Discontinued Operations

3 Months Ended

Mar. 31, 2020

Note 5. Discontinued Operations

In January 2020, we announced that our board of directors committed to explore strategic alternatives related to our ServiceMaster Brands segment in order to focus on our core pest control and termite business. We intend to complete our review of strategic alternatives and consummate a transaction, which may include the sale of the business, during the current year.

The ServiceMaster Brands Divestiture Group is classified as held for sale on the Condensed Consolidated Statements of Financial Position and as discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income and Condensed Consolidated Statements of Cash Flows for all periods presented. The net of assets and liabilities held for sale related to discontinued operations are required to be recorded at the lower of carrying value or fair value less costs to sell.

The following table summarizes the comparative financial results of discontinued operations which are presented as Net earnings from discontinued operations on the Condensed Consolidated Statements of Operations and Comprehensive Income:


	Three Months Ended March 31,
(In millions)	2020		2019
Revenue	$	65	$	63
Cost of services rendered and products sold		29		25
Selling and administrative expenses		13		13
Amortization expense		1		1
Restructuring and other charges⁽¹⁾		4		1
Income before income taxes		17		22
Provision for income taxes		5		6
Net earnings from discontinued operations	$	13	$	16

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(1)Includes $4 million of professional fees and other costs incurred in connection with the strategic evaluation.

The total assets and liabilities held for sale related to discontinued operations are stated separately in the Condensed Consolidated Statements of Financial Position and comprised the following items:


	As of		As of
(In millions)	March 31, 2020		December 31, 2019
Assets:
Current Assets:
Receivables, less allowances of $3 and $3, respectively	$	43	$	40
Inventories		2		2
Prepaid expenses and other assets		4		3
Total Current Assets		49		45
Other Assets:
Property and equipment, net		8		8
Operating lease right-of-use assets		2		2
Goodwill		178		183
Intangible assets, primarily trade names, service marks and trademarks, net		626		622
Notes receivable		12		13
Deferred customer acquisition costs		1		1
Other assets		1		1
Total Assets	$	877	$	875
Liabilities and Stockholders' Equity:
Current Liabilities:
Accounts payable	$	8	$	8
Accrued liabilities:
Payroll and related expenses		2		5
Other		24		23
Deferred revenue		3		4
Current portion of lease liability		1		1
Total Current Liabilities		38		40
Other Long-Term Liabilities:
Deferred taxes		2		1
Other long-term obligations, primarily self-insured claims		6		6
Long-term lease liability		2		2
Total Liabilities	$	48	$	50

All assets and liabilities held for sale were classified as Current assets held for sale and Current liabilities held for sale as of March 31, 2020 in the Condensed Consolidated Statements of Financial Position as it is probable the sale will occur within one year.

The following selected financial information of ServiceMaster Brands is included in the Condensed Consolidated Statements of Cash Flows as cash flows from discontinued operations:


	Three Months Ended March 31,
(In millions)	2020		2019
Depreciation	$	—	$	1
Amortization		1		1
Capital expenditures		(1)		(1)

In addition, during the three months ended March 31, 2020, the Company began marketing its corporate aircraft for sale and reclassified its book value of $6 million to Current assets held for sale on the Condensed Consolidated Statements of Financial Position.