Note 17. Condensed Consolidating Financial Statements of The ServiceMaster Company and Subsidiaries

The following condensed consolidating financial statements of the Company and its subsidiaries have been prepared pursuant to Rule 3-10 of Regulation S-X. These condensed consolidating financial statements have been prepared from the Company’s financial information on the same basis of accounting as the condensed consolidated financial statements. Goodwill and other intangible assets have been allocated to all of the subsidiaries of the Company based on management’s estimates.

The payment obligations of the Company under the $600 million aggregate principal amount of 8 percent senior notes due 2020 (the “8% 2020 Notes”) and $750 million aggregate principal amount of 7 percent senior notes due 2020 (the “7% 2020 Notes”, and together with the 8% 2020 Notes, the “2020 Notes”) are jointly and severally guaranteed on a senior unsecured basis by the Company’s domestic subsidiaries that guarantee our indebtedness under the Term Loan Facility, the pre-funded letter of credit facility (together, the “Term Facilities”) and the Revolving Credit Facility (together with the Term Facilities, the “Credit Facilities”) (the “Guarantors”). Each of the Guarantors is wholly owned, directly or indirectly, by the Company, and all guarantees are full and unconditional. Our non-U.S. subsidiaries, our subsidiaries subject to regulation as an insurance, home warranty, service contract or similar company, or certain other subsidiaries (the “Non-Guarantors”) do not guarantee the 2020 Notes. A Guarantor will be released from its obligations under its guarantee under certain customary circumstances, including, (i) the sale or disposition of the Guarantor, (ii) the release of the Guarantor from all of its obligations under all guarantees related to any indebtedness of the Company, (iii) the merger or consolidation of the Guarantor as specified in the indenture governing the 2020 Notes, (iv) the Guarantor becomes an unrestricted subsidiary under the indenture governing the 2020 Notes, (v) the defeasance of the Company’s obligations under the indenture governing the 2020 Notes or (vi) the payment in full of the principal amount of the 2020 Notes.

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations and Comprehensive Income

For the Three Months Ended September 30, 2013 (Unaudited)

(In thousands)

	The
	ServiceMaster						Non-
	Company			Guarantors			Guarantors			Eliminations			Consolidated
Operating Revenue	$	—		$	684,064		$	261,835		$	(17,077	)	$	928,822

Operating Costs and Expenses:
Cost of services rendered and products sold	—			432,914			118,766			(16,875		)	534,805
Selling and administrative expenses	1,997			152,485			99,938			(107		)	254,313
Amortization expense	—			13,179			656			—			13,835
Restructuring charges	4,267			1,133			356			—			5,756
Total operating costs and expenses	6,264			599,711			219,716			(16,982		)	808,709

Operating (Loss) Income	(6,264		)	84,353			42,119			(95		)	120,113

Non-operating Expense (Income):
Interest expense (income)	28,701			34,665			(30		)	—			63,336
Interest and net investment income	(65		)	(1,159		)	(1,041		)	(95		)	(2,360		)
Other expense	—			—			148			—			148

(Loss) Income from Continuing Operations before Income Taxes	(34,900		)	50,847			43,042			—			58,989
(Benefit) provision for income taxes	(3,811		)	(3,155		)	19,538			—			12,572
Equity in losses of joint venture	—			—			(50		)	—			(50		)

(Loss) Income from Continuing Operations	(31,089		)	54,002			23,454			—			46,367

Loss from discontinued operations, net of income taxes	—			(618		)	(61		)	—			(679		)
Equity in earnings of subsidiaries (net of tax)	76,777			19,148			—			(95,925		)	—
Net Income	$	45,688		$	72,532		$	23,393		$	(95,925	)	$	45,688

Total Comprehensive Income	$	47,688		$	73,157		$	24,734		$	(97,891	)	$	47,688

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income

For the Three Months Ended September 30, 2012 (Unaudited)

(In thousands)

	The
	ServiceMaster						Non-
	Company			Guarantors			Guarantors			Eliminations			Consolidated
Operating Revenue	$	—		$	664,090		$	251,638		$	(15,035	)	$	900,693

Operating Costs and Expenses:
Cost of services rendered and products sold	—			408,731			120,553			(14,635		)	514,649
Selling and administrative expenses	2,194			145,456			98,448			(106		)	245,992
Amortization expense	(111		)	14,435			847			—			15,171
Goodwill and trade name impairment	—			833,973			11,200			—			845,173
Restructuring charges	—			1,354			1,968			—			3,322
Total operating costs and expenses	2,083			1,403,949			233,016			(14,741		)	1,624,307

Operating (Loss) Income	(2,083		)	(739,859		)	18,622			(294		)	(723,614		)

Non-operating Expense (Income):
Interest expense (income)	45,371			21,474			(4,588		)	—			62,257
Interest and net investment loss (income)	87			2,443			(6,197		)	(294		)	(3,961		)
Loss on extinguishment of debt	16,361			—			—			—			16,361
Other expense	—			—			141			—			141

(Loss) Income from Continuing Operations before Income Taxes	(63,902		)	(763,776		)	29,266			—			(798,412		)
(Benefit) provision for income taxes	(24,458		)	(92,927		)	23,082			—			(94,303		)
Equity in losses of joint venture	—			—			(50		)	—			(50		)

(Loss) Income from Continuing Operations	(39,444		)	(670,849		)	6,134			—			(704,159		)

Loss from discontinued operations, net of income taxes	—			(186		)	(17		)	—			(203		)
Equity in (losses) earnings of subsidiaries (net of tax)	(664,918		)	13,117			—			651,801			—
Net (Loss) Income	$	(704,362	)	$	(657,918	)	$	6,117		$	651,801		$	(704,362	)

Total Comprehensive (Loss) Income	$	(698,594	)	$	(656,055	)	$	7,151		$	648,904		$	(698,594	)

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income

For the Nine Months Ended September 30, 2013 (Unaudited)

(In thousands)

	The
	ServiceMaster						Non-
	Company			Guarantors			Guarantors			Eliminations			Consolidated
Operating Revenue	$	—		$	1,850,060		$	674,773		$	(49,242	)	$	2,475,591

Operating Costs and Expenses:
Cost of services rendered and products sold	—			1,193,700			314,132			(48,544		)	1,459,288
Selling and administrative expenses	9,732			414,965			291,261			(319		)	715,639
Amortization expense	—			39,790			1,873			—			41,663
Goodwill and trade name impairment	—			667,990			5,263			—			673,253
Restructuring charges	4,267			2,821			2,243			—			9,331
Total operating costs and expenses	13,999			2,319,266			614,772			(48,863		)	2,899,174

Operating (Loss) Income	(13,999		)	(469,206		)	60,001			(379		)	(423,583		)

Non-operating Expense (Income):
Interest expense (income)	84,200			103,009			(175		)	—			187,034
Interest and net investment (income) loss	(2,268		)	5,302			(9,183		)	(379		)	(6,528		)
Other expense	—			—			435			—			435

(Loss) Income from Continuing Operations before Income Taxes	(95,931		)	(577,517		)	68,924			—			(604,524		)
(Benefit) provision for income taxes	(28,932		)	(154,041		)	64,863			—			(118,110		)
Equity in losses of joint venture	—			—			(164		)	—			(164		)

(Loss) Income from Continuing Operations	(66,999		)	(423,476		)	3,897			—			(486,578		)

Loss from discontinued operations, net of income taxes	—			(974		)	(101		)	—			(1,075		)
Equity in earnings of subsidiaries (net of tax)	(420,654		)	4,266			—			416,388			—
Net (Loss) Income	$	(487,653	)	$	(420,184	)	$	3,796		$	416,388		$	(487,653	)

Total Comprehensive (Loss) Income	$	(486,619	)	$	(420,141	)	$	2,667		$	417,474		$	(486,619	)

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Operations and Comprehensive (Loss) Income

For the Nine Months Ended September 30, 2012 (Unaudited)

(In thousands)

	The
	ServiceMaster						Non-
	Company			Guarantors			Guarantors			Eliminations			Consolidated
Operating Revenue	$	—		$	1,881,366		$	680,223		$	(44,042	)	$	2,517,547

Operating Costs and Expenses:
Cost of services rendered and products sold	—			1,161,027			316,593			(43,429		)	1,434,191
Selling and administrative expenses	6,307			376,030			297,273			(319		)	679,291
Amortization expense	—			47,828			3,134			—			50,962
Goodwill and trade name impairment	—			901,673			11,200			—			912,873
Restructuring charges	—			4,943			7,395			—			12,338
Total operating costs and expenses	6,307			2,491,501			635,595			(43,748		)	3,089,655

Operating (Loss) Income	(6,307		)	(610,135		)	44,628			(294		)	(572,108		)

Non-operating Expense (Income):
Interest expense (income)	134,726			65,258			(13,213		)	—			186,771
Interest and net investment loss (income)	551			8,793			(17,049		)	(294		)	(7,999		)
Loss on extinguishment of debt	55,554			—			—			—			55,554
Other expense	—			—			492			—			492

(Loss) Income from Continuing Operations before Income Taxes	(197,138		)	(684,186		)	74,398			—			(806,926		)
(Benefit) provision for income taxes	(71,862		)	(88,248		)	64,154			—			(95,956		)
Equity in losses of joint venture	—			—			(161		)	—			(161		)

(Loss) Income from Continuing Operations	(125,276		)	(595,938		)	10,083			—			(711,131		)

(Loss) income from discontinued operations, net of income taxes	—			(309		)	20			—			(289		)
Equity in (losses) earnings of subsidiaries (net of tax)	(586,144		)	16,142			—			570,002			—
Net (Loss) Income	$	(711,420	)	$	(580,105	)	$	10,103		$	570,002		$	(711,420	)

Total Comprehensive (Loss) Income	$	(698,958	)	$	(577,294	)	$	11,737		$	565,557		$	(698,958	)

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Financial Position (Unaudited)

As of September 30, 2013

(In thousands)

	The
	ServiceMaster					Non-
	Company		Guarantors			Guarantors			Eliminations			Consolidated
Assets:
Current Assets:
Cash and cash equivalents	$	280,480	$	15,521		$	62,505		$	—		$	358,506
Marketable securities	—		—			39,199			—			39,199
Receivables	1,719		172,652			560,799			(235,666		)	499,504
Inventories	—		55,743			2,520			—			58,263
Prepaid expenses and other assets	13,973		42,336			26,365			(6,976		)	75,698
Deferred customer acquisition costs	—		30,807			15,347			—			46,154
Deferred taxes	38,594		60,563			3,319			—			102,476
Total Current Assets	334,766		377,622			710,054			(242,642		)	1,179,800
Property and Equipment:
At cost	—		503,791			218,011			—			721,802
Less: accumulated depreciation	—		(258,376		)	(95,584		)	—			(353,960		)
Net Property and Equipment	—		245,415			122,427			—			367,842

Other Assets:
Goodwill	—		1,648,967			366,522			—			2,015,489
Intangible assets, primarily trade names, service marks and trademarks, net	—		1,342,087			740,013			—			2,082,100
Notes receivable	2,037,521		10			31,717			(2,033,288		)	35,960
Long-term marketable securities	12,037		—			115,415			—			127,452
Investments in and advances to subsidiaries	1,862,146		1,195,495			—			(3,057,641		)	—
Other assets	44,140		33,507			12,711			(43,507		)	46,851
Debt issuance costs	43,048		—			9			—			43,057
Total Assets	$	4,333,658	$	4,843,103		$	2,098,868		$	(5,377,078	)	$	5,898,551

Liabilities and Shareholder’s Equity
Current Liabilities:
Accounts payable	$	2,586	$	73,552		$	50,743		$	—		$	126,881
Accrued liabilities:
Payroll and related expenses	1,789		35,714			43,107			—			80,610
Self-insured claims and related expenses	—		36,417			61,288			—			97,705
Accrued interest payable	19,600		—			37			(413		)	19,224
Other	1,105		29,683			37,658			(6,563		)	61,883
Deferred revenue	—		140,868			373,437			—			514,305
Liabilities of discontinued operations	—		1,109			111			—			1,220
Current portion of long-term debt	116,591		27,700			151,442			(235,666		)	60,067
Total Current Liabilities	141,671		345,043			717,823			(242,642		)	961,895

Long-Term Debt	3,815,529		2,062,535			63,154			(2,033,288		)	3,907,930

Other Long-Term Liabilities:
Deferred taxes	—		578,399			268,478			(43,507		)	803,370
Intercompany payable	283,749		—			361,422			(645,171		)	—
Other long-term obligations, primarily self insured claims	21,326		34,886			97,761			—			153,973
Total Other Long-Term Liabilities	305,075		613,285			727,661			(688,678		)	957,343

Shareholder’s Equity	71,383		1,822,240			590,230			(2,412,470		)	71,383

Total Liabilities and Shareholder’s Equity	$	4,333,658	$	4,843,103		$	2,098,868		$	(5,377,078	)	$	5,898,551

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Financial Position

As of December 31, 2012

(In thousands)

	The
	ServiceMaster					Non-
	Company		Guarantors			Guarantors			Eliminations			Consolidated
Assets:
Current Assets:
Cash and cash equivalents	$	316,528	$	13,842		$	92,375		$	—		$	422,745
Marketable securities	—		—			19,347			—			19,347
Receivables	1,164		116,778			476,620			(190,857		)	403,705
Inventories	—		54,313			2,249			—			56,562
Prepaid expenses and other assets	6,597		10,272			21,810			(1,335		)	37,344
Deferred customer acquisition costs	—		19,010			14,911			—			33,921
Deferred taxes	38,140		66,129			3,230			—			107,499
Total Current Assets	362,429		280,344			630,542			(192,192		)	1,081,123
Property and Equipment:
At cost	—		440,107			193,475			—			633,582
Less: accumulated depreciation	—		(209,044		)	(84,490		)	—			(293,534		)
Net Property and Equipment	—		231,063			108,985			—			340,048

Other Assets:
Goodwill	—		2,055,779			356,472			—			2,412,251
Intangible assets, primarily trade names, service marks and trademarks, net	—		1,634,145			739,324			—			2,373,469
Notes receivable	2,005,485		23			30,343			(2,013,432		)	22,419
Long-term marketable securities	11,987		—			114,469			—			126,456
Investments in and advances to subsidiaries	2,098,929		630,029			—			(2,728,958		)	—
Other assets	47,947		1,435			7,984			(47,169		)	10,197
Debt issuance costs	44,850		—			101			—			44,951
Total Assets	$	4,571,627	$	4,832,818		$	1,988,220		$	(4,981,751	)	$	6,410,914

Liabilities and Shareholder’s Equity
Current Liabilities:
Accounts payable	$	156	$	41,011		$	45,543		$	—		$	86,710
Accrued liabilities:
Payroll and related expenses	1,709		41,861			34,618			—			78,188
Self-insured claims and related expenses	—		20,180			62,855			—			83,035
Accrued interest payable	54,008		350			38			(240		)	54,156
Other	8,355		26,377			25,357			(1,095		)	58,994
Deferred revenue	—		135,074			348,823			—			483,897
Liabilities of discontinued operations	—		767			138			—			905
Current portion of long-term debt	93,989		20,287			128,795			(190,857		)	52,214
Total Current Liabilities	158,217		285,907			646,167			(192,192		)	898,099

Long-Term Debt	3,837,872		2,044,238			40,361			(2,013,432		)	3,909,039

Other Long-Term Liabilities:
Deferred taxes	—		715,794			265,646			(47,169		)	934,271
Intercompany payable	—		—			445,489			(445,489		)	—
Other long-term obligations, primarily self insured claims	20,888		1,243			92,724			—			114,855
Total Other Long-Term Liabilities	20,888		717,037			803,859			(492,658		)	1,049,126

Shareholder’s Equity	554,650		1,785,636			497,833			(2,283,469		)	554,650

Total Liabilities and Shareholder’s Equity	$	4,571,627	$	4,832,818		$	1,988,220		$	(4,981,751	)	$	6,410,914

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2013

(In thousands)

	The
	ServiceMaster						Non-
	Company			Guarantors			Guarantors			Eliminations			Consolidated
Cash and Cash Equivalents at Beginning of Period	$	316,528		$	13,842		$	92,375		$	—		$	422,745

Net Cash (Used for) Provided from Operating Activities from Continuing Operations	(68,974		)	181,694			33,955			(37,616		)	109,059

Cash Flows from Investing Activities from Continuing Operations:
Property additions	—			(30,936		)	(26,765		)	—			(57,701		)
Sale of equipment and other assets	—			1,081			57			—			1,138
Other business acquisitions, net of cash acquired	—			(6,807		)	(15,770		)	—			(22,577		)
Notes receivable, financial investments and securities, net	—			750			(22,803		)	—			(22,053		)
Notes receivable from affiliate	(11,973		)	—			—			—			(11,973		)
Net Cash Used for Investing Activities from Continuing Operations	(11,973		)	(35,912		)	(65,281		)	—			(113,166		)

Cash Flows from Financing Activities from Continuing Operations:
Borrowings of debt	855			—			—			—			855
Payments of debt	(20,763		)	(19,742		)	(1,267		)	—			(41,772		)
Discount paid on issuance of debt	(12,200		)	—			—			—			(12,200		)
Debt issuance costs paid	(5,575		)	—			—			—			(5,575		)
Shareholders’ dividends	—			(18,808		)	(18,808		)	37,616			—
Net intercompany advances	82,582			(104,240		)	21,658			—			—
Net Cash Provided from (Used for) Financing Activities from Continuing Operations	44,899			(142,790		)	1,583			37,616			(58,692		)

Cash Flows from Discontinued Operations:
Cash used for operating activities	—			(1,313		)	(127		)	—			(1,440		)
Net Cash Used for Discontinued Operations	—			(1,313		)	(127		)	—			(1,440		)

Cash (Decrease) Increase During the Period	(36,048		)	1,679			(29,870		)	—			(64,239		)

Cash and Cash Equivalents at End of Period	$	280,480		$	15,521		$	62,505		$	—		$	358,506

THE SERVICEMASTER COMPANY AND SUBSIDIARIES

Condensed Consolidating Statement of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2012

(In thousands)

	The
	ServiceMaster						Non-
	Company			Guarantors			Guarantors			Eliminations			Consolidated
Cash and Cash Equivalents at Beginning of Period	$	232,382		$	13,751		$	82,797		$	—		$	328,930

Net Cash (Used for) Provided from Operating Activities from Continuing Operations	(83,912		)	248,465			1,412			(65,856		)	100,109

Cash Flows from Investing Activities from Continuing Operations:
Property additions	—			(35,662		)	(25,934		)	—			(61,596		)
Sale of equipment and other assets	—			1,293			5			—			1,298
Other business acquisitions, net of cash acquired	—			(27,789		)	(2,157		)	—			(29,946		)
Notes receivable, financial investments and securities, net	—			—			(7,927		)	—			(7,927		)
Net Cash Used for Investing Activities from Continuing Operations	—			(62,158		)	(36,013		)	—			(98,171		)

Cash Flows from Financing Activities from Continuing Operations:
Borrowings of debt	1,350,000			—			—			—			1,350,000
Payments of debt	(1,305,377		)	(12,431		)	(2,047		)	—			(1,319,855		)
Debt issuance costs paid	(32,301		)	—			(3		)	—			(32,304		)
Shareholders’ dividends	—			(32,928		)	(32,928		)	65,856			—
Net intercompany advances	47,068			(132,540		)	85,472			—			—
Net Cash Provided from (Used for) Financing Activities from Continuing Operations	59,390			(177,899		)	50,494			65,856			(2,159		)

Cash Flows from Discontinued Operations:
Cash used for operating activities	—			(512		)	(99		)	—			(611		)
Cash used for investing activities:
Proceeds from sale of business	—			(3,549		)	—			—			(3,549		)
Net Cash Used for Discontinued Operations	—			(4,061		)	(99		)	—			(4,160		)

Cash (Decrease) Increase During the Period	(24,522		)	4,347			15,794			—			(4,381		)

Cash and Cash Equivalents at End of Period	$	207,860		$	18,098		$	98,591		$	—		$	324,549