricted Net Assets | Restricted Net Assets There are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. These restrictions are related to our regulatory requirements. The payments of ordinary and extraordinary dividends by our subsidiaries are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things, such laws and regulations require certain such subsidiaries to maintain minimum capital and net worth requirements and may limit the amount of ordinary and extraordinary dividends and other payments that these subsidiaries can mak e to us. As of December 31, 2018 , the total net assets subject to these third-party restrictions was $1 87 million. |
Financial Instruments And Credit Risk | Financial Instruments and Credit Risk We hedge the interest payments on a portion of our variable rate debt through the use of interest rate swap agreements. We have classified our interest rate swap contract as a cash flow hedge, and, as such, the hedging instruments are recorded on the consolidated and combined statements of financial position as either an asset or liability at fair value, with the effective portion of changes in the fair value attributable to the hedged risks recorded in AOCI. The effect of derivative financial instrument transactions could have a material impact on our financial statements. We do not hold or issue derivative financial instruments for trading or speculative purposes. Financial instruments, which potentially subject us to financial and credit risk, consist principally of investments and receivables. Investments consist primarily of publicly traded debt and certificates of deposit. We periodically review our portfolio of investments to determine whether there has been an other than temporary decline in the value of the investments from factors such as deterioration in the financial condition of the issuer or the market(s) in which the issuer competes. The majority of our receivables have little concentration of credit risk due to the large number of customers with relatively small balances and their dispersion across geographical areas. We maintain an allowance for losses based upon the expected collectability of receivables. See Note 18 to the accompanying consolidated and combined financial statements for information relating to the fair value of financial instruments. |
Stock-Based Compensation | Stock-Based Compensation Stock-based compensation expense for stock options is estimated at the grant date based on an award’s fair value as calculated by the Black-Scholes option-pricing model and is recognized as expense over the requisite service period. The Black-Scholes model requires various highly judgmental assumptions including expected volatility and option life. If any of the assumptions used in the Black-Scholes model change significantly, stock-based compensation expense for future grants may differ materially from that recorded in the current period related to options granted to date. In addition, we estimate the expected forfeiture rate and only recognizes expense for those shares expected to vest. We estimate the forfeiture rate based on historical experience. To the extent the actual forfeiture rate is different from the estimate, stock-based compensation expense is adjusted accordingly. See Note 11 to the accompanying consolidated and combined financial statements for more details. |
Income Taxes | Income Taxes Frontdoor and its subsidiaries file consolidated U.S. federal income tax returns. State and local returns are filed both on a separate company basis and on a combined unitary basis with Frontdoor. Current and deferred income taxes are provided for on a separate company basis. We account for income taxes using an asset and liability approach for the expected future tax consequences of events that have been recognized in our financial statements or tax returns. Deferred income taxes are provided to reflect the differences between the tax bases of assets and liabilities and their reported amounts in the financial statements. Valuation allowances are established when necessary to reduce deferred income tax assets to the amounts expected to be realized. We record a liability for unrecognized tax benefits resulting from uncertain tax positions taken or expected to be taken in its tax return. We recognize potential interest and penalties related to its uncertain tax positions in income tax expense. |
Earnings Per Share | Earnings Per Share Basic earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings per share is computed by dividing net income by the weighted-average number of shares of common stock outstanding during the period, increased to include the number of shares of common stock that would have been outstanding had potential dilutive shares of common stock been issued. The dilutive effect of stock options and RSUs are reflected in diluted earnings per share by applying the treasury stock method. For periods prior to the Spin-off, earnings per share was calculated based on the 84,515,619 shares of Frontdoor stock that were outstanding at the date of distribution. There were no Frontdoor equity awards ou tstanding prior to the Spin-off. |
Segment Reporting | Segment Reporting A public company is required to report annual and interim financial and descriptive information about its reportable operating segments. We operate our business under four brands, who each engage in the similar activity of providing home service plans to our customers. Our chief operating decision maker, who is our Chief Executive Officer, regularly evaluates financial information on a consolidated basis in deciding how to allocate resources and in assessing performance. As such, we operate as one operating segment, which is comprised of our four brands, and we have one reportable segment. |
Newly Issued Accounting Standards | Newly Issued Accounting Standards In May 2014, the FASB issued ASU 2014-09 to provide a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. Frontdoor adopted ASC 606, effective as of January 1, 2018, using the modified retrospective method to those contracts which were not completed as of January 1, 2018. Results for reporting periods beginning after January 1, 2018 are presented under ASC 606, while prior period amounts are not adjusted and continue to be reported in accordance with ASC 605. We implemented internal controls and system functionality where necessary to enable the preparation of financial information on adoption. See Note 2 to the accompanying consolidated and combined financial statements for more details. In January 2016, the FASB issued ASU 2016-01 to change how entities measure certain equity investments, to require the disclosure of changes in the fair value of financial liabilities measured under the fair value option that are attributable to a company's own credit, and to change certain other disclosure requirements. The changes in ASU 2016-01 specifically require that the changes in fair value of all investments in equity securities be recognized in net income. In March 2018, the FASB issued ASU 2018-03, which amends ASU 2016-01 and provides further clarification re garding this standard. We adopted ASU 2018-03 effective as of January 1, 2018. There was an immaterial impact to the accompanying condensed combined financial statements as a result of our adoption of this standard. In February 2016, the FASB issued ASU 2016-02, which is the final standard on accounting for leases. In July 2018, the FASB issued ASU 2018-10 and ASU 2018-11, which amend ASU 2016-02 to provide companies an alternative transition method whereby it may elect to recognize and measure leases by applying the cumulative impact of adopting ASU 2016-02 to the opening retained earnings balance in the period of adoption, thereby removing the requirement that the financial statements of prior periods be restated. We plan to utilize this alternative transition method. While both lessees and lessors are affected by the new guidance, the effects on lessees are much more significant. The most significant change for lessees is the requirement under the new guidance to recognize right-of-use assets and lease liabilities for all leases not considered short-term leases. The lease liability represents the lessee’s obligation to make lease payments arising from a lease and will be measured as the present value of the lease payments. The right-of-use asset represents the lessee’s right to use a specified asset for the lease term, and will be measured at the lease liability amount, adjusted for lease prepayment, lease incentives received and the lessee’s initial direct costs. The guidance is effective for our fiscal year beginning January 1, 2019. We will elect the package of practical expedients permitted under the transition guidance, which allows us to carryforward our historical lease classification, our assessment on whether a contract is or contains a lease, and our initial direct costs for any leases that exist prior to adoption of the new standard. Based on our lease portfolio, which consists of real estate leases, we currently anticipate recognizing a right-of-use asset and a lease liability of approximately $24 million. Other than disclosed, we do not expect the new standard to have an impact on our consolidated and combined financial statements or our debt covenants. We are currently evaluating the impact of this standard on our internal controls. In May 2017, the FASB issued ASU 2017-09 , which clarifies the scope of modification accounting for share-based payment arrangements. Specifically, an entity would not apply modification accounting if the fair value, vesting conditions and classification of the awards are the same immediately before and af ter the modification. We adopted ASU 2017-09 effective as of January 1, 2018 with no impact to the consolidated and combined financial stateme nts as a result of our adoption of this standard and will apply the guidance prospectively to awards modified on or after the adoption date. In August 2017, the FASB issued ASU 2017-12, which simplifies certain aspects of hedge accounting and improves disclosures of hedging arrangements through the elimination of the requirement to separately measure and report hedge ineffectiveness. The ASU generally requires the entire change in the fair value of a hedging instrument to be presented in the same income statement line as the hedged item in order to align financial reporting of hedge relationships with economic results. Entities must apply the amendments to cash flow and net investment hedge relationships that exist on the date of adoption using a modified retrospective approach. The presentation and disclosure requirements must be applied prospectively. We elected to early adopt ASU 2017-12 in the fourth quarter of 2018, and there was no impact to the accompanying consolidated and combined financial statements as a result of our adoption of this standard. In February 2018, the FASB issued ASU 2018-02, allowing a reclassification from AOCI to retained earnings for stranded tax effects resulting from the corporate income tax rate change adopted as part of U.S. Tax Reform. This standard is effective for fiscal years, and interim periods within those years, beginning after December 15, 2018. As allowed by ASU 2018-02, we elected to early adopt the amendments of ASU 2018-02 in the first quarter of 2018, and there was an immaterial impact to the accompanying consolidated and combined financial statements as a result of our adoption of this standard. In October 2018, the FASB issued ASU 2018-16, which expands the list of U.S. benchmark interest rates permitted in the application of hedge accounting to include the Overnight Index Swap (“OIS”) rate based on the Secured Overnight Financing Rate (“SOFR”). SOFR is a new index calculated by reference to short-term repurchase agreements backed by Treasury securities. It was selected as a preferred replacement for U.S. dollar LIBOR, which will be phase d out by the end of 2021. As required by ASU 2018-16, we early adopted this standard in the fourth quarter of 2018 concurrently with ASU 2017-12 , and there was no impact to the accompanying consolidated and combined financial statements as a result of our adoption of this standard. |
Significant Accounting Polici_3
Significant Accounting Policies (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Significant Accounting Policies [Abstract] | |
Schedule Of Property And Equipment | As of Estimated December 31, Useful Lives (In millions) 2018 2017 (Years) Buildings and improvements $ 20 $ 19 10 - 40 Technology and communications 78 51 3 - 7 Office equipment, furniture and fixtures, and vehicles 8 6 5 - 7 107 77 Less accumulated depreciation (59) (46) Net property and equipment $ 47 $ 31 |
Revenue (Tables)
Revenue (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Revenue [Abstract] | |
Disaggregation of Revenue From Contracts With Customers | Year Ended December 31, (In millions) 2018 2017 2016 Renewals $ 835 $ 759 $ 671 Real estate (1) 262 249 207 Direct-to-consumer (1) 156 144 142 Other 6 5 — Total $ 1,258 $ 1,157 $ 1,020 _____________________________ (1) First year revenue only. |
Movement In Deferred Revenue | (In millions) Deferred revenue Balance as of January 1, 2018 $ 183 Deferral of revenue 408 Recognition of deferred revenue (406) Balance as of December 31, 2018 $ 185 |
Comparison of the Reported Condensed Consolidated Statement of Financial Position to the Pro-forma Amounts had the Previous Guidance Been in Effect | As of December 31, 2018 Consolidated and Combined Statement of Financial Position As reported Under Prior Revenue Recognition Guidance Current Assets: Receivables $ 12 $ 454 Deferred customer acquisition costs — 18 Other Assets: Deferred customer acquisition costs 21 — Total Assets $ 1,041 $ 1,482 Current Liabilities: Deferred revenue $ 185 627 Other Long-Term Liabilities: Deferred taxes 39 39 Total Liabilities 1,385 1,828 Total Deficit (344) (346) Liabilities and Equity $ 1,041 1,482 Year Ended December 31, 2018 Consolidated and Combined Statement of Operations and Comprehensive Income As reported Under Prior Revenue Recognition Guidance Selling and administrative expenses $ 338 $ 338 Provision for income taxes 42 42 Net Income $ 125 $ 125 |
Goodwill and Intangible Assets
Goodwill and Intangible Assets (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Goodwill and Intangible Assets [Abstract] | |
Schedule Of Goodwill Balances For Continuing Operations By Reportable Segment And For Other Operations And Headquarters | (In millions) Total Balance as of December 31, 2016 $ 471 Acquisitions 4 Balance as of December 31, 2017 476 Acquisitions — Balance as of December 31, 2018 $ 476 |
Schedule Of Other Intangible Asset Balances For Continuing Operations | The table below summarizes the other intangible asset balances: 0 As of December 31, 2018 2017 Accumulated Accumulated (In millions) Gross Amortization Net Gross Amortization Net Trade names (1) $ 140 $ — $ 140 $ 140 $ — $ 140 Customer relationships 173 (165) 7 172 (160) 12 Other 32 (22) 10 32 (19) 13 Total $ 345 $ (187) $ 158 $ 344 $ (179) $ 165 ___________________________________ (1) Not subject to amortization. |
Income Taxes (Tables)
Income Taxes (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Income Taxes [Abstract] | |
Reconciliation Of Unrecognized Tax Benefits | (In millions) Total Balance as of December 31, 2016 $ 2 Increases in tax positions for current year 2 Balance as of December 31, 2017 4 Increases in tax positions for current year 2 Decrease due to Spin-off (6) Balance as of December 31, 2018 $ — |
Reconciliation Of Effective Income Tax Rate | Year Ended December 31, 2018 2017 2016 Tax at U.S. federal statutory rate 21.0 % 35.0 % 35.0 % State and local income taxes, net of U.S. federal benefit 2.5 1.5 2.1 Other permanent items 0.5 2.1 0.6 Excess tax benefits from stock-based compensation (0.1) (2.5) (1.1) Transaction costs 1.2 — — U.S. Tax Reform rate change (1) — (8.9) — Effective rate 25.1 % 27.2 % 36.6 % ___________________________________ (1) Deferred income taxes on our balance sheet at December 31, 2017 were remeasured for the change in the U.S. income tax rate through income tax expense (see discussion on U.S. Tax Reform). This one-time beneficial rate change adjustment for $20 million includes $1 million in state income tax expense. |
Income Tax Expense From Continuing Operations | Year Ended December 31, (In millions ) 2018 2017 2016 Current: U.S. federal $ 29 $ 71 $ 63 State and local 6 7 7 35 78 70 Deferred: U.S. federal 7 (20) 1 State and local — 1 — 7 (19) 1 Provision for income taxes $ 42 $ 60 $ 71 |
Deferred Tax Balances | As of December 31, (In millions) 2018 2017 Long-term deferred tax assets (liabilities): Intangible assets (1) $ (34) $ (37) Property and equipment (6) (2) Prepaid expenses and deferred customer acquisition costs (6) (5) Claims and related expenses — 1 Accrued liabilities 2 2 Other long-term obligations 1 3 Tenant improvements 1 — Deferred interest expense 4 — Net operating loss and tax credit carryforwards (2) — 1 Less valuation allowance (1) — Net Long-term deferred tax liability $ (39) $ (38) ___________________________________ (1) The deferred tax liability relates primarily to the difference in the tax versus book basis of intangible assets. We had $42 million and $4 0 million of deferred tax liability included in this net deferred tax liability as of December 31, 2018 and 2017, respectively, that will not actually be paid unless certain of our business units are sold. (2) Primarily represents state credit carryforwards. We have no remaining state credit carryforwards as of December 31, 2018. |
Acquisitions (Tables)
Acquisitions (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Acquisitions [Abstract] | |
Supplemental Cash Flow Information Regarding Acquisitions | Year Ended December 31, (In millions) 2016 Assets acquired $ 140 Liabilities assumed (40) Net assets acquired $ 101 Net cash paid $ 87 Seller financed debt 14 Purchase price $ 101 |
Restructuring Charges (Tables)
Restructuring Charges (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Restructuring Charges [Abstract] | |
Schedule Of Reconciliation Of The Beginning And Ending Balances Of Accrued Restructuring Charges | (In millions) Accrued Restructuring Charges Balance as of December 31, 2016 $ — Costs incurred 7 Costs paid or otherwise settled (5) Balance as of December 31, 2017 $ 2 Costs incurred 3 Costs paid or otherwise settled (5) Balance as of December 31, 2018 $ — |
Spin-Off Charges (Tables)
Spin-Off Charges (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Spin-Off Charges [Abstract] | |
Reconciliation Of Accrued Spin-off Charges | (In millions) Accrued Spin-off Charges Balance as of December 31, 2016 $ — Costs incurred 13 Costs paid or otherwise settled (1) (12) Balance as of December 31, 2017 $ 1 Costs incurred (1) 22 Costs paid or otherwise settled (23) Balance as of December 31, 2018 $ — ___________________________________ (1) An additional $2 million of Spin-off charges were pre-paid in 2017 and subsequently expensed in 2018, which is included in Prepaid expenses and other assets on the accompanying consolidated and combined statement s of financial position as of December 31, 2017. |
Stock-Based Compensation (Table
Stock-Based Compensation (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Stock-Based Compensation [Abstract] | |
Summary Of Restricted Stock Awards Activity | Frontdoor Awards Distributed in Spin-Off Frontdoor Employees ServiceMaster Employees Total Unvested restricted stock awards at Spin-off date 143,697 106,317 250,014 Vested (7,200) (17,188) (24,388) Forfeited (4,136) — (4,136) Unvested restricted stock awards at December 31, 2018 132,361 89,129 221,490 |
Summary Of Option Activity Under The MSIP | Weighted Avg. Aggregate Remaining Weighted Avg. Intrinsic Contractual Stock Exercise Value Term Options Price (in millions) (in years) Outstanding at December 31, 2017 — $ — $ Converted on October 1, 2018 391,728 $ 30.04 4 8.31 Granted to employees — $ — Exercised — $ — Forfeited (18,341) $ 29.61 Expired — $ — Outstanding at December 31, 2018 373,387 $ 30.06 $ 1 8.04 Exercisable at December 31, 2018 98,323 $ 19.96 $ 1 6.15 |
Summary Of RSU Activity Under The MSIP | Weighted Avg. Grant Date RSUs Fair Value Outstanding at December 31, 2017 — $ — Converted on October 1, 2018 143,697 $ 41.50 Granted to employees 29,178 $ 29.13 Vested (7,200) $ 41.50 Forfeited (4,136) $ 41.50 Outstanding at December 31, 2018 161,539 $ 39.27 |
Long-Term Debt (Tables)
Long-Term Debt (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Long-Term Debt [Abstract] | |
Schedule Of Long-Term Debt | As of December 31, (In millions) 2018 2017 Term Loan Facility maturing in 2025 (1) $ 639 $ — Revolving Credit Facility maturing in 2023 — — 2026 Notes (2) 344 — Other 1 9 Less current portion (7) (9) Total long-term debt $ 977 — ___________________________________ (1) As of December 31, 2018, presented net of $8 million in unamortized debt issuance costs and $2 million in unamortized original issue discount paid. (2) As of December 31, 2018, presented net of $6 million in unamortized debt issuance costs. |
Supplemental Cash Flow Inform_2
Supplemental Cash Flow Information (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Supplemental Cash Flow Information [Abstract] | |
Schedule Of Supplemental Information Relating To The Accompanying Condensed Consolidated Statements Of Cash Flows | Supplemental information relating to the accompanying consolidated and combined statements of cash flows is presented in the following table: As of December 31, (In millions) 2018 2017 2016 Cash paid for or (received from): Interest expense $ 13 $ — $ — Income tax payments, net of refunds (1) — — — Interest and dividend income (1) — (2) ___________________________________ (1) Prior to the Spin-off, all income tax payments and refunds were paid and received by ServiceMaster on our behalf. |
Cash and Marketable Securities
Cash and Marketable Securities (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Cash and Marketable Securities [Abstract] | |
Schedule Of Amortized Cost, Fair Value And Gross Unrealized Gains And Losses Of The Company's Short- And Long-Term Investments In Debt And Equity Securities | Gross Gross Amortized Unrealized Unrealized Fair (In millions) Cost Gains Losses Value Available-for-sale securities, December 31, 2018 Debt securities $ 9 $ — $ — $ 9 Equity securities — — — — Total securities $ 9 $ — $ — $ 9 Available-for-sale securities, December 31, 2017 Debt securities $ 25 $ — $ — $ 25 Equity securities 2 — — 2 Total securities $ 27 $ — $ — $ 27 |
Schedule Of Proceeds From Sale Of Securities, Maturities Of Available-for-sale Securities And Gross Realized (Gains) Losses | Year Ended December 31, (In millions) 2018 2017 2016 Proceeds from sale of securities $ 17 $ 12 $ 42 Maturities of securities 15 36 7 Gross realized gains, pre-tax — — 4 Gross realized gains, net of tax — — 2 Gross realized losses, pre-tax — — — Gross realized losses, net of tax — — — |
Comprehensive Income (Loss) (Ta
Comprehensive Income (Loss) (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Comprehensive Income (Loss) [Abstract] | |
Summary Of The Activity In Other Comprehensive Income (Loss), Net Of The Related Tax Effects | Unrealized Gains (Losses) Unrealized on Available Loss -for-Sale (In millions) on Derivatives Securities Total Balance as of December 31, 2016 $ — $ — $ — Other comprehensive income (loss) before reclassifications: Pre-tax amount — — — Tax provision (benefit) — — — After-tax amount — — — Amounts reclassified from accumulated other comprehensive income (loss ) (1) — — — Net current period other comprehensive income (loss) — — — Balance as of December 31, 2017 $ — $ — $ — Other comprehensive income (loss) before reclassifications: Pre-tax amount (12) — (12) Tax provision (benefit) (3) — (3) After-tax amount (10) — (10) Amounts reclassified from accumulated other comprehensive income (loss) (1) — — — Net current period other comprehensive loss (9) — (9) Balance as of December 31, 2018 $ (9) $ — $ (9) ___________________________________ (1) Amounts are net of tax. See reclassifications out of AOCI below for further details. |
Schedule Of Reclassifications Out Of Accumulated Other Comprehensive Income (Loss) | Amounts Reclassified from Accumulated Other Comprehensive Income (Loss) As of December 31, Consolidated and Combined Statements of (In millions) 2018 2017 2016 Operations and Comprehensive Income Location Loss on interest rate swap contracts $ — $ — $ — Interest expense Impact of income taxes — — — Provision for income taxes Total reclassifications related to derivatives $ — $ — $ — Gains (losses) on available-for-sale securities $ — $ — $ 3 Interest and net investment income Impact of income taxes — — (1) Provision for income taxes Total reclassifications related to securities $ — $ — $ 2 Total reclassifications for the period $ — $ — $ 2 |
Fair Value Measurement (Tables)
Fair Value Measurement (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Fair Value Measurement [Abstract] | |
Schedule Of The Carrying Amount And Estimated Fair Value Of The Company's Financial Instruments That Are Recorded At Fair Value On A Recurring Basis | Estimated Fair Value Measurements (In millions) Statement of Financial Position Location Carrying Value Quoted Prices In Active Markets (Level 1) Significant Other Observable Inputs (Level 2) Significant Other Observable Inputs (Level 3) As of December 31, 2018 Financial Assets: Investments in marketable securities Marketable securities 9 9 — — Total financial assets $ 9 $ 9 $ — $ — Financial Liabilities: Interest rate swap contract Other accrued liabilities 2 — 2 — Other long-term obligations 10 10 Total financial liabilities $ 12 $ — $ 12 $ — As of December 31, 2017 Financial Assets: Deferred compensation trust assets Long-term marketable securities $ 1 $ 1 $ — $ — Investments in marketable securities Marketable securities and Long-term marketable securities 26 25 1 — Total financial assets $ 27 $ 26 $ 1 $ — |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 12 Months Ended |
Dec. 31, 2018 | |
Earnings Per Share [Abstract] | |
Schedule Of Basic And Diluted Earnings Per Share | Year Ended December 31, (In millions, except per share data) 2018 2017 2016 Net Income $ 125 $ 160 $ 124 Weighted-average common shares outstanding (1) 84.5 84.5 84.5 Effect of dilutive securities: RSUs 0.1 — — Stock options (2) — — — Weighted-average common shares outstanding - assuming dilution 84.7 84.5 84.5 Basic earnings per share $ 1.47 $ 1.90 $ 1.47 Diluted earnings per share $ 1.47 $ 1.90 $ 1.47 ___________________________________ (1) For periods prior to the Spin-off, earnings per share was calculated based on the 84,515,619 shares of Frontdoor stock that were outstanding at the date of distribution. (2) Options to purchase 0.1 million shares for the years ended December 31, 2018 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. |
Basis of Presentation (Narrativ
Basis of Presentation (Narrative) (Details) | Oct. 01, 2018 | Dec. 31, 2018stateitem |
Basis of Presentation [Abstract] | ||
Common stock, percentage held by stockholders | 80.20% | |
Number of systems or appliances covered under service plans | item | 21 | |
Number of States in which Entity Operates | state | 50 |
Significant Accounting Polici_4
Significant Accounting Policies (Narrative) (Details) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018USD ($)segmentshares | Dec. 31, 2017USD ($) | Dec. 31, 2016USD ($) | Oct. 01, 2018shares | |
Significant Accounting Policies [Line Items] | ||||
Deferred customer acquisition costs | $ 21 | $ 18 | ||
Advertising expense | 61 | 51 | $ 44 | |
Depreciation of property and equipment, including depreciation of assets held under capital leases | $ 12 | 9 | 8 | |
Shares of common stock outstanding | shares | 84,545,152 | 84,515,619 | ||
Number of Reportable Segments | segment | 1 | |||
Goodwill impairment charges | $ 0 | $ 0 | $ 0 | |
Amount of Restricted Net Assets for Consolidated and Unconsolidated Subsidiaries | 187 | |||
Accounting Standards Update 2016-02 [Member] | ||||
Significant Accounting Policies [Line Items] | ||||
Operating Lease, Liability | 24 | |||
Operating Lease, Right-of-Use Asset | $ 24 |
Significant Accounting Polici_5
Significant Accounting Policies (Schedule Of Property And Equipment) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 107 | $ 77 |
Less: accumulated depreciation | (59) | (46) |
Net Property and Equipment | 47 | 31 |
Buildings and improvements | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 20 | 19 |
Buildings and improvements | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 10 years | |
Buildings and improvements | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 40 years | |
Technology and communications | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 78 | 51 |
Technology and communications | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 3 years | |
Technology and communications | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 7 years | |
Office equipment, furniture and fixtures, and vehicles | ||
Property, Plant and Equipment [Line Items] | ||
Gross Property and equipment | $ 8 | $ 6 |
Office equipment, furniture and fixtures, and vehicles | Minimum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 5 years | |
Office equipment, furniture and fixtures, and vehicles | Maximum [Member] | ||
Property, Plant and Equipment [Line Items] | ||
Estimated Useful Lives | 7 years |
Revenue (Narrative) (Details)
Revenue (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Jan. 01, 2018 | Dec. 31, 2017 | |
Capitalized Contract Cost, Amortization | $ 22 | ||
Capitalized Contract Cost, Impairment Loss | 0 | ||
Deferred revenue | 185 | $ 573 | |
Revenue recognized | $ 179 | ||
Impact of adopting ASC 606 [Member] | |||
Capitalized Contract Cost, Net | $ 21 | ||
Adjustment to equity | $ 2 |
Revenue (Disaggregation of Reve
Revenue (Disaggregation of Revenue From Contracts With Customers) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Reportable segment revenues | $ 1,258 | $ 1,157 | $ 1,020 | |
Renewals [Member] | ||||
Reportable segment revenues | 835 | 759 | 671 | |
Real Estate [Member] | ||||
Reportable segment revenues | [1] | 262 | 249 | 207 |
Direct To Consumer [Member] | ||||
Reportable segment revenues | [1] | 156 | 144 | $ 142 |
Service, Other [Member] | ||||
Reportable segment revenues | $ 6 | $ 5 | ||
[1] | First year revenue only. |
Revenue (Movement In Deferred R
Revenue (Movement In Deferred Revenue) (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Revenue [Abstract] | |
Balance at beginning of period | $ 183 |
Deferral of revenue | 408 |
Recognition of deferred revenue | (406) |
Balance at end of period | $ 185 |
Revenue (Comparison of the Repo
Revenue (Comparison of the Reported Condensed Consolidated Statement of Financial Position to the Pro-forma Amounts had the Previous Guidance Been in Effect) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 | |
Receivables | $ 12 | $ 406 | ||
Deferred customer acquisition costs | 18 | |||
Deferred customer acquisition costs | 21 | |||
Total Assets | 1,041 | 1,416 | ||
Deferred revenue | 185 | 573 | ||
Deferred taxes | 39 | 38 | ||
Total Liabilities | 1,385 | |||
Shareholder's (Deficit) Equity | (344) | 661 | $ 560 | $ 518 |
Liabilities and Equity | 1,041 | 1,416 | ||
Selling and administrative expenses | 338 | 312 | 286 | |
Provision for income taxes | 42 | 60 | 71 | |
Net income | 125 | $ 160 | $ 124 | |
Under Prior Revenue Recognition Guidance [Member] | ||||
Receivables | 454 | |||
Deferred customer acquisition costs | 18 | |||
Total Assets | 1,482 | |||
Deferred revenue | 627 | |||
Deferred taxes | 39 | |||
Total Liabilities | 1,828 | |||
Shareholder's (Deficit) Equity | (346) | |||
Liabilities and Equity | 1,482 | |||
Selling and administrative expenses | 338 | |||
Provision for income taxes | 42 | |||
Net income | $ 125 |
Goodwill and Intangible Asset_2
Goodwill and Intangible Assets (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Indefinite-lived Intangible Assets [Line Items] | |||
Goodwill impairment charges | $ 0 | $ 0 | $ 0 |
Accumulated impairment loss | 0 | 0 | |
Amortization expense | 8 | 8 | 6 |
Amortization expense, 2019 | 6 | ||
Amortization expense, 2020 | 5 | ||
Amortization expense, 2021 | 4 | ||
Amortization expense, 2022 | 1 | ||
Amortization expense, 2023 | 1 | ||
Trade names [Member] | |||
Indefinite-lived Intangible Assets [Line Items] | |||
Intangible asset impairment charges | $ 0 | $ 0 | $ 0 |
Goodwill and Intangible Asset_3
Goodwill and Intangible Assets (Schedule Of Goodwill Balances For Continuing Operations By Reportable Segment And For Other Operations And Headquarters) (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2017USD ($) | |
Goodwill balances by segment for continuing operations | |
Balance at the beginning of the period | $ 471 |
Acquisitions | 4 |
Balance at the end of the period | $ 476 |
Goodwill and Intangible Asset_4
Goodwill and Intangible Assets (Schedule Of Other Intangible Asset Balances For Continuing Operations) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | |
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | |||
Gross | $ 345 | $ 344 | |
Accumulated Amortization | (187) | (179) | |
Net | 158 | 165 | |
Customer relationships [Member] | |||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | |||
Gross | 173 | 172 | |
Accumulated Amortization | (165) | (160) | |
Net | 7 | 12 | |
Other [Member] | |||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | |||
Gross | 32 | 32 | |
Accumulated Amortization | (22) | (19) | |
Net | 10 | 13 | |
Trade names [Member] | |||
Finite Lived and Indefinite Lived Intangible Assets by Major Class [Line Items] | |||
Gross | [1] | 140 | 140 |
Net | [1] | $ 140 | $ 140 |
[1] | Not subject to amortization. |
Income Taxes (Narrative) (Detai
Income Taxes (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Income Taxes [Abstract] | |||
Effective Income Tax Rate Reconciliation, at Federal Statutory Income Tax Rate, Percent | 21.00% | 35.00% | 35.00% |
Net reduction of total deferred tax liabilities | $ 20 | ||
Unrecognized tax benefits | 4 | $ 2 | |
Unrecognized tax benefits that would impact effective tax rate if recognized | $ 2 | ||
Valuation allowance for deferred tax assets | $ 1 | ||
Increase in valuation allowance | $ 1 |
Income Taxes (Reconciliation Of
Income Taxes (Reconciliation Of Unrecognized Tax Benefits) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Reconciliation of the beginning and ending amount of gross unrecognized tax benefits | ||
Gross unrecognized tax benefits at beginning of period | $ 4 | $ 2 |
Increases in tax positions for current year | 2 | 2 |
Decrease due to Spin-off | $ (6) | |
Gross unrecognized tax benefits at end of period | $ 4 |
Income Taxes (Reconciliation _2
Income Taxes (Reconciliation Of Effective Income Tax Rate) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Reconciliation of income tax computed at the U.S. federal statutory tax rate to the entity's effective income tax rate for continuing operations | ||||
Tax at U.S. federal statutory rate (as a percent) | 21.00% | 35.00% | 35.00% | |
State and local income taxes, net of U.S. federal benefit (as a percent) | 2.50% | 1.50% | 2.10% | |
Other permanent items (as a percent) | 0.50% | 2.10% | 0.60% | |
Excess tax benefits from stock-based compensation (as a percent) | (0.10%) | (2.50%) | (1.10%) | |
Transaction costs (as a percent) | 1.20% | |||
U.S. Tax Reform rate change (as a percent) | [1] | (8.90%) | ||
Effective rate (as a percent) | 25.10% | 27.20% | 36.60% | |
Net reduction of total deferred tax liabilities | $ 20 | |||
Effective Income Tax Rate Reconciliation, State and Local Income Taxes, Amount | $ 1 | |||
[1] | Deferred income taxes on our balance sheet at December 31, 2017 were remeasured for the change in the U.S. income tax rate through income tax expense (see discussion on U.S. Tax Reform). This one-time beneficial rate change adjustment for $20 million includes $1 million in state income tax expense. |
Income Taxes (Income Tax Expens
Income Taxes (Income Tax Expense From Continuing Operations) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Current: | |||
U.S. federal | $ 29 | $ 71 | $ 63 |
State and local | 6 | 7 | 7 |
Total current | 35 | 78 | 70 |
Deferred: | |||
U.S. federal | 7 | (20) | 1 |
State and local | 1 | ||
Total deferred | 7 | (19) | 1 |
Provision for income taxes | $ 42 | $ 60 | $ 71 |
Income Taxes (Deferred Tax Bala
Income Taxes (Deferred Tax Balances) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | |
Long-term deferred tax assets (liabilities): | |||
Intangible assets | [1] | $ (34) | $ (37) |
Property and equipment | (6) | (2) | |
Prepaid expenses and deferred customer acquisition costs | (6) | (5) | |
Claims and related expenses | 1 | ||
Accrued liabilities | 2 | 2 | |
Other long-term obligations | 1 | 3 | |
Tenant improvements | 1 | ||
Deferred interest expense | 4 | ||
Net operating loss and tax credit carryforwards | [2] | 1 | |
Less valuation allowance | (1) | ||
Net Long-term deferred tax liability | (39) | (38) | |
Deferred tax liability related primarily to the difference in the tax versus book basis of intangible assets | $ 42 | $ 40 | |
[1] | The deferred tax liability relates primarily to the difference in the tax versus book basis of intangible assets. We had $42 million and $40 million of deferred tax liability included in this net deferred tax liability as of December 31, 2018 and 2017, respectively, that will not actually be paid unless certain of our business units are sold. | ||
[2] | Primarily represents state credit carryforwards. We have no remaining state credit carryforwards as of December 31, 2018. |
Acquisitions (Narrative) (Detai
Acquisitions (Narrative) (Details) - USD ($) $ in Millions | Nov. 30, 2016 | Jun. 27, 2016 | Dec. 31, 2018 | Dec. 31, 2016 | Dec. 31, 2017 |
Business Acquisition [Line Items] | |||||
Net purchase price | $ 101 | ||||
Goodwill | $ 476 | $ 471 | $ 476 | ||
Average useful life for each class of definite lived intangible asset recorded for acquisitions | 5 years | ||||
OneGuard [Member] | |||||
Business Acquisition [Line Items] | |||||
Net purchase price | $ 61 | ||||
Goodwill | 57 | ||||
Other intangibles related to acquisitions | $ 15 | ||||
Landmark [Member] | |||||
Business Acquisition [Line Items] | |||||
Net purchase price | $ 39 | ||||
Goodwill | 37 | ||||
Other intangibles related to acquisitions | $ 13 |
Acquisitions (Supplemental Cash
Acquisitions (Supplemental Cash Flow Information Regarding Acquisitions) (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2016USD ($) | |
Acquisitions [Abstract] | |
Assets acquired | $ 140 |
Liabilities assumed | (40) |
Net assets acquired | 101 |
Net cash paid | 87 |
Seller financed debt | 14 |
Purchase price | $ 101 |
Restructuring Charges (Narrativ
Restructuring Charges (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Restructuring Charges [Abstract] | |||
Restructuring charges | $ 3 | $ 7 | $ 3 |
Restructuring charges, net of tax | 2 | 4 | 2 |
Severance Costs | 1 | 5 | 1 |
Other costs | $ 2 | 1 | 1 |
Impairment charges | $ 1 | ||
Disposal of property and equipment | $ 1 |
Restructuring Charges (Schedule
Restructuring Charges (Schedule Of Reconciliation Of The Beginning And Ending Balances Of Accrued Restructuring Charges) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Reconciliation of the beginning and ending balances of accrued restructuring charges | |||
Balance at the beginning of the period | $ 2 | ||
Costs incurred | 3 | $ 7 | $ 3 |
Costs paid or otherwise settled | $ (5) | (5) | |
Balance at the end of the period | $ 2 |
Spin-Off Charges (Narrative) (D
Spin-Off Charges (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Restructuring charges | $ 3 | $ 7 | $ 3 | |
Restructuring charges, net of tax | 2 | 4 | $ 2 | |
Discontinued Operations, Disposed of by Means Other than Sale, Spinoff [Member] | ||||
Restructuring charges | 24 | 13 | ||
Restructuring charges, net of tax | 19 | 9 | ||
Incremental capital expenditures required to effect the spin-off | 15 | |||
Discontinued Operations, Disposed of by Means Other than Sale, Spinoff [Member] | Third-Party Consulting Fees [Member] | ||||
Restructuring charges | 19 | 12 | ||
Discontinued Operations, Disposed of by Means Other than Sale, Spinoff [Member] | Other Incremental Costs [Member] | ||||
Restructuring charges | 5 | 1 | ||
Spin-off [Member] | ||||
Restructuring charges | $ 22 | [1] | $ 13 | |
[1] | An additional $2 million of Spin-off charges were pre-paid in 2017 and subsequently expensed in 2018, which is included in Prepaid expenses and other assets on the accompanying consolidated and combined statements of financial position as of December 31, 2017. |
Spin-Off Charges (Reconciliatio
Spin-Off Charges (Reconciliation Of Accrued Spin-off Charges) (Details) - USD ($) $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |||
Restructuring and Related Cost [Abstract] | |||||
Balance at the beginning of the period | $ 2 | ||||
Costs incurred | 3 | $ 7 | $ 3 | ||
Costs paid or otherwise settled | (5) | (5) | |||
Balance at the end of the period | 2 | ||||
Prepaid Spin-off charges | 2 | ||||
Spin-off [Member] | |||||
Restructuring and Related Cost [Abstract] | |||||
Balance at the beginning of the period | 1 | ||||
Costs incurred | 22 | [1] | 13 | ||
Costs paid or otherwise settled | $ (23) | (12) | [1] | ||
Balance at the end of the period | $ 1 | ||||
[1] | An additional $2 million of Spin-off charges were pre-paid in 2017 and subsequently expensed in 2018, which is included in Prepaid expenses and other assets on the accompanying consolidated and combined statements of financial position as of December 31, 2017. |
Commitments and Contingencies (
Commitments and Contingencies (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Loss Contingencies [Line Items] | |||
Rent expense | $ 4 | $ 5 | $ 4 |
Operating Leases, Future Minimum Payments Due, Next Twelve Months | 4 | ||
Operating Leases, Future Minimum Payments, Due in Five Years | 3 | ||
Operating Leases, Future Minimum Payments, Due in Four Years | 3 | ||
Operating Leases, Future Minimum Payments, Due in Three Years | 4 | ||
Operating Leases, Future Minimum Payments, Due in Two Years | 4 | ||
Operating Leases, Future Minimum Payments, Due Thereafter | 12 | ||
Maximum [Member] | |||
Loss Contingencies [Line Items] | |||
Sublease paid during period | $ 1 |
Related Party Transactions (Nar
Related Party Transactions (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Related party transactions | |||
Royalty fee as a percent of customer revenues | 0.175% | ||
Royalty expense | $ 1 | $ 2 | $ 2 |
Related Party Costs | 1 | ||
Due to Parent | 1 | ||
Directly Charged Corporate Expenses [Member] | |||
Related party transactions | |||
Corporate expenses | 14 | 13 | 12 |
Allocated Corporate Expenses [Member] | |||
Related party transactions | |||
Corporate expenses | 35 | 47 | 45 |
Health Insurance Coverage Premiums [Member] | |||
Related party transactions | |||
Insurance expense | 6 | 8 | 6 |
Risk Management Insurance Policies [Member] | |||
Related party transactions | |||
Insurance expense | $ 2 | $ 3 | $ 4 |
Stock-Based Compensation (Narra
Stock-Based Compensation (Narrative) (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 |
Stock-Based Compensation [Line Items] | |||||
Number of shares of common stock available for issuance | 14,500,000 | 14,500,000 | |||
Number of shares of common stock remaining for future grant | 13,837,877 | 13,837,877 | |||
Converted, Aggregate Intrinsic Value | 4,000,000 | ||||
Stock-based compensation expense | $ 4 | $ 4 | $ 4 | ||
Stock-based compensation expense, net of tax | 3 | $ 3 | $ 3 | ||
Total unrecognized compensation costs related to non-vested stock options, restricted share units and performance shares | $ 6 | $ 6 | |||
Weighted-average period of recognition of stock-based compensation cost | 2 years 4 months 10 days | ||||
RSU [Member] | |||||
Stock-Based Compensation [Line Items] | |||||
Granted to employees (in shares) | 29,178 | 29,178 | |||
Granted to employees (in dollars per share) | $ 29.13 | $ 29.13 | |||
Total fair value of RSUs vested | $ 1 |
Stock-Based Compensation (Summa
Stock-Based Compensation (Summary Of Restricted Stock Awards Activity) (Details) - Restricted Stock [Member] - shares | Oct. 01, 2018 | Dec. 31, 2018 |
RSUs | ||
Vested (in shares) | (24,388) | |
Forfeited (in shares) | (4,136) | |
Total outstanding at the end of the period (in shares) | 250,014 | 221,490 |
Frontdoor Employees [Member] | ||
RSUs | ||
Vested (in shares) | (7,200) | |
Forfeited (in shares) | (4,136) | |
Total outstanding at the end of the period (in shares) | 143,697 | 132,361 |
ServiceMaster Employees [Member] | ||
RSUs | ||
Vested (in shares) | (17,188) | |
Total outstanding at the end of the period (in shares) | 106,317 | 89,129 |
Stock-Based Compensation (Sum_2
Stock-Based Compensation (Summary Of Option Activity Under The MSIP) (Details) - USD ($) $ / shares in Units, $ in Millions | Oct. 01, 2018 | Dec. 31, 2018 |
Stock Options | ||
Converted (in shares) | 391,728 | |
Forfeited (in shares) | (18,341) | |
Total outstanding at the end of the period (in shares) | 373,387 | |
Total exercisable at the end of the period (in shares) | 98,323 | |
Weighted Average Exercise Price | ||
Converted (in dollars per share) | $ 30.04 | |
Forfeited (in dollars per share) | $ 29.61 | |
Total outstanding at the end of the period (in dollars per share) | 30.06 | |
Total exercisable at the end of the period (in dollars per share) | $ 19.96 | |
Total Outstanding, Beginning of Period | ||
Converted, Aggregate Intrinsic Value | 4,000,000 | |
Total Outstanding, End of Period | 1 | |
Total exercisable, End of Period | $ 1 | |
Weighted Average Remaining Contractual Term | ||
Total outstanding at the end of the period | 8 years 15 days | |
Converted, Weighted Avg. Remaining Contractual Term | 8 years 3 months 22 days | |
Total exercisable at the end of the period | 6 years 1 month 24 days |
Stock-Based Compensation (Sum_3
Stock-Based Compensation (Summary Of RSU Activity Under The MSIP) (Details) - RSU [Member] - $ / shares | Oct. 01, 2018 | Dec. 31, 2018 | Dec. 31, 2018 |
RSUs | |||
Converted (in shares) | 143,697 | ||
Granted to employees (in shares) | 29,178 | 29,178 | |
Vested (in shares) | (7,200) | ||
Forfeited (in shares) | (4,136) | ||
Total outstanding at the end of the period (in shares) | 161,539 | 161,539 | |
Weighted Average Grant Date Fair Value | |||
Converted (in dollar per share) | $ 41.50 | ||
Granted to employees (in dollars per share) | $ 29.13 | $ 29.13 | |
Vested (in dollars per share) | 41.50 | ||
Forfeited (in dollars per share) | 41.50 | ||
Total outstanding at the end of the period (in dollars per share) | $ 39.27 | $ 39.27 |
Employee Benefit Plans (Details
Employee Benefit Plans (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Employee Benefit Plans [Abstract] | |||
Discretionary contributions to qualified profit sharing and non qualified deferred compensation plan | $ 3 | $ 2 | $ 2 |
Long-Term Debt (Narrative) (Det
Long-Term Debt (Narrative) (Details) | 12 Months Ended | |
Dec. 31, 2018USD ($) | Aug. 16, 2018USD ($) | |
Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 250,000,000 | |
Credit Facilities [Member] | Alternative Base Rate [Member] | ||
Debt Instrument [Line Items] | ||
Borrowing margin (as a percent) | 1.50% | |
Credit Facilities [Member] | LIBOR [Member] | ||
Debt Instrument [Line Items] | ||
Borrowing margin (as a percent) | 2.50% | |
Term Loan Facility Maturing In 2025 [Member] | Secured Debt [Member] | ||
Debt Instrument [Line Items] | ||
Face amount of debt instrument | 650,000,000 | |
Facility maturity date | Aug. 16, 2025 | |
Revolving Credit Facility Maturing In 2023 [Member] | Revolving Credit Facility [Member] | ||
Debt Instrument [Line Items] | ||
Facility maturity date | Aug. 16, 2023 | |
Maximum borrowing capacity | $ 250,000,000 | |
Consolidated First Lien Leverage Ratio | 3.50 | |
Threshold percentage included in financial covenant | 30.00% | |
Revolving Credit Facility Maturing In 2023 [Member] | Standby Letters of Credit [Member] | ||
Debt Instrument [Line Items] | ||
Maximum borrowing capacity | $ 25,000,000 | |
2026 Notes [Member] | Loans Payable [Member] | ||
Debt Instrument [Line Items] | ||
Face amount of debt instrument | $ 350,000,000 | |
Facility maturity date | Aug. 15, 2026 | |
Fixed interest rate per annum | 6.75% | |
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed | 100.00% | |
Debt Instrument, Redemption Price, Percentage | 40.00% | |
Debt Instrument, Redemption Price, Percentage of Principal Amount Redeemed, If Triggering Event Occurs | 101.00% | |
Other [Member] | ||
Debt Instrument [Line Items] | ||
Long-term Debt and Capital Lease Obligations, Maturities, Repayments of Principal in Year Five | $ 7,000,000 | |
Long-term Debt and Capital Lease Obligations, Maturities, Repayments of Principal in Year Four | 7,000,000 | |
Long-term Debt and Capital Lease Obligations, Maturities, Repayments of Principal in Year Three | 7,000,000 | |
Long-term Debt and Capital Lease Obligations, Maturities, Repayments of Principal in Year Two | 7,000,000 | |
Long-term Debt and Capital Lease Obligations, Repayments of Principal in Next Twelve Months | 7,000,000 | |
Interest rate swap contracts [Member] | ||
Debt Instrument [Line Items] | ||
Notional amount | $ 350,000,000 | |
Weighted Average Fixed Rate (as a percent) | 3.0865% | |
Derivative, Basis Spread on Variable Rate | 2.50% |
Long-Term Debt (Schedule Of Lon
Long-Term Debt (Schedule Of Long-Term Debt) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | |
Long-term debt [Line Items] | |||
Less current portion | $ (7) | $ (9) | |
Total long-term debt | 977 | ||
Term Loan Facility Maturing In 2025 [Member] | |||
Long-term debt [Line Items] | |||
Unamortized debt issuance costs | 8 | ||
Unamortized original issue discount | 2 | ||
Term Loan Facility Maturing In 2025 [Member] | Secured Debt [Member] | |||
Long-term debt [Line Items] | |||
Long-term debt | [1] | 639 | |
2026 Notes [Member] | |||
Long-term debt [Line Items] | |||
Unamortized debt issuance costs | 6 | ||
2026 Notes [Member] | Loans Payable [Member] | |||
Long-term debt [Line Items] | |||
Long-term debt | [2] | 344 | |
Other [Member] | |||
Long-term debt [Line Items] | |||
Long-term debt | $ 1 | $ 9 | |
[1] | As of December 31, 2018, presented net of $8 million in unamortized debt issuance costs and $2 million in unamortized original issue discount paid. | ||
[2] | As of December 31, 2018, presented net of $6 million in unamortized debt issuance costs. |
Supplemental Cash Flow Inform_3
Supplemental Cash Flow Information (Narrative) (Details) - USD ($) | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Aug. 16, 2018 | |
Cash paid for or (received from): | ||||
Capital lease and other non-cash financing transactions | $ 1,000,000 | $ 1,000,000 | $ 1,000,000 | |
Loans Payable [Member] | 2026 Notes [Member] | ||||
Cash paid for or (received from): | ||||
Face amount of debt instrument | $ 350,000,000 | |||
Secured Debt [Member] | Term Loan Facility Maturing In 2025 [Member] | ||||
Cash paid for or (received from): | ||||
Face amount of debt instrument | $ 650,000,000 |
Supplemental Cash Flow Inform_4
Supplemental Cash Flow Information (Schedule Of Supplemental Information Relating To The Unaudited Condensed Consolidated Statements Of Cash Flows) (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Cash paid for or (received from): | ||||
Interest expense | $ 13 | |||
Income tax payments, net of refunds | [1] | |||
Interest and dividend income | $ (1) | $ (2) | ||
[1] | Prior to the Spin-off, all income tax payments and refunds were paid and received by ServiceMaster on our behalf. |
Cash and Marketable Securitie_2
Cash and Marketable Securities (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash and Marketable Securities [Abstract] | |||
Unrealized losses on marketable securities | $ 0 | $ 0 | |
Impairment charges due to declines in the vale of debt securities | $ 0 | $ 0 | $ 0 |
Cash and Marketable Securitie_3
Cash and Marketable Securities (Schedule Of Amortized Cost, Fair Value And Gross Unrealized Gains And Losses Of The Company's Short- And Long-Term Investments In Debt And Equity Securities) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Cash and Marketable Securities [Abstract] | ||
Amortized cost of debt securities | $ 9 | $ 25 |
Fair value of debt securities | 9 | 25 |
Amortized cost of equity securities | 2 | |
Fair value of equity securities | 2 | |
Amortized cost of securities | 9 | 27 |
Fair value of securities | $ 9 | $ 27 |
Cash and Marketable Securitie_4
Cash and Marketable Securities (Schedule Of Proceeds From Sale Of Securities, Maturities Of Available-for-sale Securities And Gross Realized (Gains) Losses) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Cash and Marketable Securities [Abstract] | |||
Proceeds from sale of securities | $ 17 | $ 12 | $ 42 |
Maturities of securities | $ 15 | $ 36 | 7 |
Gross realized gains, pre-tax | 4 | ||
Gross realized gains, net of tax | $ 2 |
Comprehensive Income (Narrative
Comprehensive Income (Narrative) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2017 | |
Comprehensive Income (Loss) [Abstract] | ||
Unrealized losses on marketable securities | $ 0 | $ 0 |
Comprehensive Income (Loss) (Su
Comprehensive Income (Loss) (Summary Of The Activity In Other Comprehensive Income (Loss), Net Of The Related Tax Effects) (Details) - USD ($) $ in Millions | 12 Months Ended | |
Dec. 31, 2018 | Dec. 31, 2016 | |
Other comprehensive income before reclassifications: | ||
Pre-tax amount | $ (12) | |
Tax provision (benefit) | (3) | |
After-tax amount | (10) | |
Net current period other comprehensive loss | (9) | $ (2) |
Balance at the end of period | (9) | |
Unrealized Losses on Derivatives | ||
Other comprehensive income before reclassifications: | ||
Pre-tax amount | (12) | |
Tax provision (benefit) | (3) | |
After-tax amount | (10) | |
Net current period other comprehensive loss | (9) | |
Balance at the end of period | $ (9) |
Comprehensive Income (Loss) (Sc
Comprehensive Income (Loss) (Schedule Of Reclassifications Out Of Accumulated Other Comprehensive Income (Loss)) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Interest expense | $ (23) | $ (1) | |
Interest and net investment income | 2 | 2 | $ 5 |
Provision for income taxes | (42) | (60) | (71) |
Net Income | $ 125 | $ 160 | 124 |
Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Net Income | 2 | ||
Unrealized Gains (Losses) on Available-for-Sale Securities | Amount Reclassified from Accumulated Other Comprehensive Income (Loss) | |||
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items] | |||
Interest and net investment income | 3 | ||
Provision for income taxes | (1) | ||
Net Income | $ 2 |
Derivative Financial Instrume_2
Derivative Financial Instruments (Details) $ in Millions | 12 Months Ended |
Dec. 31, 2018USD ($) | |
Derivative Financial Instruments [Abstract] | |
Hedging loss in accumulated other comprehensive income expected to be recognized in earnings, net of tax | $ 1 |
Fair Value Measurement (Narrati
Fair Value Measurement (Narrative) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Fair Value Measurement [Abstract] | ||
Carrying amount of total debt | $ 984 | $ 9 |
Fair value of total debt | $ 958 | $ 9 |
Fair Value Measurement (Schedul
Fair Value Measurement (Schedule Of The Carrying Amount And Estimated Fair Value Of The Company's Financial Instruments That Are Recorded At Fair Value On A Recurring Basis) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 |
Carrying Value | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred compensation trust assets | $ 1 | |
Total financial assets | $ 9 | 27 |
Total financial liabilities | 12 | |
Carrying Value | Investment In Marketable Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments in marketable securities | 9 | 26 |
Carrying Value | Other Accrued Liabilities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap contracts | 2 | |
Carrying Value | Other Long-Term Obligation [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap contracts | 10 | |
Estimated Fair Value | Quoted Price In Active Markets (Level 1) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Deferred compensation trust assets | 1 | |
Total financial assets | 9 | 26 |
Estimated Fair Value | Quoted Price In Active Markets (Level 1) | Investment In Marketable Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments in marketable securities | 9 | 25 |
Estimated Fair Value | Significant Other Observable Inputs (Level 2) | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Total financial assets | 1 | |
Total financial liabilities | 12 | |
Estimated Fair Value | Significant Other Observable Inputs (Level 2) | Investment In Marketable Securities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Investments in marketable securities | $ 1 | |
Estimated Fair Value | Significant Other Observable Inputs (Level 2) | Other Accrued Liabilities [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap contracts | 2 | |
Estimated Fair Value | Significant Other Observable Inputs (Level 2) | Other Long-Term Obligation [Member] | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Interest rate swap contracts | $ 10 |
Capital Stock (Details)
Capital Stock (Details) - shares | Dec. 31, 2018 | Oct. 01, 2018 |
Capital Stock [Abstract] | ||
Common stock registered for offering and sale | 2,000,000,000 | |
Common stock, shares issued (in shares) | 84,545,152 | |
Shares of common stock outstanding | 84,545,152 | 84,515,619 |
Earnings Per Share (Schedule Of
Earnings Per Share (Schedule Of Basic And Diluted Earnings Per Share) (Details) - USD ($) $ / shares in Units, $ in Millions | 12 Months Ended | ||||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Oct. 01, 2018 | ||
Net income | $ 125 | $ 160 | $ 124 | ||
Weighted-average common shares outstanding | [1] | 84,500,000 | 84,500,000 | 84,500,000 | |
Weighted average common shares outstanding-assuming dilution | 84,700,000 | 84,500,000 | 84,500,000 | ||
Basic earnings per share (in dollars per share) | $ 1.47 | $ 1.90 | $ 1.47 | ||
Diluted earnings per share (in dollars per share) | $ 1.47 | $ 1.90 | $ 1.47 | ||
Common Stock, Shares, Outstanding | 84,545,152 | 84,515,619 | |||
Antidilutive securities excluded from computation of diluted earnings per share (in shares) | 100,000 | ||||
RSU [Member] | |||||
Effect of dilutive securities | 100,000 | ||||
Options [Member] | |||||
Effect of dilutive securities | [2] | ||||
[1] | For periods prior to the Spin-off, earnings per share was calculated based on the 84,515,619 shares of Frontdoor stock that were outstanding at the date of distribution. | ||||
[2] | Options to purchase 0.1 million shares for the years ended December 31, 2018 were not included in the diluted earnings per share calculation because their effect would have been anti-dilutive. |
Schedule I frontdoor, inc Paren
Schedule I frontdoor, inc Parent Company Only (Condensed Statements of Comprehensive Income) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Condensed Income Statements, Captions [Line Items] | |||
Revenue | $ 1,258 | $ 1,157 | $ 1,020 |
Interest expense | 23 | 1 | |
Income before Income Taxes | 166 | 220 | 196 |
Income tax benefit | 42 | 60 | 71 |
Net Income | 125 | 160 | 124 |
Total Comprehensive Income | 116 | $ 160 | $ 123 |
Parent Company [Member] | |||
Condensed Income Statements, Captions [Line Items] | |||
Interest expense | 22 | ||
Income before Income Taxes | (22) | ||
Income tax benefit | (5) | ||
Net Loss from Operations | (18) | ||
Equity in earnings of subsidiaries (net of tax) | 34 | ||
Net Income | 17 | ||
Total Comprehensive Income | $ 8 |
Schedule I frontdoor, inc Par_2
Schedule I frontdoor, inc Parent Company Only (Condensed Balance Sheets) (Details) - USD ($) $ in Millions | Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | Dec. 31, 2015 |
Condensed Balance Sheet Statements, Captions [Line Items] | ||||
Cash and cash equivalents | $ 296 | $ 282 | $ 168 | $ 156 |
Total Current Assets | 330 | 741 | ||
Other assets | 10 | 1 | ||
Total Assets | 1,041 | 1,416 | ||
Interest payable | 9 | |||
Other | 26 | 19 | ||
Current portion of long-term debt | 7 | 9 | ||
Total Current Liabilities | 345 | 705 | ||
Long-Term Debt | 977 | |||
Due to Subsidiaries | 1 | |||
Other long-term obligations | 24 | 11 | ||
Total Other Long-Term Liabilities | 63 | 49 | ||
Stockholders' equity | (344) | 661 | $ 560 | $ 518 |
Total Liabilities and Equity | 1,041 | 1,416 | ||
Parent Company [Member] | ||||
Condensed Balance Sheet Statements, Captions [Line Items] | ||||
Cash and cash equivalents | 55 | |||
Other current assets | 3 | |||
Total Current Assets | 58 | |||
Investments in subsidiaries | 601 | |||
Deferred taxes | 3 | |||
Other assets | 1 | |||
Total Assets | 663 | |||
Interest payable | 9 | |||
Other | 2 | |||
Current portion of long-term debt | 7 | |||
Total Current Liabilities | 18 | |||
Long-Term Debt | 977 | |||
Due to Subsidiaries | 2 | |||
Other long-term obligations | 10 | |||
Total Other Long-Term Liabilities | 10 | |||
Stockholders' equity | (344) | |||
Total Liabilities and Equity | $ 663 |
Schedule I frontdoor, inc Par_3
Schedule I frontdoor, inc Parent Company Only (Condensed Statements of Cash Flows) (Details) - USD ($) $ in Millions | 12 Months Ended | ||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | |
Condensed Cash Flow Statements, Captions [Line Items] | |||
Cash and Cash Equivalents at Beginning of Period | $ 282 | $ 168 | $ 156 |
Net Cash Provided from Operating Activities | 189 | 194 | 155 |
Dividend paid to ServiceMaster | 137 | 63 | 87 |
Discount paid on issuance of debt | (2) | ||
Debt issuance costs paid | (16) | ||
Net Cash Used for Financing Activities | (165) | (68) | (88) |
Cash Increase During the Period | 14 | 114 | 12 |
Cash and Cash Equivalents at End of Period | 296 | 282 | $ 168 |
Parent Company [Member] | |||
Condensed Cash Flow Statements, Captions [Line Items] | |||
Cash and Cash Equivalents at Beginning of Period | |||
Net Cash Provided from Operating Activities | 159 | ||
Payments of debt | (2) | ||
Net transfers to Parent Company | 4 | ||
Contribution from ServiceMaster | 81 | ||
Dividend paid to ServiceMaster | (169) | ||
Discount paid on issuance of debt | (2) | ||
Debt issuance costs paid | (16) | ||
Net Cash Used for Financing Activities | (104) | ||
Cash Increase During the Period | 55 | ||
Cash and Cash Equivalents at End of Period | $ 55 |
Schedule I frontdoor, inc Par_4
Schedule I frontdoor, inc Parent Company Only (Notes To Parent Only) (Details) - USD ($) | 12 Months Ended | |
Dec. 31, 2018 | Aug. 16, 2018 | |
Parent Company [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Threshold For Restricted Net Assets Of Subsidiaries | 25.00% | |
Aggregate notional amount | $ 350,000,000 | |
Term Loan Facility Maturing In 2025 [Member] | Secured Debt [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Face amount of debt instrument | $ 650,000,000 | |
2026 Notes [Member] | Loans Payable [Member] | ||
Condensed Financial Statements, Captions [Line Items] | ||
Face amount of debt instrument | $ 350,000,000 |
Schedule II Valuation And Qua_2
Schedule II Valuation And Qualifying Accounts (Details) - USD ($) $ in Millions | 12 Months Ended | |||
Dec. 31, 2018 | Dec. 31, 2017 | Dec. 31, 2016 | ||
Allowance for doubtful accounts, Accounts receivable | ||||
Allowance for doubtful accounts | ||||
Balance at Beginning of Period | $ 1 | $ 2 | $ 2 | |
Additions Charged to Costs and Expenses | 12 | 11 | 11 | |
Deductions | [1] | 12 | 11 | 11 |
Balance at End of Period | 2 | $ 1 | $ 2 | |
Income tax valuation allowance | ||||
Allowance for doubtful accounts | ||||
Additions Charged to Costs and Expenses | 1 | |||
Balance at End of Period | $ 1 | |||
[1] | Deductions in the allowance for doubtful accounts for accounts and notes receivable reflect write-offs of uncollectible accounts. Deductions for the income tax valuation allowance in 2018, 2017 and 2016 are primarily attributable to the reduction of net operating loss carryforwards and other deferred tax assets related to the uncertainty of future taxable income in certain jurisdictions. |