On October 1, 2018, we completed the spin-off of our American Home Shield business. The separation was effectuated through a Distribution to our stockholders of approximately 80.2 percent of the outstanding shares of common stock of Frontdoor. The distribution was made to our stockholders of record as of the close of business on September 14, 2018, and such stockholders received one share of Frontdoor common stock for every two shares of ServiceMaster common stock held as of the close of business on the Record Date.

In March 2019, we exchanged all of the 19.8 percent of the outstanding shares of common stock of Frontdoor we retained for certain of our outstanding indebtedness, which obligations were subsequently cancelled and discharged upon delivery to us. See note 12 for further discussion regarding this transaction.

The historical results of the American Home Shield segment, including the results of operations, cash flows and related assets and liabilities, are reported as discontinued operations for all periods presented herein. For all periods after the separation, discontinued operations includes spin-off transaction costs primarily related to transaction fees to effect the spin-off and receipts pursuant to the transition services agreement.

In connection with the American Home Shield spin-off, the Company and Frontdoor entered into (1) a separation and distribution agreement containing key provisions relating to the separation of Frontdoor and the distribution of Frontdoor common stock to ServiceMaster stockholders, 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 Frontdoor and its subsidiaries generally to the Company for tax periods (or portions thereof) ending on or before October 1, 2018, and generally to Frontdoor for tax periods (or portions thereof) beginning after that date.

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 transition services agreement expired December 31, 2019.

Under this transition services agreement, in the years ended December 31, 2019 and 2018, we recorded approximately $2 million and $1 million, respectively, of fees from Frontdoor, which are included, net of costs incurred, in Selling and administrative expenses in the Consolidated Statements of Operations and Comprehensive Income (Loss). As of December 31, 2019, all amounts under this agreement have been paid.

During the year ended December 31, 2018, we processed certain of Frontdoor’s accounts payable transactions. Through this process, in the year ended December 31, 2018, approximately $2 million was paid on Frontdoor’s behalf. We did not process any of Frontdoor’s accounts payable transactions in the year ended December 31, 2019. All amounts under this agreement have been paid.

The Company and Frontdoor also entered into a sublease agreement for the space Frontdoor retained in our Global Service Center and Memphis customer care center after the spin-off. We recognized approximately $7 million and $1 million of rental income and other cost reimbursements related to these sublease agreements during the years ended December 31, 2019 and 2018, respectively, which were recorded as reductions to Selling and administrative expenses on the Consolidated Statements of Operations and Comprehensive Income (Loss). Payments received under the sublease agreements for rental income and other cost reimbursements during the years ended December 31, 2019 and 2018 totaled approximately $7 million and $1 million, respectively.

Goodwill and indefinite lived intangible assets are assessed annually for impairment during the fourth quarter or earlier upon the occurrence of certain events or substantive changes in circumstances. No goodwill or indefinite-lived intangible asset impairments were recorded relating to American Home Shield in the years ended December 31, 2018 and 2017.

(Loss) gain from discontinued operations, net of income taxes, for all periods presented includes the operating results of Frontdoor and previously sold businesses.



	Year Ended December 31,
(In millions)	2019		2018		2017
Revenue	$	—	$	979	$	1,157
Cost of services rendered and products sold		—		534		591
Operating expenses⁽¹⁾		1		282		296
Interest and net investment income		—		(1)		(2)
Income before income taxes		(1)		164		272
Provision for income taxes		(0)		43		103
(Loss) gain from discontinued operations, net of income taxes	$	(1)	$	122	$	169

(1)Includes spin-off transaction costs incurred of $35 million and $13 million for the years ended December 31, 2018 and 2017, respectively.

The following selected financial information of American Home Shield is included in the statements of cash flows:



(In millions)	2018		2017
Depreciation	$	8	$	9
Amortization	$	6	$	8
Capital expenditures	$	(18)	$	(9)
Significant operating and investing non-cash items:
Net assets acquired through seller financed debt	$	—	$	—