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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 June 30, 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 August 3, 2021: 124,687,026 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

32

Item 4. Controls and Procedures

32

Part II. Other Information

33

Item 1. Legal Proceedings

33

Item 1A. Risk Factors

33

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

33

Item 6. Exhibits

34

Signature

35

 

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

Six Months Ended

June 30,

June 30,

2021

2020

2021

2020

Revenue

$

560

$

534

$

1,032

$

990

Cost of services rendered and products sold

318

297

588

577

Selling and administrative expenses

143

143

280

283

Amortization expense

10

9

19

18

Acquisition-related costs

(1)

(1)

1

Mobile Bay Formosan termite settlement

4

4

Restructuring and other charges

2

8

9

12

Interest expense

11

22

23

45

Interest and net investment income

(1)

(1)

(1)

(1)

Income from Continuing Operations before Income Taxes

73

57

110

56

Provision for income taxes

20

18

31

16

Equity in earnings of joint ventures

1

1

2

1

Income from Continuing Operations

54

40

81

41

Net earnings from discontinued operations

13

26

Net Income

$

54

$

53

$

81

$

67

Total Comprehensive Income

$

48

$

54

$

97

$

19

Weighted-average common shares outstanding - Basic

127.4

131.9

129.3

133.4

Weighted-average common shares outstanding - Diluted

127.8

132.0

129.8

133.5

Basic Earnings Per Share:

Income from Continuing Operations

$

0.42

$

0.30

$

0.63

$

0.31

Net earnings from discontinued operations

0.10

0.19

Net Income

0.42

0.40

0.62

0.50

Diluted Earnings Per Share:

Income from Continuing Operations

$

0.42

$

0.30

$

0.62

$

0.31

Net earnings from discontinued operations

0.10

0.19

Net Income

0.42

0.40

0.62

0.50

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

June 30,

December 31,

2021

2020

Assets:

Current Assets:

Cash and cash equivalents

$

313

$

615

Receivables, less allowances of $27 and $25, respectively

208

206

Inventories

42

44

Prepaid expenses and other assets

167

145

Total Current Assets

730

1,010

Other Assets:

Property and equipment, net

177

182

Operating lease right-of-use assets

80

80

Goodwill

2,168

2,146

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

1,104

1,111

Restricted cash

89

89

Notes receivable

32

31

Long-term marketable securities

15

14

Deferred customer acquisition costs

96

98

Other assets

76

75

Total Assets

$

4,567

$

4,837

Liabilities and Stockholders' Equity:

Current Liabilities:

Accounts payable

$

113

$

91

Accrued liabilities:

Payroll and related expenses

90

102

Self-insured claims and related expenses

70

76

Accrued interest payable

7

7

Other

100

99

Deferred revenue

110

102

Current portion of lease liability

17

17

Current portion of long-term debt

44

94

Total Current Liabilities

552

588

Long-Term Debt

834

826

Other Long-Term Liabilities:

Deferred taxes

363

346

Other long-term obligations, primarily self-insured claims

215

239

Long-term lease liability

95

96

Total Other Long-Term Liabilities

673

681

Commitments and Contingencies (Note 6)

 

 

Stockholders' Equity:

Common stock $0.01 par value (authorized 2,000,000,000 shares with 148,838,068 shares issued and 125,271,848 outstanding at June 30, 2021 and 148,400,384 shares issued and 132,080,845 shares outstanding at December 31, 2020)

2

2

Additional paid-in capital

2,379

2,359

Retained Earnings

922

841

Accumulated other comprehensive loss

(22)

(39)

Less common stock held in treasury, at cost (23,566,220 shares at June 30, 2021 and 16,319,539 shares at December 31, 2020)

(773)

(423)

Total Stockholders' Equity

2,508

2,741

Total Liabilities and Stockholders' Equity

$

4,567

$

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

Net income

53

53

Other comprehensive income, net of tax

1

1

Total comprehensive income (loss)

53

1

54

Stock-based employee compensation

6

6

Balance June 30, 2020

148

$

2

$

2,348

$

358

$

(40)

(16)

$

(417)

$

2,251

Balance December 31, 2020

148

$