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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

________________________________________________

FORM 10-Q

________________________________________________

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2021

or

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 001-36507

________________________________________________

Terminix Global Holdings, Inc.

(Exact name of registrant as specified in its charter)

Delaware

20-8738320

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

150 Peabody Place, Memphis, Tennessee 38103

(Address of principal executive offices) (Zip Code)

901-597-1400

(Registrant’s telephone number, including area code)

________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common, par value $0.01

TMX

NYSE

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Yes x No o

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

Large Accelerated Filer x

Accelerated Filer o

Non-Accelerated Filer o

Smaller Reporting Company o

Emerging Growth Company o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes o No x

The number of shares of the registrant’s common stock outstanding as of May 3, 2021: 128,548,804 shares of common stock, par value $0.01 per share.

 


Table of Contents

TABLE OF CONTENTS

Page
No.

Part I. Financial Information

Item 1. Financial Statements (Unaudited)

Condensed Consolidated Statements of Operations and Comprehensive Income

3

Condensed Consolidated Statements of Financial Position

4

Condensed Consolidated Statements of Stockholders’ Equity

5

Condensed Consolidated Statements of Cash Flows

6

Notes to Condensed Consolidated Financial Statements

7

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

Item 3. Quantitative and Qualitative Disclosures About Market Risk

29

Item 4. Controls and Procedures

30

Part II. Other Information

30

Item 1. Legal Proceedings

30

Item 1A. Risk Factors

30

Item 2. Unregistered Shares of Registered Securities and Use of Proceeds

30

Item 6. Exhibits

31

Signature

32

 

2


Table of Contents

PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited)

(In millions, except per share data)

Three Months Ended

March 31,

2021

2020

Revenue

$

471

$

456

Cost of services rendered and products sold

270

279

Selling and administrative expenses

137

140

Amortization expense

10

9

Acquisition-related costs

1

1

Restructuring and other charges

6

4

Interest expense

12

23

Interest and net investment income

(1)

Income (Loss) from Continuing Operations before Income Taxes

37

(1)

Provision (benefit) for income taxes

11

(2)

Income from Continuing Operations

27

1

Net earnings from discontinued operations

13

Net Income

$

27

$

14

Total Comprehensive Income (Loss)

$

49

$

(36)

Weighted-average common shares outstanding - Basic

131.4

134.9

Weighted-average common shares outstanding - Diluted

131.9

135.1

Basic Earnings Per Share:

Income from Continuing Operations

$

0.20

$

0.01

Net earnings from discontinued operations

0.00

0.09

Net Income

0.20

0.10

Diluted Earnings Per Share:

Income from Continuing Operations

$

0.20

$

0.01

Net earnings from discontinued operations

0.00

0.09

Net Income

0.20

0.10

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

3


Table of Contents

Condensed Consolidated Statements of Financial Position (Unaudited)

(In millions, except share data)

As of

As of

March 31,

December 31,

2021

2020

Assets:

Current Assets:

Cash and cash equivalents

$

484

$

615

Receivables, less allowances of $24 and $25, respectively

182

206

Inventories

50

44

Prepaid expenses and other assets

167

145

Total Current Assets

882

1,010

Other Assets:

Property and equipment, net

172

182

Operating lease right-of-use assets

79

80

Goodwill

2,153

2,146

Intangible assets, primarily trade names, service marks and trademarks, net

1,102

1,111

Restricted cash

89

89

Notes receivable

31

31

Long-term marketable securities

14

14

Deferred customer acquisition costs

90

98

Other assets

76

75

Total Assets

$

4,687

$

4,837

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable

$

96

$

91

Accrued liabilities:

Payroll and related expenses

81

102

Self-insured claims and related expenses

71

76

Accrued interest payable

3

7

Other

108

99

Deferred revenue

108

102

Current portion of lease liability

17

17

Current portion of long-term debt

91

94

Total Current Liabilities

575

588

Long-Term Debt

823

826

Other Long-Term Liabilities:

Deferred taxes

356

346

Other long-term obligations, primarily self-insured claims

207

239

Long-term lease liability

94

96

Total Other Long-Term Liabilities

657

681

Commitments and Contingencies (Note 6)

 

 

Stockholders' Equity:

Common stock $0.01 par value (authorized 2,000,000,000 shares with 148,712,839 shares issued and 128,865,530 outstanding at March 31, 2021 and 148,400,384 shares issued and 132,080,845 shares outstanding at December 31, 2020)

2

2

Additional paid-in capital

2,370

2,359

Retained Earnings

868

841

Accumulated other comprehensive loss

(17)

(39)

Less common stock held in treasury, at cost (19,847,309 shares at March 31, 2021 and 16,319,539 shares at December 31, 2020)

(592)

(423)

Total Stockholders' Equity

2,631

2,741

Total Liabilities and Stockholders' Equity

$

4,687

$

4,837

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements


4


Table of Contents

Condensed Consolidated Statements of Stockholders’ Equity (Unaudited)

(In millions)

Retained

Accumulated

Additional

Earnings

Other

Common

Paid-in

(Accumulated

Comprehensive

Treasury

Total

Shares

Stock

Capital

Deficit)

(Loss) Income

Shares

Amount

Equity

Balance December 31, 2019

148

$

2

$

2,334

$

291

$

9

(12)

$

(313)

$

2,322

Net income

14

14

Other comprehensive loss, net of tax

(50)

(50)

Total comprehensive income (loss)

14

(50)

(36)

Exercise of stock options

2

2

Stock-based employee compensation

5

5

Repurchase of common stock

(4)

(103)

(103)

Balance March 31, 2020

148

$

2

$

2,341

$

305

$

(41)

(16)

$

(417)

$

2,190

Balance December 31, 2020

148

$

2

$

2,359

$

841

$

(39)

(16)

$

(423)

$

2,741

Net income

27

27

Other comprehensive loss, net of tax

22

22

Total comprehensive income (loss)

27

22

49

Issuance of common stock

1

1

Exercise of stock options

4

4

Stock-based employee compensation

6

6

Repurchase of common stock

(4)

(169)

(169)

Balance March 31, 2021

149

$

2

$

2,370

$

868

$

(17)

(20)

$

(592)

$

2,631

See accompanying Notes to the unaudited Condensed Consolidated Financial Statements

5


Table of Contents

Condensed Consolidated Statements of Cash Flows (Unaudited)

(In millions)

Three Months Ended

March 31,

2021

2020

Cash and Cash Equivalents and Restricted Cash at Beginning of Period

$

704 

$

368 

Cash Flows from Operating Activities from Continuing Operations:

Net Income

27

14

Adjustments to reconcile net income to net cash provided from operating activities:

Net earnings from discontinued operations

(13)

Depreciation expense

18

19

Amortization expense

10

9

Amortization of debt issuance costs

1

1

Amortization of lease right-of-use assets

4

5

Deferred income tax provision

5

1