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TABLE OF CONTENTS
INDEX TO FINANCIAL STATEMENTS

Table of Contents

As filed with the Securities and Exchange Commission on June 16, 2014

Registration No. 333-194772


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

Amendment No. 3
to

FORM S-1
REGISTRATION STATEMENT
UNDER THE
SECURITIES ACT OF 1933



ServiceMaster Global Holdings, Inc.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of
incorporation or organization)
  8741
(Primary Standard Industrial
Classification Code Number)
  20-8738320
(I.R.S. Employer
Identification Number)

860 Ridge Lake Boulevard
Memphis, Tennessee 38120
(901) 597-1400

(Address, including zip code, and telephone number, including
area code, of registrant's principal executive offices)



James T. Lucke, Esq.
Senior Vice President and General Counsel
ServiceMaster Global Holdings, Inc.
860 Ridge Lake Boulevard
Memphis, Tennessee 38120
(901) 597-1400
(Name, address, including zip code, and telephone number, including area code, of agent for service)



with copies to:

Peter J. Loughran, Esq.
Debevoise & Plimpton LLP
919 Third Avenue
New York, NY 10022
(212) 909-6000

 

John C. Ericson, Esq.
Simpson Thacher & Bartlett LLP
425 Lexington Avenue
New York, NY 10017
(212) 455-2000



Approximate date of commencement of proposed sale of the securities to the public:
As soon as practicable after this registration statement becomes effective.

          If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box:    o

          If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering:    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering.    o

          Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer o   Accelerated filer o   Non-accelerated filer ý
(Do not check if a
smaller reporting company)
  Smaller reporting company o

CALCULATION OF REGISTRATION FEE

               
 
Title of Each Class of Securities
to be Registered

  Amount to be
Registered(1)

  Proposed Maximum
Aggregate Offering
Price Per
Share(1)(2)

  Proposed Maximum
Aggregate Offering
Price(1)(2)

  Amount of
Registration Fee(3)

 

Common stock, $0.01 par value per share

  41,285,000   $21.00   $866,985,000   $111,668

 

(1)
Includes shares/offering price of shares that may be sold upon exercise of the underwriters' option to purchase additional shares.

(2)
This amount represents the proposed maximum aggregate offering price of the securities registered hereunder. These figures are estimated solely for the purpose of calculating the amount of the registration fee pursuant to Rule 457(o) under the Securities Act of 1933.

(3)
The registrant previously paid $12,880 of this amount.

          The registrant hereby amends this registration statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until this registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.

   


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The information in this prospectus is not complete and may be changed. We may not sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This prospectus is not an offer to sell these securities and we are not soliciting offers to buy these securities in any state where the offer or sale is not permitted.

SUBJECT TO COMPLETION, DATED JUNE 16, 2014

35,900,000 Shares

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ServiceMaster Global Holdings, Inc.

Common Stock

        This is an initial public offering of shares of common stock of ServiceMaster Global Holdings, Inc. All of the 35,900,000 shares of common stock are being sold by us.

        Prior to this offering, there has been no public market for the common stock. We have been approved to list our common stock on the New York Stock Exchange, or the "NYSE," under the symbol "SERV".

        After the completion of this offering, we expect to be a "controlled company" within the meaning of the corporate governance standards of the NYSE.

        We anticipate that the initial public offering price will be between $18.00 and $21.00 per share.

        Investing in our common stock involves risks. See "Risk Factors" beginning on page 19 of this prospectus.

 

 
  Per Share
  Total
 

Initial public offering price

  $               $            
 

Underwriting discounts and commissions(1)

  $               $            
 

Proceeds, before expenses, to us

  $               $            

 

(1)

We have agreed to reimburse the underwriters for certain FINRA-related expenses. The underwriters have agreed to reimburse us in an amount of $1.25 million for certain expenses of the offering. See "Underwriting."

        The underwriters also may purchase up to 5,385,000 additional shares from us at the initial offering price less the underwriting discounts and commissions within 30 days from the date of this prospectus.

        Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

        The underwriters expect to deliver the shares to purchasers on or about            , 2014.

Joint Book-Running Managers

J.P. Morgan   Credit Suisse   Goldman, Sachs & Co.   Morgan Stanley



BofA Merrill Lynch   Jefferies   Natixis   RBC Capital Markets

            
Baird   Piper Jaffray   Ramirez & Co., Inc.

Prospectus dated                        , 2014


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Prospectus Summary

    1  

Risk Factors

    19  

Forward-Looking Statements

    39  

Use of Proceeds

    41  

Concurrent Refinancing

    41  

Dividend Policy

    42  

Capitalization

    43  

Dilution

    45  

Selected Historical Financial Data

    47  

Management's Discussion and Analysis of Financial Condition and Results of Operations

    51  

Business

    96  

Management

    110  

Executive Compensation

    116  

Certain Relationships and Related Party Transactions

    147  

Description of Certain Indebtedness

    150  

Security Ownership of Certain Beneficial Owners and Management

    159  

Description of Capital Stock

    163  

Shares Available for Future Sale

    169  

Material U.S. Federal Tax Considerations for Non-U.S. Holders

    171  

Underwriting

    175  

Validity of Common Stock

    182  

Experts

    182  

Where You Can Find More Information

    182  

Index to Financial Statements

    F-1  

        Neither we nor the underwriters have authorized anyone to provide any information or to make any representations other than those contained in this prospectus or in any free writing prospectus we have prepared. Neither we nor the underwriters take responsibility for, nor can provide any assurance as to the reliability of, any other information that others may give you. This prospectus is an offer to sell only the shares offered hereby, but only under circumstances and in jurisdictions where it is lawful to do so. The information contained in this prospectus is current only as of its date.

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PROSPECTUS SUMMARY

        The following summary highlights information contained elsewhere in this prospectus and does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus, including the sections entitled "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and the related notes to those statements, before making an investment decision.

        Unless the context otherwise requires, the terms "we," "our," "us" and "ServiceMaster," as used in this prospectus, refer to ServiceMaster Global Holdings, Inc. and its consolidated subsidiaries. The term "SvM" refers to The ServiceMaster Company, LLC, our indirect wholly-owned subsidiary.

        All operating and statistical data in this prospectus give effect to the TruGreen Spin-off (as defined below), unless the context otherwise requires.

Our Company

        ServiceMaster is a leading provider of essential residential and commercial services, operating through an extensive service network of more than 7,000 company-owned, franchised and licensed locations. Our mission is to simplify and improve the quality of our customers' lives by delivering services that help them protect and maintain their homes or businesses, typically their most highly valued assets. We have leading market positions across the majority of the markets we serve, as measured by customer-level revenue. Our portfolio of well-recognized brands includes Terminix (termite and pest control), American Home Shield (home warranties), ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspections). We serve approximately five million residential and commercial customers through an employee base of approximately 13,000 company associates and a franchise network that independently employs an estimated 33,000 additional people.

        For the year ended December 31, 2013, we had revenue, Adjusted EBITDA and income from continuing operations of $2,293 million, $450 million and $42 million, respectively. For the three months ended March 31, 2014, we had revenue, Adjusted EBITDA and loss from continuing operations of $533 million, $115 million and $18 million, respectively. Terminix, our largest segment, represented approximately 57% and 60% of our revenue in 2013 and the three months ended March 31, 2014, respectively. For a reconciliation of Adjusted EBITDA to net income, see "—Summary Historical Consolidated Financial and Other Operating Data."

        We believe that our customers understand the financial and reputational risks associated with inadequate maintenance of their homes or businesses and that our high-quality, professional services are low-cost expenditures when compared to the alternative of failing to perform essential maintenance. We strive to be the service provider of choice and believe our customers have recognized our value proposition, as evidenced by our long-standing customer relationships and the high rate at which our customers renew their contracts from year to year. In 2013, within our Terminix segment, customer retention rates for our termite and pest control businesses were 85% and 79%, respectively, and in our American Home Shield segment our retention rate was 74%.

        We have significant size and scale, which we believe give us a number of competitive advantages. Terminix is the largest termite and pest control business in the United States, as measured by customer-level revenue, and serves approximately 2.8 million customers across 47 states and the District of Columbia through approximately 285 company-owned and 100 franchised locations. Additionally, we estimate American Home Shield to be approximately four to five times larger than its nearest competitor, as measured by revenue. American Home Shield serves approximately 1.4 million residential customers across all 50 states and the District of Columbia through a network of approximately 10,000 pre-screened independent home service contractor firms. Our Franchise Services

 

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Group serves both residential and commercial customers across all 50 states and the District of Columbia through approximately 4,000 franchised and 75 company-owned locations. We believe our significant size and scale provide a competitive advantage in our purchasing power, route density, and marketing and operating efficiencies compared to smaller local and regional competitors. Our scale also facilitates the standardization of processes, shared learning and talent development across our entire organization.

        We believe our businesses are strategically positioned to benefit from a number of favorable demographic and secular trends. These trends include growth in population, household formation and new and existing home sales. In addition, we believe there is increasing demand for outsourced services, fueled by a trend toward "do-it-for-me" as a result of an aging population and shifts in household structure and behaviors, such as dual-income families and consumers with "on-the-go" lifestyles.

        The outsourced market for residential and commercial termite and pest control services in the United States was approximately $7 billion in 2013, according to Specialty Products Consultants, LLC. We estimate that there are approximately 20,000 U.S. termite and pest control companies, nearly all of which have fewer than 100 employees. We believe this represents an opportunity for large, scaled players, such as Terminix, to act as consolidators in the industry. We believe our Terminix business stands to benefit from a number of positive industry drivers, including increasing government and consumer focus on health and safety in both the home and the workplace.

        We estimate that the U.S. home warranty market had total revenue of approximately $1.8 billion in 2013. The home warranty market is characterized by low household penetration, which we estimate to be approximately 3-4%. We believe there is an opportunity for a reliable, scaled service provider with a national, pre-screened contractor network, such as American Home Shield, to increase market share and household penetration. Additionally, we believe that increasingly complex household systems and appliances may further highlight the value proposition of professional repair services, and accordingly, the coverage offered by a home warranty.

        We believe that the businesses in our Franchise Services Group hold leading market positions in large and fragmented markets and that our scale and national presence create competitive advantages for us and our franchisees in these markets.

Our Reportable Segments

        Our operations are organized into three reportable segments: Terminix, American Home Shield and the Franchise Services Group (which includes ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec). The following charts show the percentage of our consolidated revenue and Adjusted EBITDA for each of our reportable segments as well as for Other Operations and Headquarters for the year ended December 31, 2013:


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Terminix Segment Overview

        Terminix is the leading provider of termite and pest control services in the United States, with a market share of 20%, as measured by customer-level revenue. In addition, Terminix is the most recognized brand in the industry with approximately 1.5x the unaided brand awareness of our next-largest competitor, based on a study by Decision Analyst, Inc. periodically commissioned by us as part of our ongoing marketing efforts. Terminix specializes in protection against termite damage, rodents, insects and other pests, including cockroaches, spiders, wood-destroying ants, ticks, fleas and bed bugs. Our services include termite remediation, annual termite inspection and prevention treatments with damage claim guarantees, and periodic pest control services. Our recent new product introductions include mosquito control, crawlspace encapsulation and wildlife exclusion.

        For the year ended December 31, 2013, 56% of our Terminix revenue was generated from pest control services and 39% was generated from termite control services, with the remaining 5% from distribution of pest control products. A significant portion of our Terminix revenue base is recurring, with 72% of 2013 revenue derived from services delivered through annual contracts. Additionally, in 2013, retention rates for termite and pest control customers with annual contracts were 85% and 79%, respectively.

        We believe that the strength of the Terminix brand, along with our history of providing a high level of consistent service, allows us to enjoy a competitive advantage in attracting, retaining and growing our customer base. We believe our investments in systems and processes, such as routing and scheduling optimization, robust reporting capabilities and mobile customer management solutions, enable us to deliver a higher level of customer service when compared to smaller regional and local competitors.

        Our focus on attracting and retaining customers begins with our associates in the field, who interact with our customers every day. Our associates bring a strong level of passion and commitment to the Terminix brand, as evidenced by the 15-year and 7-year average tenure of our branch managers and technicians, respectively. Our field organization is supported by dedicated customer service and call center personnel. Our culture of continuous improvement drives an intense focus on the quality of the services delivered, which we believe produces high levels of customer satisfaction and, ultimately, customer retention and referrals.

        The Terminix national branch structure includes approximately 285 company-owned and 100 franchised locations, which serve approximately 2.8 million customers in 47 states and the District of Columbia. In 2013, substantially all of Terminix revenue was generated in the United States, with less than 1% derived from international markets through subsidiaries, a joint venture and licensing arrangements. Franchise fees from Terminix franchisees represented less than 1% of Terminix revenue in 2013.

        For the year ended December 31, 2013 and the three months ended March 31, 2014, Terminix recorded revenue of $1,309 million and $320 million and Adjusted EBITDA of $266 million and $78 million, respectively.

    Terminix Competitive Strengths

    #1 market position and #1 recognized brand in U.S. termite and pest control services

    Track record of high customer retention rates

    Passionate and committed associates focused on delivering superior customer service

    Expansive scale and deep market presence across a national footprint

    Effective multi-channel customer acquisition strategy

    History of innovation leadership and introducing new products and services

 

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American Home Shield Segment Overview

        American Home Shield founded the home warranty industry in 1971 and remains the leading provider of home warranty plans for household systems and appliances in the United States, with approximately 42% market share, as measured by revenue. We estimate American Home Shield to be approximately four to five times larger than its nearest competitor, as measured by revenue. We believe that, as the market leader, American Home Shield can drive increasing use of home warranties given the low industry household penetration of approximately 3-4%.

        American Home Shield provides home warranty plans that cover the repair or replacement of up to 21 major household systems and appliances, including electrical, plumbing, central heating and air conditioning (HVAC) systems, water heaters, refrigerators, dishwashers and ovens/cook tops. Our warranty plans are generally structured as one-year contracts with annual renewal options and, as a result, a significant portion of our revenue base in this segment is recurring. In 2013, our retention rate was 74%. Of the home warranties written by American Home Shield in 2013, 69% were derived from existing contract renewals, while 18% and 13% were derived from sales made in conjunction with existing home resale transactions and direct-to-consumer sales, respectively.

        We believe that we have one of the largest contractor networks in the United States, comprised of approximately 10,000 independent home service contractor firms. We carefully screen our contractors and closely monitor their performance based on a number of criteria, including through feedback from customer satisfaction surveys. On an annual basis, our contractors respond to nearly three million service requests from approximately 1.4 million customers across all 50 states and the District of Columbia. Additionally, American Home Shield operates and takes service calls 24 hours a day, seven days a week. Furthermore, as a result of our large contractor network and sophisticated IT systems, approximately 90% of the time we successfully assign contractors to a job within 15 minutes or less.

        For the year ended December 31, 2013 and the three months ended March 31, 2014, American Home Shield recorded revenue of $740 million and $151 million and Adjusted EBITDA of $145 million and $23 million, respectively.

American Home Shield Competitive Strengths

    #1 market position in the industry with 42% market share, estimated to be four to five times the size of the next largest competitor

    Track record of high customer retention rates

    Large and pre-qualified national contractor network

    Strong partnerships with leading national residential real estate firms

    Core competency around direct-to-consumer marketing and lead generation

Franchise Services Group Segment Overview

        ServiceMaster's Franchise Services Group consists of the ServiceMaster Restore (disaster restoration), ServiceMaster Clean (janitorial), Merry Maids (residential cleaning), Furniture Medic (furniture repair) and AmeriSpec (home inspection) businesses. Our businesses in this segment operate principally through franchisees. Approximately half of our revenue in this segment consists of ongoing monthly royalty fees based upon a percentage of our franchisees' customer-level revenue. We believe that each business holds a leading market position in its respective category and that our scale and national presence create competitive advantages for us in attracting and retaining franchisees. We are able to invest in best-in-class systems, training and process development, provide multiple levels of marketing support and direct new business leads to our franchisees through our relationships with major insurance carriers and national account customers. The depth of our franchisee support is

 

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evidenced by the long average tenure of our franchisees, many of whom have partnered with ServiceMaster for over 25 years.

        For the year ended December 31, 2013 and the three months ended March 31, 2014, the Franchise Services Group recorded revenue of $236 million and $60 million and Adjusted EBITDA of $78 million and $18 million, respectively.

Franchise Services Group Competitive Strengths

    Strong and trusted brands with leading market positions in their respective categories

    Attractive value proposition to franchisees

    Exceptional focus on customer service evidenced by strong net promoter scores, or "NPS"

    Infrastructure and scale supporting our ability to service national accounts

    National network and 24/7/365 service availability supports mission-critical nature of the ServiceMaster Restore business

    Long-standing and strong relationships with the majority of the top 20 insurance carriers

Our Market Opportunity

Overview of Termite and Pest Control Industry

        The outsourced market for residential and commercial termite and pest control services in the United States was approximately $7 billion in 2013, according to Specialty Products Consultants, LLC. We estimate that there are approximately 20,000 U.S. termite and pest control companies, nearly all of which have fewer than 100 employees.

        Termites are responsible for an estimated $5 billion in home damage in the United States annually, according to the National Pest Management Association's 2012 survey. The termite control industry provides treatment and inspection services to residential and commercial property owners for the remediation and prevention of termite infestations. We believe homeowners value quality and reliability over price in choosing professional termite control services, as the cost of most professional treatments is well below the potential cost of inaction or ineffective treatment. As a result, we believe the demand for termite remediation services is relatively insulated from changes in consumer spending. In addition to remediation services, the termite control industry offers periodic termite inspections and preventative treatments to residential and commercial property owners in areas with high termite activity, typically through annual contracts. These annual contracts may carry guarantees that protect the property owner against the cost of structural damage caused by a termite infestation. Termites can cause significant damage to a structure before becoming visible to the untrained eye, highlighting the value proposition of professional preventative termite services. As a result, the termite control industry experiences high renewal rates on annual preventative inspection and treatment contracts, and revenues from such contracts are generally stable and recurring.

        Pest infestations may damage a home or business while also carrying the risk of the spread of diseases. Moreover, for many commercial facilities, pest control is essential to regular operations and regulatory compliance (e.g., hotels, restaurants and healthcare facilities). As a result of these dynamics, the pest control industry experiences high rates of renewal for its pest inspection and treatment contracts. Pest control services are often delivered on a contracted basis through regularly scheduled service visits, which include an inspection of premises and application of pest control materials. According to the National Pest Management Association's 2012 survey, approximately 30% of U.S. households currently use a professional pest exterminator.

 

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        Both termite and pest activity are affected by weather. Termite activity peaks during the annual springtime "swarm," the timing and intensity of which varies based on weather. Similarly, pest activity tends to accelerate in the spring months when warmer temperatures arrive in many U.S. regions. However, the high proportion of termite and pest control services which are contracted and recurring, as well as the high renewal rates for those services, limit the effect of weather anomalies on the termite and pest control industry in any given year.

Overview of Home Warranty Industry

        We estimate that the U.S. home warranty market had total revenue of approximately $1.8 billion in 2013. The home warranty market is characterized by low household penetration, which we estimate to be approximately 3-4%. The home warranty industry offers plans that protect a homeowner against costly repairs or replacement of household systems and appliances. Typically having a one-year term, coverage varies based on a menu of plan options. The most commonly covered items include electrical, plumbing, central heating and air conditioning (HVAC) systems, water heaters, refrigerators, dishwashers and ovens/cook tops. The home warranty industry is characterized by a high level of customer interaction and service requirements. This combination of a high-touch/high-service business model and the peace of mind it delivers to the customer has led to high renewal rates in the home warranty industry.

        As consumer demand shifts towards more outsourced services, we believe that there is an opportunity for American Home Shield, a reliable, scaled service provider with a national, pre-screened contractor network, to increase market share and household penetration. Additionally, we believe that increasingly complex household systems and appliances may further highlight the value proposition of professional repair services and, accordingly, the coverage offered by a home warranty.

        One of the drivers of sales of new home warranties is the number of existing homes sold in the United States, since a home warranty is often recommended by a real estate sales professional or offered by the seller of a home in conjunction with a real estate resale transaction. According to the National Association of Realtors, existing home resales, as measured in units, increased by approximately 9% in 2013. Approximately 18% of the revenue of American Home Shield for the year ended December 31, 2013 was tied directly to existing home resale transactions.

Overview of Key Franchise Services Group Industries

        Disaster Restoration (ServiceMaster Restore).    We estimate that the U.S. disaster restoration market is approximately $39 billion, approximately two-thirds of which is related to residential customers and the remainder related to commercial customers. Most emergency response work results from emergency situations for residential and commercial customers, such as fires and flooding. Extreme weather events and natural disasters also provide demand for emergency response work. Critical factors in the selection of an emergency response firm are the firm's reputation, relationships with insurers, available resources, proper insurance and credentials, quality of service, timeliness and responsiveness. This market is highly fragmented, with two large players, including ServiceMaster Restore, and we believe there are opportunities for growth for scaled service providers.

        Janitorial (ServiceMaster Clean).    We estimate that the U.S. janitorial services market was approximately $50 billion in 2013. The market is highly fragmented with more than 800,000 companies competing in the janitorial space, a significant majority of which have five or fewer employees.

        Residential Cleaning (Merry Maids).    We estimate that the U.S. residential professional cleaning services market was approximately $3.7 billion in 2013. Competition in this market comes mainly from local, independently owned firms, and from a few national companies.

 

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Our Competitive Strengths

        #1 Market Positions in Large, Fragmented and Growing Markets.    We are the leading provider of essential residential and commercial services in the majority of markets in which we operate. Our markets are generally large, growing and highly fragmented, and we believe we have significant advantages over smaller local and regional competitors. We have spent decades developing a reputation built on reliability and superior quality and service. As a result, we enjoy high unaided brand awareness and a reputation for high-quality customer service, which serve as key drivers of our customer acquisition efforts. Our nationwide presence also allows our brands to effectively serve both local residential customers and large national commercial accounts and to capitalize on lead generation sources that include large real estate agencies, financial institutions and insurance carriers. We believe our significant size and scale also provide a competitive advantage in our purchasing power, route density, and marketing and operating efficiencies compared to smaller local and regional competitors. Our scale also facilitates the standardization of processes, shared learning and talent development across our entire organization.

        Diverse Revenue Streams Across Customers and Geographies.    ServiceMaster is diversified in terms of customers and geographies, and our businesses served approximately five million customers in 2013. We operate in all 50 states and the District of Columbia. Our Terminix business, which accounted for 57% of our 2013 revenue, served approximately 2.8 million customers across a branch network of approximately 285 company-owned and 100 franchised locations. American Home Shield, which accounted for 32% of our 2013 revenue, responded to nearly three million service requests from approximately 1.4 million customers. Our diverse customer base and geographies help to mitigate the effect of adverse market conditions and other risks in any particular geography or customer segment we serve. We therefore believe that the size and scale of our company provide us with added protection from risk relative to our smaller local and regional competitors.

        High-Value Service Offerings Resulting in High Retention and Recurring Revenues.    We believe our high annual customer retention demonstrates the highly valued nature of the services we offer and the high level of execution and customer service that we provide. In 2013, in our Terminix termite and pest control businesses, our customer retention rates were 85% and 79%, respectively, and in our American Home Shield segment, our retention rate was 74%. Many of our technicians have built long-standing, personal relationships with their customers. We believe these personal bonds, often forged over decades, help to drive customer loyalty and retention. As a result of our strong retention rates and long-standing customer relationships, we enjoy significant visibility and stability in our business, and these factors limit the effect of adverse economic cycles on our revenue base. We experienced these advantages during the most recent downturn, when we were able to grow revenue in each year from 2008 to 2013.

        Multi-Channel Marketing Approach Supported by Sophisticated Customer Analytic Modeling Capabilities.    Our multi-channel marketing approach focuses on building the value of our brands and generating revenue by understanding the decisions customers make at each stage in the purchase of residential and commercial services. The effectiveness of our marketing efforts is demonstrated by an increase in lead generation and online sales, as well as an improvement in close rates over the last few years. For example, in our direct-to-consumer channel at American Home Shield, new home warranty lead generation, marketing yield and close rates have benefited from increased spending on marketing as well as improved digital marketing. We have also been deploying increasingly sophisticated customer analytics models that allow us to more effectively segment our prospective customers and tailor campaigns towards them. In addition, we are seeing success with newer ways of reaching and marketing to consumers via content marketing, promotions and social media channels.

 

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        Operational and Customer Service Excellence Driven by Superior People Development.    We are constantly focused on improving customer service. The customer experience is at the foundation of our business model, and we believe that each employee is an extension of ServiceMaster's reputation. We employ rigorous hiring and training practices and continuously analyze our operating metrics to identify potential improvements in service and productivity. Technicians in our Terminix branches exhibit low levels of turnover, with an average tenure of seven years, creating continuity in customer relationships and ensuring the development of best practices based on on-the-ground experience. We also provide our field personnel with access to sophisticated data management and mobility tools which enable them to drive efficiencies, improve customer service and ultimately grow our customer base and profitability.

        Resilient Financial Model with Track Record of Consistent Performance.    

    Solid revenue and Adjusted EBITDA growth through business cycles.  Our consolidated revenue and Adjusted EBITDA compound annual growth rates from 2009 through 2013 were 4% and 6%, respectively. We believe that our strong performance through the recent economic and housing downturns is attributable to the essential nature of our services, our strong value proposition and our management's focus on driving results.

    Solid margins with attractive operating leverage and productivity improvement initiatives.  Our business model enjoys inherent operating leverage stemming from route density and fixed investments in infrastructure and technology, among other factors. We have demonstrated our ability to expand our margins through a variety of initiatives, including metric-driven continuous improvement in our customer call centers, application of consistent process guidelines at the branch level, leveraging size and scale to improve the sourcing of labor and materials, and driving productivity in centralized services. We have also deployed mobility solutions and routing and scheduling systems across many of our businesses in order to enhance overall efficiency and reduce operating costs.

        Capital-Light Business Model.    Our business model is characterized by strong Adjusted EBITDA margins, negative working capital and limited capital expenditure requirements. In 2013, 2012 and 2011, our net cash provided from operating activities from continuing operations was $208 million, $104 million and $74 million, respectively, and our property additions were $39 million, $44 million and $52 million, respectively. Pre-Tax Unlevered Free Cash Flow was $426 million, $364 million and $292 million in 2013, 2012 and 2011, respectively. We intend to utilize a meaningful portion of our future cash flow to repay debt. For a reconciliation of Pre-Tax Unlevered Free Cash Flow to net cash provided from operating activities from continuing operations, which we consider to be the most directly comparable GAAP financial measure, see "—Selected Historical Financial Data."

        Experienced Management Team.    We have assembled a management team of highly experienced leaders with significant industry expertise. Our senior leaders have track records of producing profitable growth in a wide variety of industries and economic conditions. We also believe that we have a deep bench of talent across each of our business units, including long-tenured individuals with significant expertise and knowledge of the businesses they operate. Our management team is highly focused on execution and driving growth and profitability across our company. Our compensation structure, including incentive compensation, is tied to key performance metrics and is designed to incentivize senior management to seek the long-term success of our business.

 

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Our Strategy

        Grow Our Customer Base.    We are focused on the growth of our businesses through the introduction and delivery of high-value services to new and existing customers. We drive growth in recurring and new sales via three primary channels:

    Direct-to-consumer through our company-owned branches;

    Indirectly through partnerships with high-quality contractors in our home warranty business; and

    Through trusted service providers who are franchisees.

        To accelerate new customer growth, we make strategic investments in sales, marketing and advertising to drive new business leads, brand awareness and market penetration. In addition, we are executing multiple initiatives to improve customer satisfaction and service delivery, which we believe will lead to improved retention and growth in our customer base across our business segments.

        Introduce New Service Offerings.    We intend to continue to leverage our existing sales channels and local coverage to deliver additional value-added services to our customers. Our product development teams draw upon the experience of our technicians in the field, combined with in-house scientific expertise, to create innovative customer solutions for both our existing customer base and identified service/category adjacencies. We have a strong history of new product introductions, such as Terminix's crawlspace encapsulation, mosquito control and wildlife exclusion services, that we believe will appeal to new potential customers as well as our existing customer base. As another example, in the second quarter of 2014, our ServiceMaster Restore and AmeriSpec teams intend to introduce InstaScope, a new, proprietary technology for instant mold detection and water categorization.

        Expand Our Geographic Markets.    Through detailed assessments of local economic conditions and demographics, we have identified target markets for expansion, both in existing markets, where we have capacity to increase our local market position, and in new markets, where we see opportunities. In addition to geographic expansion opportunities within the United States, we intend to grow our international presence through strategic franchise expansions and additional licensing agreements.

        Grow Our Commercial Business.    Our revenue from commercial customers comprised approximately 13% of our 2013 revenue. We believe we are well positioned to leverage our national coverage, brand strength and broad service offerings to target large multi-regional accounts. We believe these capabilities provide us with a meaningful competitive advantage, especially compared to smaller local and regional competitors. We recognize that many of these large accounts seek to outsource or reduce the number of vendors used for certain services, and, accordingly, we have reenergized our marketing approach in this channel. At Terminix, for example, we have hired a dedicated sales team to focus on the development of commercial sales. Our commercial expansion strategy targets industries with a demonstrated need for our services, including healthcare, manufacturing, warehouses, hotels and commercial real estate.

        Enhance Our Profitability.    We have and will continue to invest in initiatives designed to improve our margins and drive profitable growth. We have been able to increase productivity across our segments through actions such as continuous process improvement, targeted systems investments, sales force initiatives and technician mobility tools. We are also focusing on strategically leveraging the $1.4 billion that we have spent annually with our vendors to capitalize on purchasing power and achieve more favorable pricing and terms. In addition, we have rolled out tools and processes to centralize and systematize pricing decisions. These tools and processes enable us to optimize pricing at the geographic market and product level while creating a flexible and scalable pricing architecture that can grow with the business. We intend to leverage these investments as well as identify further opportunities to enhance profitability across our businesses.

 

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        Pursue Selective Acquisitions.    Since 2008, we have completed nearly 200 acquisitions. We anticipate that the highly fragmented nature of our markets will continue to create opportunities for further consolidation. As we have in the past, we will continue to take advantage of tuck-in as well as strategic acquisition opportunities, particularly in underserved markets where we can enhance and expand our service capabilities. We seek to use acquisitions to cost-effectively grow our customer count and enter high-growth geographies. We may also pursue acquisitions as vehicles for strategic international expansion.

TruGreen Spin-Off

        On January 14, 2014, we completed a separation transaction, or the "TruGreen Spin-off," resulting in the spin-off of the assets and certain liabilities of the business that comprises the lawn, tree and shrub care services previously conducted by ServiceMaster primarily under the TruGreen brand name, or collectively, the "TruGreen Business," through a tax-free, pro rata dividend to our stockholders. As a result of the completion of the TruGreen Spin-off, TruGreen Holding Corporation, or "New TruGreen," operates the TruGreen Business as a private independent company. The TruGreen Business experienced a significant downturn in recent years. Since 2011, the TruGreen Business lost 400,000 customers, or 19 percent of its customer base. The TruGreen Business's operating margins also eroded during this time frame due to production inefficiencies, higher chemical costs and inflationary pressures, compounded by lower fixed cost leverage as falling customer counts drove revenue down. The TruGreen Business experienced revenue and Adjusted EBITDA declines of 18.6 percent and 87.6 percent, respectively, from 2011 to 2013. In light of these developments, we made the decision to effect the TruGreen Spin-off, which we expect will enable our management to increase its focus on the Terminix, American Home Shield and Franchise Services Group segments, while providing New TruGreen, as an independently operated, private company, the time and focus required to execute a turnaround. In addition, the TruGreen Spin-off was effected to enhance our ability to complete an initial public offering of our common stock and use the net proceeds primarily to reduce our indebtedness. The historical results of the TruGreen Business, including its results of operations, cash flows and related assets and liabilities, are reported in discontinued operations for all periods presented in this prospectus.

        We have historically incurred the cost of certain corporate-level activities which we performed on behalf of the TruGreen Business, including communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, marketing, facilities, information technology and other support services. Beginning with the TruGreen Spin-off, where it was practicable, employees who historically provided such services to the TruGreen Business were separated from us and transferred to New TruGreen as of the date of the TruGreen Spin-off. For certain support services for which it was not practicable to separate employees and transfer them to New TruGreen beginning with the TruGreen Spin-off, a transition services agreement was entered into pursuant to which SvM and its subsidiaries provide specified services to New TruGreen while an orderly transition of employees and other support arrangements from SvM to New TruGreen is executed. The charges for the transition services are designed to allow us to fully recover the direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The services provided under the transition services agreement will terminate at various specified times, and in no event later than January 14, 2016 (except for certain information technology services, which New TruGreen expects SvM to provide to New TruGreen beyond the two-year period).

        As a result of the transfer of employees to New TruGreen, in combination with the fees we expect to receive under the transition services agreement, we expect an approximate $25 million reduction in annual costs.

 

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Reverse Stock Split

        On June 13, 2014, we filed an amendment to our amended and restated certificate of incorporation effecting a 2-for-3 reverse stock split of our common stock. The information in this prospectus gives effect to the reverse stock split.

Concurrent Refinancing of Existing Credit Facilities

        Substantially contemporaneously with this offering, we intend to refinance, or the "Concurrent Refinancing," our existing term and revolving credit facilities with a $1,825 million term loan facility maturing 2021, or the "New Term Loan Facility," and a $300 million revolving credit facility maturing 2019, or the "New Revolving Credit Facility," and, together with the New Term Loan Facility, the "New Credit Facilities." See "Description of Certain Indebtedness—New Credit Facilities." We intend to use borrowings under the New Term Loan Facility, together with available cash (which may include a portion of the proceeds of this offering), to repay $2,187 million of borrowings outstanding under our Existing Credit Facilities in connection with the anticipated termination thereof. This offering is not contingent upon our entering into the New Credit Facilities, and there can be no assurance that we will enter into the New Credit Facilities and terminate the Existing Term Facilities at the time of consummation of this offering, or at all. See "Concurrent Refinancing."

Equity Sponsors and Organizational Structure

        In July 2007, SvM was acquired pursuant to a merger transaction, or the "2007 Merger," and, immediately following the completion of the 2007 Merger, all of our outstanding common stock was owned by investment funds managed by, or affiliated with, Clayton, Dubilier & Rice, LLC ("CD&R"), or the "CD&R Funds," Citigroup Private Equity LP, or "Citigroup," BAS Capital Funding Corporation, or "BAS," and JPMorgan Chase Funding Inc., or "JPMorgan." On September 30, 2010, Citigroup transferred the management responsibility for certain investment funds that owned shares of our common stock to StepStone Group LP, or "StepStone," and the investment funds managed by StepStone Group, the "StepStone Funds." As of December 22, 2011, we purchased from BAS 5 million shares of our common stock. On March 30, 2012, an affiliate of BAS sold 5 million shares of our common stock to Ridgemont Partners Secondary Fund I, L.P, or "Ridgemont." On July 24, 2012, BACSVM-A L.P., an affiliate of BAS, distributed 1,666,666 million shares of our common stock to Charlotte Investor IV, L.P., its sole limited partner, (together with the CD&R Funds, the StepStone Funds, JPMorgan, Citigroup Capital Partners II Employee Master Fund, L.P., an affiliate of Citigroup, and BACSVM-A, L.P., an affiliate of BAS, the "Equity Sponsors"). After giving effect to this offering, the CD&R Funds, the StepStone Funds and JPMorgan will beneficially own 47.3%, 10.4% and 5.2%, respectively, of the shares of our outstanding common stock, and each of the other Equity Sponsors will beneficially own less than 5% of our outstanding common stock.

        CD&R is a private equity firm composed of a combination of financial and operating executives pursuing an investment strategy predicated on building stronger, more profitable businesses. Since its founding in 1978, CD&R has managed the investment of more than $19 billion in 59 businesses with an aggregate transaction value of more than $90 billion. CD&R has a disciplined and clearly defined investment strategy with a special focus on multi-location services and distribution businesses.

        StepStone Group LP is a global private markets firm overseeing more than $60 billion of private capital allocations, including approximately $11 billion of assets under management. StepStone creates customized portfolios for investors using a highly disciplined research-focused approach that integrates fund, secondary, mezzanine and co-investments.

 

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        The following chart illustrates our ownership and organizational structure, after giving effect to this offering, assuming the underwriters do not exercise their option to purchase additional shares:

GRAPHIC


(1)
Guarantor of SvM's existing senior secured revolving credit facility, or the "Existing Revolving Credit Facility," and SvM's existing senior secured term loan facilities, or the "Existing Term Facilities," and together with the Existing Revolving Credit Facility, the "Existing Credit Facilities"; and will be a guarantor of the New Credit Facilities. See "Description of Certain Indebtedness."

(2)
Borrower under the Existing Credit Facilities and issuer of the 8% senior notes maturing in 2020, or the "8% 2020 Notes," and the 7% senior notes maturing in 2020, or the "7% 2020 Notes," and collectively with the 8% 2020 Notes, the "2020 Notes," and the Continuing Notes, as defined in "Description of Certain Indebtedness." SvM will be the borrower under the New Credit Facilities. See "Description of Certain Indebtedness."

(3)
SvM's subsidiary The Terminix International Company Limited Partnership is a co-borrower under the Existing Revolving Credit Facility. Certain direct and indirect domestic subsidiaries of SvM guarantee the Existing Credit Facilities and the 2020 Notes and will guarantee the New Credit Facilities.

Market and Industry Data

        This prospectus includes estimates regarding market and industry data and forecasts, which are based on publicly available information, industry publications and surveys, reports from government agencies, reports by market research firms and our own estimates based on our management's knowledge of, and experience in, the residential and commercial services industry and market segments in which we compete. Third-party industry publications and forecasts generally state that the

 

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information contained therein has been obtained from sources generally believed to be reliable. Our estimates involve risks and uncertainties and are subject to change based on various factors, including those discussed under the captions "Risk Factors," "Forward-Looking Statements" and "Management's Discussion and Analysis of Financial Condition and Results of Operations."

Service Marks, Trademarks and Trade Names

        We hold various service marks, trademarks and trade names, such as ServiceMaster, Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec, that we deem particularly important to the advertising activities conducted by each of our businesses. As of March 31, 2014, we had marks that were protected by registration (either by direct registration or by treaty) in the United States and approximately 90 other countries.

* * * * *

        Our corporate headquarters are located at 860 Ridge Lake Boulevard, Memphis, Tennessee, 38120. Our telephone number is (901) 597-1400.

 

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THE OFFERING

Common stock offered by us

  35,900,000 shares

Option to purchase additional shares of common stock

  The underwriters have a 30-day option to purchase up to an additional 5,385,000 shares of common stock from us at the initial public offering price, less underwriting discounts and commissions.

Common stock to be outstanding after this offering

  127,755,945 shares (or 133,140,945 shares if the underwriters exercise in full their option to purchase additional shares)

Use of proceeds

  We estimate that the net proceeds to us from this offering, after deducting underwriting discounts and commissions and estimated offering expenses, will be approximately $656 (or approximately $755 million if the underwriters exercise in full their option to purchase additional shares).

  We intend to use the net proceeds of this offering to:

 

redeem $210.0 million in principal amount of the 8% 2020 Notes (representing 35% of the outstanding principal amount thereof) at 108% of the principal amount thereof, plus accrued and unpaid interest estimated to be approximately $7.0 million;

 

redeem $262.5 million in principal amount of the 7% 2020 Notes (representing 35% of the outstanding principal amount thereof) at 107% of the principal amount thereof, plus accrued and unpaid interest estimated to be approximately $7.7 million;

 

repay $112 million in aggregate principal amount of borrowings outstanding under the Existing Term Loan Facility; and

 

pay certain of the Equity Sponsors aggregate fees of $21 million in connection with the termination of our consulting agreements with each of them upon the consummation of this offering.

  See "Use of Proceeds" and "Concurrent Refinancing."

Dividend policy

  We do not currently anticipate paying dividends on our common stock for the foreseeable future. See "Dividend Policy."

NYSE trading symbol

  "SERV"

Risk factors

  See "Risk Factors" for a discussion of factors that you should consider carefully before deciding to invest in shares of our common stock.

 

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        The number of shares of our common stock to be outstanding immediately following this offering is based on the number of our shares of common stock outstanding as of June 13, 2014, and excludes:

    5,708,369 shares of common stock issuable upon exercise of options to purchase shares outstanding as of June 13, 2014 at a weighted average exercise price of $12.03 per share;

    609,259 shares of common stock issuable pursuant to restricted shares and restricted stock units as of June 13, 2014; and

    7,629,757 shares of common stock reserved for future issuance following this offering under our equity plans.

        Unless otherwise indicated, all information in this prospectus:

    gives effect to the 2-for-3 reverse stock split of our common stock effected on June 13, 2014;

    gives effect to the issuance of 35,900,000 shares of common stock in this offering;

    assumes no exercise by the underwriters of their option to purchase additional shares;

    assumes that the initial public offering price of our common stock will be $19.50 per share (which is the midpoint of the price range set forth on the cover page of this prospectus); and

    gives effect to amendments to our amended and restated certificate of incorporation and amended and restated by-laws to be adopted prior to the completion of this offering.

 

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SUMMARY HISTORICAL
CONSOLIDATED FINANCIAL AND OTHER OPERATING DATA

        The following tables set forth summary historical consolidated financial and other operating data as of the dates and for the periods indicated. The summary historical consolidated financial and other operating data as of March 31, 2014 and for the three months ended March 31, 2014 and March 31, 2013 have been derived from our unaudited condensed consolidated financial statements included in this prospectus. The summary historical consolidated financial and other operating data as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 have been derived from our audited consolidated financial statements and related notes included in this prospectus. The summary historical consolidated balance sheet data as of December 31, 2011 has been derived from our audited consolidated financial statements and related notes not included in this prospectus. The summary historical financial and other operating data are qualified in their entirety by, and should be read in conjunction with, our audited consolidated financial statements and related notes and our unaudited condensed consolidated financial statements and related notes and "Management's Discussion and Analysis of Financial Condition and Results of Operations" and "Selected Historical Financial Data" included in this prospectus.

 
  Three
Months
Ended
March 31,
  Year Ended December 31,  
(In millions, except per share data)
  2014   2013   2013   2012   2011  

Operating Results:

                               

Revenue

  $ 533   $ 514   $ 2,293   $ 2,214   $ 2,105  

Cost of services rendered and products sold

    288     270     1,220     1,196     1,125  

Selling and administrative expenses

    151     158     691     678     648  

Amortization expense

    13     13     51     58     83  

Impairment of software and other related costs(1)

    48                  

Restructuring charges(2)

    5     3     6     15     7  

Interest expense

    61     60     247     245     266  

Interest and net investment income

    (6 )   (2 )   (8 )   (7 )   (11 )

Loss on extinguishment of debt(3)

                55      
                       

(Loss) Income from Continuing Operations before Income Taxes(1)(2)(3)

    (27 )   12     86     (26 )   (13 )

(Benefit) provision for income taxes

    (9 )   6     43     (8 )   (6 )

Equity in losses of joint venture

            (1 )        
                       

(Loss) Income from Continuing Operations(1)(2)(3)

    (18 )   6     42     (18 )   (7 )

Loss from discontinued operations, net of income taxes(4)

    (95 )   (29 )   (549 )   (696 )   53  
                       

Net (Loss) Income(1)(2)(3)(4)

  $ (113 ) $ (23 ) $ (507 ) $ (714 ) $ 46  
                       
                       

Weighted average shares outstanding:

                               

Basic

    92     92     92     92     92  

Diluted

    92     93     92     92     92  

Basic and Diluted (Loss) Earnings Per Share—Continuing Operations

  $ (0.20 ) $ 0.07   $ 0.46   $ (0.20 ) $ (0.08 )

Financial Position (as of period end):

                               

Total assets

  $ 5,197         $ 5,905   $ 6,415   $ 7,156  

Cash and cash equivalents

    432           484     418     330  

Total long-term debt

    3,904           3,906     3,924     3,859  

Total shareholders' (deficit) equity(1)(2)(3)(4)

    (369 )         23     535     1,234  

Other Financial Data:

                               

Capital expenditures

  $ 14   $ 9   $ 39   $ 44   $ 52  

Adjusted EBITDA(5)

    115     103     450     413     397  

Ratio of total debt to annual Adjusted EBITDA(5)

                8.68     9.50     9.72  

Ratio of annual Adjusted EBITDA to interest expense(5)

                1.82     1.68     1.49  

(1)
We recorded an impairment charge of $48 million ($29 million, net of tax) in the first quarter of 2014 relating to our decision to abandon our efforts to deploy a new operating system at American Home Shield. See Note 1 to our unaudited condensed consolidated financial statements included in this prospectus for further details.

(2)
See Note 8 to our audited consolidated financial statements and Note 3 to our unaudited condensed consolidated financial statements included in this prospectus for further details.

 

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(3)
The 2012 results include a $55 million ($35 million, net of tax) loss on extinguishment of debt related to the redemption of the remaining $996 million aggregate principal amount of SvM's 10.75% senior notes maturing in 2015, or the "2015 Notes," and repayment of $276 million of outstanding borrowings under the Term Facilities.

(4)
On January 14, 2014, we completed the TruGreen Spin-off, resulting in the spin-off of the assets and certain liabilities of the TruGreen Business through a tax-free, pro rata dividend to our stockholders. As a result of the TruGreen Spin-off, we were required to perform an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. This interim impairment analysis resulted in a pre-tax non-cash trade name impairment charge of $139 million ($84 million, net of tax) to reduce the carrying value of the TruGreen trade name to its estimated fair value.


In 2013, 2012 and 2011, we recorded pre-tax non-cash impairment charges of $673 million ($521 million, net of tax), $909 million ($764 million, net of tax) and $37 million ($22 million, net of tax), respectively, associated with the goodwill and trade name at the TruGreen Business in (loss) income from discontinued operations, net of income taxes. See Note 7 to our audited consolidated financial statements for further details.


In 2011, in conjunction with the decision to dispose of our commercial landscaping business, we recorded a pre-tax non-cash impairment charge of $34 million to reduce the carrying value of the commercial landscaping business's assets to their estimated fair value less cost to sell in accordance with applicable accounting standards. Upon completion of such sale in 2011 we recorded a pre-tax loss on sale of $6 million.

(5)
We use Adjusted EBITDA to facilitate operating performance comparisons from period to period. Adjusted EBITDA is a supplemental measure of our performance that is not required by, or presented in accordance with, accounting principles generally accepted in the United States of America, or "GAAP." Adjusted EBITDA is not a measurement of our financial performance under GAAP and should not be considered as an alternative to net income or any other performance measures derived in accordance with GAAP or as an alternative to net cash provided by operating activities or any other measures of our cash flow or liquidity. "Adjusted EBITDA" means net income (loss) before: income (loss) from discontinued operations, net of income taxes; provision (benefit) for income taxes; gain (loss) on extinguishment of debt; interest expense; depreciation and amortization expense; non-cash goodwill and trade name impairment; residual value guarantee charge; non-cash impairment of software and other related costs; non-cash impairment of property and equipment; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; non-cash effects attributable to the application of purchase accounting and other non-operating expenses.


We believe Adjusted EBITDA facilitates company-to-company operating performance comparisons by backing out potential differences caused by variations in capital structures (affecting net interest income and expense), taxation and the age and book depreciation of facilities and equipment (affecting relative depreciation expense), which may vary for different companies for reasons unrelated to operating performance. In addition, we exclude residual value guarantee charges that do not result in additional cash payments to exit the facility at the end of the lease term.


Adjusted EBITDA is not necessarily comparable to other similarly titled financial measures of other companies due to the potential inconsistencies in the methods of calculation.


Adjusted EBITDA has limitations as an analytical tool, and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:

    Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs;

    Adjusted EBITDA does not reflect our interest expense, or the cash requirements necessary to service interest or principal payments on our debt;

    Adjusted EBITDA does not reflect our tax expense or the cash requirements to pay our taxes;

    Adjusted EBITDA does not reflect historical capital expenditures or future requirements for capital expenditures or contractual commitments;

    Although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and Adjusted EBITDA does not reflect any cash requirements for such replacements; and

    Other companies in our industries may calculate Adjusted EBITDA differently, limiting its usefulness as a comparative measure.

 

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The following table sets forth Adjusted EBITDA for each of our reportable segments and Other Operations and Headquarters and reconciles the total Adjusted EBITDA to Net (Loss) Income for the periods presented, which we consider to be the most directly comparable GAAP financial measure, to Adjusted EBITDA:

 
  Three
Months
Ended
March 31,
  Year Ended
December 31,
 
(In millions)
  2014   2013   2013   2012   2011  

Adjusted EBITDA:

                               

Terminix

  $ 78   $ 75   $ 266   $ 266   $ 249  

American Home Shield

    23     21     145     117     107  

Franchise Services Group

    18     17     78     70     75  
                       

Reportable Segment Adjusted EBITDA

  $ 119   $ 113   $ 489   $ 453   $ 431  

Other Operations and Headquarters(a)

    (4 )   (10 )   (39 )   (40 )   (34 )
                       

Total Adjusted EBITDA

  $ 115   $ 103   $ 450   $ 413   $ 397  
                       
                       

Depreciation and amortization expense

    (25 )   (25 ) $ (99 ) $ (100 ) $ (121 )

Non-cash impairment of software and other related costs(b)

    (48 )                

Non-cash impairment of property and equipment(c)

                (9 )    

Non-cash stock-based compensation expense(d)

    (1 )   (1 )   (4 )   (7 )   (8 )

Restructuring charges(e)

    (5 )   (3 )   (6 )   (15 )   (7 )

Management and consulting fees(f)

    (2 )   (2 )   (7 )   (7 )   (8 )

Loss from discontinued operations, net of income taxes(g)

    (95 )   (29 )   (549 )   (696 )   53  

Benefit (provision) for income taxes

    9     (6 )   (43 )   8     6  

Loss on extinguishment of debt(h)

                (55 )    

Interest expense

    (61 )   (60 )   (247 )   (245 )   (266 )

Other(i)

            (2 )   (1 )    
                       

Net (Loss) Income

  $ (113 ) $ (23 ) $ (507 ) $ (714 ) $ 46  
                       
                       

(a)
Represents unallocated corporate expenses.

(b)
Represents the impairment of software and other related costs described in footnote (1) above. We exclude non-cash impairments from Adjusted EBITDA because we believe doing so is useful to investors in aiding period-to-period comparability.

(c)
For the year ended December 31, 2012, primarily represents a $3 million impairment of licensed intellectual property and a $1 million impairment of abandoned real estate at Terminix, and a $4 million impairment of certain internally developed software at Merry Maids recorded in 2012 for which there were no similar impairments recorded in 2013. We exclude non-cash impairments of property and equipment from Adjusted EBITDA because we believe doing so is useful to investors in aiding period-to-period comparability.

(d)
Represents the non-cash expense of our equity-based compensation. We exclude this expense from Adjusted EBITDA primarily because it is a non-cash expense and because it is not used by management to assess ongoing operational performance. We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability.

(e)
Represents the restructuring charges described in footnote (2) above, which include restructuring charges related primarily to the impact of a branch optimization project at Terminix and an initiative to enhance capabilities and reduce costs in our centers of excellence at Other Operations and Headquarters. Our centers of excellence are functions at our headquarters that provide company-wide administrative services for our operations. We exclude these restructuring charges from Adjusted EBITDA because we believe they do not reflect our ongoing operations and because we believe doing so is useful to investors in aiding period-to-period comparability.

(f)
Represents the amounts paid to certain of our Equity Sponsors under the consulting agreements described in "Certain Relationships and Related Party Transactions—Consulting Agreements." We exclude these amounts from Adjusted EBITDA primarily because they are not reflective of ongoing operating results and because they are not used by management to assess ongoing operational performance. In addition, we have excluded these amounts from Adjusted EBITDA because the consulting agreements will terminate in connection with the completion of this offering.

(g)
Represents our loss in connection with the spin-off of the TruGreen Business in 2014 and the disposition of our commercial landscaping business in 2011, including the non-cash impairment charges and the loss on sale described in footnote (4) above. We exclude these amounts from Adjusted EBITDA because these charges are not part of our ongoing operations and we believe doing so is useful to investors in aiding period-to-period comparability.

(h)
Represents the loss on extinguishment of debt described in footnote (3) above. We believe excluding this expense from Adjusted EBITDA is useful to investors in aiding period-to-period comparability.

(i)
Represents administrative expenses of ServiceMaster and interest expense of ServiceMaster related to a note payable due to SvM. Although we expect to incur similar expenses in the future, we exclude these expenses from the calculation of Adjusted EBITDA in order to present Adjusted EBITDA on a basis consistent with Adjusted EBITDA as previously reported by SvM, which is familiar to holders of SvM's indebtedness.

 

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RISK FACTORS

        Investing in our common stock involves a high degree of risk. You should consider and read carefully all of the risks and uncertainties described below, as well as other information included in this prospectus, including our audited consolidated financial statements and related notes appearing at the end of this prospectus, before making an investment decision. The risks described below are not the only ones facing us. The occurrence of any of the following risks or additional risks and uncertainties not presently known to us or that we currently believe to be immaterial could materially and adversely affect our business, financial position, results of operations or cash flows. In such case, the trading price of our common stock could decline, and you may lose all or part of your investment. This prospectus also contains forward-looking statements and estimates that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of specific factors, including the risks and uncertainties described below.

Risks Related to Our Business and Our Industry

Weakening in general economic conditions, especially as they may affect home sales, unemployment or consumer confidence or spending levels, may adversely impact our business, financial position, results of operations and cash flows.

        A substantial portion of our results of operations is dependent upon spending by consumers. Deterioration in general economic conditions and consumer confidence, particularly in California, Texas and Florida, which collectively represented approximately one-third of our 2013 revenue in our Terminix and American Home Shield segments, could affect the demand for our services. Consumer spending and confidence tend to decline during times of declining economic conditions. A worsening of macroeconomic indicators, including weak home sales, higher home foreclosures, declining consumer confidence or rising unemployment rates, could adversely affect consumer spending levels, reduce the demand for our services and adversely impact our business, financial position, results of operations and cash flows. These factors could also negatively impact the timing or the ultimate collection of accounts receivable, which would adversely impact our business, financial position, results of operations and cash flows.

We may not successfully implement our business strategies, including achieving our growth objectives.

        We may not be able to fully implement our business strategies or realize, in whole or in part within the expected time frames, the anticipated benefits of our various growth or other initiatives. Our various business strategies and initiatives, including growth of our customer base, introduction of new service offerings, geographic expansion, growth of our commercial business and enhancement of profitability, are subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control.

        In addition, we may incur certain costs to achieve efficiency improvements and growth in our business and we may not meet anticipated implementation timetables or stay within budgeted costs. As these efficiency improvement and growth initiatives are undertaken, we may not fully achieve our expected cost savings and efficiency improvements or growth rates, or these initiatives could adversely impact our customer retention or our operations. Also, our business strategies may change from time to time in light of our ability to implement our new business initiatives, competitive pressures, economic uncertainties or developments, or other factors.

We may be required to recognize additional impairment charges.

        We have significant amounts of goodwill and intangible assets, such as trade names, and have incurred impairment charges in 2013 and earlier periods with respect to goodwill and intangible assets. In the first quarter of 2014, we incurred impairment charges with respect to fixed assets, and we have

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also incurred impairment charges in the past in connection with our disposition activities. In accordance with applicable accounting standards, goodwill and intangible assets that are not amortized are subject to assessment for impairment by applying a fair-value based test annually, or more frequently if there are indicators of impairment, including:

    significant adverse changes in the business climate, including economic or financial conditions;

    significant adverse changes in expected operating results;

    adverse actions or assessments by regulators;

    unanticipated competition;

    loss of key personnel; and

    a current expectation that it is more likely than not that a reporting unit or intangible asset will be sold or otherwise disposed of.

        In each of the past three years based on lower projected revenue and operating results for TruGreen, we recorded pre-tax non-cash impairment charges to reduce the carrying value of TruGreen's goodwill and the TruGreen trade name, respectively, as a result of our interim or annual impairment testing of indefinite-lived intangible assets. These charges were $417 million and $256 million, respectively in 2013, and $790 million and $119 million, respectively, in 2012.

        As a result of the TruGreen Spin-off, we performed an interim impairment analysis as of January 14, 2014 on the TruGreen trade name. The assumptions were based on the TruGreen Business as a standalone company, and resulted in an impairment charge of $139 million during the first quarter of 2014.

        In February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. We recorded an impairment charge of $48 million in the first quarter of 2014 relating to this decision.

        Based upon future economic and financial market conditions, the operating performance of our reporting units and other factors, including those listed above, future impairment charges could be incurred. It is possible that such impairment, if required, could be material. Any future impairment charges that we are required to record could have a material adverse impact on our results of operations.

Adverse credit and financial market events and conditions could, among other things, impede access to or increase the cost of financing or cause our commercial and governmental customers to incur liquidity issues that could lead to some of our services not being purchased or being cancelled, or result in reduced revenue and lower Adjusted EBITDA, any of which could have an adverse impact on our business, financial position, results of operations and cash flows.

        Disruptions in credit or financial markets could, among other things, lead to impairment charges, make it more difficult for us to obtain, or increase our cost of obtaining, financing for our operations or investments or to refinance our indebtedness, cause our lenders to depart from prior credit industry practice and not give technical or other waivers under the Existing Credit Facilities or, if then in effect, the New Credit Facilities, to the extent we may seek them in the future, thereby causing SvM to be in default under one or more of the Existing Credit Facilities or the New Credit Facilities, as applicable. These disruptions also could cause our commercial customers to encounter liquidity issues that could lead to some of our services being cancelled or reduced, or that could result in an increase in the time it takes our customers to pay us, or that could lead to a decrease in pricing for our services and products, any of which could adversely affect our accounts receivable, among other things, and, in turn,

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increase our working capital needs. Volatile swings in the commercial real estate segment could also impact the demand for our services as landlords cut back on services provided to their tenants. In addition, adverse developments at federal, state and local levels associated with budget deficits resulting from economic conditions could result in federal, state and local governments decreasing their purchasing of our products or services and/or increasing taxes or other fees on businesses, including us, to generate more tax revenues, which could negatively impact spending by commercial customers and municipalities on our services.

Our market segments are highly competitive. Competition could reduce our share of the market segments served by us and adversely impact our reputation, business, financial position, results of operations and cash flows.

        We operate in highly competitive market segments. Changes in the source and intensity of competition in the market segments served by us impact the demand for our services and may also result in additional pricing pressures. The relatively low capital cost of entry into certain of our business categories has led to strong competitive market segments, including competition from smaller regional and local owner-operated companies. Regional and local competitors operating in a limited geographic area may have lower labor, benefits and overhead costs. The principal methods of competition in our businesses include name recognition, quality and speed of service, customer satisfaction, reputation and pricing. We may be unable to compete successfully against current or future competitors, and the competitive pressures that we face may result in reduced market segment share, reduced pricing or adversely impact our reputation, business, financial position, results of operations and cash flows.

Weather conditions and seasonality affect the demand for our services and our results of operations and cash flows.

        The demand for our services and our results of operations are affected by weather conditions, including, without limitation, potential impacts, if any, from climate change, known and unknown, and by the seasonal nature of our termite and pest control services, home inspection services, home warranties and disaster restoration services. Adverse weather conditions (e.g., cooler temperatures or droughts), whether created by climate change factors or otherwise, can impede the development of the termite swarm and lead to lower demand for our termite remediation services. For example, colder weather conditions in 2014 adversely affected our traditional termite revenue in the three months ended March 31, 2014, and we expect these conditions to affect our consolidated revenues in the second quarter of 2014 and throughout the remainder of the year, particularly in our Terminix segment. Severe winter storms can also impact our home cleaning business if personnel cannot travel to service locations due to hazardous road conditions. In addition, extreme temperatures can lead to an increase in service requests related to household systems and appliances in our American Home Shield business, resulting in higher claim frequency and costs and lower profitability. These or other weather conditions could adversely impact our business, financial position, results of operations and cash flows.

Increases in raw material prices, fuel prices and other operating costs could adversely impact our business, financial position, results of operations and cash flows.

        Our financial performance is affected by the level of our operating expenses, such as fuel, chemicals, refrigerants, appliances and equipment, parts, raw materials, wages and salaries, employee benefits, health care, vehicle maintenance, self-insurance costs and other insurance premiums as well as various regulatory compliance costs, all of which may be subject to inflationary pressures. In particular, our financial performance is adversely affected by increases in these operating costs. In recent years, fuel prices have fluctuated widely, and previous increases in fuel prices increased our costs of operating vehicles and equipment. We cannot predict what effect recent global events or any future Middle East or other crisis could have on fuel prices, but it is possible that such events could lead to higher fuel

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prices. With respect to fuel, our Terminix fleet, which consumes approximately 11 million gallons annually, has been negatively impacted by significant increases in fuel prices in the past and could be negatively impacted in the future. Although we hedge a significant portion of our fuel costs, we do not hedge all of those costs. In 2014, we expect to use approximately 11 million gallons of fuel. A ten percent change in fuel prices would result in a change of approximately $4 million in our 2014 fuel cost before considering the impact of fuel swap contracts. Although based upon Department of Energy fuel price forecasts, as well as the hedges we have executed to date for 2014, we have projected that fuel prices will not significantly increase our per gallon fuel costs for 2014 compared to 2013, those forecasts and projections may not prove correct. Fuel price increases can also result in increases in the cost of chemicals and other materials used in our business. We cannot predict the extent to which we may experience future increases in costs of fuel, chemicals, refrigerants, appliances and equipment, parts, raw materials, wages and salaries, employee benefits, health care, vehicle, self-insurance costs and other insurance premiums as well as various regulatory compliance costs and other operating costs. To the extent such costs increase, we may be prevented, in whole or in part, from passing these cost increases through to our existing and prospective customers, and the rates we pay to our subcontractors and suppliers may increase, any of which could have a material adverse impact on our business, financial position, results of operations and cash flows.

We may not be able to attract and retain qualified key executives or transition smoothly to new leadership, which could adversely impact us and our businesses and inhibit our ability to operate and grow successfully.

        The execution of our business strategy and our financial performance will continue to depend in significant part on our executive management team and other key management personnel and the smooth transition of new senior leadership. We have recently enhanced our senior management team, including through the hiring of Robert J. Gillette as Chief Executive Officer, or "CEO," and Alan J. M. Haughie as Chief Financial Officer, or "CFO." Any inability to attract in a timely manner other qualified key executives, retain our leadership team and recruit other important personnel could have a material adverse impact on our business, financial position, results of operations and cash flows.

Our franchisees and third-party distributors and vendors could take actions that could harm our business.

        For the three months ended March 31, 2014 and the year ended December 31, 2013, $33 million and $137 million, respectively, of our consolidated revenue was received in the form of franchise revenues. Accordingly, our financial results are dependent in part upon the operational and financial success of our franchisees. Our franchisees, third-party distributors and vendors are contractually obligated to operate their businesses in accordance with the standards set forth in our agreements with them. Each franchising brand also provides training and support to franchisees. However, franchisees, third-party distributors and vendors are independent third parties that we do not control, and who own, operate and oversee the daily operations of their businesses. As a result, the ultimate success of any franchise operation rests with the franchisee. If franchisees do not successfully operate their businesses in a manner consistent with required standards, royalty payments to us will be adversely affected and our brands' image and reputation could be harmed, which in turn could adversely impact our business, financial position, results of operations and cash flows. Similarly, if third-party distributors and vendors do not successfully operate their businesses in a manner consistent with required laws, standards and regulations, we could be subject to claims from regulators or legal claims for the actions or omissions of such third-party distributors and vendors. In addition, our relationship with our franchisees, third-party distributors and vendors could become strained (including resulting in litigation) as we impose new standards or assert more rigorous enforcement practices of the existing required standards. These strains in our relationships or claims could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

        From time to time, we receive communications from our franchisees regarding complaints, disputes or questions about our practices and standards in relation to our franchised operations. Recently, we have received communications from franchisees or groups representing franchisees expressing concerns regarding the expansion of our franchised operations in certain territories and certain economic terms of our franchise arrangements, among other things. If franchisees or groups representing franchisees were to bring legal proceedings against us, we would vigorously defend against the claims in any such proceeding, but our reputation, business, financial position, results of operations and cash flows could be materially adversely impacted and the price of our common stock could decline.

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Disruptions or failures in our information technology systems could create liability for us or limit our ability to effectively monitor, operate and control our operations and adversely impact our reputation, business, financial position, results of operations and cash flows.

        Our information technology systems facilitate our ability to monitor, operate and control our operations. Changes or modifications to our information technology systems could cause disruption to our operations or cause challenges with respect to our compliance with laws, regulations or other applicable standards. As the development and implementation of our information technology systems (including our operating systems) evolve, we may elect to modify, replace or abandon certain technology initiatives, which could result in write-downs. For example, in February 2014, American Home Shield ceased efforts to deploy a new operating system that had been intended to improve customer relationship management capabilities and enhance its operations. We recorded an impairment charge of $48 million in the first quarter of 2014 relating to this decision.

        Any disruption in, capacity limitations, instability or failure to operate as expected of, our information technology systems, could, depending on the magnitude of the problem, adversely impact our business, financial position, results of operations and cash flows, including by limiting our capacity to monitor, operate and control our operations effectively. Failures of our information technology systems could also lead to violations of privacy laws, regulations, trade guidelines or practices related to our customers and associates. If our disaster recovery plans do not work as anticipated, or if the third-party vendors to which we have outsourced certain information technology, contact center or other services fail to fulfill their obligations to us, our operations may be adversely impacted, and any of these circumstances could adversely impact our reputation, business, financial position, results of operations and cash flows.

Changes in the services we deliver or the products we use could impact our reputation, business, financial position, results of operations and cash flows and our future plans.

        Our financial performance is affected by changes in the services and products we offer our customers. For example, Terminix has been developing new products relating to mosquito control and wildlife exclusion. In addition, in the second quarter of 2014, our ServiceMaster Restore and AmeriSpec teams introduced InstaScope, a new, proprietary technology for instant mold detection and water categorization. There can be no assurance that our new strategies or product offerings will succeed in increasing revenue and growing profitability. An unsuccessful execution of new strategies, including the rollout or adjustment of our new services or products or sales and marketing plans, could cause us to re-evaluate or change our business strategies and could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows and our future plans.

If we fail to protect the security of personal information about our customers, we could be subject to interruption of our business operations, private litigation, reputational damage and costly penalties.

        We rely on, among other things, commercially available systems, software, tools and monitoring to provide security for processing, transmission and storage of confidential customer information, such as payment card and personal information. The systems currently used for transmission and approval of payment card transactions, and the technology utilized in payment cards themselves, all of which can put payment card data at risk, are central to meeting standards set by the payment card industry, or "PCI." We continue to evaluate and modify our systems and protocols for PCI compliance purposes, and such PCI standards may change from time to time. Activities by third parties, advances in computer and software capabilities and encryption technology, new tools and discoveries and other events or developments may facilitate or result in a compromise or breach of our systems. Any compromises, breaches or errors in applications related to our systems or failures to comply with standards set by the PCI could cause damage to our reputation and interruptions in our operations, including our customers' ability to pay for our services and products by credit card or their willingness

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to purchase our services and products and could result in a violation of applicable laws, regulations, orders, industry standards or agreements and subject us to costs, penalties and liabilities which could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

We may not be able to adequately protect our intellectual property and other proprietary rights that are material to our business.

        Our ability to compete effectively depends in part on our rights to service marks, trademarks, trade names and other intellectual property rights we own or license, particularly our registered brand names, ServiceMaster, Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. We have not sought to register or protect every one of our marks either in the United States or in every country in which they are or may be used. Furthermore, because of the differences in foreign trademark, patent and other intellectual property or proprietary rights laws, we may not receive the same protection in other countries as we would in the United States. If we are unable to protect our proprietary information and brand names, we could suffer a material adverse impact on our reputation, business, financial position, results of operations and cash flows. Litigation may be necessary to enforce our intellectual property rights and protect our proprietary information, or to defend against claims by third parties that our products, services or activities infringe their intellectual property rights.

Future acquisitions or other strategic transactions could impact our reputation, business, financial position, results of operations and cash flows.

        We may pursue strategic transactions in the future, which could involve acquisitions or dispositions of businesses or assets. Any future strategic transaction could involve integration or implementation challenges, business disruption or other risks, or change our business profile significantly. Any inability on our part to consolidate and manage growth from acquired businesses or successfully implement other strategic transactions could have an adverse impact on our reputation, business, financial position, results of operations and cash flows. Any acquisition that we make may not provide us with the benefits that were anticipated when entering into such acquisition. The process of integrating an acquired business may create unforeseen difficulties and expenses, including the diversion of resources needed to integrate new businesses, technologies, products, personnel or systems; the inability to retain associates, customers and suppliers; the assumption of actual or contingent liabilities (including those relating to the environment); failure to effectively and timely adopt and adhere to our internal control processes and other policies; write-offs or impairment charges relating to goodwill and other intangible assets; unanticipated liabilities relating to acquired businesses; and potential expense associated with litigation with sellers of such businesses. Any future disposition transactions could also impact our business and may subject us to various risks, including failure to obtain appropriate value for the disposed businesses, post-closing claims being levied against us and disruption to our other businesses during the sale process or thereafter.

Laws and government regulations applicable to our businesses and lawsuits, enforcement actions and other claims by third parties or governmental authorities could increase our legal and regulatory expenses, and impact our business, financial position, results of operations and cash flows.

        Our businesses are subject to significant international, federal, state, provincial and local laws and regulations. These laws and regulations include laws relating to consumer protection, wage and hour requirements, franchising, the employment of immigrants, labor relations, permitting and licensing, building code requirements, workers' safety, the environment, insurance and home warranties, employee benefits, marketing (including, without limitation, telemarketing) and advertising, the application and use of pesticides and other chemicals. In particular, we anticipate that various

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international, federal, state, provincial and local governing bodies may propose additional legislation and regulation that may be detrimental to our business or may substantially increase our operating costs, including proposed legislation, such as the Employee Free Choice Act, the Paycheck Fairness Act and the Arbitration Fairness Act; environmental regulations related to chemical use, climate change, equipment efficiency standards, refrigerant production and use and other environmental matters; other consumer protection laws or regulations; health care coverage; or "do-not-knock," "do-not-mail," "do-not-leave" or other marketing regulations. It is difficult to predict the future impact of the broad and expanding legislative and regulatory requirements affecting our businesses and changes to such requirements may adversely affect our business, financial position, results of operations and cash flows. In addition, if we were to fail to comply with any applicable law or regulation, we could be subject to substantial fines or damages, be involved in lawsuits, enforcement actions and other claims by third parties or governmental authorities, suffer losses to our reputation, suffer the loss of licenses or incur penalties that may affect how our business is operated, which, in turn, could have a material adverse impact on our business, financial position, results of operations and cash flows.

        In April 2014, the Bureau of Consumer Financial Protection, or the "CFPB," issued a Civil Investigative Demand, or the "CID," to American Home Shield seeking documents and information to determine whether home warranty providers or other unnamed persons have engaged or are engaging in unlawful acts and practices in connection with referral arrangements and relationships in violation of the Real Estate Settlement Procedures Act and its implementing regulation, or "RESPA," and other laws enforceable by the CFPB. American Home Shield intends to comply with its obligations to respond to the CID and believes that it has complied with RESPA and other laws applicable to American Home Shield's home warranty business. If the CFPB determines to bring an enforcement action, it could include demands for money penalties, changes to certain of American Home Shield's business practices and customer restitution or disgorgement.

Public perceptions that the products we use and the services we deliver are not environmentally friendly or safe may adversely impact the demand for our services.

        In providing our services, we use, among other things, pesticides and other chemicals. Public perception that the products we use and the services we deliver are not environmentally friendly or safe or are harmful to humans or animals, whether justified or not, or our improper application of these chemicals, could reduce demand for our services, increase regulation or government restrictions or actions, result in fines or penalties, impair our reputation, involve us in litigation, damage our brand names and otherwise have a material adverse impact on our business, financial position, results of operations and cash flows.

Compliance with, or violation of, environmental, health and safety laws and regulations, including laws pertaining to the use of pesticides could result in significant costs that adversely impact our reputation, business, financial position, results of operations and cash flows.

        International, federal, state, provincial and local laws and regulations relating to environmental, health and safety matters affect us in several ways. In the United States, products containing pesticides generally must be registered with the U.S. Environmental Protection Agency, or the "EPA," and similar state agencies before they can be sold or applied. The failure to obtain or the cancellation of any such registration, or the withdrawal from the market place of such pesticides, could have an adverse effect on our business, the severity of which would depend on the products involved, whether other products could be substituted and whether our competitors were similarly affected. The pesticides we use are manufactured by independent third parties and are evaluated by the EPA as part of its ongoing exposure risk assessment. The EPA may decide that a pesticide we use will be limited or will not be re-registered for use in the United States. We cannot predict the outcome or the severity of the effect of the EPA's continuing evaluations.

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        In addition, the use of certain pesticide products is regulated by various international, federal, state, provincial and local environmental and public health agencies. Although we strive to comply with such regulations and have processes in place designed to achieve compliance, given our dispersed locations, distributed operations and numerous associates, we may be unable to prevent violations of these or other regulations from occurring. Even if we are able to comply with all such regulations and obtain all necessary registrations and licenses, the pesticides or other products we apply or use, or the manner in which we apply or use them, could be alleged to cause injury to the environment, to people or to animals, or such products could be banned in certain circumstances. The regulations may also apply to third-party vendors who are hired to repair or remediate property and who may fail to comply with environmental laws, health and safety regulations and subject us to risk of legal exposure. The costs of compliance, non-compliance, remediation, combating unfavorable public perceptions or defending products liability lawsuits could have a material adverse impact on our reputation, business, financial position, results of operations and cash flows.

        International, federal, state, provincial and local agencies regulate the disposal, handling and storage of waste, discharges from our facilities and the investigation and clean-up of contaminated sites. We could incur significant costs, including investigation and clean-up costs, fines, penalties and civil or criminal sanctions and claims by third parties for property damage and personal injury, as a result of violations of, or liabilities under, these laws and regulations. In addition, potentially significant expenditures could be required to comply with environmental, health and safety laws and regulations, including requirements that may be adopted or imposed in the future.

We are subject to various restrictive covenants that could adversely impact our business, financial position, results of operations and cash flows.

        From time to time, we enter into noncompetition agreements or other restrictive covenants (e.g., exclusivity, take or pay and non-solicitation), including in connection with business dispositions or strategic contracts, that restrict us from entering into lines of business or operating in certain geographic areas into which we may desire to expand our business. We also are subject to various non-solicitation and no-hire covenants that may restrict our ability to solicit potential customers or associates. If we do not comply with such restrictive covenants, or if a dispute arises regarding the scope and interpretation thereof, litigation could ensue, which could have an adverse impact on our business, financial position, results of operations and cash flows. Further, to the extent that such restrictive covenants prevent us from taking advantage of business opportunities, our business, financial position, results of operations and cash flows may be adversely impacted.

Our business process outsourcing initiatives have increased our reliance on third-party contractors and may expose our business to harm upon the termination or disruption of our third-party contractor relationships.

        Our strategy to increase profitability, in part, by reducing our costs of operations includes the implementation of certain business process outsourcing initiatives. Any disruption, termination or substandard performance of these outsourced services, including possible breaches by third-party vendors of their agreements with us, could adversely affect our brands, reputation, customer relationships, financial position, results of operations and cash flows. Also, to the extent a third-party outsourcing provider relationship is terminated, there is a risk that we may not be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that we consider favorable, and even if we find an alternate provider, or choose to insource such services, there are significant risks associated with any transitioning activities. In addition, to the extent we decide to terminate outsourcing services and insource such services, there is a risk that we may not have the capabilities to perform these services internally, resulting in a disruption to our business, which could adversely impact our reputation, business, financial position, results of operations and cash flows. We could incur costs, including personnel and equipment costs, to insource previously outsourced services like these, and these costs could adversely affect our results of operations and cash flows.

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        In addition, when a third-party provider relationship is terminated, there is a risk of disputes or litigation and that we may not be able to enter into a similar agreement with an alternate provider in a timely manner or on terms that we consider favorable, and even if we find an alternate provider, there are significant risks associated with any transitioning activities.

Our future success depends on our ability to attract, retain and maintain positive relations with trained workers and third-party contractors.

        Our future success and financial performance depend substantially on our ability to attract, train and retain workers, attract and retain third-party contractors and ensure third-party contractor compliance with our policies and standards. Our ability to conduct our operations is in part impacted by our ability to increase our labor force, including on a seasonal basis, which may be adversely impacted by a number of factors. In the event of a labor shortage, we could experience difficulty in delivering our services in a high-quality or timely manner and could be forced to increase wages in order to attract and retain associates, which would result in higher operating costs and reduced profitability. New election rules by the National Labor Relations Board, including "expedited elections" and restrictions on appeals, could lead to increased organizing activities at our subsidiaries or franchisees. If these labor organizing activities were successful, it could further increase labor costs, decrease operating efficiency and productivity in the future, or otherwise disrupt or negatively impact our operations. In addition, potential competition from key associates who leave ServiceMaster could impact our ability to maintain our market segment share in certain geographic areas.

Risks Related to Our Substantial Indebtedness

We have substantial indebtedness and may incur substantial additional indebtedness, which could adversely affect our financial health and our ability to obtain financing in the future, react to changes in our business and satisfy our obligations.

        As of March 31, 2014, on an as adjusted basis to give effect to this offering, the Concurrent Refinancing and the use of the net proceeds therefrom, we would have had approximately $3.1 billion of total long-term consolidated indebtedness outstanding. In anticipation of the TruGreen Spin-off, on November 27, 2013, SvM entered into Amendment No. 3, or the "2013 Revolver Amendment," to the credit agreement governing SvM's Existing Revolving Credit Facility, or the "Existing Revolving Credit Agreement." Pursuant to the 2013 Revolver Amendment, SvM currently has $242 million of available borrowing capacity under the Existing Revolving Credit Agreement through July 23, 2014 and $183 million from July 24, 2014 through January 31, 2017. As of March 31, 2014, there were no outstanding borrowings under SvM's Existing Revolving Credit Facility. If we complete the Concurrent Refinancing, following completion of this offering, SvM will have $300 million of borrowing capacity under the New Revolving Credit Facility. In addition, we are able to incur additional indebtedness in the future, subject to the limitations contained in the agreements governing our indebtedness. Our substantial indebtedness could have important consequences to you. Because of our substantial indebtedness:

    our ability to engage in acquisitions without raising additional equity or obtaining additional debt financing is limited;

    our ability to obtain additional financing for working capital, capital expenditures, acquisitions, debt service requirements or general corporate purposes and our ability to satisfy our obligations with respect to our indebtedness may be impaired in the future;

    a large portion of our cash flow from operations must be dedicated to the payment of principal and interest on our indebtedness, thereby reducing the funds available to us for other purposes;

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    we are exposed to the risk of increased interest rates because a portion of our borrowings are or will be at variable rates of interest;

    it may be more difficult for us to satisfy our obligations to our creditors, resulting in possible defaults on, and acceleration of, such indebtedness;

    we may be more vulnerable to general adverse economic and industry conditions;

    we may be at a competitive disadvantage compared to our competitors with proportionately less indebtedness or with comparable indebtedness on more favorable terms and, as a result, they may be better positioned to withstand economic downturns;

    our ability to refinance indebtedness may be limited or the associated costs may increase;

    our flexibility to adjust to changing market conditions and ability to withstand competitive pressures could be limited; and

    we may be prevented from carrying out capital spending and restructurings that are necessary or important to our growth strategy and efforts to improve operating margins of our businesses.

Increases in interest rates would increase the cost of servicing our indebtedness and could reduce our profitability.

        A significant portion of our outstanding indebtedness, including indebtedness we expect to incur under the New Credit Facilities, bears interest or will bear interest at variable rates. As a result, increases in interest rates would increase the cost of servicing our indebtedness and could materially reduce our profitability and cash flows. As of March 31, 2014, each one percentage point change in interest rates would result in an approximately $22 million change in the annual interest expense on our Existing Term Loan Facility. Assuming all revolving loans were fully drawn as of March 31, 2014, each one percentage point change in interest rates would result in an approximately $2 million change in annual interest expense on our Existing Revolving Credit Facility. The impact of increases in interest rates could be more significant for us than it would be for some other companies because of our substantial indebtedness.

A lowering or withdrawal of the ratings, outlook or watch assigned to our debt securities by rating agencies may increase our future borrowing costs and reduce our access to capital.

        Our indebtedness currently has a non-investment grade rating, and any rating, outlook or watch assigned could be lowered or withdrawn entirely by a rating agency if, in that rating agency's judgment, current or future circumstances relating to the basis of the rating, outlook, or watch such as adverse changes to our business, so warrant. Any future lowering of our ratings, outlook or watch likely would make it more difficult or more expensive for us to obtain additional debt financing.

The agreements and instruments governing our indebtedness contain restrictions and limitations that could significantly impact our ability to operate our business.

        The Existing Credit Facilities and the indenture governing our 2020 Notes contain, and the New Credit Facilities will contain, covenants that, among other things, restrict the ability of SvM and its subsidiaries to:

    incur additional indebtedness (including guarantees of other indebtedness);

    pay dividends to ServiceMaster, redeem stock, or make other restricted payments, including investments and, in the case of the Existing Revolving Credit Facility, make acquisitions;

    prepay, repurchase or amend the terms of certain outstanding indebtedness;

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    enter into certain types of transactions with affiliates;

    transfer or sell assets;

    create liens;

    merge, consolidate or sell all or substantially all of our assets; and

    enter into agreements restricting dividends or other distributions by subsidiaries to SvM.

        The restrictions in the indenture governing the 2020 Notes, the Existing Credit Facilities and the New Credit Facilities, as applicable, and the instruments governing SvM's other indebtedness may prevent us from taking actions that we believe would be in the best interest of our business and may make it difficult for us to execute our business strategy successfully or effectively compete with companies that are not similarly restricted. We may also incur future debt obligations that might subject us to additional restrictive covenants that could affect our financial and operational flexibility. We may be unable to refinance our indebtedness, at maturity or otherwise, on terms acceptable to us, or at all.

        The ability of SvM to comply with the covenants and restrictions contained in the Existing Credit Facilities and the New Credit Facilities, as applicable, the indenture governing the 2020 Notes, and the instruments governing our other indebtedness may be affected by economic, financial and industry conditions beyond our control including credit or capital market disruptions. The breach of any of these covenants or restrictions could result in a default that would permit the applicable lenders or noteholders, as the case may be, to declare all amounts outstanding thereunder to be due and payable, together with accrued and unpaid interest. If we are unable to repay indebtedness, lenders having secured obligations, such as the lenders under the Existing Credit Facilities and the New Credit Facilities, as applicable, could proceed against the collateral securing the indebtedness. In any such case, we may be unable to borrow under the Existing Credit Facilities or the New Credit Facilities, as applicable, and may not be able to repay the amounts due under such facilities or our other outstanding indebtedness. This could have serious consequences to our financial position and results of operations and could cause us to become bankrupt or insolvent.

Our ability to generate the significant amount of cash needed to pay interest and principal on our indebtedness and our ability to refinance all or a portion of our indebtedness or obtain additional financing depends on many factors beyond our control.

        ServiceMaster and SvM are each holding companies, and as such they have no independent operations or material assets other than ownership of equity interests in their respective subsidiaries. ServiceMaster and SvM each depend on their respective subsidiaries to distribute funds to them so that they may pay obligations and expenses, including satisfying obligations with respect to indebtedness. Our ability to make scheduled payments on, or to refinance our obligations under, our indebtedness depends on the financial and operating performance of our subsidiaries, and their ability to make distributions and dividends to us, which, in turn, depends on their results of operations, cash flows, cash requirements, financial position and general business conditions and any legal and regulatory restrictions on the payment of dividends to which they may be subject, many of which may be beyond our control.

        There are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. If we cannot receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund general corporate expenses or service our debt obligations. These restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at The ServiceMaster Acceptance Company Limited Partnership, or "SMAC." The payment of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) are subject to significant regulatory restrictions under the laws and regulations of the states in which they operate. Among other things,

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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 pay to us. As of March 31, 2014, the total net assets subject to these third-party restrictions was $184 million. Such limitations will be in effect through the end of 2014, and similar limitations are expected to be in effect in 2015.

        We may be unable to maintain a level of cash flows from operating activities sufficient to permit us to pay the principal and interest on our indebtedness. If our cash flow and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay capital expenditures, sell assets, seek to obtain additional equity capital or restructure our indebtedness. In the future, our cash flow and capital resources may not be sufficient for payments of interest on and principal of our indebtedness, and such alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations.

        The $2,184 million of outstanding borrowings under the Existing Term Facilities, after including the unamortized portion of the original issue discount paid, have a maturity date of January 31, 2017. The Existing Revolving Credit Facility is also scheduled to mature on January 31, 2017. We intend to terminate the Existing Credit Facilities and repay all borrowings outstanding thereunder with borrowings under the New Credit Facilities substantially contemporaneously with the closing of this offering; however, this offering is not contingent upon our entry into the New Credit Facilities, and there can be no assurance that we will complete the Concurrent Refinancing substantially contemporaneously with this offering, or at all. The 8% 2020 Notes will mature on February 15, 2020, and the 7% 2020 Notes will mature on August 15, 2020. We may be unable to refinance any of our indebtedness or obtain additional financing, particularly because of our high levels of indebtedness. Market disruptions, such as those experienced in 2008 and 2009, as well as our significant indebtedness levels, may increase our cost of borrowing or adversely affect our ability to refinance our obligations as they become due. If we are unable to refinance our indebtedness or access additional credit, or if short-term or long-term borrowing costs dramatically increase, our ability to finance current operations and meet our short-term and long-term obligations could be adversely affected.

        If our subsidiary, SvM, cannot make scheduled payments on its indebtedness, it will be in default, holders of the 2020 Notes could declare all outstanding principal and interest to be due and payable, the lenders under the Existing Credit Facilities or the New Credit Facilities, as applicable, could terminate their commitments to loan money, the secured lenders could foreclose against the assets securing their borrowings and we could be forced into bankruptcy or liquidation.

Risks Related to Our Common Stock and This Offering

ServiceMaster is a holding company with no operations of its own, and it depends on its subsidiaries for cash to fund all of its operations and expenses, including to make future dividend payments, if any.

        ServiceMaster's operations are conducted entirely through our subsidiaries, and our ability to generate cash to fund our operations and expenses, to pay dividends or to meet debt service obligations is highly dependent on the earnings and the receipt of funds from our subsidiaries through dividends or intercompany loans. Deterioration in the financial condition, earnings or cash flow of SvM and its subsidiaries for any reason could limit or impair their ability to pay such distributions. Additionally, to the extent that ServiceMaster needs funds, and its subsidiaries are restricted from making such distributions under applicable law or regulation or under the terms of our financing arrangements, or are otherwise unable to provide such funds, it could materially adversely affect our business, financial condition, results of operations or prospects.

        For example, there are third-party restrictions on the ability of certain of our subsidiaries to transfer funds to us. If we cannot receive sufficient distributions from our subsidiaries, we may not be able to meet our obligations to fund general corporate expenses or service our debt obligations. These

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restrictions are related to regulatory requirements at American Home Shield and to a subsidiary borrowing arrangement at SMAC. The payment of ordinary and extraordinary dividends by our home warranty and similar subsidiaries (through which we conduct our American Home Shield business) 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 pay to us. As of March 31, 2014, the total net assets subject to these third-party restrictions was $184 million. Such limitations will be in effect through the end of 2014, and similar limitations are expected to be in effect in 2015.

        Further, the terms of the indenture governing the 2020 Notes and the agreements governing the Existing Credit Facilities significantly restrict, and we expect the agreements governing the New Credit Facilities will significantly restrict, the ability of our subsidiaries to pay dividends, make loans or otherwise transfer assets to ServiceMaster. Furthermore, our subsidiaries are permitted under the terms of the Existing Credit Facilities and other indebtedness, and will be permitted under the terms of the New Credit Facilities, to incur additional indebtedness that may restrict or prohibit the making of distributions, the payment of dividends or the making of loans by such subsidiaries to us. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock.

        We do not currently expect to declare or pay dividends on our common stock for the foreseeable future. Payments of dividends, if any, will be at the sole discretion of our board of directors after taking into account various factors, including general and economic conditions, our financial condition and operating results, our available cash and current and anticipated cash needs, capital requirements, contractual, legal, tax and regulatory restrictions and implications of the payment of dividends by us to our stockholders or by our subsidiaries (including SvM) to us, and such other factors as our board of directors may deem relevant. In addition, Delaware law may impose requirements that may restrict our ability to pay dividends to holders of our common stock. To the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to us for the payment of dividends.

Our common stock has no prior public market and the market price of our common stock may be volatile and could decline after this offering.

        Prior to this offering, there has been no public market for our common stock, and an active market for our common stock may not develop or be sustained after this offering. We will negotiate the initial public offering price per share with the representatives of the underwriters and, therefore, that price may not be indicative of the market price of our common stock after this offering. In the absence of an active public trading market, you may not be able to liquidate your investment in our common stock. In addition, the market price of our common stock may fluctuate significantly. Among the factors that could affect our stock price are:

    industry or general market conditions;

    domestic and international economic factors unrelated to our performance;

    changes in our customers' preferences;

    new regulatory pronouncements and changes in regulatory guidelines;

    lawsuits, enforcement actions and other claims by third parties or governmental authorities;

    actual or anticipated fluctuations in our quarterly operating results;

    changes in securities analysts' estimates of our financial performance or lack of research coverage and reports by industry analysts;

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    action by institutional stockholders or other large stockholders (including the Equity Sponsors), including future sales of our common stock;

    failure to meet any guidance given by us or any change in any guidance given by us, or changes by us in our guidance practices;

    announcements by us of significant impairment charges;

    speculation in the press or investment community;

    investor perception of us and our industry;

    changes in market valuations or earnings of similar companies;

    announcements by us or our competitors of significant contracts, acquisitions, dispositions or strategic partnerships;

    war, terrorist acts and epidemic disease;

    any future sales of our common stock or other securities; and

    additions or departures of key personnel.

        In particular, we cannot assure you that you will be able to resell your shares at or above the initial public offering price. The stock markets have experienced extreme volatility in recent years that has been unrelated to the operating performance of particular companies. These broad market fluctuations may adversely affect the trading price of our common stock. In the past, following periods of volatility in the market price of a company's securities, class action litigation has often been instituted against the affected company. Any litigation of this type brought against us could result in substantial costs and a diversion of our management's attention and resources, which would harm our business, operating results and financial condition.

Future sales of shares by existing stockholders could cause our stock price to decline.

        Sales of substantial amounts of our common stock in the public market following this offering, or the perception that these sales could occur, could cause the market price of our common stock to decline. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

        Based on shares outstanding as of June 12, 2014, upon completion of this offering, we will have 127,755,945 outstanding shares of common stock (or 133,140,945 outstanding shares of common stock, assuming exercise in full of the underwriters' option to purchase additional shares). All of the shares sold pursuant to this offering will be immediately tradeable without restriction under the Securities Act of 1933, as amended, or the "Securities Act," except for any shares held by "affiliates," as that term is defined in Rule 144 under the Securities Act, or "Rule 144."

        The remaining 91,855,945 shares of common stock as of June 12, 2014 will be restricted securities within the meaning of Rule 144 under the Securities Act, but will be eligible for resale subject to applicable volume, means of sale, holding period and other limitations of Rule 144 under the Securities Act or pursuant to an exception from registration under Rule 701 under the Securities Act, subject to the lock-up agreements entered into by us, our executive officers and directors, and stockholders currently representing substantially all of the outstanding shares of our common stock.

        Upon completion of this offering, we intend to file one or more registration statements on Form S-8 under the Securities Act to register the shares of common stock to be issued under our equity compensation plans and, as a result, all shares of common stock acquired upon exercise of stock options granted under our plans will also be freely tradable under the Securities Act, subject to the terms of the lock-up agreements, unless purchased by our affiliates. As of June 12, 2014, there were

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stock options outstanding to purchase a total of 5,708,369 shares of our common stock and there were 609,259 shares of our common stock subject to restricted shares and restricted stock units. In addition, 7,629,757 shares of our common stock are reserved for future issuances under our 2014 omnibus incentive plan.

        In connection with this offering, we, our executive officers and directors, and stockholders currently representing substantially all of the outstanding shares of our common stock will sign lock-up agreements under which, subject to certain exceptions, we and they will agree not to offer or sell, directly or indirectly, any shares of our common stock or any securities convertible into or exercisable or exchangeable for shares of our common stock for a period of 180 days after the date of this prospectus, subject to possible extension under certain circumstances, except with the prior written consent of J.P. Morgan Securities LLC and Credit Suisse Securities (USA) LLC. See "Underwriting." Following the expiration of this 180-day lock-up period, the 91,855,945 shares of our common stock outstanding on the date of this prospectus will be eligible for future sale, subject to the applicable volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act or pursuant to an exception from registration under Rule 701 under the Securities Act. See "Shares Available for Future Sale" for a discussion of the shares of common stock that may be sold into the public market in the future. In addition, our significant stockholders may distribute shares that they hold to their investors who themselves may then sell into the public market following the expiration of the lock-up period. Such sales may not be subject to the volume, manner of sale, holding period and other limitations of Rule 144 under the Securities Act. As resale restrictions end, the market price of our common stock could decline if the holders of those shares sell them or are perceived by the market as intending to sell them. Furthermore, stockholders currently representing substantially all of the outstanding shares of our common stock will have the right to require us to register shares of common stock for resale in some circumstances.

        In the future, we may issue additional shares of common stock or other equity or debt securities convertible into or exercisable or exchangeable for shares of our common stock in connection with a financing, acquisition, litigation settlement or employee arrangement or otherwise. Any of these issuances could result in substantial dilution to our existing stockholders and could cause the trading price of our common stock to decline.

If securities or industry analysts do not publish research or publish misleading or unfavorable research about our business, our stock price and trading volume could decline.

        The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage for our common stock. If there is no research coverage of our common stock, the trading price for our common stock may be negatively impacted. In the event we obtain research coverage for our common stock, if one or more of the analysts downgrades our stock or publishes misleading or unfavorable research about our business, our stock price would likely decline. If one or more of the analysts ceases coverage of our common stock or fails to publish reports on us regularly, demand for our common stock could decrease, which could cause our common stock price or trading volume to decline.

A few significant stockholders will have significant influence over us and may not always exercise their influence in a way that benefits our public stockholders.

        Following the completion of this offering, the CD&R Funds and the StepStone Funds will own approximately 47.3% and 10.4%, respectively, of the outstanding shares of our common stock assuming that the underwriters do not exercise their option to purchase additional shares. Prior to the completion of this offering, we and the Equity Sponsors will enter into an amendment and restatement to our existing stockholders agreement, or the "amended stockholders agreement," pursuant to which

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the CD&R Funds and the StepStone Funds will agree to vote in favor of one another's designees to our board of directors, among other matters. As a result, the CD&R Funds and the StepStone Funds will exercise significant influence over all matters requiring stockholder approval for the foreseeable future, including approval of significant corporate transactions, which may reduce the market price of our common stock.

        As long as the CD&R Funds and the StepStone Funds continue to own at least 50% of our outstanding common stock, the CD&R Funds and the StepStone Funds generally will be able to determine the outcome of corporate actions requiring stockholder approval, including the election of the members of our board of directors, the approval of significant corporate transactions such as mergers and the sale of substantially all of our assets. Even after the CD&R Funds and the StepStone Funds reduce their beneficial ownership below 50% of our outstanding common stock, they will likely still be able to assert significant influence over our board of directors and certain corporate actions. Following the consummation of this offering, the CD&R Funds and the StepStone Funds will have the right to designate for nomination for election a majority of our directors.

        Because the CD&R Funds' and the StepStone Funds' interests may differ from your interests, actions the CD&R Funds and the StepStone Funds take as our controlling stockholders or as significant stockholders may not be favorable to you. For example, the concentration of ownership held by the CD&R Funds and the StepStone Funds could delay, defer or prevent a change of control of us or impede a merger, takeover or other business combination which another stockholder may otherwise view favorably. Other potential conflicts could arise, for example, over matters such as employee retention or recruiting, or our dividend policy.

Under our amended and restated certificate of incorporation, the CD&R Funds and the StepStone Funds and their respective affiliates and, in some circumstances, any of our directors and officers who is also a director, officer, employee, member or partner of the CD&R Funds and the StepStone Funds and their respective affiliates, have no obligation to offer us corporate opportunities.

        The policies relating to corporate opportunities and transactions with the CD&R Funds and the StepStone Funds to be set forth in our second amended and restated certificate of incorporation, or "amended and restated certificate of incorporation," address potential conflicts of interest between ServiceMaster, on the one hand, and the CD&R Funds and the StepStone Funds and their respective officers, directors, employees, members or partners who are directors or officers of our company, on the other hand. In accordance with those policies, the CD&R Funds and the StepStone Funds may pursue corporate opportunities, including acquisition opportunities that may be complementary to our business, without offering those opportunities to us. By becoming a stockholder in ServiceMaster, you will be deemed to have notice of and have consented to these provisions of our amended and restated certificate of incorporation. Although these provisions are designed to resolve conflicts between us and the CD&R Funds and the StepStone Funds and their respective affiliates fairly, conflicts may not be so resolved.

Future offerings of debt or equity securities which would rank senior to our common stock may adversely affect the market price of our common stock.

        If, in the future, we decide to issue debt or equity securities that rank senior to our common stock, it is likely that such securities will be governed by an indenture or other instrument containing covenants restricting our operating flexibility. Additionally, any convertible or exchangeable securities that we issue in the future may have rights, preferences and privileges more favorable than those of our common stock and may result in dilution to owners of our common stock. We and, indirectly, our stockholders, will bear the cost of issuing and servicing such securities. Because our decision to issue debt or equity securities in any future offering will depend on market conditions and other factors beyond our control, we cannot predict or estimate the amount, timing or nature of our future offerings.

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Thus, holders of our common stock will bear the risk of our future offerings reducing the market price of our common stock and diluting the value of their stock holdings in us.

Fulfilling our obligations incident to being a public company, including with respect to the requirements of and related rules under the Sarbanes-Oxley Act of 2002, will be expensive and time-consuming, and any delays or difficulties in satisfying these obligations could have a material adverse effect on our future results of operations and our stock price.

        Following this offering, we will be subject to the reporting and corporate governance requirements, under the listing standards of the NYSE and the Sarbanes-Oxley Act of 2002, that apply to issuers of listed equity, which will impose certain new compliance costs and obligations upon us. The changes necessitated by publicly listing our equity will require a significant commitment of additional resources and management oversight which will increase our operating costs. Other expenses associated with being a public company include increases in auditing, accounting and legal fees and expenses, investor relations expenses, increased directors' fees and director and officer liability insurance costs, registrar and transfer agent fees and listing fees, as well as other expenses. As a public company, we will be required, among other things, to define and expand the roles and the duties of our board of directors and its committees and institute more comprehensive compliance and investor relations functions. Failure to comply with the Sarbanes-Oxley Act of 2002 could potentially subject us to sanctions or investigations by the Securities and Exchange Commission, or "SEC," the NYSE or other regulatory authorities.

Anti-takeover provisions in our amended and restated certificate of incorporation and amended and restated by-laws could discourage, delay or prevent a change of control of our company and may affect the trading price of our common stock.

        Our amended and restated certificate of incorporation and amended and restated by-laws include a number of provisions that may discourage, delay or prevent a change in our management or control over us that stockholders may consider favorable. For example, prior to the completion of this offering, our amended and restated certificate of incorporation and amended and restated by-laws will collectively:

    authorize the issuance of "blank check" preferred stock that could be issued by our board of directors to thwart a takeover attempt;

    establish a classified board of directors, as a result of which our board of directors will be divided into three classes, with members of each class serving staggered three-year terms, which prevents stockholders from electing an entirely new board of directors at an annual meeting;

    limit the ability of stockholders to remove directors if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock;

    provide that vacancies on our board of directors, including vacancies resulting from an enlargement of our board of directors, may be filled only by a majority vote of directors then in office;

    prohibit stockholders from calling special meetings of stockholders if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock;

    prohibit stockholder action by written consent, thereby requiring all actions to be taken at a meeting of the stockholders, if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock;

    establish advance notice requirements for nominations of candidates for election as directors or to bring other business before an annual meeting of our stockholders; and

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    require the approval of holders of at least 662/3% of the outstanding shares of our common stock to amend our amended and restated by-laws and certain provisions of our amended and restated certificate of incorporation if the CD&R Funds and the StepStone Funds cease to own at least 40% of the outstanding shares of our common stock.

        These provisions may prevent our stockholders from receiving the benefit from any premium to the market price of our common stock offered by a bidder in a takeover context. Even in the absence of a takeover attempt, the existence of these provisions may adversely affect the prevailing market price of our common stock if the provisions are viewed as discouraging takeover attempts in the future.

        Our amended and restated certificate of incorporation and amended and restated by-laws may also make it difficult for stockholders to replace or remove our management. Furthermore, the existence of the foregoing provisions, as well as the significant amount of common stock that the CD&R Funds and the StepStone Funds will own following this offering, could limit the price that investors might be willing to pay in the future for shares of our common stock. These provisions may facilitate management entrenchment that may delay, deter, render more difficult or prevent a change in our control, which may not be in the best interests of our stockholders.

We do not intend to pay dividends on our common stock and, consequently, your ability to achieve a return on your investment will depend on appreciation in the price of our common stock.

        We do not intend to declare and pay dividends on our common stock for the foreseeable future. We currently intend to use our future earnings, if any, to repay debt, to fund our growth, to develop our business, for working capital needs and general corporate purposes. Therefore, you are not likely to receive any dividends on your common stock for the foreseeable future and the success of an investment in shares of our common stock will depend upon any future appreciation in their value. There is no guarantee that shares of our common stock will appreciate in value or even maintain the price at which our stockholders have purchased their shares. In addition, ServiceMaster's operations are conducted almost entirely through our subsidiaries. As such, to the extent that we determine in the future to pay dividends on our common stock, none of our subsidiaries will be obligated to make funds available to ServiceMaster for the payment of dividends. Further, the indenture governing the 2020 Notes and the agreements governing the Existing Credit Facilities significantly restrict, and the agreements governing the New Credit Facilities will significantly restrict, the ability of our subsidiaries to pay dividends or otherwise transfer assets to us. In addition, the payment of ordinary and extraordinary dividends by our subsidiaries that are regulated as insurance, home service, or similar companies is subject to applicable state law limitations, and Delaware law may impose additional requirements that may restrict our ability to pay dividends to holders of our common stock.

We expect to be a "controlled company" within the meaning of the NYSE rules and, as a result, we will qualify for, and currently intend to rely on, exemptions from certain corporate governance requirements. You will not have the same protections afforded to stockholders of companies that are subject to such requirements.

        After completion of this offering, the CD&R Funds and the StepStone Funds will control a majority of the voting power of our outstanding common stock. Accordingly, we expect to qualify as a "controlled company" within the meaning of the NYSE corporate governance standards. Under the NYSE rules, a company of which more than 50% of the voting power is held by an individual, group or another company is a "controlled company" and may elect not to comply with certain NYSE corporate governance standards, including:

    the requirement that a majority of the board of directors consist of independent directors;

    the requirement that our nominating and corporate governance committee be composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities;

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    the requirement that we have a compensation committee that is composed entirely of independent directors with a written charter addressing the committee's purpose and responsibilities; and

    the requirement for an annual performance evaluation of the nominating and corporate governance and compensation committees.

        Following this offering, we intend to utilize these exemptions. As a result, we will not have a majority of independent directors, our nominating and corporate governance committee and compensation committee will not consist entirely of independent directors and such committees may not be subject to annual performance evaluations. Consequently, you will not have the same protections afforded to stockholders of companies that are subject to all of the NYSE corporate governance rules and requirements. Our status as a controlled company could make our common stock less attractive to some investors or otherwise harm our stock price.

Our amended and restated certificate of incorporation will designate the Court of Chancery of the State of Delaware as the exclusive forum for certain litigation that may be initiated by our stockholders, which could limit our stockholders' ability to obtain a favorable judicial forum for disputes with us.

        Our amended and restated certificate of incorporation will provide that the Court of Chancery of the State of Delaware will be the sole and exclusive forum for (i) any derivative action or proceeding brought on our behalf, (ii) any action asserting a claim of breach of a fiduciary duty owed to us or our stockholders by any of our directors, officers, employees or agents, (iii) any action asserting a claim against us arising under the General Corporation Law of the State of Delaware, or the "DGCL," or (iv) any action asserting a claim against us that is governed by the internal affairs doctrine. By becoming a stockholder in our company, you will be deemed to have notice of and have consented to the provisions of our amended and restated certificate of incorporation related to choice of forum. The choice of forum provision in our amended and restated certificate of incorporation may limit our stockholders' ability to obtain a favorable judicial forum for disputes with us.

Investors purchasing common stock in this offering will experience immediate and substantial dilution as a result of this offering and future equity issuances.

        The initial public offering price per share will significantly exceed the net tangible book value per share of our common stock outstanding. As a result, investors purchasing common stock in this offering will experience immediate substantial dilution of $46.86 a share, based on an assumed initial public offering price of $19.50. This dilution is due in large part to the fact that our earlier investors paid substantially less than the initial public offering price when they purchased their shares. Investors purchasing shares of common stock in this offering will contribute approximately 33.7% of the total amount of equity invested in our company, but will own only approximately 28.1% of our total common stock immediately following the completion of this offering. In addition, we have issued options to acquire common stock at prices significantly below the initial public offering price. To the extent outstanding options are ultimately exercised, there will be further dilution to investors in this offering. In addition, if the underwriters exercise their option to purchase additional shares, or if we issue additional equity securities in the future, investors purchasing common stock in this offering will experience additional dilution.

Risks Related to the TruGreen Spin-off

If the TruGreen Spin-off were ultimately determined to be a taxable transaction for U.S. federal income tax purposes, then we could be subject to significant tax liability.

        In connection with the TruGreen Spin-off we received an opinion of tax counsel with respect to the tax-free nature of the TruGreen Spin-off to ServiceMaster, TruGreen and ServiceMaster's

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stockholders under Section 355 and related provisions of the Internal Revenue Code of 1986, as amended, or the "Code." The opinion relied on an Internal Revenue Service, or "IRS," private letter ruling as to matters covered by the ruling. The tax opinion was based on, among other things, certain assumptions and representations as to factual matters made by us, which, if incorrect or inaccurate in any material respect, would jeopardize the conclusions reached by tax counsel in its opinion. The opinion is not binding on the IRS or the courts, and the IRS or the courts may not agree with the opinion. If the TruGreen Spin-off were ultimately determined not to be tax-free, we could be liable for the U.S. federal income taxes imposed as a result of the transaction. Furthermore, events subsequent to the TruGreen Spin-off could cause us to recognize a taxable gain in connection therewith. In addition, as is customary with tax-free spin-off transactions, we and the Equity Sponsors are limited in our ability to pursue certain strategic transactions with respect to SvM.

Federal and state fraudulent transfer laws and Delaware corporate law may permit a court to void the TruGreen Spin-off, which would adversely affect our financial condition and our results of operations.

        In connection with the TruGreen Spin-off, we undertook several corporate restructuring transactions which, along with the contributions and distributions to be made as part of the spin-off, may be subject to challenge under federal and state fraudulent conveyance and transfer laws as well as under Delaware corporate law.

        Under applicable laws, any transaction, contribution or distribution completed as part of the spin-off could be voided as a fraudulent transfer or conveyance if, among other things, the transferor received less than reasonably equivalent value or fair consideration in return and was insolvent or rendered insolvent by reason of the transfer.

        We cannot be certain as to the standards a court would use to determine whether or not any entity involved in the spin-off was insolvent at the relevant time. In general, however, a court would look at various facts and circumstances related to the entity in question, including evaluation of whether or not:

    the sum of its debts, including contingent and unliquidated liabilities, was greater than the fair saleable value of all of its assets;

    the present fair saleable value of its assets was less than the amount that would be required to pay its probable liability on its existing debts, including contingent liabilities, as they become absolute and mature; or

    it could not pay its debts as they became due.

        If a court were to find that any transaction, contribution or distribution involved in the spin-off was a fraudulent transfer or conveyance, the court could void the transaction, contribution or distribution. In addition, the spin-off could also be voided if a court were to find that the spin-off was not a legal dividend under Delaware corporate law. The resulting complications, costs and expenses of either finding could materially adversely affect our business, financial condition and results of operations.

Our directors and officers may have actual or potential conflicts of interest because of their equity ownership in New TruGreen.

        Our directors and officers may own shares of New TruGreen's common stock or be affiliated with certain equity owners of New TruGreen. This ownership may create, or may create the appearance of, conflicts of interest when these directors and officers are faced with decisions that could have different implications for us and New TruGreen. In connection with the TruGreen Spin-off, we entered into a transition services agreement with New TruGreen under which we will provide a range of support services to New TruGreen for a limited period of time. Potential conflicts of interest could arise in connection with the resolution of any dispute that may arise between us and New TruGreen regarding the terms of the transition services agreement or other agreements governing the TruGreen Spin-off and the relationship thereafter between the companies.

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FORWARD-LOOKING STATEMENTS

        This prospectus contains forward-looking statements and cautionary statements. Some of the forward-looking statements can be identified by the use of forward-looking terms such as "believes," "expects," "may," "will," "shall," "should," "would," "could," "seeks," "aims," "projects," "is optimistic," "intends," "plans," "estimates," "anticipates" or other comparable terms. Forward-looking statements include, without limitation, all matters that are not historical facts. They appear in a number of places throughout this prospectus and include, without limitation, statements regarding our intentions, beliefs, assumptions or current expectations concerning, among other things, financial position; results of operations; cash flows; prospects; commodities trends; growth strategies or expectations; customer retention; the continuation of acquisitions, including the integration of any acquired company and risks relating to any such acquired company; fuel prices; estimates of future amortization expense for intangible assets; attraction and retention of key personnel; the impact of fuel swaps; the valuation of marketable securities; estimates of accruals for self-insured claims related to workers' compensation, auto and general liability risks; estimates of accruals for home warranty claims; estimates of future payments under operating and capital leases; the outcome (by judgment or settlement) and costs of legal or administrative proceedings, including, without limitation, collective, representative or class action litigation; and the impact of prevailing economic conditions.

        Forward-looking statements are subject to known and unknown risks and uncertainties, many of which may be beyond our control. We caution you that forward-looking statements are not guarantees of future performance or outcomes and that actual performance and outcomes, including, without limitation, our actual results of operations, financial condition and liquidity, and the development of the market segments in which we operate, may differ materially from those made in or suggested by the forward-looking statements contained in this prospectus. In addition, even if our results of operations, financial condition and cash flows, and the development of the market segments in which we operate, are consistent with the forward-looking statements contained in this prospectus, those results or developments may not be indicative of results or developments in subsequent periods. A number of important factors, including, without limitation, the risks and uncertainties discussed in "Risk Factors" and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in this prospectus, could cause actual results and outcomes to differ materially from those reflected in the forward-looking statements. Additional factors that could cause actual results and outcomes to differ from those reflected in forward-looking statements include, without limitation:

    weakening general economic conditions, especially as they may affect home sales, unemployment and consumer confidence or spending levels;

    our ability to successfully implement our business strategies;

    our recognition of future impairment charges;

    adverse credit and financial markets impeding access, increasing financing costs or causing our customers to incur liquidity issues leading to some of our services not being purchased or cancelled;

    increases in prices for fuel and raw materials;

    changes in the source and intensity of competition in our market segments;

    adverse weather conditions;

    our ability to attract and retain key personnel, including our ability to attract, retain and maintain positive relations with trained workers and third-party contractors;

    our franchisees and third-party distributors and vendors taking actions that harm our business;

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    disruptions or failures in our information technology systems and our failure to protect the security of personal information about our customers;

    changes in our services or products;

    our ability to protect our intellectual property and other material proprietary rights;

    negative reputational and financial impacts resulting from future acquisitions or strategic transactions;

    laws and governmental regulations increasing our legal and regulatory expenses;

    lawsuits, enforcement actions and other claims by third parties or governmental authorities;

    compliance with, or violation of, environmental, health and safety laws and regulations;

    increases in interest rates increasing the cost of servicing our substantial indebtedness;

    increased borrowing costs due to lowering or withdrawal of the ratings, outlook or watch assigned to our debt securities;

    restrictions contained in our debt agreements;

    our ability to refinance all or a portion of our indebtedness or obtain additional financing; and

    other factors described in this prospectus and from time to time in documents that we file with the SEC.

        You should read this prospectus completely and with the understanding that actual future results may be materially different from expectations. All forward-looking statements made in this prospectus are qualified by these cautionary statements. These forward-looking statements are made only as of the date of this prospectus, and we do not undertake any obligation, other than as may be required by law, to update or revise any forward-looking or cautionary statements to reflect changes in assumptions, the occurrence of events, unanticipated or otherwise, and changes in future operating results over time or otherwise.

        Comparisons of results for current and any prior periods are not intended to express any future trends, or indications of future performance, unless expressed as such, and should only be viewed as historical data.

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USE OF PROCEEDS

        Based upon an assumed initial public offering price of $19.50 per share, we estimate that we will receive net proceeds from this offering of approximately $656 million (or approximately $755 million if the underwriters exercise in full their option to purchase additional shares), after deducting estimated underwriting discounts and commissions in connection with this offering and estimated offering expenses payable by us of approximately $6 million.

        We intend to use the net proceeds of this offering to:

    redeem $210.0 million in principal amount of the 8% 2020 Notes (representing 35% of the outstanding principal amount thereof) at 108% of the principal amount thereof, plus accrued and unpaid interest estimated to be approximately $7.0 million;

    redeem $262.5 million in principal amount of the 7% 2020 Notes (representing 35% of the outstanding principal amount thereof) at 107% of the principal amount thereof, plus accrued and unpaid interest estimated to be approximately $7.7 million;

    repay $112 million in principal amount of borrowings outstanding under the Existing Term Loan Facility; and

    pay certain of the Equity Sponsors aggregate fees of $21 million in connection with the termination of our consulting agreements with each of them upon the consummation of this offering.

        The 8% 2020 Notes mature on February 15, 2020 and bear annual interest at a rate of 8.00%. The 7% 2020 Notes mature on August 15, 2020 and bear annual interest at a rate of 7.00%. Borrowings under the Existing Term Loan Facility currently bear interest at a weighted average rate of 4.33%.

        To the extent the underwriters exercise their option to purchase additional shares, we intend to use the net proceeds from the sale of such shares to repay additional borrowings outstanding under the Existing Term Loan Facility.

        A $1.00 increase or decrease in the assumed initial public offering price of $19.50 per share would increase or decrease the net proceeds to us from this offering by approximately $34 million assuming the number of shares offered by us remains the same and after deducting estimated underwriting discounts and commission and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease the net proceeds to us by approximately $18 million, assuming no change in the assumed initial public offering price of $19.50 per share and after deducting the estimated underwriting discounts and commissions and estimated offering expenses payable by us. The information discussed above is illustrative only and will change based on the actual initial public offering price and other terms of this offering determined at pricing.


CONCURRENT REFINANCING

        We anticipate entering into the New Credit Facilities substantially contemporaneously with the consummation of this offering. This offering is not contingent upon our entering into the New Credit Facilities, and there can be no assurance that we will enter into the New Credit Facilities. If we enter into the New Credit Facilities, we intend to use the net proceeds of the $1,825 million principal amount of borrowings under the New Credit Facilities, together with approximately $250 million of available cash and approximately $112 million of net proceeds from this offering, to repay in full $2,187 million in principal amount of borrowings outstanding under the Existing Credit Facilities, and we will terminate the Existing Credit Facilities.

        If we are unable to enter into the New Credit Facilities, the Existing Credit Facilities will remain outstanding, and we will use $112 million of the net proceeds of this offering to repay a portion of the borrowings outstanding under the Existing Credit Facilities.

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DIVIDEND POLICY

        We do not intend to declare or pay dividends on our common stock for the foreseeable future. We currently intend to use our future earnings, if any, to repay debt, to fund our growth, to develop our business, for working capital needs and general corporate purposes. Our ability to pay dividends to holders of our common stock is significantly limited as a practical matter by the Existing Credit Facilities and the New Credit Facilities, as applicable, and the indenture governing the 2020 Notes, insofar as we may seek to pay dividends out of funds made available to us by SvM or its subsidiaries, because SvM's debt instruments directly or indirectly restrict SvM's ability to pay dividends or make loans to us. Any future determination to pay dividends on our common stock is subject to the discretion of our board of directors and will depend upon various factors, including our results of operations, financial condition, liquidity requirements, capital requirements, level of indebtedness, contractual restrictions with respect to payment of dividends, restrictions imposed by applicable law, general business conditions and other factors that our board of directors may deem relevant. See "Description of Certain Indebtedness" for a description of restrictions on our ability to pay dividends under our debt instruments.

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CAPITALIZATION

        The following table sets forth our cash and cash equivalents and our consolidated capitalization as of March 31, 2014 on:

    an actual basis; and

    an as adjusted basis, after giving effect to our sale of 35,900,000 shares of common stock in this offering at an assumed initial public offering price of $19.50 per share, and the application of the net proceeds therefrom as described in "Use of Proceeds."

        You should read the following table in conjunction with the sections entitled "Use of Proceeds," "Selected Historical Financial Data," "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes appearing in this prospectus.

 
  As of March 31, 2014  
(In millions)
  Actual   As Adjusted for the Offering(1)  

Cash and cash equivalents(2)

  $ 432   $ 432  
           
           

Long-term debt:

             

Existing Term Loan Facility(3)

  $ 2,193   $ 2,081  

Existing Revolving Credit Facility(4)

         

8% 2020 Notes(5)

    600     390  

7% 2020 Notes

    750     488  

Continuing Notes(6)

    357     357  

Vehicle capital leases(7)

    32     32  

Other long-term debt(8)

    42     42  

Less current portion

    (41 )   (41 )
           

Total long-term debt

  $ 3,933   $ 3,349  

Total shareholders' equity

    (369 )   (369 )
           

Total capitalization

  $ 3,564   $ 2,980  
           
           

(1)
Each $1.00 increase or decrease in the assumed initial public offering price of $19.50 per share would increase or decrease, as applicable, our long-term debt, additional paid-in capital and stockholders' equity by approximately $34 million, assuming that the number of shares offered by us as set forth on the cover page of this prospectus remains the same and after deducting estimated underwriting discounts and commissions and estimated offering expenses.

The foregoing table does not (a) reflect stock options or restricted stock units outstanding under our stock incentive plans or stock options or restricted stock units to be granted after this offering; or (b) give effect to the issuance on April 1, 2014 of 10,000 restricted shares. As of June 12, 2014, there were 5,708,369 stock options outstanding with an average exercise price of $12.03 per share and 599,259 restricted stock units outstanding.

(2)
Our cash and cash equivalents and short- and long-term marketable securities totaled $545 million as of March 31, 2014. As of March 31, 2014, the total net assets subject to third-party restrictions was $184 million. See "Management's Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources—Limitations on Distributions and Dividends by Subsidiaries" for our discussion of restricted net assets.

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(3)
Includes $988 million of Tranche B loans and $1,205 million of Tranche C loans. Excludes $9 million in unamortized original issue discount paid as part of the 2013 Existing Term Loan Facility Amendment, as defined below. We intend to enter into the New Credit Facilities substantially contemporaneously with the consummation of this offering. In the event that the Concurrent Refinancing is completed, we intend to use the borrowings under the New Credit Facilities to repay all amounts outstanding under the Existing Term Facilities after the application of the proceeds of this offering. This offering is not contingent upon our entering into the New Credit Facilities, and there can be no assurance that we will enter into the New Credit Facilities and terminate the Existing Term Facilities at the time of consummation of this offering, or at all. See "Concurrent Refinancing."

(4)
As of March 31, 2014, we had available borrowing capacity under the Existing Revolving Credit Facility of $242 million.

(5)
Excludes $2 million in unamortized premium received on the sale of $100 million aggregate principal amount of such notes.

(6)
Excludes $63 million in discounts related to the application of purchase accounting in the 2007 Merger. See "Description of Certain Indebtedness" for the definition of Continuing Notes.

(7)
SvM has entered into a fleet management services agreement, or the "Fleet Agreement," which, among other things, allows SvM to obtain fleet vehicles through a leasing program. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual adjustments and a borrowing margin totaling 2.45%.

(8)
Our other long-term debt includes (i) capital leases and (ii) certain other indebtedness.

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DILUTION

        If you invest in our common stock in this offering, your ownership interest in us will be immediately diluted to the extent of the difference between the initial public offering price per share of our common stock and the net tangible book value per share of our common stock immediately after this offering. Dilution results from the fact that the per share offering price of the common stock exceeds the book value per share attributable to the shares of common stock held by existing stockholders.

        Our net tangible book value as of March 31, 2014 was a deficit of $4,153 million. Net tangible book value per share before the offering has been determined by dividing net tangible book value (total book value of tangible assets less total liabilities) by the number of shares of common stock outstanding as of March 31, 2014, after giving effect to a 2-for-3 reverse stock split of our common stock effected on June 13, 2014.

        After giving effect to the sale of shares of our common stock sold by us in this offering at an assumed initial public offering price of $19.50 per share and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us, our adjusted net tangible book value as of March 31, 2014 would have been a deficit of $3,497 million, or $(27.36) per share. This represents an immediate increase in net tangible book value per share of $17.81 to the existing stockholders and an immediate and substantial dilution in net tangible book value per share of $46.86 to new investors who purchase shares in this offering. The following table illustrates this per share dilution to new investors:

 
  Existing
Stockholders
  New
Investors
 

Net tangible book value per share as of March 31, 2014

  $ (45.17 )      

Assumed initial public offering price per share

        $ 19.50  

Adjusted net tangible book value per share after this offering

  $ (27.36 ) $ (27.36 )
           

Increase in net tangible book value per share attributable to new investors in this offering

  $ 17.81        
             
             

Dilution of net tangible book value per share to new investors

        $ 46.86  
             
             

        If the underwriters exercise in full their option to purchase additional shares, the adjusted tangible book value per share after giving effect to the offering would be $(25.51) per share. This represents an immediate increase in adjusted net tangible book value of $19.66 per share to the existing stockholders and an immediate and substantial dilution in adjusted net tangible book value of $45.01 per share to new investors.

        A $1.00 increase or decrease in the assumed initial public offering price of $19.50 per share would increase or decrease total consideration paid by new investors and total consideration paid by all stockholders by approximately $34 million, assuming that the number of shares offered by us set forth on the front cover of this prospectus remains the same, and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us. An increase or decrease of 1,000,000 shares in the number of shares offered by us would increase or decrease the total consideration paid to us by new investors and total consideration paid to us by all stockholders by approximately $18 million, assuming an initial public offering price of $19.50 per share (the mid-point of the price range set forth on the cover page of this prospectus) remains the same and after deducting the underwriting discounts and commissions and estimated offering expenses payable by us.

        The following table summarizes, as of March 31, 2014, the total number of shares of common stock issued by us, the total consideration paid to us and the average price per share paid by the

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existing stockholders and by new investors purchasing shares in this offering (amounts in millions, except percentages and per share data):

 
  Shares
Issued
  Total
Consideration
   
 
 
  Number   Percent   (in millions)
Amount
  Percent   Average
Price
Per Share
 

Existing stockholders

    91,939,331     71.9 % $ 1,377     66.3 % $ 14.98  

New investors

    35,900,000     28.1     700     33.7   $ 19.50  
                       

Total

    127,839,331     100 % $ 2,077     100 % $ 16.25  
                       
                       

        The foregoing table does not reflect stock options, restricted shares or restricted stock units outstanding under our stock incentive plans or stock options or restricted stock units to be granted after this offering. As of June 13, 2014, there were 91,855,945 shares of our common stock outstanding, and 5,708,369 stock options outstanding with an average exercise price of $12.03 per share and 609,259 restricted shares and restricted stock units outstanding.

        To the extent that any of these stock options are exercised or any of these restricted stock units are settled into shares of common stock, there may be further dilution to new investors. See "Executive Compensation" and Note 17 to our audited consolidated financial statements included in this prospectus.

        In addition, we may choose to raise additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of such securities could result in further dilution to our stockholders.

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SELECTED HISTORICAL FINANCIAL DATA

        The following tables set forth selected historical financial data as of the dates and for the periods indicated. The selected historical consolidated financial data as of March 31, 2014 and for the three months ended March 31, 2014 and March 31, 2013 have been derived from our unaudited condensed consolidated financial statements included in this prospectus. The selected historical financial data as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 have been derived from our audited consolidated financial statements and related notes included in this prospectus. The selected historical financial data as of December 31, 2011, 2010 and 2009 and for the years ended December 31, 2010 and 2009 have been derived from our consolidated financial statements and related notes not included in this prospectus. The selected historical financial data are qualified in their entirety by, and should be read in conjunction with, "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our audited consolidated financial statements and related notes included in this prospectus.

 
  Three Months
Ended
March 31,
  Year Ended December 31,  
(In millions, except per share data)
  2014   2013   2013   2012   2011   2010   2009  

Operating Results:

                                           

Revenue

  $ 533   $ 514   $ 2,293   $ 2,214   $ 2,105   $ 2,031   $ 1,929  

Cost of services rendered and products sold

    288     270     1,220     1,196     1,125     1,095     1,032  

Selling and administrative expenses

    151     158     691     678     648     643     599  

Goodwill and trade name impairment(1)

                            5  

Impairment of software and other related costs(2)

    48                          

Interest expense

    61     60     247     245     266     280     293  

(Loss) Income from Continuing Operations(1)(2)(3)

    (18 )   6     42     (18 )   (7 )   (47 )   (26 )

Cash dividends per share

  $   $   $   $   $   $   $  

Weighted average shares outstanding:

                                           

Basic

    92     92     92     92     92     92     92  

Diluted

    92     93     92     92     92     92     92  

Basic and Diluted (Loss) Earnings Per Share—Continuing Operations

  $ (0.20 ) $ 0.07   $ 0.46   $ (0.20 ) $ (0.08 ) $ (0.51 ) $ (0.28 )

Financial Position (as of period end):

                                           

Total assets

  $ 5,197         $ 5,905   $ 6,415   $ 7,156   $ 7,106   $ 7,151  

Total long-term debt

    3,904           3,906     3,924     3,859     3,877     3,893  

Total shareholders' (deficit) equity(1)(2)(3)

    (369 )         23     535     1,234     1,246     1,240  

Cash Flow Data:

                                           

Net cash provided from operating activities from continuing operations

  $ 21   $ 20   $ 208   $ 104   $ 74   $ 38   $ 2  

Net cash used for investing activities from continuing operations

    (17 )   (16 )   (70 )   (85 )   (80 )   (73 )   (38 )

Net cash used for financing activities from continuing operations

    (43 )   (29 )   (78 )   (14 )   (110 )   (45 )   (256 )

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  Three Months
Ended
March 31,
  Year Ended December 31,  
(In millions, except per share data)
  2014   2013   2013   2012   2011   2010   2009  

Other Financial Data:

                                           

Adjusted EBITDA(4)

  $ 115   $ 103   $ 450   $ 413   $ 397   $ 354   $ 351  

Adjusted EBITDA Margin(5)

    21.5 %   20.0 %   19.6 %   18.7 %   18.9 %   17.4 %   18.2 %

Pre-Tax Unlevered Free Cash Flow(6)

              $ 426   $ 364   $ 292   $ 275   $ 294  

(1)
In 2009, we recorded a pre-tax non-cash impairment charge of $5 million to reduce the carrying value of trade names as a result of our annual impairment testing of goodwill and indefinite-lived intangible assets. There were no similar impairment charges included in continuing operations in 2010 through 2013.

(2)
Represents the impairment of software and other related costs described in Note 1 to our unaudited condensed consolidated financial statements included in this prospectus.

(3)
The three months ended March 31, 2014 and 2013 results include restructuring charges of $5 million and $3 million, respectively, as described in Note 3 to our unaudited condensed consolidated financial statements included in this prospectus. The 2013, 2012 and 2011 results include restructuring charges of $6 million, $15 million and $7 million, respectively, as described in Note 8 to our audited consolidated financial statements included in this prospectus.


The 2010 and 2009 results include restructuring charges of $5 million and $18 million, respectively. For 2010 and 2009, these charges included lease termination and severance costs related to a branch optimization project at Terminix; reserve adjustments, severance, employee retention, consulting and other costs associated with previous restructuring initiatives; severance, employee retention, legal fees and other costs associated with the 2007 Merger; and, for 2009, transition fees, employee retention and severance costs and consulting and other costs related to the information technology outsourcing initiative.


The 2012 results include a $55 million ($35 million, net of tax) loss on extinguishment of debt related to the redemption of the remaining $996 million aggregate principal amount of the 2015 Notes and repayment of $276 million of outstanding borrowings under the Term Facilities.


The 2009 results include a $52 million ($34 million, net of tax) gain on extinguishment of debt related to the completion of open market purchases of $100 million in face value of the 2015 Notes.

(4)
For our definition of Adjusted EBITDA, see "Prospectus Summary—Summary Historical Consolidated Financial and Other Operating Data."


The following table reconciles Adjusted EBITDA to Net (Loss) Income for the periods presented, which we consider to be the most directly comparable GAAP financial measure to Adjusted

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    EBITDA. For information on certain of the adjustments set forth in the table, see "Prospectus Summary—Summary Historical Consolidated Financial and Other Operating Data."

 
  Three Months
Ended
March 31,
  Year Ended December 31,  
(In millions)
  2014   2013   2013   2012   2011   2010   2009  

Adjusted EBITDA:

                                           

Terminix

  $ 78   $ 75   $ 266   $ 266   $ 249   $ 223   $ 212  

American Home Shield

    23     21     145     117     107     90     92  

Franchise Services Group

    18     17     78     70     75     76     70  
                               

Reportable Segment Adjusted EBITDA

  $ 119   $ 113   $ 489   $ 453   $ 431   $ 389   $ 374  

Other Operations and Headquarters(a)

    (4 )   (10 )   (39 )   (40 )   (34 )   (35 )   (23 )
                               

Total Adjusted EBITDA

  $ 115   $ 103   $ 450   $ 413   $ 397   $ 354   $ 351  
                               
                               

Depreciation and amortization expense

    (25 )   (25 )   (99 )   (100 )   (121 )   (130 )   (127 )

Non-cash goodwill and trade name impairment

                            (5 )

Non-cash impairment of software and other related costs

    (48 )                        

Residual value guarantee charge

                        (1 )   (1 )

Non-cash impairment of property and equipment

                (9 )            

Non-cash stock-based compensation expense

    (1 )   (1 )   (4 )   (7 )   (8 )   (9 )   (8 )

Restructuring charges

    (5 )   (3 )   (6 )   (15 )   (7 )   (5 )   (18 )

Management and consulting fees

    (2 )   (2 )   (7 )   (7 )   (8 )   (8 )   (8 )

Loss (income) from discontinued operations, net of income taxes

    (95 )   (29 )   (549 )   (696 )   53     37     47  

Benefit (provision) for income taxes

    9     (6 )   (43 )   8     6     32     30  

Loss on extinguishment of debt

                (55 )           52  

Interest expense

    (61 )   (60 )   (247 )   (245 )   (266 )   (280 )   (293 )

Other

            (2 )   (1 )           2  
                               

Net (Loss) Income

  $ (113 ) $ (23 ) $ (507 ) $ (714 ) $ 46   $ (10 ) $ 22  
                               
                               

(a)
Represents unallocated corporate expenses.
(5)
Adjusted EBITDA margin is defined as Adjusted EBITDA as a percentage of revenue.

(6)
Pre-Tax Unlevered Free Cash Flow is not a measurement of our financial performance or liquidity under GAAP and does not purport to be an alternative to net cash provided from operating activities from continuing operations or any other performance or liquidity measures derived in accordance with GAAP.

    Management believes Pre-Tax Unlevered Free Cash Flow is useful as a supplemental measure of our liquidity. Management uses Pre-Tax Unlevered Free Cash Flow to facilitate company-to-company cash flow comparisons by removing potential differences caused by variations in capital structures (affecting interest payments and payments made or received in connection with debt issuances and debt retirements), as well as payments for taxation, restructuring, and management and consulting fees, which may vary from company to company for reasons unrelated to operating performance.

    "Pre-Tax Unlevered Free Cash Flow" means (i) net cash provided from operating activities from continuing operations before: cash paid for interest expense; call premium paid on retirement of

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    debt; premium received on issuance of debt; cash paid for income taxes, net of refunds; cash paid for restructuring charges; and cash paid for management and consulting fees, (ii) less property additions.

    Pre-Tax Unlevered Free Cash Flow has limitations as an analytical tool and should not be considered in isolation or as a substitute for analyzing our results as reported under GAAP. Some of these limitations are:

    Pre-Tax Unlevered Free Cash Flow does not reflect cash payments to service interest, make principal payments on our debt or make payments for other financing activities;

    Pre-Tax Unlevered Free Cash Flow does not reflect cash payments for taxes;

    Pre-Tax Unlevered Free Cash Flow does not reflect cash payments for restructuring charges or management and consulting fees; and

    Other companies in our industries may calculate Pre-Tax Unlevered Free Cash Flow or similarly titled non-GAAP financial measures differently, limiting is usefulness as a comparative measure.

    The following table reconciles net cash provided from operating activities from continuing operations, which we consider to be the most directly comparable GAAP measure, to Pre-Tax Unlevered Free Cash Flow using data derived from our audited consolidated financial statements for the periods indicated:

 
  Year Ended December 31,  
(In millions)
  2013   2012   2011   2010   2009  

Net Cash Provided from Operating Activities from Continuing Operations

  $ 208   $ 104   $ 74   $ 38   $ 2  

Cash paid for interest expense

    232     233     244     261     294  

Call premium paid on retirement of debt

        43              

Premium received on issuance of debt

        (3 )            

Cash paid for income taxes, net of refunds

    9     9     12     13     1  

Cash paid for restructuring charges

    9     15     6     3     16  

Cash paid for management and consulting fees(a)

    7     7     8     8     8  

Property additions

    (39 )   (44 )   (52 )   (48 )   (27 )
                       

Pre-Tax Unlevered Free Cash Flow

  $ 426   $ 364   $ 292   $ 275   $ 294  
                       
                       


(a)
Represents the amounts paid to certain of our Equity Sponsors under the consulting agreements described in "Certain Relationships and Related Party Transactions—Consulting Agreements."

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS

        The following information should be read in conjunction with "Selected Historical Financial Data," "Summary Historical Consolidated Financial and Other Operating Data," our audited consolidated financial statements and related notes and our unaudited condensed consolidated financial statements and related notes included in this prospectus. The following discussion may contain forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to these differences include those factors discussed below and elsewhere in this prospectus, particularly in "Risk Factors" and "Forward-Looking Statements."

Overview

        Our core services include termite and pest control, home warranties, disaster restoration, janitorial, residential cleaning, furniture repair and home inspection under the following leading brands: Terminix, American Home Shield, ServiceMaster Restore, ServiceMaster Clean, Merry Maids, Furniture Medic and AmeriSpec. Our operations for the historical periods presented in this prospectus are organized into three reportable segments:    Terminix, American Home Shield and Franchise Services Group.

Key Business Metrics

        We focus on a variety of indicators and key operating and financial metrics to monitor the financial condition and performance of the continuing operations of our businesses. These metrics include:

    customer retention rates,

    customer counts growth,

    revenue,

    operating expenses,

    Adjusted EBITDA,

    net (loss) income, and

    earnings per share.

        To the extent applicable, these measures are evaluated with and without impairment, restructuring and other charges that management believes are not indicative of the earnings capabilities of our businesses. We also focus on measures designed to optimize cash flow, including the management of working capital and capital expenditures.

        Customer Retention Rates and Customer Counts Growth.    We report our customer retention rates and growth in customer counts for our two largest revenue generating businesses in order to track the performance of those businesses. Customer counts represent our recurring customer base and include customers with active contracts for recurring services. At Terminix, these services are primarily delivered on an annual, quarterly or monthly frequency. Retention rates are calculated as the ratio of ending customer counts to the sum of beginning customer counts, new sales and acquired accounts for the applicable period. These measures are presented on a rolling, twelve-month basis in order to avoid seasonal anomalies. See "—Segment Review."

        Revenue.    Our revenue results are primarily a function of the volume and pricing of the services and products provided to our customers by our businesses as well as the mix of services and products provided across our businesses. The volume of our revenue in Terminix and American Home Shield,

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and in our company-owned branches in the Franchise Services Group, is impacted by new unit sales, the retention of our existing customers and tuck-in acquisitions. We expect to continue our tuck-in acquisition program at Terminix in 2014 at levels consistent with prior periods. Revenue results in the remainder of our Franchise Services Group are driven principally by royalty fees earned from our franchisees. We serve both residential and commercial customers, principally in the United States. In 2013, approximately 98% of our revenue was generated by sales in the United States.

        Operating Expenses.    In addition to the impact of changes in our revenue results, our operating results are affected by, among other things, the level of our operating expenses. A number of our operating expenses are subject to inflationary pressures, such as fuel, chemicals, raw materials, wages and salaries, employee benefits and health care, vehicles, self-insurance costs and other insurance premiums, as well as various regulatory compliance costs.

        We have historically hedged a significant portion of our annual fuel consumption of approximately 11 million gallons. Fuel costs, after the impact of the hedges and after adjusting for the impact of year over year changes in the number of gallons used, were comparable to 2012. Based upon current Department of Energy fuel price forecasts, as well as the hedges we have executed to date for 2014, we project that fuel prices will not significantly increase our fuel costs for 2014 compared to 2013.

        After adjusting for the impact of year over year changes in the number of covered employees, health care and related costs for 2013 were comparable to 2012. We expect to incur incremental aggregate health care costs in 2014 as compared to 2013 as a result of continued inflation in the cost of health care services and due to certain provisions of the Patient Protection and Affordable Care Act.

        Adjusted EBITDA.    We evaluate performance and allocate resources based primarily on Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) before: income (loss) from discontinued operations, net of income taxes; provision (benefit) for income taxes; gain (loss) on extinguishment of debt; interest expense; depreciation and amortization expense; non-cash goodwill and trade name impairment; non-cash impairment of software and other related costs; non-cash impairment of property and equipment; non-cash stock-based compensation expense; restructuring charges; management and consulting fees; non-cash effects attributable to the application of purchase accounting; and other non-operating expenses. We believe Adjusted EBITDA is useful for investors, analysts and other interested parties as it facilitates company-to-company operating performance comparisons by excluding potential differences caused by variations in capital structures, taxation, the age and book depreciation of facilities and equipment, restructuring initiatives, consulting agreements and equity-based, long-term incentive plans.

        Net (Loss) Income and Earnings Per Share.    Basic (loss) earnings per share is computed by dividing net income (loss) by the weighted average number of shares of common stock outstanding. Diluted (loss) earnings per share is computed by dividing net income (loss) 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 restricted stock units are reflected in diluted net income (loss) per share by applying the treasury stock method. The presentation of net (loss) income and earnings per share provides GAAP measures of performance which are useful for investors, analysts and other interested parties in company-to-company operating performance comparisons.

Seasonality

        We have seasonality in our business, which drives fluctuations in revenue and Adjusted EBITDA for interim periods. In 2013, approximately 22 percent, 28 percent, 27 percent and 23 percent of our revenue and approximately 23 percent, 29 percent, 28 percent and 20 percent of our Adjusted EBITDA was recognized in the first, second, third and fourth quarters, respectively.

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Effect of Weather Conditions

        The demand for our services and our results of operations are also affected by weather conditions, including the seasonal nature of our termite and pest control services, home inspection services and disaster restoration services. Weather conditions which have a potentially unfavorable impact to our business include cooler temperatures or droughts which can impede the development of termite swarms and lead to lower demand for our termite control services; severe winter storms which can impact our home cleaning business if we cannot travel to service locations due to hazardous road conditions; and extreme temperatures which can lead to an increase in service requests related to household systems and appliances, resulting in higher claim frequency and costs. Weather conditions which have a potentially favorable impact to our business include mild winters which can lead to higher demand for termite and pest control services; mild winters or summers which can lead to lower household systems and appliance claim frequency; and severe storms which can lead to an increase in demand for disaster restoration services.

        Colder weather conditions in early 2014 adversely affected our traditional termite revenue in the three months ended March 31, 2014. We expect the colder weather to continue to affect our consolidated revenues in the second quarter of 2014 and throughout the remainder of the year, particularly in our Terminix segment.

        Contract claims expense in our American Home Shield segment decreased $27 million in the year ended December 31, 2013 as compared to the year ended December 31, 2012 (including a favorable adjustment to reserves for prior year contract claims of $4 million recorded in 2013). This favorable outcome was driven, in part, by an increase in the service fee charged to our customers for service visits and, to a lesser extent, by cooler summer temperatures in 2013 as compared to 2012. Warmer summer temperatures in 2014 as compared to 2013 could lead to an unfavorable impact on our contract claims expense in 2014.

TruGreen Spin-off

        On January 14, 2014, we completed the TruGreen Spin-off. As a result of the completion of the TruGreen Spin-off, New TruGreen operates the TruGreen Business as a private independent company. In connection with the TruGreen Spin-off, SvM and TruGreen Limited Partnership, an indirect wholly-owned subsidiary of New TruGreen, or "TGLP," entered into a transition services agreement pursuant to which SvM and its subsidiaries provide TGLP with specified communications, public relations, finance and accounting, tax, treasury, internal audit, human resources operations and benefits, risk management and insurance, supply management, real estate management, marketing, facilities, information technology and other support services. The charges for the transition services allow us to fully recover the allocated direct costs of providing the services, plus specified margins and any out-of-pocket costs and expenses. The services provided under the transition services agreement will terminate at various specified times, and in no event later than January 14, 2016 (except for certain information technology services, which New TruGreen expects SvM to provide to TGLP beyond the two-year period). TGLP may terminate the transition services agreement (or certain services under the transition services agreement) for convenience upon 90-days written notice, in which case TGLP will be required to reimburse SvM for early termination costs.

        Beginning with the TruGreen Spin-off, where it was practicable, employees who historically provided such services to the TruGreen Business were separated from us and transferred to New TruGreen as of the date of the TruGreen Spin-off. For certain support services for which it was not practicable to separate employees and transfer them to New TruGreen beginning with the TruGreen Spin-off, a transition services agreement was entered into pursuant to which SvM and its subsidiaries provide specified services to New TruGreen while an orderly transition of employees and other support arrangements from SvM to New TruGreen is executed. As a result of the transfer of employees to New

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TruGreen, in combination with the fees we expect to receive under the transition services agreement, we expect an approximate $25 million reduction in annual costs.

        In addition, we, SvM, New TruGreen and TGLP entered into (1) a separation and distribution agreement containing key provisions relating to the separation of the TruGreen Business and the distribution of New TruGreen common stock to our stockholders (including relating to specified TruGreen legal matters with respect to which we have agreed to retain liability, as well as insurance coverage, non-competition, indemnification and other matters), (2) an employee matters agreement allocating liabilities and responsibilities relating to employee benefit plans and programs and other related matters and (3) a tax matters agreement governing the respective rights, responsibilities and obligations of the parties thereto with respect to taxes, including allocating liabilities for income taxes attributable to New TruGreen and its subsidiaries generally to SvM for tax periods (or portions thereof) ending on or before January 14, 2014 and generally to New TruGreen for tax periods (or portions thereof) beginning after that date.

        Under this transition services agreement, in the three months ended March 31, 2014, SvM recorded $10 million of fees due from TGLP, which is included, net of costs incurred, in Selling and administrative expenses in our unaudited condensed consolidated statement of operations and comprehensive loss. As of March 31, 2014, all amounts owed by TGLP under this agreement have been paid.

        During the three months ended March 31, 2014, SvM processed certain of TGLP's accounts payable transactions. Through this process, in the three months ended March 31, 2014, $44 million was paid on TGLP's behalf, of which $41 million was repaid by TGLP. As of March 31, 2014, SvM recorded a $3 million receivable due from TGLP, which is included in Receivables on the unaudited condensed consolidated statement of financial position.

Results of Operations

Three Months Ended March 31, 2014 and 2013

 
  Three months ended
March 31,
  Increase
(Decrease)
  % of Revenue  
(In millions)
  2014   2013   2014 vs. 2013   2014   2013  

Revenue

  $ 533   $ 514     3.7 %   100.0 %   100.0 %

Cost of services rendered and products sold

    288     270     6.6     54.0     52.5  

Selling and administrative expenses

    151     158     (4.4 )   28.4     30.8  

Amortization expense

    13     13     0.8     2.4     2.5  

Impairment of software and other related costs

    48         *     9.0      

Restructuring charges

    5     3     55.6     0.9     0.6  

Interest expense

    61     60     1.9     11.5     11.7  

Interest and net investment income

    (6 )   (2 )   138.6     (1.0 )   (0.4 )
                       

(Loss) Income from Continuing Operations before Income Taxes

    (27 )   12     *     (5.1 )   2.4  

(Benefit) Provision for income taxes

    (9 )   6     *     (1.7 )   1.2  
                       

(Loss) Income from Continuing Operations

    (18 )   6     *     (3.4 )   1.3  

Loss from discontinued operations, net of income taxes

    (95 )   (29 )   *     (17.8 )   (5.7 )
                       

Net Loss

  $ (113 ) $ (23 )   *     (21.2 )%   (4.5 )%
                       
                       

*
not meaningful

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    Revenue

        We reported revenue of $533 million for the first quarter of 2014, a $19 million or 3.7 percent increase compared to the first quarter of 2013. A summary of changes in revenue for each of our reportable segments and Other Operations and Headquarters is included in the table below. See "—Segment Review" for a discussion of the drivers of the year over year changes.

(In millions)
  Terminix   American
Home
Shield
  Franchise
Services
Group
  Other
Operations and
Headquarters
  Total  

Three months ended March 31, 2013

  $ 313   $ 143   $ 56   $ 2   $ 514  

Pest Control

    3                 3  

Termite

    4                 4  

Home Warranties(1)

        8             8  

Franchise-Related Revenue

            4         4  
                       

Three months ended March 31, 2014

  $ 320   $ 151   $ 60   $ 2   $ 533  
                       
                       

(1)
Includes approximately $5 million as a result of the acquisition of Home Security of America, Inc., or "HSA," on February 28, 2014.

    Cost of Services Rendered and Products Sold

        We reported cost of services rendered and products sold of $288 million and $270 million for the first quarter of 2014 and 2013, respectively. The following table provides a summary of changes in cost of services rendered and products sold for the first quarter of 2014 compared with the first quarter of 2013 for each of our reportable segments and Other Operations and Headquarters:

(In millions)
  Terminix   American
Home
Shield
  Franchise
Services
Group
  Other
Operations and
Headquarters
  Total  

Three months ended March 31, 2013

  $ 171   $ 71   $ 24   $ 4   $ 270  

Change in revenue

    3     4     3         10  

Contract claims

        4             4  

Insurance program

                2     2  

Labor efficiency

    1                 1  

Other

    1     (1 )   2     (1 )   1  
                       

Three months ended March 31, 2014

  $ 176   $ 78   $ 29   $ 5   $ 288  
                       
                       

        Favorable adjustments to reserves for prior year contract claims of $1 million and $5 million were recorded at American Home Shield in the first quarter of 2014 and 2013, respectively. The increase in expenses in our automobile, general liability and workers' compensation insurance program was driven by adverse claims trends. The decrease in labor efficiency at Terminix was primarily driven by increased staffing in customer care centers.

    Selling and Administrative Expenses

        Selling and administrative expenses comprised general and administrative expenses of $70 million and $79 million and selling and marketing expenses of $81 million and $79 million for the first quarter of 2014 and 2013, respectively, and decreased $7 million to $151 million for the first quarter of 2014 compared to $158 million for the first quarter of 2013. A $3 million reduction in tax-related reserves was recorded in the first quarter of 2013 for which there was no similar adjustment recorded in the first quarter of 2014. The remaining decrease of $10 million primarily reflected a decrease in costs in our centers of excellence driven by the transition of certain costs to New TruGreen and other cost

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reductions realized through recent initiatives discussed further under "—Restructuring Charges" below; and a decrease in technology costs at American Home Shield driven by the decision to abandon its efforts to deploy a new operating system. We expect an approximate $25 million reduction in annual costs associated with the transition of costs to New TruGreen.

    Amortization Expense

        Our portfolio of intangible assets has remained relatively stable, and, as a result, amortization expense was $13 million in the first quarter of 2014 and 2013.

    Impairment of Software and Other Related Costs

        We recorded an impairment charge of $48 million in the first quarter of 2014 relating to American Home Shield's decision to abandon its efforts to deploy a new operating system. This decision will allow us to more effectively focus our energy and resources on driving growth and serving our customers. Included in this charge are the impairment of the capitalized software of $45 million and the recognition of the remaining liabilities associated with the termination of lease, maintenance and hosting agreements totaling $3 million.

    Restructuring Charges

        We incurred restructuring charges of $5 million and $3 million for the first quarter of 2014 and 2013, respectively. Restructuring charges were comprised of the following:

 
  Three
months
ended
March 31,
 
(In millions)
  2014   2013  

Terminix branch optimization(1)

  $ 1   $ 1  

Centers of excellence initiative(2)

    4     2  
           

Total restructuring charges

  $ 5   $ 3  
           
           

(1)
For the three months ended March 31, 2014, these charges included severance costs. For the three months ended March 31, 2013, these charges included lease termination costs.

(2)
Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in our headquarters functions that provide company-wide administrative services for our operations that we refer to as centers of excellence. For the three months ended March 31, 2014, these charges included professional fees of $1 million and severance and other costs of $3 million. For the three months ended March 31, 2013, these charges included professional fees of $1 million and severance and other costs of $1 million. During the remainder of 2014, we will continue to assess the mix and cost of our company-wide administrative services in light of the TruGreen Spin-off. We do not expect additional charges related to this initiative to be significant.

    Interest Expense

        Interest expense totaled $61 million and $60 million for the first quarter of 2014 and 2013, respectively. Our average long-term debt balance and average interest rate for the first quarter of 2014 were comparable to the first quarter of 2013.

        We have historically entered into various interest rate swap agreements, although we have no interest rate swap agreements outstanding as of March 31, 2014. As of March 31, 2014, each one

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percentage point change in interest rates would result in an approximate $22 million change in the annual interest expense on our Existing Term Facilities.

    Interest and Net Investment Income

        Interest and net investment income totaled $6 million and $2 million for the first quarter of 2014 and 2013, respectively, and was comprised of the following:

 
  Three
months
ended
March 31,
 
(In millions)
  2014   2013  

Realized gains(1)

  $ 5   $ 1  

Deferred compensation trust(2)

        1  

Other(3)

    1      
           

Total interest and net investment income

  $ 6   $ 2  
           
           

(1)
Represents the net investment gains and the interest and dividend income realized on the American Home Shield investment portfolio.

(2)
Represents investment income resulting from a change in the market value of investments within an employee deferred compensation trust (for which there is a corresponding and offsetting change in compensation expense within income from continuing operations before income taxes).

(3)
Includes interest income on other cash balances.

    (Loss) Income from Continuing Operations before Income Taxes

        Loss from continuing operations before income taxes was $27 million for the first quarter of 2014 compared to income from continuing operations before income taxes of $12 million for the first quarter of 2013. The decrease in income from continuing operations before income taxes for the first quarter of 2014 compared to the first quarter of 2013 of $39 million primarily reflects the net effect of year over year changes in the following items:

(In millions)
  2014
Compared to
2013
 

Segment results(1)

  $ 12  

Impairment of software and other related costs(2)

    (48 )

Restructuring charges(3)

    (2 )

Interest expense(4)

    (1 )
       

  $ (39 )
       
       

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

(2)
Represents a $48 million impairment of software and other related costs at American Home Shield recorded in the first quarter of 2014 as described in "—Impairment of Software and Other Related Costs."

(3)
Represents the net change in restructuring charges related primarily to the impact of a branch optimization project at Terminix and an initiative to enhance capabilities and reduce costs in our centers of excellence. Our centers of excellence are functions at our

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    headquarters that provide company-wide administrative services for our operations. See "—Restructuring Charges" for further details.

(4)
Represents the net change in interest expense as described in "—Interest Expense."

    (Benefit) Provision for Income Taxes

        The effective tax rate on (loss) income from continuing operations was a benefit of 33.3 percent for the first quarter of 2014 compared to a provision of 48.3 percent for the first quarter of 2013. The effective tax rate for the first quarter of 2014 was impacted by various discrete events, including an adjustment to deferred state taxes resulting from a change in our state apportionment factors primarily attributable to the TruGreen Spin-off. The effective tax rate for the first quarter of 2013 was impacted by the reclassification of the TruGreen Business to discontinued operations and the resulting impact on the allocation of the full year effective tax rate on income from continuing operations to interim periods.

    Net Loss

        Net loss for the first quarter of 2014 was $113 million compared to $23 million for the first quarter of 2013. The $90 million increase was primarily driven by a $39 million decrease in income from continuing operations before income taxes and a $66 million increase in loss from discontinued operations, net of tax, offset, in part, by a $15 million increase in benefit for income taxes.

Years Ended December 31, 2013, 2012 and 2011

 
   
   
   
  Increase
(Decrease)
 
 
  Year ended December 31,  
 
  2013 vs.
2012
  2012 vs.
2011
 
(in millions)
  2013   2012   2011  

Revenue

  $ 2,293   $ 2,214   $ 2,105     3.6 %   5.2 %

Cost of services rendered and products sold

    1,220     1,196     1,125     2.0     6.3  

Selling and administrative expenses

    691     678     648     2.0     4.6  

Amortization expense

    51     58     83     (13.0 )   (29.9 )

Restructuring charges

    6     15     7     (59.3 )   111.9  

Interest expense

    247     245     266     0.8     (7.8 )

Interest and net investment income

    (8 )   (7 )   (11 )   9.3     (32.2 )

Loss on extinguishment of debt

        55         *     *  
                       

Income (Loss) from Continuing Operations before Income Taxes

    86     (26 )   (13 )   *     *  

Provision (benefit) for income taxes

    43     (8 )   (6 )   *     *  

Equity in losses of joint venture

    (1 )           *     *  
                       

Income (Loss) from Continuing Operations

    42     (18 )   (7 )   *     *  

(Loss) income from discontinued operations, net of income taxes

    (549 )   (696 )   53     *     *  
                       

Net (Loss) Income

  $ (507 ) $ (714 ) $ 46     *     *  
                       
                       

*
not meaningful

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  % of Revenue  
 
  Year ended December 31,  
(in millions)
  2013   2012   2011  

Revenue

    100.0 %   100.0 %   100.0 %

Cost of services rendered and products sold

    53.2     54.0     53.4  

Selling and administrative expenses

    30.2     30.6     30.8  

Amortization expense

    2.2     2.6     4.0  

Restructuring charges

    0.3     0.7     0.3  

Interest expense

    10.8     11.1     12.6  

Interest and net investment income

    (0.4 )   (0.3 )   (0.5 )

Loss on extinguishment of debt

        2.5      
               

Income (Loss) from Continuing Operations before Income Taxes

    3.7     (1.2 )   (0.6 )

Provision (benefit) for income taxes

    1.9     (0.4 )   (0.3 )

Equity in losses of joint venture

    *     *     *  
               

Income (Loss) from Continuing Operations

    1.8     (0.8 )   (0.3 )

(Loss) income from discontinued operations, net of income taxes

    (24.0 )   (31.4 )   2.5  
               

Net (Loss) Income

    (22.1 )%   (32.2 )%   2.2 %
               
               

*
not meaningful

    Revenue

        We reported revenue of $2,293 million for the year ended December 31, 2013, $2,214 million for the year ended December 31, 2012 and $2,105 million for the year ended December 31, 2011. A summary of changes in revenue for each of our reportable segments and Other Operations and Headquarters is included in the table below. See "—Segment Review" for a discussion of the drivers of the year over year changes.

(In millions)
  Terminix   American
Home
Shield
  Franchise
Services
Group
  Other
Operations and
Headquarters
  Total  

Year ended December 31, 2011

  $ 1,193   $ 687   $ 220   $ 5   $ 2,105  

Pest Control

    44                 44  

Termite

    17                 17  

Home Warranties

        34             34  

Franchise-Related Revenue

            1         1  

Other

    11             2     13  
                       

Year ended December 31, 2012

  $ 1,265   $ 721   $ 221   $ 7   $ 2,214  
                       
                       

Pest Control

    31                 31  

Termite

    9                 9  

Home Warranties

        19             19  

Franchise-Related Revenue

            15         15  

Other

    4             1     5  
                       

Year ended December 31, 2013

  $ 1,309   $ 740   $ 236   $ 8   $ 2,293  
                       
                       

    Cost of Services Rendered and Products Sold

        We reported cost of services rendered and products sold of $1,220 million for the year ended December 31, 2013, $1,196 million for the year ended December 31, 2012, and $1,125 million for the year ended December 31, 2011. The following table provides a summary of changes in cost of services

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rendered and products sold for each of our reportable segments and Other Operations and Headquarters: See "—Segment Review" for a discussion of the drivers of the year over year changes.

(In millions)
  Terminix   American
Home
Shield
  Franchise
Services
Group
  Other
Operations and
Headquarters
  Total  

Year ended December 31, 2011

  $ 657   $ 377   $ 98   $ (7 ) $ 1,125  

Change in revenue

    39     21     3         63  

Contract claims

        (15 )           (15 )

Insurance program

                10     10  

Impairment of property and equipment(1)

    5         4         9  

Other

    3             1     4  
                       

Year ended December 31, 2012

  $ 704   $ 383   $ 105   $ 4   $ 1,196  
                       
                       

Change in revenue

    30     10     7         47  

Bad debt

    3                 3  

Legal

    7                 7  

Contract claims

        (27 )           (27 )

Insurance program

                4     4  

Impairment of property and equipment(1)

    (5 )       (4 )       (9 )

Other

    4     1     (7 )   1     (1 )
                       

Year ended December 31, 2013

  $ 743   $ 367   $ 101   $ 9   $ 1,220  
                       
                       

(1)
Represents a $3 million impairment of licensed intellectual property and a $1 million impairment of abandoned real estate at Terminix and a $4 million impairment of certain internally developed software at Merry Maids recorded in 2012 for which there were no similar impairments recorded in 2013. We exclude non-cash impairments of property and equipment from Adjusted EBITDA because we believe doing so is useful to investors in aiding period-to-period comparability.

    Selling and Administrative Expenses

        Selling and administrative expenses comprised general and administrative expenses of $314 million and $322 million and selling and marketing expenses of $377 million and $356 million for the year ended December 31, 2013 and 2012, respectively, and increased $13 million to $691 million for the year ended December 31, 2013 compared to $678 million for the year ended December 31, 2012. At American Home Shield, a $3 million reduction in tax-related reserves was recorded in 2013, and a $5 million increase in tax-related reserves was recorded in 2012. Additionally, key executive transition charges of $9 million and $3 million were recorded in 2013 and 2012, respectively. The remaining increase of $15 million primarily reflected increased investments in sales and marketing at Terminix; and increased sales and marketing and higher technology costs at American Home Shield; offset, in part, by lower incentive compensation expense at Terminix; lower provisions for certain legal matters at American Home Shield; and cost reductions in our centers of excellence realized through recent initiatives discussed further under "—Restructuring Charges" below.

        Selling and administrative expenses comprised general and administrative expenses of $322 million and $301 million and selling and marketing expenses of $356 million and $347 million for the year ended December 31, 2012 and 2011, respectively, and increased $30 million to $678 million for the year ended December 31, 2012 compared to $648 million for the year ended December 31, 2011. At American Home Shield, a $5 million increase in tax-related reserves was recorded in 2012. In the Franchise Services Group, a $1 million gain resulting from the sale of ten company-owned branches to existing and new franchisees was recorded in 2011. Additionally, key executive transition charges of $3 million and $6 million were recorded in 2012 and 2011, respectively. The remaining increase of

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$29 million primarily reflected increased investments in sales and marketing and higher incentive compensation expense at Terminix; and higher provisions for certain legal matters and increased investments to drive improvements in service delivery at American Home Shield; offset, in part, by a reduction in sales and marketing costs at American Home Shield.

    Amortization Expense

        Amortization expense was $51 million, $58 million and $83 million for the years ended December 31, 2013, 2012 and 2011, respectively. The decreases are a result of certain finite lived intangible assets recorded in connection with the 2007 Merger being fully amortized.

    Restructuring Charges

        We incurred restructuring charges of $6 million, $15 million and $7 million for the years ended December 31, 2013, 2012 and 2011, respectively. Restructuring charges were comprised of the following:

 
  Year ended December 31,  
(In millions)
  2013   2012   2011  

Terminix branch optimization(1)

  $ 2   $ 4   $ 4  

American Home Shield reorganization(2)

        1      

Franchise Services Group reorganization(2)

        1      

Centers of excellence initiative(3)

    4     9     3  
               

Total restructuring charges

  $ 6   $ 15   $ 7  
               
               

(1)
For the years ended December 31, 2013 and 2012, these charges included severance costs of $1 million, and for the years ended December 31, 2013, 2012 and 2011, these charges included lease termination costs of $1 million, $3 million and $4 million, respectively.

(2)
These charges included severance costs.

(3)
Represents restructuring charges related to an initiative to enhance capabilities and reduce costs in our headquarters functions that provide company-wide administrative services for our operations that we refer to as centers of excellence. For the years ended December 31, 2013, 2012 and 2011, these charges included severance and other costs of $1 million, $4 million and $2 million, respectively, and professional fees of $3 million, $5 million and $1 million, respectively. During 2014, we will continue to assess the mix and cost of our company-wide administrative services in light of the TruGreen Spin-off. We do not expect charges related to this initiative to be significant.

    Interest Expense

        Interest expense totaled $247 million, $245 million and $266 million for the years ended December 31, 2013, 2012 and 2011, respectively. The increase in 2013 compared to 2012 is primarily due to an increase in our average long-term debt balance. The decrease in 2012 compared to 2011 is primarily due to decreases in our weighted average interest rate and average long-term debt balance.

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    Interest and Net Investment Income

        Interest and net investment income totaled $8 million, $7 million and $11 million for the years ended December 31, 2013, 2012 and 2011, respectively, and was comprised of the following:

 
  Year ended December 31,  
(In millions)
  2013   2012   2011  

Realized gains(1)

  $ 5   $ 6   $ 10  

Deferred compensation trust(2)

    2     1      

Other(3)

    1         1  
               

Interest and net investment income

  $ 8   $ 7   $ 11  
               
               

(1)
Represents the net investment gains and the interest and dividend income realized on the American Home Shield investment portfolio.

(2)
Represents investment income (loss) resulting from a change in the market value of investments within an employee deferred compensation trust (for which there is a corresponding and offsetting change in compensation expense within income from continuing operations before income taxes).

(3)
Includes interest income on other cash balances and, in 2012, a $3 million charge for the impairment of a loan related to a prior business disposition.

    Loss on Extinguishment of Debt

        The loss on extinguishment of debt of $55 million for the year ended December 31, 2012 is due to the redemption of $996 million aggregate principal amount of the 2015 Notes and repayment of $276 million of outstanding borrowings under the Term Facilities. There were no debt extinguishments by us in 2013 or 2011.

    Income (Loss) from Continuing Operations

        Income from continuing operations before income taxes was $86 million for the year ended December 31, 2013. Loss from continuing operations before income taxes was $26 million for the year ended December 31, 2012 and $13 million for the year ended December 31, 2011.

        The improvement in income from continuing operations before income taxes for 2013 compared to 2012 of $112 million and increase in loss from continuing operations before income taxes for 2012 compared to 2011 of $13 million primarily reflect the net effect of year over year changes in the following items:

(In millions)
  2013
Compared to
2012
  2012
Compared to
2011
 

Loss on extinguishment of debt(1)

    55     (55 )

Segment results(2)

    37     16  

Restructuring charges(3)

    9     (8 )

Non-cash impairment of property and equipment(4)

    9     (9 )

Interest expense(5)

    (2 )   21  

Depreciation and amortization expense(6)

    1     21  

Other

    3     1  
           

  $ 112   $ (13 )
           
           

(1)
Represents the loss on extinguishment of debt recorded in 2012 related to the redemption of $996 million aggregate principal amount of the 2015 Notes and repayment of

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    $276 million of outstanding borrowings under the Term Facilities. There were no debt extinguishments in 2013 or 2011.

(2)
Represents the net change in Adjusted EBITDA as described in "—Segment Review." Includes key executive transition charges of $9 million, $3 million and $6 million recorded in 2013, 2012 and 2011, respectively, as described in "—Segment Review." Additionally, at American Home Shield, a $3 million reduction in tax-related reserves was recorded in 2013, and a $5 million increase in tax-related reserves was recorded in 2012.

(3)
Represents the net change in restructuring charges related primarily to the impact of a branch optimization project at Terminix, a reorganization of leadership at American Home Shield and our Franchise Services Group and an initiative to enhance capabilities and reduce costs in our centers of excellence. Our centers of excellence are functions at our headquarters that provide company-wide administrative services for our operations. See Note 8 to our audited consolidated financial statements included in this prospectus for further details.

(4)
Primarily represents a $3 million impairment of licensed intellectual property and a $1 million impairment of abandoned real estate at Terminix, and a $4 million impairment of certain internally developed software at our Franchise Services Group recorded in 2012 for which there were no similar impairments recorded in 2013 or 2011.

(5)
The increase in 2013 compared to 2012 is primarily due to an increase in our average long-term debt balance. The decrease in 2012 compared to 2011 is primarily due to decreases in our weighted average interest rate and average long-term debt balance.

(6)
The decrease is primarily driven by decreased amortization of intangible assets as a result of certain finite lived intangible assets recorded in connection with the 2007 Merger being fully amortized, offset, in part, by increased depreciation of property and equipment as a result of property additions.

    Provision (Benefit) for Income Taxes

        The effective tax rate on income (loss) from continuing operations was a provision of 50.1 percent for the year ended December 31, 2013, and a benefit of 30.5 percent and 43.8 percent for the years ended December 31, 2012 and 2011, respectively. For a reconciliation of our effective tax rates to the statutory rate see Note 5 to our audited consolidated financial statements included in this prospectus.

    Net (Loss) Income

        Net loss for the year ended December 31, 2013 was $507 million compared to a net loss of $714 million for the year ended December 31, 2012 and net income of $46 million for the year ended December 31, 2011. The $207 million improvement for 2013 compared to 2012 was primarily driven by a $112 million improvement in income (loss) from continuing operations before income taxes and a $147 million reduction in loss from discontinued operations, net of tax, offset, in part, by a $51 million increase in provision (benefit) for income taxes. The $760 million decrease for 2012 compared to 2011 was primarily driven by a $13 million reduction in income (loss) from continuing operations before income taxes and a $749 million increase in loss from discontinued operations, net of tax, offset, in part, by a $2 million reduction in provision (benefit) for income taxes.

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Segment Review

        The following business segment reviews should be read in conjunction with the required footnote disclosures presented in the notes to our audited consolidated financial statements and our unaudited condensed consolidated financial statements included in this prospectus.

        Revenue and Adjusted EBITDA by reportable segment and for Other Operations and Headquarters are as follows:

 
   
   
  Increase
(Decrease)
   
   
   
   
   
 
 
  Three months ended March 31,    
   
   
  Increase (Decrease)  
 
  Year ended December 31,  
 
  2014 vs.
2013
  2013 vs.
2012
  2012 vs.
2011
 
(In millions)
  2014   2013   2013   2012   2011  

Revenue:

                                                 

Terminix

  $ 320   $ 313     2.2 % $ 1,309   $ 1,265   $ 1,193     3.5 %   6.1 %

American Home Shield

    151     143     5.5 %   740     721     687     2.7 %   5.0 %

Franchise Services Group

    60     56     8.1 %   236     221     220     6.3 %   0.8 %

Other Operations and Headquarters

    2     2     (5.7 )%   8     7     5     22.1 %   14.1 %
                                   

Total Revenue:

  $ 533   $ 514     3.7 % $ 2,293   $ 2,214   $ 2,105     3.6 %   5.2 %
                                   
                                   

Adjusted EBITDA(1):

                                                 

Terminix

  $ 78   $ 75     3.6 % $ 266   $ 266   $ 249     0.3 %   6.6 %

American Home Shield

    23     21     9.0 %   145     117     107     24.4 %   9.4 %

Franchise Services Group

    18     17     1.5 %   78     70     75     11.7 %   (6.2 )%
                                   

Reportable Segment Adjusted EBITDA

  $ 119   $ 113     4.3 % $ 489   $ 453   $ 431     8.3 %   5.1 %

Other Operations and Headquarters(2)

    (4 )   (10 )   66.2 %   (39 )   (40 )   (34 )   1.4 %   (17.3 )%
                                   

Total Adjusted EBITDA

  $ 115   $ 103     11.6 % $ 450   $ 413   $ 397     8.9 %   4.1 %